Los Angeles County Sues Time Warner Cable for Not Paying Bill

Time Warner Cable Logo - H 2012

Time Warner Cable Logo - H 2012

The county of Los Angeles says that Time Warner Cable owes it almost $700,000.

In what might provoke a sense of schadenfreude for any Los Angeles resident ever late in paying a cable bill, the county is now taking TWC to federal court, looking for money owed plus a judge's declaration that the company has violated the law.

Could the cable company be in any danger of being booted from California?

The dispute emanates in part from quirky changes in the way cable franchises are set up in the state.

Prior to 2007, cable franchises were issued by local governments. Cable companies were required to pay franchise fees plus they had to provide facilities and channels for public, educational and government ("PEG") access.

Thanks to the Digital Infrastructure and Video Competition Act of 2006, that changed. Under the new law, incumbent cable operators transitioned from locally issued cable franchises to video service provider franchises issued by the state of California. Fees still were paid locally, it seems. In 2007, Los Angeles updated its code to require each state-franchised video service provider within its borders to pay a franchise fee of up to five percent of gross revenue plus a one percent PEG fee. Late payments incurred interest, of course.

TWC obtained two franchises from California, but according to the lawsuit filed by Los Angeles, the company was required to honor PEG requirements in connection with its prior 21 local franchises.

Los Angeles says that TWC owed PEG fees for 2008 in the amount of $695,571.90.

In May 2011, TWC sent a check for $694,258, leaving an underpayment in the amount of $1,313.90 (plus interest).

But...Los Angeles also says that TWC owed it a state franchise fee payment of $837,304. TWC then sent a payment of $143,046, leaving a balance of $694,258, or the same alleged amount that was owed for the PEG fee. In other words, TWC seems to have changed its mind about paying the PEG fee.

According to the complaint, TWC has taken the position that "during any year where an incumbent provider was subject to any grandfathered PEG obligations, the provider was not required to pay the PEG fee." (A spokesperson for the company hasn't yet returned our request for comment to confirm this.)

But Los Angeles says the offset of PEG amounts against state franchise fees does not constitute a deduction authorized by law.

So now, Los Angeles wants its owed money and is suing TWC for violation of the Digital Infrastructure and Video Competition Act as well as its own local code.

Yes, nearly $700,000 is at stake, but what else?

According to the Digital Infrastructure and Video Competition Act, "The commission shall not renew the franchise if the video service provider is in violation of any final nonappealable court order issued pursuant to this division."

Email: eriq.gardner@thr.com; Twitter: @eriqgardner