Papas Fritas writes:
"Time Warner Cable Inc. has stirred anger over its hike in subscription rates for customers and its efforts to extract hefty fees from rivals to air the L.A. Dodgers channel. Now Meg James reports at the LA Times that the city of Los Angeles has sued the cable giant, alleging Time Warner Cable stiffed the city on franchise fees over four years through 2011. The city seeks nearly $10 million in fees, money it said could have helped ease its budget problems during the financial crisis. 'Time Warner owes L.A.'s taxpayers millions of dollars for the privilege of having its franchise,' says City Attorney Michael Feuer. 'This is a day where we are standing up and saying enough is enough.' The 24-page lawsuit, filed in U.S. District Court in Los Angeles, contends that Time Warner Cable "blatantly refused to live up to its obligations to the city" (PDF) to pay franchise fees to operate its cable network over city-owned rights of way while collecting more than $500 million a year from customers in the city. The city is seeking $9.7 million from Time Warner Cable which includes $2.5 million in franchise and PEG (public, educational and government channel) fees and support for 2008 and 2009, plus another $7.2 million owed for 2010 and 2011.
The lawsuit comes just a few weeks after Time Warner Cable alerted its Southern California customers that it planned to hike rates by an average of about 6% a month for homes that are not covered by a promotional package. Time Warner Cable, in a statement, denied the allegation that it had cheated the city. 'As a major job creator, tax contributor and service provider in the city of Los Angeles, Time Warner Cable is an active and responsible corporate citizen,' the company said in a statement. 'We are disappointed the city has chosen to bring this action, which we strongly believe is without merit.' Jonathan Kramer, a Los Angeles-based telecom attorney and a member of the California chapter of the National Association of Telecommunications Officers and Advisors, said it was 'inevitable that [more] of these types of lawsuits will be filed' and that other cities are considering similar action, but that 'Los Angeles is first to pull the trigger.' 'It's the devil you know,' Kramer said. 'We know Time Warner. But Comcast is much more aggressive when it comes to pushing back (against) local jurisdictions.'"
(Score: 5, Insightful) by GungnirSniper on Sunday March 16 2014, @06:14PM
Or in other words, Time Warner is pocketing the taxes LA could just collect directly. If LA cuts out the middleman, it avoids this problem.
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(Score: 3, Insightful) by VLM on Sunday March 16 2014, @07:28PM
At a high enough level, yes. Difference probably being LA would simply tax everyone equally, including non-subscribers. Its a "sin tax" on cable subscribers.
(Score: 5, Insightful) by Thexalon on Sunday March 16 2014, @07:31PM
I'm confused about your thinking here.
1. TWC contracted with the City of Los Angeles to pay $X in exchange for their cable monopoly. Municipalities make these kinds of contracts all the time.
2. TWC doesn't pay $X when the time comes.
How is this a taxation issue rather than a matter of contract law? You seem to have decided to blame the City of Los Angeles for TWC's breach of contract, which makes about as much sense as blaming the chef for a table skipping out on the check.
I get that the money that TWC pays the City of Los Angeles is coming from those citizens that choose to have cable. But those citizens' money is coming from their employers, which is all ultimately created by somebody borrowing it from the Federal Reserve. So it would be just as logical to eliminate all payments to government for any reason, and we'll just have the Fed give out money to governments whenever they need it while not somehow causing inflation (which would cause the equivalent of a tax in real-money terms).
Vote for Pedro
(Score: 2) by VLM on Sunday March 16 2014, @08:21PM
"TWC contracted"
Bug in the logic is right there. No contract. It's been under negotiation for YEARS. I've never heard of any situation quite like it.
The primary effect of adding a lawsuit to negotiations would appear to be slowing the negotiations down. So who exactly is working for whom for what purpose is not crystal clear.
(Score: 4, Insightful) by Fluffeh on Sunday March 16 2014, @09:39PM
... Bug in the logic is right there. ...
What I find amazing, simply jawdropping is that cities have the power to do something like this in the US. A city that grants the right for a complete monopoly of which cable service its residents can subsribe to? There's something really fishy going on there. And on that note, how come the people living there aren't stringing this lot up?
(Score: 4, Insightful) by edIII on Sunday March 16 2014, @11:30PM
That's a damn good question. These monopolies are tiresome and never good for the consumer. If the city owns everything and gives easements, then any qualifying corporation should be entitled to such easement.
Obviously not everyone can play. Suitability should include a couple hundred million dollar bond (proportional to the amount of easements) with the state so in the case where a corporation cannot continue the funds exist to remove their infrastructure from the city and scrap it. They can keep the leftovers from the bond. Interest from the bond goes towards specific expenses of the corporation, those being the requirement for operating fuel contracts to keep a minimum amount of infrastructure alive during natural disasters no different then telco being on preferred backup. The corporation is responsible for the share of maintenance on the easements. More players, the more distributed the maintenance costs.
In this way there would never be an argument about whether Google could come into LA. They could put up the bond in two seconds flat and start putting their infrastructure in. The bonds protect the citizens, a suitable barrier to entry is put up to protect citizens from abandoned infrastructure costs, and more competition can exist.
It's not like we don't have the space. We could have literally dozens of providers all the way to the last mile and not fill up the physical infrastructure in which all the cabling passes through.
While we are at it, the same should be done for the power grid. It shouldn't be owned or operated by a corporation either. It should be state run. The state controls all the infrastructure and the measurements of how much power is being consumed by a property or generated by it . The state merely operates an energy market where a homeowner is just as capable of selling their excess solar energy on the market as a megacorp operating power plants that produce megawatts. A transaction cost, minimum with a percentage cap, for each sale helps pay for the infrastructure.
It's never made sense to me, other than corruption and malfeasance, to allow any corporation the monopoly over critical infrastructure. It was a recipe for abuse, and we are enjoying the consequences now.
Net Neutrality would be a dead issue if there were dozens of different local providers for Internet. All it would take is one to remain a common carrier and everyone would flock to that one. You can only force people into the a la carte pricing the greedy carriers want. Choice will eliminate that.
Technically, lunchtime is at any moment. It's just a wave function.
(Score: 2) by VLM on Monday March 17 2014, @01:22PM
If you think 10 sets of competing aerial hardline would be expensive PITA, imagine having 10 sets of competing buried hardline, or in steam tunnels downtown or whatever.
Usually the monopoly comes with a requirement to serve every residential parcel in the city, or something like that.
(Score: 1) by mgcarley on Monday March 17 2014, @03:03PM
I'm not entirely sure that it's a monopoly or ever was, except maybe by default.
In the complaint, the wording is "virtual monopoly" which suggests "for practical purposes it was a monopoly because nobody else has strung up their own wires and no unbundled infrastructure was in place so competitors couldn't even lease the infrastructure", and in section IV it notes that the franchise rights are non-exclusive, as in, another entity could get a franchise if it wanted.
However, what normally seems to happen (in my own experience building cables in a much smaller city which has two incumbent operators) is that if an entity wants to string up it's own wires, in the permits the city will require them to be attached to poles - which is fair enough - in my case I have Ameren or Frontier owned poles and I'm not allowed to place my own (that would require a separate permit, but it would not be likely to be granted anyway due to the fact that poles already exist).
Then, if either one of those entities decides it doesn't want to let me use it's poles (this is the response I got from Frontier - despite the fact that the competitor, Mediacom, uses them) I only have one choice left, which is Ameren.
In my case, I got lucky in that Ameren said yes and the conditions weren't *too* hard to meet, but there is every chance that in a place like L.A. competitors may not have had 2 options for poles and/or the owner of the poles would require ridiculous rates for connecting to them or they might impose some ridiculous requirement which would render the whole thing either pointless, unprofitable or both. And they probably either didn't think about or didn't want to let anyone run cables in the sewers or use micro-trenching.
The only other option: underground.
But there are already a bunch of underground cables in the area (I seem to recall a figure of 7 entities having laid fiber being thrown around by this particular city - many of which aren't even in use, and none of which are accessible to anybody who might want to provide services to the adjacent residents, businesses and MDUs), and due to the fact that those cables already exist the city won't issue any more permits for underground cabling - and even if they did I have to deal with avoiding other utilities in addition to the existing wires AND it's also quite expensive (and I do want to keep the cost of my services reasonable).
So while TWC is very likely to be the bad guy in this case, there's probably a good reason that they could be considered (for practicality's sake) a monopoly, and for that, part of the blame would probably have to go to the city (or state or country) for probably not requiring that communications systems being built must be accessible to competitors.
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(Score: 2) by tangomargarine on Monday March 17 2014, @02:29PM
You mean they've been providing the service while there is no contract in place? Er, what? Sounds like a good excuse to jettison the service and say, "No more making money off these guys while you waffle on terms. Get the terms down on paper, THEN charge people."
(I'm probably totally misunderstanding what you said, though.)
"Is that really true?" "I just spent the last hour telling you to think for yourself! Didn't you hear anything I said?"
(Score: 2) by VLM on Monday March 17 2014, @02:46PM
"You mean they've been providing the service while there is no contract in place?"
Exactly. And its not unusual at all.
What is unusual is the previous contract expired like 8 years ago or whatever.
Another unusual thing is rather than taking care of back pay in contract terms like usually happens one side is now suing the other, which normally does not help negotiations. Then again, see above, its been a good chunk of a decade since both sides signed on the dotted line.
This happens all the time with service contracts. I've never heard of it being this dysfunctional. The source of the dysfunction in negotiations is where the real, interesting story likely lies, unreported. Maybe the greens want them to implement IP over organic biodegradable rice noodles instead of traditional cable hardware, maybe someone wants a bribe either formal or informal. Whatever it is, its likely to be one heck of a story.
Speaking very generally about union/mgmt contracts and service contracts I've seen stall out, usually its because one side wants to get waaaay too deep into the other sides business and/or one side is super stubborn. Maybe it takes both at the same time to pull off a near decade of non-negotiation.
(Score: 2) by tangomargarine on Monday March 17 2014, @03:30PM
I've become jaded enough to suspect that the actual reasoning is that Warner wants 350% profit and the other guys are trying to limit them to 340% and that's unacceptable (or something like that).
Thanks for the explanation.
"Is that really true?" "I just spent the last hour telling you to think for yourself! Didn't you hear anything I said?"
(Score: 5, Insightful) by sjames on Sunday March 16 2014, @07:38PM
Or, put another way, Time Warner is making a lot of money through access to a public right of way for which they agreed to pay rent. The rent is years overdue. The people were going to cut them some slack (and have been for a while), but since Time-Warner isn't going to cut the people of LA any slack, the people have decided not to cut them any either.
Put another way, why subsidize TW's business expenses? They seem profitable enough to pay their bills.
(Score: 2, Funny) by fnj on Sunday March 16 2014, @06:51PM
Hmm ... Time Warner ... the city of Los Angeles ... which of these two organizations is the most awful ... it's impossible to decide. Hope they both lose this - except the real losers will be the people, no matter what happens.
(Score: 4, Interesting) by lajos on Sunday March 16 2014, @06:53PM
$10 million? Ease LA's budget crisis?
You know what would ease LA's budget crisis? Not shitting away money on stupid things like buying every LA unified student an iPad for $1000 a pop, that they use for flapping the bird.
(Score: 5, Informative) by gallondr00nk on Sunday March 16 2014, @07:22PM
The iPad program used bond money intended for repairs, at a time when the schools are falling apart [vice.com]. The problem seems to be one of hopelessly inept administrators, but what else is new?
(Score: 3, Funny) by el_oscuro on Sunday March 16 2014, @08:11PM
Nothing at all. LA's school district was falling apart 30 years ago when I attended.
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(Score: 2) by tangomargarine on Monday March 17 2014, @02:32PM
I usually flap the bird in the privacy of my own home.
"Is that really true?" "I just spent the last hour telling you to think for yourself! Didn't you hear anything I said?"