Some cities aren’t exactly putting out the welcome mat for Comcast Corp. and Time Warner Inc.
The two cable companies have formed a venture to take over the regional operations of bankrupt Adelphia Communications Corp., which has nearly 150,000 subscribers in North County, most in Anaheim and Santa Ana.
Some cities recently agreed to extend expired pacts with Adelphia until early December, but only after many were set to consider moves to deny transferring cable franchises to Comcast Time Warner.
Cities in various stages of renegotiating or transferring their Adelphia franchises include Anaheim, Santa Ana, Brea, Newport Beach and Yorba Linda.
Sticking Points
William M. Marticorena, a lawyer with Costa Mesa-based Rutan & Tucker LLP, which represents several cities, estimates as many as 19 cities in the region are in various stages of talks with Adelphia, Comcast and Time Warner.
Sticking points involve disputes over franchise fees not paid by Adelphia, utility pole spacing problems, electrical code violations and a lack of processes to handle customer complaints.
“Time Warner will have to work harder to get these franchises transferred,” Marticorena said. “At the end of the day, there is a potential for some cities to disapprove the transfer. With the amount of resources being devoted, this smacks of a big deal.”
Seeking Assurances
The cities are seeking assurances that things will change under Time Warner and Comcast.
“We’ve been working under a franchise agreement written in 1979 but still effective in 2005,” said Chris Meyer, city manager of Fullerton, which counts 20,000 Adelphia subscribers.
Adelphia, long based in Pennsylvania and now headquartered in Colorado, collapsed three years ago amid charges that the founding Rigas family lied about the company’s financial health while pilfering money from the business.
In June, a federal judge sentenced Adelphia founder John Rigas to 15 years in jail for looting the cable company and defrauding its investors.
Former Adelphia chief financial officer Tim Rigas, son of John Rigas, was sentenced to 20 years.
Comcast and Time Warner, which serves part of coastal OC, agreed in April to split up the remains of Adelphia in an $18 billion deal.
Time Warner wants to spin off its cable business to the public, following the closing of its buy of Adelphia jointly with Comcast, sometime early next year. As part of the spinoff, Time Warner is expected to buy out Comcast’s stake in Time Warner Cable.
Adelphia’s OC and other regional operations are seen as crown jewels. The North County network is part of a larger system of 1.4 million subscribers in Adelphia’s Southern California business.
While many welcome the takeover, Fullerton officials still are smarting over the waning days of Adelphia. They’ve hired Irvine-based accounting firm Diehl, Evans & Co. LLP to do an audit of Adelphia payments since 2000, when the cable operator took over the system from previous owner Comcast.
The goal of the audit is to see if the city had received proper payment of franchise fees, according to Fullerton’s Meyer.
“Since Adelphia filed bogus numbers, we asked our accountant to make sure we weren’t victimized by the false financial information that the Rigas family presented to everyone,” he said.
The city is waiting for Adelphia to turn over documents for the financial review, Meyer said.
The Fullerton City Council was set to possibly deny a transfer of its franchise because of trouble getting an updated deal with Time Warner and Comcast.
Last month, Time Warner agreed to talks, prompting the City Council to put off any action, Meyer said.
Deane Leavenworth, a spokesman with Time Warner Cable, said overall the transfer “process is going along very well.”
“We feel the cities are working very cooperatively with us,” he said.
The process of transferring franchises involves lots of documents and information, so it isn’t unusual for an extension of time to be requested, he said.
Bob Wilson, director of internal services for Orange County’s Resources and Development Management Department, said the Board of Supervisors recently dropped an item that would have denied the transference of Adelphia service to Time Warner.
Adelphia has roughly 20,000 subscribers outside of cities in county areas.
“We wanted to talk with them about outstanding issues we have related to the franchises in unincorporated areas of the county,” Wilson said.
