October 27, 2007 in Business

Cities won’t fight Time Warner

By The Spokesman-Review
 

Affected cities

Cities that could lose regulation of basic Time Warner Cable rates: In Idaho, Genesee, Juliaetta, Kendrick, Moscow, Onaway and Potlatch; in Washington, Albion, Colton, Palouse, Pullman and Uniontown.

In an attempt to avoid a costly legal battle, Pullman and Moscow city officials say they won’t challenge a recent attempt by Time Warner NY Cable LLC to eradicate the cities’ ability to review and regulate basic cable rates. But they criticized Time Warner’s petition to the Federal Communications Commission, which contends the company shouldn’t be subject to city oversight because it faces “effective competition” from national satellite-TV services.

That competition partly stems from a dispute between Time Warner and a local Fox affiliate that resulted in the cable company dropping Fox and upset customers switching to satellite, officials contended.

Officials think “Time Warner kind of caused people to go to DISH (satellite) not because of effective competition, which is what the act contemplates, but because they weren’t providing the channels that people wanted to see,” said Laura McAloon, Pullman city attorney. “It definitely put a bad taste in the mouths of the elected officials in Pullman.”

Federal law dictates that when the FCC determines that cable companies face “effective competition,” they no longer must face state or municipal oversight.

Under a current franchise agreement Time Warner inherited when it purchased Adelphia Communications Corp. holdings, Time Warner would have to go through public hearings for rate-increase requests, McAloon said.

Time Warner’s petition, however, asserts national satellite providers DirecTV and DISH Network pose effective competition, meeting federal requirements that they offer service to more than 50 percent of people in the city franchise areas and have subscribers there composing more than 15 percent of households.

Satellite companies have 16.81 percent of the market in Pullman and 21.57 percent in Moscow, according to Time Warner.

Time Warner serves 48.02 percent of households in Pullman and 49.53 percent in Moscow, or more than 8,000 households combined, according to the company. The petition also seeks exemption in nine other Eastern Washington and North Idaho cities.

Attempts to reach Time Warner representatives for comment Friday were unsuccessful.

“This latest legal maneuver by Time Warner Cable is another example of this media conglomerate’s disregard of their local service communities,” Pullman Mayor Glenn Johnson said in a prepared statement.

Both cities have “limited budgets,” and challenging “an entity the size of Time Warner on a statistical fight” would require legal fees and experts to examine the company’s numbers, McAloon said.

While “we don’t have any reason to believe” its numbers are inaccurate, there is no way to know for sure without paying for a survey, she said.

Similar efforts to fight a city-oversight exemption failed in Los Angeles, McAloon said.

Time Warner served about 20,000 customers in the Pullman-Moscow and Libby, Mont., areas earlier this year. It charges $13.28 a month for basic cable there.

DirecTV charges $29.99 a month for more than 45 channels as its basic package, while DISH Network offers more than 40 channels for $19.99.

About 45,000 Time Warner subscribers in the Coeur d’Alene, Pullman-Moscow and Libby, Mont., areas lost Fox affiliate KAYU-TV in December.

Northwest Broadcasting, the company that owns KAYU, demanded Time Warner pay to carry its over-the-air signal, but the companies didn’t reach an agreement.

That means those cable customers can’t watch the World Series on Fox or the upcoming Super Bowl, said Fox 28 general manager Jon Rand. The two companies still have “ongoing communication” about a potential agreement, he said.

Time Warner argued other local broadcast channels did not charge to include them, but Rand has said most cable providers and all satellite-TV companies do pay Fox 28.

The cities lose franchise fees as Time Warner loses customers, Rand said. He estimated the tiff has cost Time Warner millions of dollars.

“I am disappointed to learn that our cable television provider has chosen this course of action and I would hope that Time Warner is sensitive to the needs of the consumers it serves here in Moscow and on the Palouse when considering what it charges for television service,” Moscow Mayor Nancy Chaney said in a prepared statement.

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