Adelphia Communications Corp. opted to withdraw its attempt to appeal a rate rollback order in Los Angeles, and will refund $5 million to consumers in the franchises it serves there.
The Federal Communications Commission, acting earlier this year on Adelphia's request for a stay of the rate order, had already signaled that the company's chance of prevailing on the challenge was poor. Local Adelphia executives said the MSO decided to shift strategy in order to change the company's reputation with its constituents. The refund will affect 220,000 customers.
"Although we strongly disagree with the city's rate order, our goal is to put this dispute, associated with financial statements prepared by prior management, behind us," said Tom Carlock, regional vice president of law and public policy.
Adelphia issued a statement indicating consumers will get credits on their bills in the next monthly cycle.
Customers will also receive credits on their bills going forward, representing the difference between the current rates and the lower rates ordered by the City Council.
In May, the city ordered Adelphia to rescind the 6% rate hike it implemented in 2002. That decision was based on an audit conducted earlier this year that faulted Adelphia's computations that justified the basic rate hikes.
Local management asserted the city's data was "flawed," citing such discrepancies as the report's misstatements of the number of channels offered on regulated basic-cable packages.
But due to the company's having filed for Chapter 11 bankruptcy, Adelphia's current management could not effectively fight the city's computations, and new management couldn't certify the financials by the city's deadline.
The refund will affect four of the five franchises operated by the company: East San Fernando Valley, West Los Angeles, Sherman Oaks and Eagle Rock.
East Los Angeles customers served by a different operator during the audited period — and Adelphia customers outside the city limits — will not receive rate rollbacks.
This is the second recent financial hit sustained by the Los Angeles operation. Earlier this summer, Adelphia paid the city $2.6 million to resolve a challenge of its franchise fee accounting.
The city faulted accounting dating back to 1995, when the cable operator's previous owner, Century Communications Corp., held the franchises. Municipal auditors found the company had not accounted for items such as home-shopping revenue in its gross-revenue computations.
Adelphia is restructuring its Los Angeles operations to improve customer choice and value, Carlock added. Part of that initiative includes reinstitution of a lifeline tier option. That low-cost option will be available throughout city franchises by year-end.
Resolution of these outstanding issues should help ease efforts to negotiate refranchises in Los Angeles.
Franchises for all of Los Angeles' cable operators — including Comcast Corp., Time Warner Cable, Cox Communications Inc. and Charter Communications Inc. — have expired, and the companies are operating under extensions. The parties are still in the informal negotiating stage on new agreements.
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