Adelphia Sends L.A. $2.6M Covering Back Fees

Adelphia Communications Corp. has paid $2.6 million to Los Angeles in an attempt to resolve a dispute over franchise fee accounting that predates the company's bankruptcy.

The shortfall was discovered in a city audit of payments made by the operator's predecessor, Century Communications Corp., between 1995 and 1999. Apparently, the operator didn't appropriately account for such revenue as its split of home-shopping sales.

The $2.6 million does not include interest the city had tacked on between the time it notified Adelphia of the discrepancy and its bankruptcy.

Adelphia was not the only company dunned following the audit. Earlier, Comcast Corp. was found to have underpaid more than $800,000, according to the city. The auditor said the former AT&T Broadband system did not count revenues from fiber leases, launch fees or leased channel revenues when it computed its franchise fees in the past.

Comcast agreed with part of the assessment and paid the undisputed fees, according to the city. It challenged the balance, which prompted arbitration.

Adelphia said an internal audit examined fees paid to the city from 1999 to 2002. It has placed $600,000, representing the newly identified unpaid fees, into an escrow account as it continues talks with the city, executives said.

Adelphia installed a new regional vice president of law and public policy, Tom Carlock, two months ago. His message to the city: "This is a new Adelphia."

City council members often responded by challenging him to prove it with fee payments.

In a statement, Carlock said Adelphia has taken local action to prove it is a quality service provider and a good corporate citizen.

"We hope these actions are viewed as they are meant: positive, responsive efforts to create a renewed cable leader in the community," he said.

Still to be resolved: A dispute over a 6% rate increase Adelphia levied in 2002. The city wanted Adelphia to verify the costs it claimed to justify the increase.

But because of Adelphia's overall corporate accounting issues, the current management can't verify the numbers.

Without that proof, the city ordered the operator to roll back its rates to 2001 levels and rebate the difference to consumers. According to Los Angeles's accounting, that could lead to $4.3 million in rebates.

An Adelphia spokesman said the operator has filed an appeal of that order with Federal Communications Commission.

The MSO's new management wants to resolve these issues in order to ease the franchise-renewal process.

All of the city's franchises have expired, but have been extended as regulators informally negotiate with operators, which also include Comcast, Cox Communications Inc. and Time Warner Cable.