News

AT&T Unit Faces Fines in California

9/23/2001 8:00 PM Eastern

Two California cities have decided to levy financial penalties against AT&T Broadband: Los Angeles for a franchise-fee shortfall and Daly City for franchise violations.

Los Angeles will hold the MSO responsible for the underpayment of more than $219,000 in franchise fees. The city ruled that AT&T remains responsible even though the underpayment occurred when the system was still owned by the MSO's predecessor company, Tele-Communications Inc.

Though Adelphia Communications Corp. later acquired the system that serves customers in Los Angeles' San Fernando Valley, AT&T Broadband was its owner of record when a third-party accountant instigated an audit on the city's behalf.

The accounting contractor checked the system's books from June 1994 to July 1998. According to the audit report, the operator failed to take credit for a refund it gave consumers.

But that was offset by the fact the system also took improper deductions for insurance claims it made after an earthquake during those years. It also improperly deducted advertising sales commissions prior to reporting ad revenues to the city.

Those irregularities, plus interest, amount to a tab of $321,000, according to regulators.

Cole, Raywid & Braverman attorney Suzanne Curtis, who represented AT&T Broadband at the meeting, questioned the city's procedures and challenged a staff assertion that the cable company hadn't provided comments to the audit report. AT&T Broadband received a copy of that report July 11, according to city officials.

But members of the city's Board of Information Technology Commissioners said they had "no sympathy" for the operator and unanimously approved assessment of the past-due payment.

Daly City — a Northern California locality just down the peninsula from San Francisco — will penalize its operator $25,000 a month for franchise violations.

When AT&T Broadband took control of the system's operations, it signed a November 1998 franchise agreement with a plant-upgrade requirement. Officials expected the system to be two-way capable within a year, said senior management analyst Joseph Curran.

But when cable executives realized that mark wouldn't be met, they renegotiated the pact in December 1999 and gained another 18 months to complete the project.

At the end of June, city officials began sending letters asking about the progress of the upgrade, as well as an institutional network that the operator had also committed to build.

AT&T Broadband has not responded to any inquiry, and did not attend a city council meeting on Sept. 10 to discuss the matter, Curran said.

At that time, the council invoked terms in the extension which allow the city to assess a fine for each month the company fails to deliver on its promises. AT&T Broadband has about 18,000 customers in Daly City.

"We gave them every opportunity to engage us," said Curran. The fines will be retroactive to June.

AT&T Broadband has retrenched on system upgrades throughout the U.S., citing the soft financial market.

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