Policy

Cracking Down in L.A.

5/29/2005 8:00 PM Eastern

Los Angeles— Cable operators here could face tighter financial scrutiny under terms of recommendations made to their regulator, the Information Technology Agency, by the city Controller’s Office.

A recent audit of the ITA by the city faulted regulators for not checking cable’s books frequently enough. Although recent audits have caught underpayments by operators, collecting $7.7 million in back fees, the controller’s report said the agency should be more up to date with auditing, verifying payments immediately after the conclusion of each calendar year.

RAISED STANDARDS

The report came out just days after the citizen Board of Information Technology Commissioners announced its approval of a broad package of updated consumer standards. The controller’s report was very critical of the regulatory agency that guides the BITC, faulting the ITA on accounting and franchise-standards enforcement.

The agency needs to be more zealous tracking franchise fees, for the majority of those monies are used by the city to provide “precious dollars for police and fire protections, street repair, libraries, and other needed services,” said the controller, Laura Chick.

The audit determined that the agency couldn’t prove operators consistently made required support payments for public, educational and government channels.

The report was most critical of the failure to renegotiate the city’s current franchises, now 18 years old. Locally, Comcast Corp., Time Warner Cable, Adelphia Communications Inc. and Cox Communications Inc. are operating under contract extensions that end in August.

The ITA began the informal process in 1999, hiring its outside consultant, then holding public hearings to create the city’s needs assessment. But in 2003, the city council asserted that it, not the BITC, had the authority for franchise negotiations.

The council has not launched negotiations beyond a single committee fact-finding meeting that did not include operator input.

The local operators’ association said members are ready to negotiate with any city officials.

The controller also wants more aggressive use of the agency’s authority to apply liquidated damages. Traditionally, the agency’s focus has been on corrective, not punitive, action even though the current agreements authorize the city to dun companies $500 a day for franchise violations such as poor service.

The report said liquidated damages were last applied in 1999, apparently as part of the transfer process of former AT&T Broadband properties to Comcast Corp.

ONE MISSING FRANCHISE

The report also expressed surprise that one company, not named in the report, was operating without having been audited and without a valid franchise. The last agreement, for a system serving fewer than 100 customers, expired in 1987, according to the report. (Though not named, Charter Communications Inc. is the city’s smallest provider, serving 60 customers in Malibu. No other operator has as small a subscriber base.)

September