Policy

L.A. to Examine Cable Finances

5/23/2005 8:39 AM Eastern

Los Angeles cable operators 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.

The report was very critical of the cable regulators, faulting the agency for failing to renegotiate the current franchises, which are now 18 years old. Local operators Comcast Corp., Time Warner Cable, Adelphia Communications Corp. and Cox Communications Inc. are operating under contract extensions that end in August.

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 action, not punitive action. Damages have been delayed until they are triggered by things such as contract renegotiation or transfer. The controller wants the ITA to assess damages when violations occur.

The report also expressed surprise that one operator, 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. (Although not named, Charter Communications Inc. is the city's smallest provider, serving 60 customers in Malibu.)

The report noted that the operator pays about $3,000 per year in franchise fees, but it added that if the company stopped paying, the city would have no legal recourse due to the lack of an agreement.

September