The transfer of ownership of Time Warner Cable franchises in Los Angeles to America Online Inc. moved ahead last week, as a City Council subcommittee approved a deal despite stated reservations about AOL's customer-service history.
The subcommittee also changed the language on open-access policy for the transfer. The transfer came to the subcommittee from the Board of Information Technology Commissioners without an agreement on open-access language.
The cable-oversight board wanted the same open-access pledge in the local regulation that Time Warner and AOL made to the Federal Communications Commission in its memorandum of understanding. However, Time Warner would not agree to that inclusion.
To resolve the dispute, the subcommittee substituted language that was used in the Tele-Communications Inc.-AT & T Corp. transfer, which requires open access if the policy is upheld and implemented in other communities.
Time Warner was also compelled to pay $586,000 in fees and interest to resolve a dispute over franchise-fee payments. The cable operator must pay by July 30.
The commissioners recommended approval despite staff assertions that the operator did not produce all of the documentation demanded by the city-a claim rebutted by the operator.
Most alarming to city officials, it appeared, was a Time Warner assertion that it had "no adverse legal proceedings" against it. Days later, AOL agreed to pay $3.5 million in penalties to satisfy Securities and Exchange Commission claims of illegal accounting procedures.
Officials said the company should have detailed that legal action and others taken against AOL in 1987 by several state attorneys general for price gouging. Staff members said they were "acutely concerned" about AOL's ability to accurately account for its revenues for franchise-fee purposes.
The Los Angeles City Council must still grant final approval to the transfer.