AT&T Broadband faces an uphill fight to keep its franchise in Tustin, Calif., an Orange County community in which rates could skyrocket as much as 26 percent.
Officials there were weighing their options last week, which include denial or even revocation of the MSO's existing deal because its renewal proposal failed to address service problems at the 9,000-subscriber system it inherited from MediaOne Group Inc.
Consumers in Tustin are up in arms over a proposed 3 percent rate hike will balloon to 26 percent for some once the monthly cost of new set-tops are added.
"They [AT&T] have reopened some old wounds. After years of problems, people contemplated better service from AT&T," said Joe Meyers, senior management analyst at the Tustin Public Works Department. "Instead, they get a big rate hike and a heavy-handed approach by AT&T."
Whichever way the city goes, it's looking at a long and drawn-out process.
If it doesn't renew the franchise, the 1984 Cable Act requires administrative hearings. A similar case in Brunswick, Ohio, led to a lawsuit that has been in the courts for two years.
Should AT&T's franchise be revoked, an immediate court fight is assured, which will also drag out for years. Either way, AT&T would continue to operate in Tustin.
"It's not a quick process," said John Mansell, cable analyst with Paul Kagan Associates.
Nonetheless, more than 200 Tustin residents last week elbowed their way into a city council hearing on AT&T's service. The MSO's problems were highlighted when-as if on cue-the local-origination channel carrying the proceedings went dark.
It wasn't the first time a broadcast of the council's proceedings had been interrupted.
"The council thought it was awfully coincidental that it always seems to happen when we discuss AT&T/MediaOne service," Meyers said.
Chagrined AT&T officials conceded that a switcher glitch couldn't have come at a worse time, but denied the failure was purposeful.
"One of the things we're looking at is bringing that switcher up to date," AT&T spokeswoman Gisselle Acevedo-Franco said.
EchoStar Communications Corp. added to AT&T's headaches. The direct-broadcast satellite operator thumbed its nose at AT&T by setting up shop across the street from city hall and signing up customers among residents attending the hearing.
The council is expected to vote Nov. 20 on an AT&T franchise renewal proposal that was apparently dead on arrival at city hall.
"We asked them to address these service issues in their proposal," Meyers said.
Instead, Meyers said, the company announced a 3 percent price hike. But a system upgrade requires a new converter box, which adds $3.60 to the monthly bill, plus 49 cents for a remote.
"Some people have anywhere from two to five televisions in their homes. That amounts to a huge increase for them," Meyers said.
The average cable bill in Tustin will rise to a projected $46.45 a month.
Anaheim Hills resident Tony Andrade said he doesn't know what he'll do about changes that will boost his bill for basic cable to about $70 a month.
Under MediaOne, Andrade paid about $38 for basic and a deeply discounted suite of premium channels. Even at that price point, he wasn't happy, because of "fuzzy channels and service interruptions."
AT&T Broadband bought the system, cleaned up reception problems and added many more channels, he noted. Andrade responded to an offer for three months of free cable and connected four TVs. Now, he'll have to pay converter rental fees for each of those sets-adding $16 to his bill-as well as the service hike.
"We'll have to cut back," he said.
PROGRAM COSTS RISE
Acevedo-Franco said the rate hikes are similar to increases implemented by all cable operators, and reflect increased programming costs.
As for the new set-top boxes, she said consumers across the country have faced a period of adjustment when the devices were introduced in their markets.
"But eventually our customers have been very happy with them," she said. "It allows us to increase the number of channels we offer, and gives the customer a chance for two-way interactivity."
AT&T plans to introduce digital cable in Tustin "shortly," with local phone service possible by year's end and high-speed Internet access in early 2001.
The MSO is also adding customer-service representatives to field consumer complaints and field technicians to assist consumers in adjusting to their new converters.
The local system also plans to air a video that will explain the changes to consumers.
To ensure word gets out, a letter will also be sent to all subscribers.
"It's important that the company goes out of its way to make sure that people understand," Acevedo-Franco said. "People deserve to have things explained to them."
There is still the question of a franchise that expires in 2002, and which the city may not renew.
Meyers said AT&T's renewal proposal does not address service outages, missed service appointments and rude customer representatives. Instead, he said, AT&T has "insulted" local residents by claiming many citizens have pirated high-priced premium programming.
"It's because of technological deficiencies at the system that people have received services they weren't suppose to receive," he said.
Acevedo-Franco said the problem was caused by some 500 illegal connections originating in area schools, which signal leaks that threatened to bring the Federal Communications Commission down on the company.
To resolve the leaks, AT&T is considering a mini-headend plan that would allow schools to have as many connection as they want.
If the city successfully forces AT&T out of the market, it would lose $210,000 in franchise fees.
"We find it interesting that they would be willing to do away with those fees," Acevedo-Franco said.