AT&T Broadband said it won't accept the conditions Los Angeles city officials requested in return for a transfer of its cable franchise to Comcast Corp., so the city has denied the transfer without prejudice.
If the MSOs consummate their merger — for instance, by changing branding or staff at the L.A. franchises — the city could find AT&T Broadband in material breach of its franchise, according to Liza Lowery, general manager of the city's Information Technology Agency.
The city and operator have two major bones of contention: First, in approving the transfer — part of the pending AT&T-Comcast merger — the Los Angeles City Council tacked on a requirement reserving its right to ban the operator from inking exclusive programming agreements. It also balked on a clause that would have required the operator to accept mandatory arbitration of any disputes with customers.
The council is in the midst of a study on "open program access," and — at the urging of competitor Verizon Communications Inc. — it inserted language into the transfer resolution that could allow it to change AT&T Broadband's franchise terms, depending on the results.
AT&T Broadband has dropped the practice of exclusivity, and told the consumers of that move through ads in newspapers, including the Los Angeles Times. But Lowery said the company does not want that policy codified in the city resolution.
The city and operator will continue to negotiate on a contract, according to Lowery.
It's not the first time the city has refused a transfer, and the effect on the company has yet to be seen. Los Angeles refused the transfer of United Cable Corp. to Tele-Communications Inc. in the 1980s, and the city continued to refer to the franchise as United for years — well past the point at which that company ceased to exist.
That issue wasn't resolved until TCI sought to sell the property to AT&T Corp. But AT&T is currently in refranchising negotiations, so the lack of franchise affords Los Angeles leverage.
Los Angeles has joined a short list of regulators that have denied the transfer, a group that also includes DeKalb County, Ga., and Berkeley, Calif.