Calif. Cities: Hold AOL to Access Pledge

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Regulators shouldn't take America Online Inc. and Time Warner Inc. at their word when it comes to open access, a group of California cities told the FCC last week.

In a Sept. 29 petition for special relief, the communities asked the Federal Communications Commission to make the terms of a voluntary memorandum of understanding on access a condition for approval of the two companies' planned merger.

The memorandum is a non-binding commitment in which the merged company promises to open Time Warner Cable's high-speed platform to competing Internet-access and content providers.

The cities-Hawthorne, Huntington Beach, La Quinta, Indian Wells, Fountain Valley, Stanton and Westminster-account for 107,000 cable subscribers in Los Angeles, Riverside and Orange counties.

Officials from those cities said they were drawn into the open-access debate in part because of persuasive pro-consumer arguments America Online made prior to the merger deal with Time Warner. Because of that advocacy, cities accepted the memorandum's "trust-me" vows when it was signed earlier this year.

However, when the cities tried to make open access a provision of franchise transfers over the spring and summer, the municipal officials said, AOL and Time Warner balked.

The localities tried four different methods of adopting open access: as a franchise requirement; by reserving the right to change franchise-transfer documents as needs changed; through most-favored-nation clauses, in which the city could demand access if it was granted elsewhere; or through a contractual commitment by AOL Time Warner.

At that point, "trust us" became "Hell, no, we won't go," according to the cities' petition.

AOL Time Warner's refusal to incorporate the memorandum's language into local rules showed "that parochial economic self-interests will always prevail over voluntary non-enforceable commitments," said Bill Marticorena of Rutan & Tucker, special counsel to the cities.

The municipalities produced documents in which Time Warner general counsel Gary Matz invoked the U.S. Court of Appeals for the 9th Circuit to argue that the cities couldn't incorporate the memo in franchise-transfer language. The 9th Circuit had ruled that Portland, Ore., could not block a Tele-Communcations Inc. franchise from transferring to AT & T Broadband on open-access grounds.

The cities also claimed that Time Warner Cable's blackout of The Walt Disney Co.-owned ABC broadcast-TV stations in a retransmission-consent dispute earlier this year showed a lack of concern for consumers.

During the dispute, "the [local franchising authorities] stood helplessly while the mega-corporations jockeyed for legal and tactical position with little apparent regard for the interests of captive cable subscribers," wrote Mary Morales, executive director of the Public Cable Television Authority, a consortium of four of the petitioning cities.

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