Adelphia Communications Corp.'s hold on Moreno Valley, Calif., was in doubt last week after the city ruled the MSO had illegally taken control of the local cable system.
In a 5-0 vote, the Moreno Valley City Council found AT&T Broadband illegally transferred its franchise to Adelphia under the guise of a management agreement.
The agreement gave Adelphia complete control and all profits generated by the system. But city officials hadn't signed off on a transfer, so AT&T technically continues to hold the franchise.
The council ordered staff members to draft a resolution declaring the franchise had been violated, and ordering that the management agreement be dissolved. It will vote on the measure Feb. 13.
"The resolution will say that AT&T transferred all of the assets to Adelphia under a 'sham' management agreement," said Moreno Valley city manager Gene Rogers.
Adelphia officials were "very disappointed" in the city's action, which they called just another step toward a resolution.
"We're very close," said Adelphia regional vice president of operations Bill Rosendahl. "It's only a matter of time. These are just more tactics on the part of some aggressive lawyers for the city."
The staff members also will advise the council with respect to its options, including termination of the franchise agreement that provides cable service to the community of 150,000 east of Los Angeles.
If the city terminates the franchise, the issue would likely head to the courts.
Adelphia has argued that the city indirectly approved a transfer by not taking any action when the matter first came up last year. Under federal law, if a city takes no action on a transfer request, the deal is considered approved.
But the MSO may have hurt its cause by running local newspaper ads accusing the council of impeding a planned $12 million system upgrade.
The council has been weighing whether the franchise was illegally transferred while also trying to negotiate a renewal with Adelphia. A franchise for Act5, a small local operator whose system was managed by AT&T, is also about to expire.
"Hopefully, we can come to a settlement that will be beneficial to everybody," Rogers said.
Rosendahl said the company felt it had "a very rich offer on the table."