There is a "significant possibility" that Santa Cruz County, Calif., will appeal a recent court decision that overrode its refusal to transfer Charter Communications Inc.'s local cable franchise to Vulcan Venture's Paul Allen, according to a consultant for the local government.
The court ruling is "ripe" for the 9th U.S. Circuit Court of Appeals, said attorney and consultant Bill Marticorena, who noted the county's "traditionally strident" stance on consumer rights.
Santa Cruz County declined to transfer Charter's franchise to Allen in 1998, contending that the millionaire and Microsoft Corp. cofounder lacked the "financial and technical" ability to operate a cable system. County regulators feared the high price Allen paid to acquire the MSO would force Charter to increase rates significantly in order to recoup the investment.
Charter and Allen sued over the county's action, asserting the move violated the operator's First Amendment rights and unreasonably interfered with its contractual transfer rights. A decision in Charter's favor was handed down March 7 in U.S. District Court for the Northern District of California.
The MSO considers the matter closed and intends to proceed under the terms of the franchise it negotiated in 1997, when it bought the system from Sonic Communications.
Those terms include an upgrade of the 5,000-customer Santa Cruz system to 750 megahertz. Charter has already completed that work, despite its lack of a legal franchise.
"This is one of those decisions that had something for everybody," said Marticorena.
Despite the fact that U.S. District Court Judge William Alsup found in favor of Charter and Allen on some facts, attorneys for the county also believe he reaffirmed the federal mandates within the transfer proceeding. Those include fact-finding with "no substantive limits," in Marticorena's view.
That runs contrary to the interpretation by Charter senior vice president and general counsel, Curt Shaw, who said the decision affirms operators' First Amendment rights and restrictively limits allowable intrusions.
Marticorena also believes the decision empowers cities to consider the impact of a system's acquisition costs on consumers' bottom lines.
Charter has raised rates by 15 percent in Santa Cruz, the attorney noted. And even though the operator has upgraded and added new product offerings, prices went up in unimproved areas as well, Marticorena said.
Santa Cruz has never been fearful of cable-related litigation. In the 1980s, the county sought and won a consent decree governing local rates. The county protects those residents who are captive cable customers because the topography of their neighborhood prevents direct-broadcast satellite reception, Marticorena noted.
That decree affects AT & T Broadband in the parts of the county where it operates. The parties averted further legal action in 1998 when the MSO-then Tele-Communications Inc.-argued successfully that the county improperly charged it a possessory interest tax.
The two sides settled their dispute without going to court.