Century Communications Corp. will conclude a nearly
four-year-old rate dispute by paying consumers in Los Angeles more than $12 million in
rebates, rate rollbacks and regulatory costs.
Although the Federal Communications Commission has brokered
expensive countrywide "social contracts" to settle rate disparities, it is
believed that this is the largest municipal settlement ever.
City officials confirmed that they had a negotiating factor
in their favor -- Century needs city approval if it is to go forward with a plan to absorb
Tele-Communications Inc.'s Los Angeles operation.
"For them to apply for a transfer, they need city
approval. A reasonable person would see that the city's not happy, and they would
compromise," said Alan Arkatov, one of the commissioners on the city's Board of
Information Technology who spent five months negotiating the settlement. "They were
Joyce Emerson, chairman of the commission, added that the
agreement sends a message to other operators that the city will move aggressively to
protect consumers from unfair rate hikes and poor service.
The agreement calls for $8.18 million in rebates, $3.3
million in rate rollbacks and an $800,000 payment to the city to cover its costs. The
rebates amount to $60 per household, to be paid out over 12 months; and $20 per household
in rate rollbacks, also paid out over one year. This amounts to a $6.66-per-month decrease
off bills of approximately $35 to $40 -- the highest in the city.
"We feel good about the settlement. We're glad to
have it behind us -- it's good for both sides," said Dan Gold, president of
Century's cable division.
Century has had a tough relationship with local regulators
dating back to its entry into the community. It took over three franchise areas in the
city in the 1980s as part of its share in the breakup of Group W Cable, and the systems
were not in great condition at the time.
The operator inherited a 20-year-old, nonaddressable plant
capable of delivering only 36 channels. The traps made the system vulnerable to piracy,
and illegal hookups diminished its signal quality even further. Because of these factors,
the city of Los Angeles chronically received more complaints about Century than about any
other operator in the city.
The company finally upgraded to fiber optic, adding boxes
in some homes for the first time. The improvements allowed the operator to add about 20
Packaging them was what got Century into trouble, however.
The division carved out a handful of basic services for a tier that it called
"Century Select." The full, 12-channel tier was priced at $6.30 per month. A
smaller package was also available, or channels could be bought a la carte for 79 cents
Century ran afoul of the FCC, however, because some of the
"select" channels were not new additions -- they had been migrated from the
former basic package into the higher-priced tier.
The FCC negotiated a social contract with Century last year
to cover the rate dispute on behalf of its Southern California properties, which include
Los Angeles, Beverly Hills and Santa Monica. The contract called for $4.5 million in
rebates and rate adjustments.
However, Santa Monica continued local negotiations with
Century, and it eventually cut a deal that was better than the federal pact. The rebates
there resulted in a $7.91-per-month cut in basic and tier charges, dropping Century's
rate to $34.51 from $42.42.
And Los Angeles formally opted out of the FCC contract,
which would have granted only $1.6 million in rate relief to subscribers.
"We felt that we could get a better deal,"
The negotiations involved the highest layers of city
government, including Mayor Richard Riordan's office.
Fred Polner, an attorney who represents cities in rate
appeals to the FCC, said he couldn't recall such a large settlement.
"Too often, cities merely verify the mathematical
computations, and they are then frustrated by the results. The best action lies in using
the FCC's own rules in the body of case-law decisions to get behind the
numbers," Polner said.
Gold said the company will work with its billing vendor to
get the rebates out in a timely fashion and expressed in a way that's orderly and
well-understood by consumers. The city said the new rates are effective May 1.
When asked if the rate agreement, in part, was a
recognition that Century's rates were too high when compared with competitors --
especially with Pacific Bell's wireless service -- Gold said, "Absolutely
not." He added that the loss of revenue would not impact the introduction of new
services to the area.