The long-simmering dispute between Jacksonville, Fla., and AT&T Broadband has exploded into full flame, as its city council has begun revocation of the MSO's franchise — and AT&T has countered by threatening a protracted legal battle.
Jacksonville's criticism began two years ago, in concert with a massive spike in consumer complaints to the city that AT&T blamed on a switch of computer systems.
As municipal regulators scruitinized the operator's activities, they repeatedly found such contract violations as failures to automatically credit customers for service interruptions, said Mayor John Delaney.
The operator also misrepresented the state of its upgrade to its approximately 250,000 South Florida customers, Delaney said.
"If they had just come to us and said, 'Look, we're not going to make the buildout. We need 18 months and we'll do [Home Box Office] free for a couple of months,' we'd have extended it," he said. "But they tried to hide it.
"Every time we'd catch them, they'd boost the payoff," added Delaney, referring to the amount of damages AT&T Broadband offered to pay to resolve the dispute. "They've ruined their goodwill in this city. If you can't punch their ticket for that, I don't know when you can."
Hits transfer, too
The mayor is so disgusted that at the Oct. 8 meeting, he introduced an ordinance to revoke the franchise of the operator, still legally known as MediaOne of Greater Florida Inc. (AT&T acquired the system through its purchase of MediaOne Group Inc.)
The revocation also would preclude transfer of the system to Comcast Corp., which is in the process of merging with AT&T Corp.'s cable unit.
In June, the two parties thought they had hammered out an agreement in principle that would end the service dispute and open the door for a franchise transfer, both sides said.
But the accord fell apart over details — specifically, the role the city would take in a pending lawsuit filed by a local attorney on behalf of Jacksonville subscribers. That suit, filed in May by attorney Norwood Wilner, seeks damages for AT&T Broadband consumers based on allegations of breach of contract, falsified performance reports and overcharging.
The city "changed the rules midstream," charged Ellen Filipiak, AT&T Broadband senior vice president for Florida, at an Oct. 9 press conference.
The MSO "owned up to the problems" it caused for consumers, she said, adding that AT&T took several steps to address subscriber dissatisfaction. Rates were frozen, though that ended last month with a 7.5 percent rate increase.
Filipiak said that early on, she had disclosed incorrect information on the status of the system upgrade — a faux pas attributed to confusion over language in the franchise. But the project has continued throughout negotiations, she added, and is now 91 percent complete.
The system has met telephone standards for two quarters in a row, she said, and service appointments are met on time 90 percent of the time.
AT&T is prepared to commit to a Sept. 29, 2003, completion date for its rebuild and would except damages assessed by the city for any day past that deadline, she said.
Though the revocation vote has frustrated AT&T Broadband, it will act on one of the elements of the proposed agreement, Filipiak said. The MSO will make a gift for which the city had lobbied: a $50,000 donation to the Alliance for World Class Education.
But the rest of the terms are "off the table if the city revokes the franchise, and they should expect a protracted legal fight," she added.
Filipiak and an AT&T Broadband attorney stressed that the class-action suit is a separate issue, but both said the company had been led to believe the city would remain "neutral" on the matter. The suit was filed in state court in Jacksonville in May, but plaintiff's attorneys want it certified as a federal class action.
"The city has been clear and consistent. Any deal can't be used as a bar or defense against a class-action suit," said Matt Leibowitz, special counsel to Jacksonville. "The city has been very vocal on this point. The city is not going to knowingly do something adverse to citizens."
With respect to customer service, Leibowitz said: "I give Ellen Filipiak a lot of credit. Complaints are down in absolute numbers."
But calls peaked at 1,200 a month, and still ring in to the tune of 300 to 400 a month, he added.
"People are not happy," Leibowitz said.
Later this month, AT&T Broadband officials will argue that the lawsuit should be thrown out of court, because consumers have not exhausted all their administrative remedies. City officials believe the MSO does not want a franchise settlement that would bolster plaintiffs' damage claims.
And city officials don't want AT&T Broadband to use a settlement to offset any damages that a court might award consumers.
Standing in the background are attorneys for Comcast Corp., whose executives will run the post-merger AT&T Comcast Corp. The Philadelphia-based MSO now finds itself in a bee's nest in Florida.
Billing questions raised by Jacksonville have prompted a statewide investigation. And Broward County, Fla., consumers filed a class-action suit in federal court earlier this year, accusing AT&T Broadband of "electronic redlining.
Comcast will also inherit some tough concessions AT&T Broadband had to make in some communities, including Miami, to convince skeptical officials of the benefit of a transfer.
Filipiak said AT&T would provide continuity of service to South Florida even if the city follows through with revocation.