Los Angeles has taken the first steps toward requiring Adelphia Communications Corp. to refund as much as $5.5 million to subscribers there.
The city has demanded that the operator certify financial information provided to justify a 6% rate increase applied to basic-cable bills, starting in March 2002.
The MSO based its filing on cost data from 2000 and 2001. Information unearthed during the investigation surrounding Adelphia's corporate bankruptcy uncovered questionable bookkeeping by the operator during the last several years of management by its former majority owners, the Rigas family.
Because of the fraud attributed to the former owners, city auditors said, current Adelphia management couldn't certify past filings under penalty of perjury.
In a city audit, analysts assert Adelphia has overcharged for basic cable in at least two of five Los Angeles franchises. It may also have misstated subscriber numbers and overcharged for equipment, according to city analyst Patrick Collins.
For example, in cases where costs varied in a category, Adelphia always used the highest possible variable, said Collins.
On May 1, Mayor James Hahn directed the city's Board of Information Technology Commissioners to ignite a process that would roll back rate increases and provide rebates to an estimated 240,000 customers for a period covering 13 months.
"Adelphia has failed to justify the basic cable service rate increase it imposed on subscribers last year," the mayor said.
The BITC unanimously advanced the decertification effort.
Adelphia sells broadcast basic at $12.63 in suburban Van Nuys, but city computations put the appropriate rate at $10.99. In Eagle Rock, where the lowest-price tier includes broadcast basic and some satellite channels, Adelphia charges $28.54, instead of the $27.49 charge the city calculated.
But in two other franchises, West Los Angeles and Sherman Oaks, the city figures Adelphia is actually undercharging by 12 cents and 50 cents per month.
Adelphia local government affairs manager Larry Windsor said the company understands the need to recertify figures, and wants to work with the city. But local executives have been unable to comply with the demands.
This monetary dispute is separate from $3.8 million sought by the city in alleged unpaid franchise fees and interest, dating back to 1998.