L.A. OK with Time Warner

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The Los Angeles City Council has approved the largest and perhaps most complicated transaction related to the sale of Adelphia Communications Corp.: the transfer of ownership of four city cable franchises from Adelphia to Time Warner Cable and Comcast Corp. and the swap of those systems, plus six other properties, from Comcast to Time Warner.

The council approved the transactions Wednesday.

When the financial portion of the Adelphia acquisition is closed, Time Warner will swell from one Los Angeles franchise to 11 of the city’s 14 franchises. Only the system serving San Pedro in the city’s port area and operated by Cox Communications Inc., and a tiny Malibu franchise operated by Charter Communications Inc., will remain outside of Time Warner’s control.

Time Warner’s converged city holdings will serve 599,000 customers in the city from former Adelphia businesses in Boyle Heights and the east San Fernando Valley, Sherman Oaks and Eagle Rock neighborhoods, as well as Comcast’s Sylmar, Sunland/Tujunga, Hollywood/Wilshire, Westchester, South Los Angeles and Wilmington systems.

After Time Warner submitted its transfer applications June 16, city officials expressed some concern about giving the MSO near-monopoly power in the city. In the end, however, council members were swayed by the company’s good service record in its west San Fernando Valley system.

Consultants also raised the issue of financial responsibility. Time Warner is creating a new business division out of the new properties, so officials sought, and were given, a corporate guarantee from parent Time Warner Inc. that it would be responsible for the continued operation of this cable division.

Elected officials were also concerned about potential job losses due to the merger and system swap. According to a report from the city attorney to the City Council, Los Angeles received a commitment by Time Warner to offer jobs to all Adelphia and Comcast frontline personnel within 40 days of the close of the transaction. Those jobs are contingent on clean background checks and drug tests, however.

The three operators involved in the transaction also agreed to a global settlement to resolve any past allegations of franchise breaches, such as underpaid franchise fees. Comcast and Time Warner will each pay $350,000, according to the city attorney’s report. A different payment was negotiated with Adelphia over past service lapses and fee underpayments. With the approval of a bankruptcy court, that operator will pay $4.5 million.

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