Two Cities Hold Out

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In all of the United States, just two communities have said "no" to the Time Warner Inc.-America Online Inc. merger.

Most cities have said they see no benefit in taking action to block the deal, citing the federal government's authority over the merger. But regulators in Biddeford, Maine, and Cary, N.C., disagree with Time Warner's assertion that the merger does not constitute a transfer under franchising rules.

Those two communities have voted "no" to the change or held off on action, seeking concessions that Time Warner Cable has refused.

MSO spokesman Mike Luftman limited his comments with respect to municipal merger opposition, pointing out that more than 3,000 Time Warner Cable franchising authorities had approved the transfer. "That's a remarkable percentage," he said.

Officials in 21,000-resident Biddeford made a "modest request" for a second activated public, education or government (PEG) channel and about $18,000 in support, they said. For its part, Cary wants to resolve long-simmering rate disputes and an open-access promise.

Both were left dissatisfied by Time Warner's response.

"They just kept shoving a resolution, endorsing the transaction, at us, and saying, 'It's not a transfer, it's not a transfer,'" said Richard Rhames, a city councilman and chairman of Biddeford's cable committee. "It's just a corporation throwing its weight around. They're denying us the courtesy of telling it like it is."

Currently, all of Biddeford's PEG users share one channel. The city has programmed additional meetings and work sessions on that outlet, he said.

Time Warner Cable has rebuilt its system in Biddeford and a second channel exists, but is dark. City officials have suggested a .5-percent hike in franchise fees, which would raise about $8,000 a year, to support a second channel, plus about $10,000 for equipment.

The franchise hike would fit under the federal cap because of the collection method, he explained. U.S. law allows a maximum 5-percent fee on gross revenues; Biddeford collects 5 percent on only basic and expanded basic, Rhames said.

Time Warner refused the demand because the proceeding was not a franchise transfer. The MSO said the city's issues should be addressed during refranchising, which is not scheduled for three more years.

The council put its foot down and refused to endorse the resolution without concessions.

"We didn't even bring up customer-service issues," Rhames said. "We just tried to keep it modest."

As for Cary, it's not the first time the North Carolina town has refused to green-light a proposed transfer of its Time Warner franchise. In the late 1990s, the town declined to sign off on a transfer of the franchise inside the MSO's own corporate structure.

This time, the community of almost 100,000 is refusing to turn its franchise over to AOL unless federal regulators make open access a part of the deal and tougher customer service standards are imposed on the surviving entity.

Time Warner has come under fire in Cary for imposing regular rate hikes at a time when it can't answer customer calls in a timely fashion or keep its service appointments. The community has contested every rate increase going back to 1996.

Earlier this year, it finally received a decision from the Federal Communications Commission, which remanded the 1996 complaint back to the town.

It hasn't helped that one Cary's local broadcast stations is the only The Walt Disney Co.-owned ABC affiliate in the state. The station was yanked from the local Time Warner system last summer during a retransmission consent battle that saw Cary mayor Glen Lang complain about the situation during an interview on ABC's Nightline.

"We feel that Time Warner doesn't meet our community's needs," said Cary public information officer Susan Moran. "We believe if this deal goes through, we'll end up with a bigger pipe, which will also control content, and our citizens will be held hostage by an even bigger gorilla."

The community had become so disenchanted that it has spent $250,000 studying the possibility of bringing in a second telecom company to compete with Time Warner.

Although she would not identify the newcomer, Moran said city staffers will recommend next month that the town council consider bringing in a specific company that's interested in the market.

The possible competitor was likely attracted by demographics that show 66 percent of Cary residents are college educated and 85 percent have Internet access either at home or at work.

"Our goal is to make a recommendation to the council," Moran said. "We believe that the council wants to have a new system under construction within six months, and completed within two years."

At present, Time Warner operates under month-to-month renewals of a franchise that expired in 1998.

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