L.A. Grants AOL Cable Rights After Heated Debate

Following a heated hearing Friday, Los Angeles regulators voted to approve the transfer of Time Warner Inc.’s local cable franchise to America Online Inc.

The move, necessitated by the pending merger of the two companies, is part of a nationwide review of Time Warner’s cable franchise rights. As cities across the country consider the transfers of these rights, the debate over “open access” of cable systems is resurfacing after a period of relative quiet.

While Time Warner maintains that this transfer process is proceeding smoothly, the hearing in Los Angeles was contentious.

Local regulators used the opportunity to try to ensure that AOL lives up to its commitment to open Time Warner’s high-speed cable networks to competing Internet access providers. Time Warner interpreted those conditions as mandating open access, which the company claims is beyond the local governments’ jurisdiction.

During Friday’s hearing, commissioners chastised AOL for switching sides in the long-running debate now that it is merging with the nation’s largest cable provider. Only one of the five commissioners objected to the approval. Sharon Rubalcava said the city does not have the authority to make the transfer conditional on an open-access provision.

The city’s Information Technology Agency says that it is not mandating open access but only requiring the companies to carry out promises they have made to federal officials.

Still, the conditions are more specific than those required during other recent transfers. Those transfers have all included boilerplate language requiring the cable operators to comply with an open-access policy if and when one is developed by the city, said Alex Padilla, the chairman of the City Council’s information technology committee. He said the city prefers a uniform policy rather than deciding on a case-by-case basis.

The City Council, which must still vote on the Time Warner transfer, is separately expected to vote on a broad, industrywide policy for open access in the coming months. The city has been studying the issue for the last two years.

Whether municipalities have the jurisdiction to require open access has been a matter of debate since AT&T; sought to take over cable systems as part of its acquisition of Tele-Communications Inc. After the TCI-AT&T; deal was announced two years ago, AOL led a grass-roots crusade urging cities to force cable companies to lease space on their high-speed cable systems to Internet service providers other than their own.

Several cities voted in favor of “open access,” including Portland, Ore., which is battling AT&T; in court. AT&T; contends that only the Federal Communications Commission has the power to decide the issue.

The Information Technology Agency, which has recommended letting the market mature before shaping a policy, took a slightly harder stance during the debate Friday, signaling its frustration with both the cable industry and AOL’s shifting positions.

“I have been struck by how disingenuous both companies have been in this debate and would like you now to provide a leadership position in providing open access to show the other cable companies why they were wrong to oppose it,” Rohit Shulka, vice president of the board of the Information Technology commission, told representatives of AOL-Time Warner. “AOL argued vociferously in the AT&T; transfer to have this [open-access] language in the agreement and now you are opposed to it?”

In approving the transfer, the city requires AOL and Time Warner to comply with the terms of their own February memorandum of understanding on open access, which they filed with the FCC. The memorandum outlines that the two companies will strike a commercial agreement for carrying AOL on the Time Warner cable systems.

Such an agreement is imminent and will be used as a template for agreements with other service providers.

“We have always been in favor of open access, but we’ve never been in favor of forcing it upon cable operators,” said Paul Janis, the agency’s assistant general manager. He said he didn’t understand why Time Warner objected to a provision it was already committed to.

“This ordinance would allow retroactive objection to the transfer,” said Eric Brown, vice president and general manager of Time Warner’s northern region, which covers 120,000 customers in the West San Fernando Valley.

Brown believes the city can only object to a transfer based on the legal, financial and technical capability of the buyer, in this case AOL.