L.A. Probing Marketers of Dish Network

The city of Los Angeles is investigating the telemarketing practices used to sell Dish Network satellite TV service to current customers of troubled Adelphia Communications Corp., the city’s second-largest cable provider, which filed for Chapter 11 bankruptcy protection in June.

City Atty. Rocky Delgadillo said his office is trying to determine the company responsible for a telemarketing campaign that over the last two weeks has warned many Adelphia customers, through recorded messages at their homes, that the cable company’s subscribers are experiencing interruptions and blackouts as a result of its financial troubles.

The messages begin by pointing out that Adelphia has filed for bankruptcy protection as a result of one of the worst accounting scandals in corporate history. One message claims that “Adelphia customers are already reporting service outages and blackouts. In an effort to minimize the potential impact to California residents, we are offering to replace their existing cable equipment at no cost with digital satellite TV service and high-speed Internet access.”

Adelphia says it has received scores of calls from alarmed customers who are confused by the messages and by the claims made by live telemarketers answering the toll-free lines.

According to Adelphia, one employee who called the toll-free number was told by a sales affiliate named Ryan that his company “made a deal with Adelphia to basically take over their customers.”

The phone mailbox that answers if the toll-free lines are busy identifies the company as Satellite Solutions.

Two telemarketers answering the toll-free numbers over the last two weeks described Satellite Solutions as a promotional company hired by Dish, which is owned by EchoStar Communications Corp., the nation’s second-largest satellite provider.

EchoStar spokesman Marc Lumpkin said the Littleton, Colo.-based company does not conduct telemarketing campaigns and that retailers of its Dish service nationwide are required to follow sales solicitation guidelines that prohibit false claims or any other violation of the law. He said the company has several retailers named Satellite Solutions and is investigating the situation.

“Dish Network will take disciplinary action up to termination for retailers who fail to comply” with the law, he said.

According to a transcript provided to the city by Adelphia, another message tells cable customers, “You will be experiencing interruptions in your service due to an immediate stop of all Adelphia services.”

The messages end with toll-free telephone numbers to call for satellite service.

“They are lying to our customers, using scare tactics that are below the belt and probably illegal,” said Bill Rosendahl, vice president of political affairs for Adelphia. “In some cases, they are misrepresenting themselves as part of an Adelphia transition team.”

EchoStar’s plan to become the nation’s only satellite service by merging with DirecTV Inc., the industry leader, is being reviewed by federal regulators.

Since Adelphia’s bankruptcy filing, both DirecTV and EchoStar have launched campaigns targeting the cable operator’s customers. The campaigns offer special discounts to customers who switch from cable to satellite.

EchoStar launched another special promotion late last week in response to recent price increases by Adelphia and other cable operators.

“We’re hyping that our prices are the lowest in the nation,” said Lumpkin, adding that cable rates have increased by 45% over the last six years.

Lumpkin said Adelphia had recently raised rates in West Palm Beach, Fla., by 20%.

Delgadillo said he has asked Los Angeles County’s Department of Consumer Affairs to assist with the city’s investigation.

“We don’t know who the telemarketers are,” Delgadillo said. “But we’re looking into violations of the state’s business and professional codes that prohibit false claims in these sales pitches. We’ve been unable to substantiate blackouts among Adelphia customers, so this could be a serious misrepresentation.”

Delgadillo said if violations were found, the perpetrator could be fined $2,500 for each customer contacted. He cautioned, however, that the investigation “may prove to be unfounded.”

Adelphia serves about 250,000 cable customers in the city and an additional 1 million throughout Southern California. Customers in areas including Huntington Beach, Redondo Beach, Santa Monica, Eagle Rock, Van Nuys and Riverside received the special satellite offer, according to anecdotal evidence collected by Adelphia and The Times.

The city has been monitoring Adelphia closely since the bankruptcy filing, worried about the upcoming renewal of the company’s five cable franchises. After the bankruptcy filing, Delgadillo put Adelphia on notice, threatening to revoke the company’s franchises if service deteriorated or Adelphia failed to pay city franchise fees on time.

The company made its most recent $1.7-billion payment by the July 31 deadline. On Friday, when Adelphia’s five franchise licenses expired, the city granted a 45-day extension to give both parties more time to hammer out a new agreement.

Adelphia said this is not the first questionable assault on its subscribers since its bankruptcy filing and the arrest of five former executives about two weeks ago. “We’ve had this issue in other parts of the country, but we weren’t able to pinpoint the problem,” said Adelphia general counsel Randy Fisher. “I’m happy that the city of Los Angeles is on the forefront, looking into practices that appear to require a second look.”

One Adelphia customer who called the toll-free number said a sales representative claimed she would lose her service “because [Adelphia’s] CEOs were just arrested today.”

Former Adelphia Chief Executive and founder John Rigas and four other former company executives were arrested by federal authorities July 24 on criminal charges related to personal loans of $3 billion that were not disclosed to shareholders.

The executives were ousted in May, and the company has since been run by independent board members and led by one of them, Erland Kailbourne, who has become interim chief executive.

Kailbourne has promised to maintain the level of service to the company’s 6 million customers nationwide during the bankruptcy proceedings.