Cable Deal a ‘Mixed Blessing’
Officials in Los Angeles and elsewhere are concerned about a key element of the proposed sale of Adelphia to Time Warner and Comcast, because it would give one cable provider a near-monopoly in communities that now are served by several companies.
At this point, their doubts appear unlikely to stop the mega-deal. But they could force the cable giants to make specific commitments to upgrade technology and improve customer service.
Under the complicated deal, which was announced in April, Time Warner would go from providing service to about 20% of Los Angeles -- mainly in the west San Fernando Valley -- to covering 98% of the city.
The deal would also bring major changes for cable customers across Southern California: Nearly all Comcast and Adelphia customers in Los Angeles, Orange and Ventura counties, as well as parts of the Inland Empire, would see their cable service switched to Time Warner.
Similar swaps would occur across the nation, giving Time Warner market domination in Ohio and the Carolinas as well as Southern California. Comcast would take over swaths of Florida, New England and Pennsylvania.
With only one operator in town, some cities say, they would lose their ability to compare the performance of cable operators against each other -- information they use to pressure companies to improve their service. Moreover, local officials said dealing with one dominant operator could make it harder to extract generous franchise agreements. While the federal government caps the amount that municipalities can charge in franchise fees, cities have often sought such bonuses from providers as free Internet hookups for schools and fire stations.
The Time Warner deal would not reduce the number of choices cable subscribers have in Los Angeles, because each neighborhood is assigned a particular firm. But officials in L.A. believe that having more than one provider in the city benefits consumers.
The Adelphia sale must be approved by federal regulators, who are considering it. But municipalities have the final word on the swaps.
L.A. returned the first applications from Time Warner, Comcast and Adelphia for the transfer because officials said they didn’t give enough information.
Last week, the agency that oversees cable service for Charlotte, N.C., and surrounding communities issued an initial denial of Time Warner’s bid to absorb Adelphia’s franchises, though the company is allowed to refile an application.
“There will be a loss of things such as yardstick competition within the city,” said Dean Hansell, president of the Los Angeles Board of Information Technology Commissioners. He said that the city in the past has used Time Warner’s superior customer service to pressure Adelphia to improve the way it deals with customers.
Federal regulators are expected to complete their review of the Adelphia sale in December, about the time Los Angeles is set to decide on the Time Warner swap. If the city ultimately rejects the idea, Time Warner might have to go back to the drawing board and present a new plan or take the city to court.
It’s possible that the cable giants and city regulators could work out a compromise that would more specifically spell out what Time Warner would do to improve customer service and technology citywide.
Some members of the City Council, which would have the final say on the swap plan, also expressed concern about Time Warner’s dominating the city’s cable service.
“It’s a decidedly mixed blessing,” said Councilman Jack Weiss. “The good news is, they’re not Adelphia. I don’t see how an operator could have treated its customers more poorly than Adelphia over the past few years.” At the same time, Time Warner is “going to become essentially a monopoly. I can tell you this: A lot of people are going to do what I just did and switch” to satellite service.
The debate comes amid increased focus in Los Angeles on the quality of cable service. In the last few weeks, customers flooded Adelphia with complaints after the provider accidentally fed the Spanish simulcast of “Desperate Housewives” over its main audio broadcast.
The city, which gets about 2,000 complaints from cable customers a year, recently imposed some of the nation’s toughest rules, giving officials the ability to fine operators for poor service.
Time Warner insists that the Adelphia sale would be a boon to customers, allowing providers to achieve economies of scale and thus making it easier to provide improved digital cable service to more areas.
Time Warner and Comcast have argued to federal regulators that Adelphia, the nation’s fifth-largest cable provider, has lagged in improving service. They also say concerns about a lack of competition are unwarranted, because the cable giants are in a pitched battle for customers with satellite television, which is not regulated by local governments. Local telephone companies such as Verizon and SBC are gearing up to compete against local cable companies in providing video services.
Moreover, Time Warner and Comcast say many cities, including Boston, San Jose and San Francisco, are already served by a single cable provider.
Time Warner spokesman Deane Leavenworth said the purchase is a win for L.A. subscribers. The city’s own records show that the firm has a reputation for good customer service, he said, adding that the deal would only speed up the deployment of advanced services, such as digital and high-definition cable service, to the rest of the city.
“For years, Time Warner has had the best customer service record and lowest level of complaints to the city of any major cable operator in Los Angeles,” he said.
Los Angeles officials agree that Time Warner has provided good customer service for the West Valley areas it now serves.
But “they are acquiring areas where the customer service is unacceptable, and what are they going to do to address those issues?” Hansell asked.
When cable TV was introduced to all of Los Angeles decades ago, the city created 14 distinct cable regions. The hope, Hansell said, was to have a variety of providers so officials could compare service, technology, programming and pricing.
But the industry has consolidated, with smaller companies being bought out by the likes of Time Warner and Comcast.
“There’s a lot of political leverage that’s lost,” said Cheryl Leanza, principal legislative counsel for the National League of Cities. When cities have only one major provider, she said, they become stuck with a “take it or leave it transaction.”
But Los Angeles Councilman Bill Rosendahl, a former Adelphia executive, said the city can get top-quality cable service even with just one provider.
“The old monopoly mind-set that we had five years ago isn’t as prevalent today,” he said. “When you have competition from [satellite TV and phone companies], the cable operators have to be careful how they keep their market share.”
Times staff writer Steve Hymon contributed to this report.