The Santa Monica City Council adopted an ordinance Tuesday, January 24th, which allows Time Warner Cable and Comcast Cable — subject to certain conditions — to acquire Adelphia’s Santa Monica cable television system.
Time Warner and Comcast will acquire Century-TCI California, LP (doing business as Adelphia Cable Communications), which controls the Santa Monica cable system.
An application filed by Century-TCI with the Federal Communications Commission last year outlined a plan to transfer Adelphia’s partnership interest in the cable television system to Comcast and then to Time Warner.
“The proposed transaction is extraordinarily complex,” said Kathryn Vernez, government relations assistant to the Santa Monica city manager.
“Adelphia filed for bankruptcy protection in 2002 as a result of significant financial fraud by Adelphia management. The proposed corporate ownership of the city franchise will be one of several newly formed companies which have been formed solely for Adelphia sales transaction purposes,” Vernez said.
Under last year’s “Asset Purchase Agreement,” Comcast Cable Holdings, LLC — a subsidiary of the Comcast Corporation — will purchase Adelphia’s partnership interest in Century-TCI.
On the same day — April 20th, 2005 — Comcast Cable and Time Warner Cable (an entity of Time Warner Incorporated) entered into an “Exchange Agreement” in which Comcast will assign Century-TCI assets to CAC Exchange I, LLC.
At the conclusion of this action, 100 percent of CAC’s outstanding equity securities will be transferred to Time Warner Cable.
Century-TCI/Adelphia’s control of the cable television system in Santa Monica expires October 2007.
Approval of the system’s transfer is void if the transfer to Time Warner Cable is not completed.
“While the city had requested assumption of the franchise obligations by the ultimate parent corporation Time Warner Incorporated, Time Warner Cable has unconditionally guaranteed the performance of CAC,” Vernez said.
Time Warner Cable currently assumes Century-TCI/Adelphia’s obligations in Santa Monica.
At the previous request of the City Council, city staff reviewed the legal, technical, and financial implications of the transfer before the ordinance was written.
City Council members requested that Time Warner Cable resolve noncompliance issues with cable communications operations such as safety violations.
Safety code and construction violations involve the grounding of drops to cable subscribers’ homes, upgrades to multiple-dwelling units, and upgrades to single-family homes.
Adelphia has fixed the violations, but Time Warner Cable is obligated to follow a repair and maintenance program with city officials establishing an 18-month “cure period” to ensure compliance.
Other requests by the City Council were that cable service not be suspended or degraded, facilities on the public right-of-way be well-maintained and in compliance with all codes, and construction in the public right-of-way not be disrupted or delayed because of financial problems.
Time Warner Cable agreed to provide the same level of customer service to Santa Monica customers that are provided to customers in Los Angeles.
Adelphia agreed to a settlement payment of $950,000 to the City of Santa Monica to resolve disputes related to owed franchise fees, utility user taxes, fees and penalties, and construction violation fines.
“The settlement resolves all outstanding financial claims of the city with the city receiving $950,000,” said Steve Stark, Santa Monica chief financial officer. “Of that amount, $63,152.16 is payment for Adelphia’s fiscal year 2005-2006 business license.”
Stark said the remaining funds would go into the General Fund Miscellaneous Revenue account.