LOS ANGELES (CN) - Though it enjoys a virtual monopoly of the Los Angeles cable-television market, Time Warner Cable has withheld nearly $10 million in fees, the city claims in court.
In a federal complaint filed Friday against Time Warner Cable and its affiliates, Los Angeles claims that the cable company makes $1 billion every two years providing cable services to city residents but "stubbornly" refuses to pay franchise fees or support local public programming.
Angry cable customers filed two lawsuits against Time Warner Cable in 2013. In the first, a class claimed that Warner Cable's $11 billion deal to broadcast Dodgers and Lakers games was passed on to subscribers.
Customers in a second lawsuit took legal action after the cable company dropped Showtime and CBS from its lineup, as part of a bitter dispute over fees.
The latest lawsuit alleges that Los Angeles unsuccessfully tried to resolve its dispute with the cable company out of court.
"The city of Los Angeles enabled Time Warner to make billions and in turn they shortchanged the taxpayers millions," City Attorney Mike Feuer said in statement. "This is the day where we stand up and say enough is enough."
Time Warner's franchise has let it lay network cables beneath city streets and on telephone poles.
"These franchise fees, though insignificant as a percentage of TWC's Los Angeles-generated revenue, are important to the city's general fund, representing dollars which can be expended on core services such as police and fire protection, sanitation, and the operation of the city's parks, senior centers, and libraries," the lawsuit states, abbreviating Time Warner Cable.
Time Warner likewise avoided an agreement to provide nonmonetary support to public access studios for city residents, the city alleges.
Los Angeles calls the franchise fee and commitment to public programming "modest" and a "small price to pay for the enormous financial benefits accruing to Time Warner from its control over the city-wide cable market."
It says Time Warner refused in 2008 and 2011 to pay more than $5 million in fees.
"Not coincidentally," Time Warner's stance coincided with the enactment of a California law that encouraged competition from other pay TV service providers, like AT&T and Verizon, the lawsuit claims.
That legislation required Time Warner to support new public access studios, the city adds.
Los Angeles also filed suit in 2008 after Time Warner acquired the bankrupt business, Adelphia cable systems.
"The acquisition had resulted in TWC obtaining control over more than 90 percent of the customers in the Los Angeles cable television market, but had also been accompanied by allegations of unexpected rate hikes and severe disruption in the continuity and quality of service, among other wrongful consumer practices," the complaint states.
Time Warner allegedly ducked its obligations to the city by arguing that it had never agreed to provide the bulk of support for public access studios. But the city contends that the cable company's refusal is grounded in its increased obligations to support public access studios under California law.
"Perhaps not by coincidence, TWC's precipitous and wrongful withholding of the franchise fee occurred less than eight weeks before the end of Los Angeles' 2010 - 2011 fiscal year, exacerbating the city's well-publicized fiscal crisis, and further reducing the city's ability to pay for its already diminished core services," the complaint states.
Los Angeles demands Time Warner Cable pay $9.6 million in fees, including $2.5 million for the 2008 and 2009 franchise fees, as wells as public, governmental, and educational fees. The same fees allegedly totaled $7.1 in 2010 and 2011.
Time Warner's actions violate the Digital Infrastructure and Video Competition Act of 2006, the California Public Utilities Code and the False Claims Act, the city alleges.
The company defended its conduct "as a major job creator, tax contributor and service provider in the city of Los Angeles."
"We are disappointed the city has chosen to bring this action, which we strongly believe is without merit," Time Warner said in a statement.
Named defendants are Time Warner Cable; Time Warner Cable Pacific West; Time Warner Cable Enterprises; Time Warner NY Cable; TW NY Cable Holding; and Time Warner Entertainment Advance/Newhouse Partnership.
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