Los Angeles Sues Time Warner Cable

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The Los Angeles Times reported over the weekend that the city of Los Angeles has filed a lawsuit against Time Warner Cable Inc. (NYSE: TWC) for allegedly cheating on its franchise fees to the city for more than four years.

According to the 24-page lawsuit, filed in U.S. District Court in Los Angeles, the city is seeking $9.7 million from Time Warner Cable, which it said “blatantly refused to live up to its obligations to the city” over city-owned rights of way, even though the cable provider got $500 million a year from customers there.

Time Warner Cable is said to owe some $2.5 million in franchise fees and public, education and governmental channel fees in 2008 and 2009, as well as $7.2 million in 2010 and 2011. Time Warner Cable has of course denied the allegations, and it said in a statement, “We are disappointed the city has chosen to bring this action, which we strongly believe is without merit.”

Los Angeles charges cable companies franchise fees of 5% of a cable operators’ revenues, in lieu of charging rent for the public right-of-way to install and maintain the necessary wires and equipment.

The lawsuit comes weeks after Time Warner Cable announced that it plans to hike rates on some Southern California customers by an average of about 6%.

Time Warner Cable shares were down fractionally in premarket trading Monday to $137.69, in a 52-week range of $89.81 to $147.28.