Time Warner Cable countersues L.A. over franchise fees

Time Warner Cable (NYSE: TWC) is countersuing the City of Los Angeles after the city filed suit against the MSO claiming Time Warner Cable owed the city millions of dollars in unpaid franchise fees.

The city sued Time Warner Cable in March, claiming the MSO owed the city $2.5 million in franchise and PEG (public, educational and government) fees from 2007-2008 as well as $7.2 million in fees between 2010 and 2011. Time Warner Cable's counterclaim, filed in federal court on Thursday, argues the MSO has collected PEG fees from its customers since 2009 but argues that millions of those dollars have not been used to construct TV facilities as promised.

"The city already has collected from TWC and its customers 5% of its gross cable revenues in 'franchise fees,' the federal and state maximum, as well as an additional 1% of gross revenues in PEG fees since 2009," Time Warner Cable said in its suit. "Not only do TWC's customers not owe the city any more money; they are entitled to refunds of overpayments to the city."

Franchise fees and how municipalities use those funds have long been controversial, with some cities creating elaborate local origination studios and others putting the money collected by cable companies into their general funds. The funds have allowed communities to install high-definition cameras with digital editing suites, turning once primitive studio spaces into full-blown studio centers. But some customers have questioned the value of those fees and the uses of those studio production facilities.

For more:
- see this Variety article
- see this Boston Globe article

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