Twenty-one cities are suing Time Warner Cable Texas, LLC and Charter Communications
The cities are seeking unpaid franchise fees in excess of $1 million and seeking a judgment for all other relief that they might be entitled.
The lawsuit was filed in the 170th Judicial District Court.
Cities included in the lawsuit:
- City of Allen
- City of Arlington
- City of Bedford
- City of Belton
- City of Carrollton
- City of Cedar Hill
- City of Colleyville
- City of Coppell
- City of Dalworthington Gardens
- City of Euless
- City of Grand Prairie
- City of Harker Heights
- City of Hutto
- City of Irving
- City of Killeen
- City of Lewisville
- City of Mesquite
- City of Rockwall
- City of Rowlett
- City of Waco
- City of Wichita Falls
The venue for the lawsuit is in McLennan County because all or part of the events or omissions forming the basis of the lawsuit occurred in that county. The lawsuit states McLennan County is also a fair and convenient venue for the plaintiffs and defendants.
The lawsuit provided the following background on the case:
For many years, cable companies were the sole providers of wire-based video programming to municipal residents. Until 2005, a cable company wanting to serve customers within a Texas municipality did so by obtaining a local franchise agreement from that city. Federal law required a local authority, like a state or local government, to issue a franchise agreement. Texas law provided for compensation for the use of the city's rights-of-way.
Prior to 2005, each of the cities negotiated a cable franchise agreement with the defendants and other cable providers. In exchange for access to the municipal rights-of-way necessary for the deployment of the cable system infrastructure, Charter and other cable providers paid the cities a franchise fee, among other in-kind contributions, including the operation of public, educational and government access channels.
Because of the ever-growing technological capabilities, telecommunications companies also have the ability to provide video programming. Those companies wanted the local franchise system reformed so they would have to obtain hundreds of franchises to implement their new technologies.
In 2005, the Texas Legislature passed into law Chapter 66 of the Texas Public Utility Regulatory Act. It fundamentally changed the way cable providers gained access to municipal ROW.
In September 2005, the state of Texas allowed cable providers to provide cable in a municipality pursuant to a State Issued Certificate of Franchise Authority (SICF). Local franchise agreements were no longer required or authorized.
An entity seeking to provide cable services in Texas must, therefore, apply to PUC for a SICFA. PUC is obligated to issue a SICFA provided the applicant:
- Agrees to comply with all federal laws and regulations
- Agrees to comply with all city and regulations regarding the use and occupation of the public ROW, including police powers of the cities
- Provides a description of the service area footprint to be served within the municipality
A SICFA authorizes a cable provider to use municipal ROW so long as the cable provider makes a quarterly franchise payment to each city in which it provides service.
Charter began providing service to residents in the 21 cities between 2006-2011.
Between at least Jan. 1, 2014, and the present, Charter has failed to remit franchise fees to the cities on some or all of the following basis:
- Reconnect fee revenue
- "Commercial Trouble Call" revenue
- "Under-reported Advertising" revenue
- Incorrect calculation methodology
- FCC user fees
- Late Fees
- In-kind revenue
As a result of Charter's failure to properly account for and remit the franchise fees as required by PURA, the cities suffered damages.
Due to the fact that Charter owes and will continue to owe the cities franchise fees, there is an actual and present justiciable controversy regarding Charter's legal obligations and responsibilities to the cities under PURA. The facts alleged show that there is a substantial controversy between the cities and Charter regarding the classification and calculation of "gross revenue" under PURA.
Charter must include in its calculations all:
- Reconnect fee revenue
- "Commercial Trouble Call" revenue
- "Under-reported Advertising" revenue
- Incorrect calculation methodology
- FCC user fees
- Late Fees
- In-kind revenue
As a result of Charter's failure to correctly include these revenues in the calculation of franchise fees, the cities have not received the total franchise fees each of them is entitled to under the act.
The cities seek a declaration from the court that for a period of 2014 through the present and into the future, to extend that such dealings are governed by Chapter 66 of the act:
- All reconnect fees collected by Charter from cable subscribers
- All "Commercial Trouble Call" fees
- FCC user-fees
- Late Fees
- In-kind services revenue
Charter must provide support for quarterly payments as required under PURA.
Charter has not properly calculated the franchise fees owed to the cities. They also used an incorrect methodology to calculate revenue and the franchise fees owed to the cities. Those actions are in violation of PUC sections 66.005 and 66.006 of the Texas Utilities Code.
As a result of Charter's unlawful conduct, Charter holds money that in equity and good conscience belongs to the cities. The cities have been damaged by Charter's conduct and Charter should be ordered to account to remit those funds to the cities.
The cities seek a declaratory judgment that the definition of "gross revenue" found in Chapter 66 of the act, includes:
- Any amounts of advertising revenue and commissions shown on Charter's books and records
- Any other amounts of contra-revenue
- Any late fees
- Any FCC end-user fees
- Any in-kind services revenue
There is also a declaration that Charter has an ongoing obligation to remit all franchise fees as required by Chapter 66 of the act.
The cities asked the court to set this matter for hearing and upon final hearing, award the cities actual damages, pre- and post-judgment interest, costs, attorney's fees and such other and further relief to which they are entitled at law.
The cities also asked the court to grant them the declaratory judgment that was in the petition. They also seek all available pursuant to section 66.015 of the Texas Utilities Code.
They also demand judgment for all other relief to which they are entitled.
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