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Adelphia Deal Sparks Lawsuit Duel

3/31/2002 7:00 PM Eastern

Adelphia Communications Corp.'s decision to buy Verizon Communications Inc.'s cable-television systems has prompted a litigation battle in California.

After officials in Thousand Oaks, Calif., indicated they would sue Adelphia over its proposed purchase of its overbuild competitor's plant, the Coudersport, Pa.-based MSO beat them to the punch with a federal lawsuit of its own.

Adelphia announced Feb. 28 that it would buy the properties, including systems in Pinellas County, Fla., and in California. Terms were not revealed, but observers pegged the estimated purchase price for all of Verizon's systems at $127 million to $135 million.

Problems immediately arose in California. Adelphia's purchase there — which includes plant in Thousand Oaks, Camarillo, Port Hueneme and Oxnard — will replace its own, older plant and eliminate a cable competitor.

In Florida, Adelphia becomes an overbuilder, competing with Time Warner Cable.

Thousand Oaks blasted the intended sale, quickly firing off letters to both Verizon and Adelphia in which it warned both companies they were in violation of local franchises.

Verizon is required to give the city 60 days notice if it intends to shut down. Thousand Oaks has right of first refusal to buy the plant.

Adelphia maintains it does not need to apply for a franchise transfer, since it will not operate the Verizon cable system. It plans to move its customers to the Verizon system and wreck out its own, aged plant, for a quick system upgrade.

Thousand Oaks indicated its intent to sue over the purchase during a meeting with Adelphia last week.

MSO strikes first

Before the City Council was able to vote on the lawsuit, though, Adelphia made a legal move of its own. On March 21, the MSO filed suit in U.S. District Court for the Central District of California.

Adelphia's suit, which names Thousand Oaks and city manager Maryjane Lazz as plaintiffs, accuses the municipality of violating the MSO's First Amendment rights.

Later that same day, the Thousand Oaks City Council voted unanimously to sue to block the Verizon sale. The city filed its suit March 25.

"It's truly unfortunate that the residents of Thousand Oaks potentially will be impacted by a potential delay in services on plant purchased by Verizon," said Adelphia divisional vice president Lee Perron. "We'd prefer to sit down, hear their concerns and move forward. That's what we're doing in other cities."

The city wants to preserve competition, but Perron notes it still exists in that market, thanks to direct-broadcast satellite. DBS providers have a 19 percent penetration rate in Ventura County, Perron said.

Adelphia needs the fiber-rich Verizon plant to quickly upgrade its Ventura County operations, so it can offer customers a channel lineup comparable to DBS.

September