|Time Warner Sued by Fed-Up Customers|
|By SUSANNA KIM (@skimm)||Aug 16, 2013, 12:47 PM|
Time Warner Cable customers are waging a legal war against the cable company for dropping CBS while the companies bicker over cable fees.
Three plaintiffs filed a lawsuit on Wednesday against Time Warner Cable Inc. in Los Angeles County Superior Court. They hope to build their case into a class action with Time Warner Cable subscribers in California starting from Aug. 2, 2013, when the cable company began to block out four channels in the state.
About 3.5 million customers in areas of Dallas, Los Angeles and New York don't have access to CBS programming such as "Under the Dome" and "Big Brother."
Time Warner is battling over fees it pays to CBS to run its programming. The cable company has marketed aggressively to customers, encouraging them to complain to CBS.
The lawsuit filed this week cites Time Warner's "failure" to provide its cable subscribers with broadcast channels CBS, Showtime and Movie Channel "while nonetheless continuing to collect from subscribers, and retain the full monthly service fees for monthly cable subscription."
Lead plaintiff James Armstrong of Hermosa Beach, Calif., accuses Time Warner Cable of breach of contract, unfair business practices, unjust enrichment and unconscionability, in the suit.
Armstrong and his attorney, Elaine Nguyen of Weintraub & Selth, declined to comment.
From August 2011, Armstrong has subscribed to Time Warner's enhanced basic cable services and also Showtime, which is bundled with the Movie Channel, the lawsuit states, in addition to subscribing to Time Warner's bundled package for Internet services. Showtime Networks Inc. is a subsidiary of CBS Corporation.
Prior to its dispute with CBS, according to the lawsuit, Time Warner Cable "utilized Showtime as a significant incentive to induce customer subscriptions of general cable services through advertisement and marketing materials."
Time Warner Cable, incorporated in Delaware with its main place of business in New York City, is the second-largest operator of cable television systems in the U.S., according to the lawsuit, and the largest cable provider for all of Los Angeles and Orange counties. The company has "millions of subscribers," the lawsuit says.
A spokeswoman for Time Warner Cable declined to comment to ABC News.
In a statement on its website, the company said, "CBS is making outrageous demands for the right to continue carrying their channels. We are holding the line against broadcasters who continue to make their stations available free over-the-air and online while they demand more from cable customers without delivering any additional value."
CBS has said, "We remain ready to negotiate in good faith when they are."
Craig Moffett, founder of independent equity research firm Moffett Research, said it is not likely the class action will change the outcome of the dispute nor that it will yield significant financial compensation for the plaintiffs, if successful.
"In some ways, a class action is a consumer temper tantrum but not much more than that," he said.
Though Time Warner Cable decided to drop CBS programming by refusing to pay CBS' higher fees, Moffett said Time Warner Cable is negotiating on the behalf of consumers.
"Paradoxically," Moffett said, "what customers are complaining about is that their bills are too high, but they're frustrated with TWC trying to keep them from getting higher."
Moffett estimated that if Time Warner does refund its customers for the lost programming, based on the cost of CBS alone, a subscriber would receive about 40 to 75 cents a month.
"If this thing drags on for three weeks, you might argue for something like 50 cents, and it's not unlikely that Time Warner Cable would voluntarily refund that amount to subscribers anyway," he said.
Moffett said he expects more disputes involving broadcast contracts, like that of CBS and Time Warner Cable, which typically expire after about five years, on average.
Moffett said disputes between "lesser" companies in smaller markets, like the one between Dish Network and Raycom that blacked out 36 cities until it was settled on Friday night, "don't even register anymore."
"Give the TWC/CBS blackout extra style points for occurring in New York -- the news media naturally tends to gaze at its own navel -- but still we're talking a relatively run-of-the-mill occurrence," he said.