June 18 (Bloomberg) -- The U.S. Supreme Court refused to revive a provision in Texas’s state cable television franchising system that barred some providers, including Time Warner Cable Inc., from opting out of their municipal contracts.
The court, without comment, refused to hear the Texas Public Utility Commission’s appeal of a lower court ruling that the plan discriminated against Time Warner Cable by letting other television providers drop their municipal franchises in favor of the simpler state franchise system.
Texas lawmakers created the state franchising system in 2005 to make it easier for competitors to enter the cable TV market. Companies selling service in an area that already had a cable provider were allowed to drop their municipal contracts in favor of a state franchise. Companies, such as Time Warner Cable, that were an area’s main cable TV provider were required to keep the municipal franchise until it expired.
The Texas Cable Association and New York-based Time Warner Cable challenged the law. A federal judge ruled against them. While their appeal was pending, the state legislature amended the law to require only the main provider in cities with at least 215,000 population to retain their municipal franchises.
Time Warner Cable has franchise agreements with Irving, Dallas and Corpus Christi scheduled to expire between 2013 and 2017, according to the 5th U.S. Circuit Court of Appeals.
The New Orleans-based appeals court ruled in January that the amended law “plainly discriminates against a small and identifiable number of cable providers.”
“Promoting competition bears no relationship” to the rule requiring companies such as Time Warner Cable to keep their municipal contracts, the court said. It said the provision would be unlawful under either a strict or intermediate standard of legal review.
In the appeal denied by the Supreme Court, the Texas utility commission said it should get a chance to argue in a trial court that the amended law could be upheld under an intermediate legal standard. Municipalities should be able to rely on their long-term franchise agreements with cable providers, the commission said.
Lawyers for Time Warner Cable and the cable association said the provision was enacted “as a result of heavy lobbying by telephone companies aiming to hobble their competitors.” The state didn’t explain why companies serving cities smaller than 215,000 should be allowed to drop their local franchises, the lawyers said.
The case is Nelson v. Time Warner Cable, 11-1236.
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