The spat began when Time Warner took over the existing franchise for Adelphia Communications last year. City officials have argued that the deal expired late last year but that Time Warner has continued its business anyway.

Under a law signed by Gov. Arnold Schwarzenegger last year, cable companies in California will be allowed to abrogate their existing contracts with localities in favor of new statewide deals beginning in January. The law is designed to speed the entry of telephone companies into the state's television market.

Time Warner has asserted that the city should have to extend its expired deal until next January, when it is eligible to seek a statewide franchise. The city said in its lawsuit that an extension is not mandated by the law and that Time Warner was unwilling to follow the formal renewal process for the franchise after the law was passed in 2006.

California's cable industry initially opposed the statewide franchising proposal. It withdrew that opposition after the abrogation provision was added to it.

"The city is not required under the Public Utilities Code to extend the now-expired franchise until [January 2008]," according to the complaint. "That section of [the law] authorizes the city to extend a franchise but does not mandate such an extension. As such, [Time Warner] is operating a cable system in the city without a franchise."

Carlsbad wants Time Warner to pay "reasonable compensation" or damages to the city equal to the franchising revenues it was supposed to receive after the deal expired. It also wants to be compensated for Time Warner's use of the city's public rights-of-way to run cable wires.

Time Warner has been given until Oct. 10 to respond to the complaint. A company spokesman would not comment in specifics about the lawsuit, but he said Time Warner believes the city's position is frivolous and the firm has ample authority to operate there under state and federal law.