Archive for: May 2005

Cox Communications has lost a narrow vote in the Arizona legislature which would have prohibited the payment of cable franchise fees to Arizona’s local governments. This is good news for franchising authorities, because cable fees are often used to offset general operating expenses.

Cox had appealed to state legislators with the claim that it was being unfairly taxed relative to its competitors. Direct broadcast satellite (”DBS”) companies like DirecTV and Echostar pay no franchise fees, nor do “wireless” cable providers. Because most cities charge cable operators a franchise fee of 5% on gross revenues, that fee, according to Cox, placed it at a significant disadvantage.
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This past Tuesday, the FCC issued its “Second Further Notice of Proposed Rulemaking” in “The Commission’s Cable Horizontal and Vertical Ownership Limits” matter. Put another way, the FCC is still trying to figure out how big a cable operator can get before it gets too big. There’s some speculation that this renewed effort will have a direct impact on the Adelphia/Time Warner/Comcast deal: Comcast is already close to the previous ownership cap of 30%, and the timing of the announcement, given the lengthy history of the issue, seems related. Despite this speculation, it’s unlikely that the FCC’s renewed interest in ownership limits will place any additional pressures on the deal.
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Charter’s challenges continue to mount. Today the stock fell below a buck a share. That’s particularly troubling if you own a lot of them, like Paul Allen does. In just 6 years, his original investment of $8 billion has dwindled in value to about $425 million. Sure, he’s not clipping coupons yet, but at this pace . . .

If memory serves, as of the last quarterly conference call Charter had something like $19 billion in debt, $32 million in cash on hand, and $1.2 billion in remaining borrowing power. That financial position will get them through the end of 2005, but beyond that more work on the financing front will need to be done.
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I’ve been getting a lot of questions lately asking whether a community’s cable system will be served by Time Warner or Comcast following the Adelphia sale. Complicating the matter is the fact that Time Warner and Comcast hope to exchange certain systems they already own around the same time the Adelphia sale occurs.

Unfortunately, a specific list identifying the eventual operator hasn’t been made public. There is, however, a pretty good map that’s been published by Time Warner that will prove useful if you want to satisfy your curiosity on the matter.
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In my past life with cable operators, my team and I managed a number of campaigns in opposition to proposed municipally-owned telecommunications systems. Given that experience, I’d recommend a story appearing in today’s 2theadvocate.com to all communities considering construction of their own telecom system. The article reveals one of the tactics some incumbent companies will use when public debate begins to develop and just how ugly the situation can become.
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