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The debate over whether area towns should buy the local cable TV and Internet system has been quiet – and mostly theoretical – until now. But a judge’s order last week setting a price for the system puts it on the front burner.

Public hearings are planned over the next two weeks, beginning Tuesday in Davidson, on the proposal by Davidson, Mooresville, Troutman and Cornelius to acquire the former Adelphia system. Citizens can comment and ask questions and local officials will talk more about why they’re considering public ownership of the system – which they’re calling MI Connection, (MI rhymes with “my”). Their key selling point: The four towns’ 10,730 customers will see better service if the purchase goes through.

The towns have until mid-June to decide whether to buy the system. If they decide to go through with it, they will have another 120 days to complete the purchase.

UPGRADING SERVICE

“We never really have had the kind of customer service and kind of offerings that I thought people here deserve,” Mr. Brice told reporters during a media briefing Monday in Davidson.

Ownership or management of the system has changed frequently over the past 15 years, and the owners invested little in technology or customer service. So Davidson and other towns wrote into their contracts with the previous owners the right of first refusal – meaning they would have the right to buy the system if it came up for sale.

The 2002 bankruptcy of Adelphia resulted last year in the sale of most of Adelphia’s assets to two of the nation’s largest cable TV operators – Time Warner Cable and Comcast. Time Warner has been operating the Lake Norman area system temporarily until the towns decide whether to exercise their purchase rights.

Critics of public ownership have questioned whether local government can improve service or whether it should even get into the cable business.

HIRING AN EXPERT

Mr. Brice emphasized this week that public ownership won’t mean government management. Instead, Davidson and the other towns plan to hire an outside management firm – Bristol Virginia Utilities, or BVU — to run the system.

“BVU is recognized throughout the industry for the kind of customer service they provide and what they’ve been able to accomplish with that, and we’re hoping to accomplish the same thing,” Mr. Brice said.

BVU grew out of an electric utility in Bristol, Va. Originally, its fiber-optic lines were used to monitor the company’s electricity network. But in 2003, it began selling cable TV, high-speed network access and telephone service to consumers and businesses. Although it faces competition from private companies, it says good customer service has helped it become the market leader in Bristol.

Today, it supplies cable TV to about 65 percent of homes in the market. By contrast, the former Adelphia system here serves only about 35 percent of homes – which Mr. Brice attributes to a record of poor service and subpar offerings. The local system is well below the national average for cable subscribership of about 65 percent of housholds.

Sandy Crusenberry, marketing and business development director for BVU, said Monday that with BVU’s help, the local towns can succeed. “The big question has been, OK can government do this?” Ms. Crusenberry said. “Can they be exciting, can they sell, can they advertise? Can they make all these decisions like a competitive private company. Yes.”

WHAT WE WOULD GET

Some changes in service could come fairly quickly if the towns buy the system, such as improved customer service and new channels, officials said. Bigger changes will come over time.

“We’ll see a series of changes over a period of years,” Mr. Brice said. “People will see gradual improvements to a point where we are as good or better than anyone else. … We’re going to have to maintain a state of the art system.”

Here’s what officials are offering:

• More stable rates, with price increases limited to no more than 5% every two years, as opposed to the 6-7% annual increases they say are typical among large system operators.
• Upgrading the system from its current capacity of 650 megahertz – a measure of the amount of data that can flow over the network – to 860 megahertz, within 18 months. That means more channels, more high-definition channels, video on demand, faster internet service and more.
• Adding new services more quickly than a large national competitor.
• Reducing the number of customers sharing a single internet connection from 600 to 200.
• 24-hour customer service, with shorter wait times - most calls answered in under a minute.
• Specific times given for service and installation appointments, within a 30 minute window.
• Faster responses to technical problems or outages.
• Installation of fiber-optic lines to each home and business, starting with new developments and eventually extending townwide.
• Easy payment plans.
• Introduction of competitive telephone service in 2008.

ECONOMIC DEVELOPMENT TOOL

Meanwhile, having more local control over decisions on where to spend money could help the area towns lure more businesses to town, Mr. Brice said. It’s important to towns like Cornelius and Davidson to “build fewer houses but have more jobs and more industrial tax base. I think this will help us draw that kind of industry,” Mr. Brice said.

In the past, businesses thinking about relocating here have approached the town with inquiries about the availability of high-speed network access, Mr. Brice said. But Adelphia’s troubles and a lack of control network investment decisions meant local officials could not respond to requests for expanded network access, he said.

Meanwhile, most existing businesses have not turned to the Adelphia system for access because of poor service. Right now, the former Adelphia system has only about 10 business customers throughout the north Mecklenburg and south Iredell franchise, Mr. Brice said. By contrast, BVU serves about 55% of business customers in its territory. If the towns buy the system, they believe they can increase revenues by expanding the number of business customers.

Telecommuters also offer a potentially large base of customers, Mr. Brice said. “We can provide the kind of broadband or bandwith people need in their homes or in small offices near their homes. … Right now, I don’t know if they have that option, and if they do, it’s much more expensive than we will be offering,” Mr. Brice said.

GOVERNANCE, FINANCING PLANS

Three towns – Davidson, Mooresville and Troutman – have drawn up an inter-local agreement that would set the terms of their joint ownership of the system, including cost and profit sharing and makeup of a regional cable board. Cornelius officials also are interested in the idea, and could be added to the agreement later. Or Cornelius could decide not to participate financially, but transfer its customers to the system, an option Cornelius board member discussed with the Charlotte Observer recently.

Last week, a New York bankruptcy judge ruled that the towns must pay $3,810 per subscriber for the system. Time Warner Cable had argued that was a fair price. It’s also the maximum figure that towns were expecting, and they say it fits in with their business model.

If the towns go through with the plan, Mooresville would use its borrowing capacity to finance the deal. Officials said Bank of America would be lead underwriter for a bond offering or other financing arrangement, with help from First Southwest Corp., an investment advisor in Mooresville.

The towns are looking to borrow about $74 million to buy and upgrade the system. If all four towns participate, Cornelius would be responsible for 43 percent of the debt, as the town with the most customers. Davidson would be allocated 28.3 percent, Mooresville 24.9 percent and Troutman 3.8 percent.

The group’s business plan envisions growth from the current 10,730 customers to aboptu 15,700 in five years, and projects a positive cash flow by 2013 (including payment of debt principle and capital additions).

COME TO A HEARING

If you’ve got questions or opinions about the proposal by Davidson, Mooresville, Troutman and Cornelius to acquire the former Adelphia system, you can put them forward Tuesday, May 22, at 7 p.m. at a public hearing at Davidson Town Hall, 216 S. Main St.

Other hearings are planned at the following days and locations:

Mooresville Town Hall, Wednesday, May 23, 7 p.m.
Holy Trinity Lutheran Church, Troutman, Thursday, May 24, 7 p.m.
Cornelius Town Hall, Monday, June 4, 7 p.m. (TENTATIVE)

PREVIOUS COVERAGE

May 17, 2007, “Judge sets cable price, deal clock starts”

All Davidson News coverage of the cable TV deal, CLICK HERE>

May, 20, 2007, Charlotte Observer, “Cable price tag no suprise.”

Filed under: Cable TV, Davidson town board