(updated Nov. 15, 12:09 p.m.) Town officials have released released a wealth of new business, legal and financial documents related to the planned purchase of the local cable TV system. Davidson and Mooresville plan to buy the system Dec. 18, and rename it MI-Connection.
In one document provided this week, consultant Icon Broadband Technologies of Woodstock, Ga., called many of the towns’ financial assumptions “reasonable,” and said projected business customer growth rates are “conservative.”
Icon also warned the system could face competition from satellite, cable and local telephone companies.
Time Warner, which wanted to buy the system and has been operating it temporarily, could build its own cable network in the towns, for example. Icon said Time Warner has “limited capability” right now because of heavy costs for buying many of the former Adelphia Cable properties nationwide and big investments underway on the West Coast.
And local phone company AT&T has announced a $350 million upgrade of its fiber-optic network, which could touch customers in Cornelius and Davidson. AT&T has not said when or if it will include Davidson and Cornelius in those plans. The biggest threat could come from competitors’ signing contracts to serve new homes being built in north Meck, which could reduce the number of new homes MI-Connection adds through natural growth.
The business plan released this week includes more detailed schedules of income and expenses, though it mirrors what the towns have previously released.
RESIDENT’S REQUEST
The document release follows a request by resident Bobby Cashion, who filed a Freedom of Information Act request with the town on Nov. 3. He and other residents have been critical of the purchase, worrying that the venture will lose money and cost taxpayers money.
Evan Webster, a Davidson commissioner and chair of the MI-Connection board, said Thursday that “most everything in the documents has pretty much been discussed in a public forum. … We’re just trying to make as much information available as we can.”
The documents, posted on the town website, include:
- the court decision ruling that the towns have the legal right to buy the system;
- the interlocal agreement spelling out how the towns will operate, pay for and share proceeds from the system;
- the management agreement with Bristol Virginia Utilities (BVU), which will run the system;
- consultants’ opinions on the deal;
- Bank of America’s commitment letter for financing the deal;
- portions of the cable system’s business plan.
Sara-Lynne Levine, Davidson’s communications director, said parts of the documents have been redacted to avoid disclosure of proprietary business information.
PURCHASE IN DECEMBER
The towns have the right of first refusal to buy the system under their agreements with former operator Adelphia Communications, which went bankrupt.
Time Warner Cable, which operates the system in Charlotte, had bought most of Adelphia’s assets nationwide in partnership with fellow cable giant Comcast. Time Warner had hoped to win the system itself and fought the town’s plans. It has been running the local system since last year while the towns decided whether to go ahead with the purchase. In August, they voted to do so, but not until after other potential participants dropped out, including Huntersville, Cornelius, Troutman and Mecklenburg County. But Cornelius and Mecklenburg County have agreed to transfer their subscribers served by the system to MI-Connection.
MI-Connection has already set up a governing board, chaired by Mr. Webster, to plan for the takeover. It hopes to complete the deal Dec. 18.
MI-Connection has hired a general manager, James Miller, and signed a five-year contract, worth up to $11 million, with a unit of BVU, called BVU Focus, to manage the system.
OPPOSITION
Some residents, as well as candidates in the recent local elections in Davidson and Mooresville, have spoken out against the purchase. Their concerns include philosophical opposition to to the towns’ owning a cable company and whether the business might be in danger of failing – which they fear could lead to property tax increases.
Town officials have repeatedly said that the cable system is healthy and it’s highly unlikely that taxpayers would end up with an unexpected bill. The system is currently profitable, and projections show that revenues should cover operating expenses and debt payments. And the Local Government Commission in Raleigh has reviewed the town’s plans and approved financing for the deal.
LINKS
New cable documents on the town website. (Documents may require Adobe Reader or Microsoft Word software.)
Five-year cash flow projections for MI-Connection, provided by Davidson Town Manager Leamon Brice (Requires Adobe Reader software)
Slides about MI-Connection financial assumptions, from Aug. 6, 2007, public presentation by Davidson Town Manager Leamon Brice. (Requires Adobe Reader)
Nov. 2, 2007, Commentary by MI-Connection chair and Davidson commissioner Evan Webster, on DavidsonNews.net, “What if cable system loses money?”
Oct. 5, 2007, DavidsonNews.net, “Quit cable deal? Think twice supporters say.”
Other DavidsonNews.net coverage of the cable deal.
The final report issued by the consultant (ICON) should give everyone pause. In section six of the summary, it states “The primary premise on which a successful Consortium operation is grounded is the maintenance of an incumbent, near-monopoly position in the three communities….Should any major cable or voice provider compete…it will have a negative impact on the market assumptions upon which this model was based.” Section 7 states that in the financial model, no monies were included for future upgrades of the system, even though the consultant says that cable companies typically upgrade every six to eight years, at a cost of several million dollars. This was the experience of the Morganton, NC municipal-owned cable system which had to issue another $7MM of debt recently to upgrade its system a few years after buying it.
The town board has always said its business plans were “conservative.” It now appears – based upon reading the paid consultant’s report – that the business plan assumed no competition, and no new investments beyond the initial investments of 2008. To me, those are not “conservative” assumptions.
Our purchase appears to have been justified upon operating a monopoly that doesn’t make the investments required to provide state-of-the-art services to its captive audience. Ooh boy!
I am of course reading through the reports from the perspective of someone who has always opposed the cable venture. The board members looked at it from the perspective of wanting support for this venture. As Paul Simon wrote, “a man hears what he wants to hear and disregards the rest.”