By DAVID BORAKS
DavidsonNews.net
Davidson commissioners and Town Manager Leamon Brice will take a road trip to Bristol, Va., Thursday for meetings with officials from BVU Focus, the company hired to run the town-owned MI-Connection cable TV and internet system. Mr. Brice said it would be the first trip of its kind for Davidson officials since Davidson and Mooresville acquired the system in December 2007. It comes as town officials seek a clearer picture of MI-Connection’s performance and prospects.
In a public notice, the town said the trip is “to tour the facility, observe operations, meet the BVU Staff, and receive an update on MI-Connection’s upgrades.” The board and manager also will get a report on the first 1½ years of MI-Connection’s operations, the notice said.
“It really is kind of information-seeking,” Mr. Brice said Wednesday. “The board wants to know how the upgrade has gone, how’s the customer count doing, what does the financial picture look like, and what are they doing to increase business.”
“We’ve realized that we aren’t getting the kind of information we need,” Mr. Brice said.
Town officials and taxpayers are watching the system closely to see if it lives up to expectations. BVU Focus, which also operates a cable TV, telephone and internet system in Bristol, Va., recently completed a $20 million upgrade of cable lines, equipment and software here.
The upgrade has allowed the system to expand its TV channel lineup, add video-on-demand, increase internet speeds and add telephone service to its list of offerings. But the system has not been growing at the 6 percent annual rate originally predicted, largely because of the down economy and intense competition from satellite TV and other competitors.
As of May 30, after 11 months of the 2008-9 fiscal year, the system was profitable in its day-to-day operations. Revenues for the 11 months totaled $13.43 million, while operating expenses were $12.97 million, leaving an operating profit of $459,068. But the system had $100,000-plus operating losses in both April and May.
And with debt and other expenses added in, the system so far this year has lost $6.24 million overall. MI-Connection’s fiscal year ended on June 30, and a full-year financial summary has not been made public yet. Last month, officials said the year-end loss is projected at $7.65 million.
Those losses have not required any additional funding from the towns so far, though town officials and some taxpayers are concerned they eventually could. Davidson and Mooresville bought the system in December 2007 from Time Warner Cable, which had been operating it following the bankruptcy of former owner Adelphia Communications. Mr. Brice said the system anticipated several years of losses because of the need to upgrade the network, and is covering those costs through reserves set aside from borrowings.
Two weeks ago, MI-Connection’s board approved a 2009-10 budget that anticipates another loss as well. The new budget projects revenue gains this year, partly through customer growth and through a 9.3 percent average rate increase that took effect July 1 – the first price hike since the towns bought the system. It also includes reductions in expenses, including a negotiated cut in the fee the towns pay to BVU. (More on this year’s budget in our June 26 report, “Cable system board approves new budget.”)
Town officials initially predicted the system would break even by 2012, based on projections of annual growth. But the economic downturn and competition have so far led MI-Connection’s customer base to shrink slightly, rather than grow. The big question for the two towns right now is how far into the future that break-even date has been pushed, and how they’ll fund ongoing losses until then.
MI-Connection Chairman Evan Webster, who also is a Davidson Town Board member, said recently the board doesn’t have an answer yet.
On Wednesday, Mr. Brice said he doesn’t have a new date either, but hopes Thursday’s trip will shed new light. “We’re going to need to know that. … If there’s a gap or a problem, what are we going to do to make that up?” he said.
LINKS AND DOCUMENTS
Year-to-date financial statement from MI-Connection (11 months ending May 30), PDF, CLICK HERE>
June 26, 2009, “Cable system board approves a new budget.”
June 1, 2009, “MI-Connection cable rates going up July 1”
©2009 DavidsonNews.net, no republication or distribution without permission.
Wouldn’t it have been great for the tax-paying citizens of Davidson if this trip had been made before the decision to purchase? Shouldn’t the head of the board be able to answer some basic questions about break even calculation? Should the town consider selling its share to Time Warner?
That this deal is losing money faster than originally projected should come as no surprise. I give the cable system ZERO chance of ever breaking even. It will be an albatross around the necks of Davidson tax payers until it is divested. The purchase of the cable system was a bad decision from the onset and should have been put to a vote of the townspeople.
The town’s involvement is this risky venture is an affront to free enterprise.
We’ve gotten pretty good service from MI-C at a pretty good price. We’re interested in high-speed internet only; tee-vee is irrelevant, thus also most of the complicated-looking packages and bundle deals.
I just got a solicitation call from MI-C that didn’t do much for my opinion of their business. They’re trying to get me to add phone service. The script was a tad on the aggressive side (How much is your current phone bill?); the speaker was barely literate, it seemed; and even though I said I had already considered the voice plan I wasn’t interested in discussing it on the phone, he kept at it.
I hate phone solicitations!
If MI-C can deliver super fast, consistent internet at a fair price and leave the crummy sales pitches and garbage tee-vee out of my life, I’ll be satisfied.
My interests would then be in more of a regulated service provider–like power or natural gas or (maybe an apt analogy?) highways–and not some so-called free enterprise entity. (I can’t quite buy the free enterprise argument when cable and internet providers are more or less monopolies; certainly their pricing structures look like a cartel is at work.)
I wish MI-C well. It will be interesting to see how this all shakes out in a decade.
It is not too late to vote on the town-funded acquisition of MI-C. A retrospective vote would allow town citizens to decide if the purchase should stand, and if not, how best to divest ourselves of the albatross. Could this go on the ballot at the same time we vote for the next round of Commissioners?
I am glad to see that the majority of the commissioners are attempting to stay on to see the cable purchase through the next couple years. It would have been an easy time to bail out and avoid responsibility for the outcome.
I don’t blame anyone, especially a Davidson College prof for not wanting U.S. cable TV in their home. It is a vast wasteland, and I say that having worked in it for 30 years. It is designed by corporate sharpies to sell as much needless junk to gullible audiences as possible. CNN now has about 7 minutes of ads for drugs and junk food you don’t need for every five minutes of news. When MI was conceived, I imagined good cable channels like English language news services from France, Germany, UK, Russia, Korea, even Iran and al-Jazeera, and more arts channels and education/training options. Alas, all we got was more sports, shopping, and religious frauds.
The best option is Internet video on demand, which offers essentially infinite program choice. That is the future for those who can afford it. I’m already enjoying numerous interesting and unique Netflix downloads, that you’ll never see on any cable channel. And the quality gets better by the month.
The result is that all broadcast and cable programmers, including cable operators like MI are going for the lowest common denominator as their audience drains toward to the vast choices found on-line.
The best way to protect the town’s investment, which I still support, is to hope that Internet connections begin charging by volume of bandwidth used, so that people like me will pay their fair share of gigabytes used, while those paying $100/month for the privilege of watching 65 percent ads on cable can support their end of the system.
A posthumous vote is not going to happen, nor should it. 2007 was the year to debate the purchase of the cable system. Those of us who felt purchasing a cable system was not in the best interests of Davidson lost that argument. Rehashing it does not move us forward.
What is a legitimate and positive discussion is the governance of the system since it was purchased. To recap some basic financials, Davidson’s indebtedness prior to buying the cable system was about $5 million. Our share of MI-C’s debt is $45 million. Thus, the cable system now represents 90% of our total debt of $50 million. Our annual budget is about $7 million. In other words, the financial performance of MI-Connection IS A BIG DEAL.
Given that, I think the following are legitimate questions:
1. Why did it take 540 days for Town officials to visit BVU for a fact-finding mission, especially since there were warning signs over a year ago that the performance of MI-C was not on track?
2. Early this year the Town’s elected officials and staff had their annual retreat. One of the outputs of that retreat was a listing of six priorities. Why was MI-C not listed as one of the six priorities? Why is ‘increase visibility at local, regional and state levels’ a higher priority than monitoring an investment seven times larger than our annual budget?
3. What are elected officials plans for a better governance structure going forward? The current one is not working.
We have great potential in Davidson. I would like to see us become a model of a sustainable town that could inspire others. I agree wholeheartedly with the six priorities that were given by the elected officials, in addition to other priorities. But the reality is that most of those priorities require money. And, if we don’t turn the MI-C ship around, we’re either going to have to give up other priorities, or raise taxes. Neither option is a good one.
As technology continues to rapidly evolve, competitive threats to traditional cable companies like MI-Connection will likely intensify. Our town board would be wise to speak with knowledgeable independent sources who may be able to provide more objective perspective regarding the competitive outlook for MI-Connection. (BVU is not likely objective in this regard.)
In addition, it would behoove the town board to quietly educate itself regarding the saleability of the cable business (i.e., price, number of potential buyers). Although the timing of such a sale would likely be poor, given the state of the economy, the board needs a fact-based and well-informed read on their potential options (sooner rather than later).
The fact that the chairman of MI will not run again for the town board and is stepping down as chairman of the cable company suggests to me that things are worse than advertised in terms of the company’s financial outlook.
Do yourself and your children a favor and unplug your cable. Free yourself of the propaganda and do your own research via internet, books, and meetings. I am not very encouraged by the financials at MI-Connection and wish the town leaders would outline how the government owned enterprise will stay afloat. Are they expecting stimulus funds from the money tree in D.C.?