Do we know if the purpose of the audit is purely to establish “performance against cable industry norms”? I would hate for the town to spend more money to find out what we all already know.

Perhaps, instead, the consultants could also help establish a market value for the sale of the company.

During the election I was referred to the investment into Mi-connection as an opportunity for the town. I stated that Mi-Connection had to be competitive with the likes of AT&T, DirecTV, etc.

Since the election I have really been thinking about what is Davidson to do? What it the right decision now?

Davidson has to make some tough decisions about the future of Mi-Connection. Either to really take it seriously or to get out as quickly as possible. Seeing if MI is financially competitive is good but not a single solution.

I have no answers, but I do have a few thoughts…

As someone that has experience in the telecom business in my professional past and one that works with a company that is changing it on a daily basis (Apple Inc) with offerings like iTunes and AppleTV I see an industry in major flux and upheaval in the years ahead.

It is no secret that the movie industry, broadcast and content providers are hurting by a ever changing model of how to make money. DVD sales and rentals are drastically down. Why buy a DVD or BlueRay when I can download it? The broadcast companies are struggling to sell advertising. And, cable companies are loosing subscribers to an ever expensive subscription model that is changing daily.

In the past few years we have seen how the iPod and iTunes have revolutionized the Music Industry. In a matter of a few years we have seen giant companies like Tower, Virgin, Sam Goody and shutter their stores due to purchases online. (some would say pirating has done this to, but the numbers do not support it, legal online purchases have supplanted all legal purchases while pirating has not increased) iTunes has revolutionized how we buy music. Instead of buying a whole album, we now can purchase songs that we like and pay for what we want.

This is also has been the case for movies and TVs. In the past few months we have seen the titan Blockbuster close almost all of its stores to be replaced by online downloads or the Red Box machines in Harris Teeter and Food Lion.

Advertising In The Broadcast Industry

When it comes to the world of broadcast and cable, advertising is what runs these businesses. Right now that model is in jeopardy. Consumers are more and more spending their time on sites like hulu.com, tv.com and spending money on iTunes.

Take a look at what your kids are watching and how they are watching their shows. Do they really care about the 52” plasma/LCD TV in the living room? No, most likely they are watching it on their PC, MacBook or iPod. And it is online. Not a big problem right? Well, yes it is. They are not watching the advertising that makes those programs money.

We are quickly moving into an online world.

The broadcast stations are in a panic. They are losing customer and advertising dollars left and right. In such a panic they have created such companies like hulu.com. Hulu is great, but still does not solve the problem. Hulu only offers a fraction of the advertising that is during a regular broadcast.

We also have seen that more and more the subscription models is equally broken. Right now the cable companies have been successful in balkanizing the industry by bundling all the Discover channels together (TLC, Discovery, Science Channel, etc) in an unbreakable package, but again online download ability is changing this. How long are you going to pay for the premium channels like HBO, Showtime, Cinemax when they replay the same “Weekend at Bernie’s II” over and over again. But as these companies adopt profitable channels to deliver their content that is not through cable companies like Comcast, Cox, Mi-Connection. Why should consumers continue to pay high pricing for an expensive infrastructure?

Microsoft and numerous other companies have offered subscription models for their music and movies. They have all resoundingly failed. Consumers, you and me, want to pay for what they buy.

??A few final questions that still need to be answered:

What does Mi-Connection do to remain competitive?

How does Mi-Connection modify its model from a subscription model to a online/download model?

As consumers move away from an expensive subscription model. What are they moving to? How are consumers getting their content and TV?

Would this by chance be the same consultants that the Town of Davidson hired to advise it on the purchase of the system? Will the property owning citizens be privy to the results of their study?

Somebody get a gun put this dying horse out of its misery and out of our memory.

And then what? Have a massive debt and no income?

At least for the first time, Davidson has decent cable service and really fast internet available. I opposed the towns’ takeover, but we are where we are.

Now that I live in Davidson for real, I’m thankful to have these services available. Satellite might be better now than it was when I had it in Catawba County, I hope. I couldn’t watch TV when it rained, and I had to replace the receiver about every time there was a storm, and DirecTV invariably sent me the wrong replacement, sometimes more than once each time.

And then the two years I lived in Gaston County, Time Warner raised my rates 20% in that short time.

I’m glad to be shed of them both.

MI-Connection is providing superior service for about the same rates we paid Adelphia and then Time Warner for a very marginal system. I can appreciate why folks in this area felt enough was enough and wanted control over the system.

It’s easy enough now for us to say “We told you so,” but in reality none of us were predicting a severe economic downturn as a major reason to oppose the purchase.

To say the reason we’re in this situation is the recession just doesn’t square with the facts. How are our competitors – who operate in the same economy as MI-Connection – profitable and growing their customer base? It’s like blaming the iceberg for sinking the Titanic when hundreds of other ships had no problems that night.

This purchase was heavily leveraged, and even based on the overly optimistic scenarios that Davidson was touting in 2007 MI-Connection was not scheduled to break even until 2012. In other words, it had a very long payback period. And when you have a long payback period, the exposure to risk is much higher. No, noone could have been expected to know the timing and severity of the recession of 2008/2009, but the seasoned folks who made this decision should have known that the assumption of continued growth for years on end was a false and dangerous assumption.

The ownership and operation of a cable company has no relationship whatsoever to the core responsibilities and/or competencies of a small municipal government. Even a Town with the intelligence of Davidson has no hope of competing against giants like Time-Warner and AT&T (companies that are also blessed with smart people, especially in the area of technology).

I am glad the cable service is better, but I’d be happier if the Town had the resources to provide the services which it should provide. Regrettably we’ve already started to cut back on staff and the police force because of the losses at MI-Connection. That’s not a price I am willing to pay for improved TV and internet service.

Rodney, I don’t really disagree with anything you said. Even with good economic times, whoever took over the cable service here would be losing money. Time Warner no doubt is taking a hit on the service in Huntersville for a while, assuming they upgraded it at least into the 20th century. But they’re big and can spread the costs around. I imagine my rapid rate increase in Cramerton helped fund their losses over here. AT&T doesn’t even try to compete with the cable service in my part of Davidson, though I understand they offer a nice package in River Run. (They raised my phone rates over 9% in the months I’ve had service here–annualized about 25%–so they’d have a hard sell with me anyway.)

Perhaps I should have been better informed and opposed the cable buyout with the zeal with which I opposed the state’s going into the gambling business. However, I was not a full-time resident or a voter here at the time, and I didn’t see it as essentially a justice issue relating to exploiting the poor.

As I recall, one of the arguments for buying the system related to business recruitment in offering direct fiber-optic service. If that pans out, we could term that as corporate welfare, but perhaps with potential for growing non-residential tax base.

But longer term, I think the issues that Nick raises may trump all these other considerations.

Here’s our report on Thursday’s meeting:

“Consultant: MI-Connection is ‘first-class’ but must cut costs”