Pending Adelphia Deal Could Impact Santa Monica

By Olin Ericksen
Staff Writer

February 9 -- With the City's only cable service provider entertaining bids from its competitors, the City of Santa Monica may soon find itself in a position to change the channel on Adelphia.

Adelphia -- the City's sole cable service provider for almost 6 years -- had been operating under bankruptcy protection for almost three years when Time-Warner and Comcast offered $17 billion last week for the struggling company.

Though any proposed deal between the giants is not expected for at least several weeks, if it goes through, the City will likely have a chance to reevaluate its rocky relationship with the company before its current contract expires in July of 2007.

"The important thing here is how Adelphia emerges from bankruptcy," said Kate Vernez, the assistant to City Manager for Governmental Relations. "It depends whether Adelphia sells and it transfers ownership.

"If it does, then the company will need to seek City Council consent whether to approve a deal to continue its contract," Vernez said, adding that the decision could come before the City Council as early as this summer.

The City has not received offers from any other provider so far, said Vernez, and whether or not the City will stick with Adelphia after any buy-out depends largely on the financial strength of the new company.

"The challenge is to find a provider large enough who can do the over-building... or putting in the fiber that is required here in Santa Monica," Vernez said.

Adelphia officials believe that in spite of the merger-mania and financial uncertainty surrounding the company, Santa Monica will renew with Adelphia.

"Bankruptcy will have little to no impact on purchase renewal," said Tom Carlock, vice president of Law and Public Policy for Adelphia. "We've done several local franchise renewals, and we've been in bankruptcy going on three years now."

As for Adelphia's relationship with the City, Carlock said he believes it has "gone extremely well," and noted that the company is planning to "launch the next level of technology to customers."

Indeed, Adelphia's 25,000 Santa Monica subscribers have filed fewer complaints about the service with Adelphia -- with the number dropping from 400 four years ago to 50 last year, according to Robin Gee, the City's cable TV manager, who monitors the complaints.

A closer look at past and current disputes between the City and Adelphia show there to be more static than the cable giant is letting on.

"No comment," was Vernez's response when asked whether she would describe the relationship as rocky.

Adelphia is currently challenging the City's rights to regulate its cable rates, said Vernez.

"They're stating they have effective competition from satellite, and we don't believe that's the case," said Vernez. "That's important whether there is competition or not."

Under a Federal Communications Commission provision, if there is a 15 percent penetration of the local market by satellite, service providers may forgo rate regulations by the City.

And there have been other disputes in the past.

"Negotiations have been contentious, unpredictable and protracted," stated a April 2002 staff report presented to the City Council during negotiations of a $3 million settlement paid by Adelphia before the most current contract renewal.

In 2002, the City also secured its right to review its contract if any current service provider changes hands, a prospect which is becoming more and more certain.

Bankruptcy is not the only difficulty faced by Adelphia, which in 2002 claimed 1.2 million basic subscribers in the Los Angeles and San Diego areas.

The company has undergone a Security and Exchange Commission investigation of $2.3 billion of loans to a partnership owned by the Rigas family that were not recorded in Adelphia's books.

The SEC charged that the Rigas family used the money to buy more Adelphia stock in an effort to keep control of the Philadelphia-based company, which has six million basic cable subscribers nationwide.

The conservative cable company, known for extolling family virtues and removing adult content from its systems, has caused consternation in Santa Monica by increasing the number of home shopping channels and relegating channels such as Sundance and the Independent Film Channel to the paid tier.

It is unclear whether a move last week by Adelphia to allow more adult programming will include Santa Monica. Adelphia officials had no comment on that proposal.