Va. Town Loses Bid to Buy Adelphia System

By Linda Haugsted -- Multichannel News, 8/24/2006 4:50:00 PM

A federal judge in Virginia dashed the hopes of a small town there that wanted a chance to buy the local Adelphia Communications system, rather than seeing it transferred to new owners under the operator’s bankruptcy settlement.

Judge Michael Urbanski, in a ruling made public Thursday, ruled in favor of the acquiring operators, Comcast and Time Warner Cable, in a suit brought by Martinsville Cable.

Martinsville, a 14,900-population town on the south-central border of the state, has language in its franchise that allows it the “right of first refusal” -- that is, the city has the opportunity to submit a bid for the cable infrastructure in town should the franchisee opt to sell the system.

Henry County, which includes Martinsville, also has the purchase rights in its franchise. Last year, when it was announced that Comcast and Time Warner would acquire the assets of Adelphia in its bankruptcy proceeding, the city of Martinsville made a deal with the county to assume its purchase rights, according to court documents. The theory: With the county’s purchase rights, the city could then submit an offer for the majority of the regional system, which serves about 16,000 customers, including 4,000 in the city limits and 12,000 in the county.

The city filed suit in June 2005, asking a county court to support its purchase rights, but the case was moved to the U.S. District Court for Western Virginia. The suit named Time Warner NY Cable LLC, the unit acquiring the Henry County assets.

As the suit progressed, the parties mutually agreed that Comcast, which would receive the system in a post-bankruptcy swap with Time Warner, could run the system as the suit was pending, as long as the operator did not make any “substantive changes” or consummate the system swap with Time Warner.

In a counter-complaint, attorneys for Time Warner argued, among other things, that the cable company has no standing to sue; only the city and county have that right. If those parties were to sue, state law prevents the county from operating a cable system.

State law requires that a city must hold a public hearing, do feasibility studies and hold a public referendum to enter the cable business -- steps not taken by Martinsville, cable attorneys added.

The judge ruled on the summary judgment in favor of the cable operators, striking the case from the active docket.

“We are pleased that the judge has ruled in Comcast’s favor, and we look forward to working with the city and continuing to serve our newest customers in Martinsville and Henry County. Comcast had already assumed responsibility for temporary operations of the Martinsville cable system, so the transition will be smooth and seamless,” Comcast spokeswoman Lisa Altman said.