Overcoming protests from incumbent operators, Altrio Communications Inc.'s application to overbuild AT&T Broadband in one city franchise here passed its first test.
The city's Board of Information Technology Commissioners unanimously approved the proposal on Aug. 19. That meeting was a continuation of an Aug. 16 meeting cut short due to a bomb threat that triggered the evacuation of the meeting site.
Altrio, which already operates in Pasadena, Monrovia and Arcadia, Calif., plans to build an open video system to deliver telephony, data and video service in the Sunland and Tujunga communities. The area passes an estimated 33,000 homes, two-thirds of which already subscribe to AT&T Broadband, according to the city.
Altrio had raised an estimated $180 million as of January. At that time, the company negotiated a $65 million credit facility from lenders including BNP Paribas, CIT Lending Service Corp. and Royal Bank of Canada.
The Los Angeles Cable Operators Association, through comments written by attorney Jeremy Stern, said its members did not oppose competition. But the group questioned why Altrio, a company with "minimal funding and limited experience," faced "cursory" analysis compared with the broad scrutiny that was focused on AT&T Broadband and Comcast Corp. over their merger.
LACOA also questioned whether PEG requirements are on par with AT&T Broadband's obligations. Altrio will pay $50,000 within the first six months of its franchise, plus 50 cents per home as activated.
According to LACOA testimony, AT&T Broadband has paid $192,373 in capital grants and $84,000 a year in capital support. But the commissioners said the 50 cent per customer formula would offer roughly comparable PEG support on a per capita basis.
Incumbents noted that Altrio plans to start construction with money already raised, then pay for the rest of the eight-year buildout using revenue from early subscribers. That is the same business plan used by overbuilder Western Integrated Networks LLC, and that company went bankrupt before it ever reached the Los Angeles, incumbents said.
Competitors urged the city to demand bonding to cover a wreck-out of the plant, should Altrio fail.
But city officials were convinced that other telecommunications companies, or the city itself, would use any abandoned plant.
The BITC did act on one of the issues raised by the incumbents. The board amended a resolution to increase the bonding required of Altrio. The company must seek a $350,000 bond — a $100,000 increase — and must renew within 30 days any draw down taken by the city. The bond Altrio must preserve for maintenance once the system is completed was also increased to $100,000, double the amount initially negotiated.
Altrio's bid will now advance to another committee, and then to the full City Council.