An Americast Sale Would Wow Locals

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Local government officials tracking a possible sale of SBC Communications Inc.'s Ameritech New Media cable unit to startup overbuilder WideOpenWest LLC responded positively to word of a possible deal.

In suburban Chicago— where Ameritech New Media holds 24 franchises representing some 600,000 residents — the consensus was that a sale would significantly improve the prospects of obtaining high-speed Internet access service.

"It's all good news for us," said Naperville, Ill., spokesman Gary Karafiat. "WideOpenWest is very aggressive in investing in high-speed Internet access. And that's what we're all excited about."

AT&T Broadband, the region's incumbent cable operator, said it would hold off on cable-modem deployments in those localities while it integrates its operations in Chicago proper. Karafiat said WOW's move into the market might "light a fire under AT&T" and cause the MSO to rethink its plan to hold off on upgrades in the Chicago suburbs.

SBC's Americast-branded cable systems don't presently offer cable-modem service, and digital subscriber line providers are struggling in a weak economy.

"If a company can come in here and fight the negative market forces, that would be great," said Elgin, Ill., assistant city manager Sean Stegall. "If they could offer a data product, we'd be extremely receptive."

Following a speech to the National Press Club in Washington last week, SBC chairman Edward Whitacre was asked to confirm the potential sale of the Americast systems to WOW, as Multichannel News
first reported last week.

"We're trying to sell it," Whitacre replied, without mentioning the potential buyer's name.

Asked when a sale might be announced, Whitacre responded, "Hopefully soon."

Officials with WOW — a Denver-based startup headed by former RCN Corp. executives, declined to comment. So did an SBC corporate spokesman.

Though one source close to the talks had been hopeful a deal would happen as soon as last week, the source said it's now unlikely an announcement will come prior to today (May 21).

"And that's a stretch," the source said.

The source would not specify the factors that might be holding up a deal.

SBC has been trying to sell the Americast cable systems since it acquired them in its merger with fellow regional Bell operating company Ameritech Corp. in October 1999.

One MSO executive who looked at SBC's sales proposal estimated that the asking price is about $1.1 billion, or less than $4,000 per subscriber for the 300,000-subscriber MSO.

Not only are the Ameritech systems overbuilds of existing cable operations, but they also have technical limitations. Even though the plant was built in the mid- to late 1990s, it does not accommodate two-way services, such as high-speed Internet access, and its headends are located in SBC-owned telephone central offices.

The central-office issue, in particular, makes purchase talks difficult, sources said.

"Ameritech isn't going to want [WideOpenWest] in there," one source familiar with the talks said.

Another possible sticking point is whether SBC wants to maintain control of some of the "dark fiber" Ameritech had installed, said the source.

Stewart Chapman, a Chicago-based municipal consultant, predicted that franchise transfers would not be a problem, since local governments in Illinois are aware that WOW's business model revolves around offering high-speed Internet access and SBC lacked a "strong commitment" to its cable properties.

Given SBC's disdain for cable, most local jurisdictions feared the telco would abandon its systems, as it did in Texas, California and, most recently, Connecticut.

"For the last two years, people have been waiting for the other shoe to drop. They didn't want to see these systems abandoned," Chapman said.

Steve Donohue contributed to this report.

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