Denver Jones Intercable Inc. was scrambling last
week to determine what Internet access service it will offer in the future to more than 1
The MSO's dilemma was the result of a U.S. District
Court ruling here that blocked the MSO's plans for a full-blown launch of the Jones
Internet Channel, a high-speed data service owned by Jones Intercable chairman Glenn
In a win for the MSO's largest outside shareholder,
judge Richard P. Matsch issued an injunction prohibiting any rollout of the service
unless approved by independent directors placed on the Jones Intercable board by BCI
Telecom Holding Inc.
That proviso is expected to intensify a high-stakes
showdown building between BCI and Glenn Jones.
Sources speculated that BCI, which owns 30 percent of Jones
Intercable, will use it to try and pressure Glenn Jones into reworking a buyout agreement
obliging the Canadian outfit to pay north of $60 a share for his controlling stake in the
"They could say 'if you renegotiate this, maybe
the next vote [on launching the Jones Internet Channel] will come out
differently,'" said a source close to the situation.
William Gajda, BCI vice president of communications, said
the company has no plans to try and buy out Glenn Jones, and instead will conduct
"business as usual" with Jones Intercable. Its option to acquire Glenn
Jones' super-voting shares does not kick in until the year 2001.
Jones Intercable issued a statement declaring it was
considering its options, which include asking the U.S. Court of Appeals for the 10th
Circuit to review the decision.
Sources indicated an appeal, which must be filed within 30
days, was a "strong possibility."
Privately, Jones Intercable executives were confused by the
ruling, noting that Matsch agreed with the company's argument that the fledgling
Jones Internet Channel represents programming.
If so, then launching the service does not fall under the
requirements contained in the shareholder's agreement between the MSO and BCI, they
"That's the killer," said a company insider.
"Our guys felt that all we had to prove was that it was programming. Even BCI's
argument was based on the fact that it wasn't programming."
However, in his ruling, Matsch declared the issue "a
dispute about corporate governance," adding that the shareholder's agreement was
"an integral part of BCI's structured investment in Jones Intercable."
That agreement included a clause under which the MSO
pledged not to enter into any new deals with any Jones subsidiaries unless they were
"fully and fairly disclosed to the board, and approved by a majority of the unrelated
Therefore, "any business arrangement between any Jones
entities and Intercable for the Jones Internet Channel must be approved by the unrelated
shareholders," Matsch wrote.
The Jones Internet Channel is owned by Jones International,
which is solely controlled by Glenn Jones.
Jones Intercable is currently delivering the online service
to some 2,500 cable subscribers at systems in Alexandria, Va., and Eastern Prince William
BCI sued Jones Intercable over those and any future
launches, alleging that by offering the Jones Internet Channel, rather than a competitive
Internet Access service, Jones Intercable was enriching "Jones International at the
expense of Jones Intercable and all its shareholders."
Jones Intercable countered that it was allowed to launch
the service under Section 3.5 of the shareholders' agreement, which allows Glenn
Jones to program up to six Jones Intercable channels.
Moreover, Jones Internet officials testified that BCI had
been aware of Jones Intercable's plans for launching the network since 1995.
Sources believe BCI wants to scuttle the Jones Internet
Channel in order to launch its existing high-speed service after it acquires control of
Jones Intercable, an allegation BCI has denied.
While they consider their next move, Jones Intercable
officials said they must now decide what competing service the MSO can roll out to its
high-speed data customers.
Asked if the company will look at @Home Network or Road
Runner, one Jones Intercable official replied: "Where else would we go?"
What was not immediately clear was what the company will do
about the systems currently offering the Jones Internet Channel.
Since Matsch's order only prohibits any further
rollout of the service, the MSO could, theoretically, continue to offer the service in
In the meantime, however, sources predicted that
Matsch's ruling will not spur Glenn Jones to renegotiate his buyout agreement with
"He does not like being muscled," said one
industry official. MCN