Cable One Inc. has been declared in breach of its Modesto, Calif., franchise, a development that threatens plans to swap its more than 100,000 San Joaquin Valley subscribers to AT&T Broadband.
In an Oct. 4 letter to Cable One, city manager Jack Crist outlined a laundry list of alleged problems at the system, including hundreds of electrical violations, poor picture quality and almost $60,000 in unpaid franchise fees.
The city has given Cable One until Nov. 7, when a public hearing will be held, to prove it has addressed the violations.
Otherwise, local officials could take the MSO to court, or simply withhold the franchise transfer Cable One needs to swap 108,000 subscribers served by its Modesto and Santa Rosa systems for 107,000 AT&T subscribers in Oregon, Utah and Idaho.
"Until we settle the breach issue, staff's recommendation to council will be not to transfer the franchise," said Donna Hansen, assistant to city manager Jack Crist.
With respect to Cable One's physical plant, the city has based its allegations on an evaluation by Jonathan Kramer, head of Kramer.Firm, a California-based municipal consulting outfit.
Kramer estimated there are between 2,500 and 4,000 violations of state and federal electrical codes at the Modesto system, including improper grounding at some 1,800 homes. During a storm, improperly grounded plant could allow an electrical surge to be discharged through a consumer's television set, he said.
"It will take about 12 to 18 months to inspect and fix the system," said Kramer. Cable One technicians will need additional training to avoid similar violations in the future, he added.
Kramer also said Cable One internal documents indicate that its picture-quality tests were unreliable, because the equipment used had not been calibrated correctly since 1996.
But in a written response, Cable One vice president Mitch Bland said Kramer only inspected 72 of the company's 387 miles of plant in the area, and identified only 1,800 improperly grounded drops of a total of 80,000. Nevertheless, the company has hired its own engineering consultant to ensure all drops are properly grounded, Bland said.
Meanwhile, Cable One has agreed to pay some $10,000 to cover water damage to city equipment when its technicians failed to properly seal a conduit in city hall. It has also agreed to pay $1,500 to evaluate whether warranties covering damaged equipment were voided by the mishap.
"There's no doubt that Cable One has addressed some of the issues," Hansen said. "But they haven't given a full response."
Cable One and Modesto are still at odds over whether the company owes $59,000 in unpaid franchise fees. The city contends Cable One is required to include advertising expenses in the gross revenues used to calculate those fees.
In his response, Bland said the disagreement is over commissions paid to an advertising agency. Since those commissions are withheld by the agency before ad revenues are forwarded to the operator, that money should not be included in the company's gross revenues, he said.
Bland said it was "premature" to speculate on the city's course of action, but added that the AT&T system swap remains on track to close by year-end.
He said the company would stand on 15 years of favorable evaluations by the city, some of which declared Cable One's system "one of the best cable systems in the country."
"That kind of evaluation speaks for itself," Bland said. "We have a pretty good record to stand on in Modesto."