Death of an American Dream

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It's impossible to imagine what life must be like in once-bucolic Coudersport, Pa.—the headquarters of Adelphia Communications Corp., which is now beset with financial woes that are assuming Enron Corp.-like proportions.

It's a sleepy town in which many work for the nation's sixth-largest MSO, or depend on it for their livelihood in some way. And last week, things took a dramatic turn for the worse for the company, which had already announced that it was selling half of its systems in order to take care of its nasty off-balance-sheet debt.

Last Wednesday, Adelphia chairman John Rigas stepped down to assume the role of chairman emeritus. That move—arguably more symbolic than meaningful—seemed only to outrage shareholder Leonard Tow, who owns nearly 12 percent of Adelphia's outstanding shares and threatened to sue the MSO if certain steps were not taken immediately.

Tow, who had sold Century Communications Corp. to Adelphia in 1999 for $5.2 billion, has seen his holdings in Adelphia lose 70 percent of their value. He demanded that the company name three new members to its board of directors.

Adelphia's troubles cascaded the next day, when chief financial officer Tim Rigas resigned just one day after his father. At press time, the future of the other Rigas family members who work for Adelphia was unclear.

While it's sad to sit on the sidelines and watch Adelphia unravel, to some cable insiders, the company's woes haven't entirely come as a surprise. Although Adelphia's a public company, in many respects, the Rigases ran it like a privately held firm.

Its executives were always somewhat press shy, to say the least. And since this imbroglio unfolded in March, even Tow—a major investor—complained about not getting his phone calls returned.

Others say that with Adelphia's 1999 acquisition spree, the company simply took on more than it could manage. The MSO's executive ranks are thin, and it's seen as "insular," since many of its top executives are Rigas family members.

"How can you attract good people, given all that, to a MSO headquartered in Coudersport?" asked one cable executive.

Indeed. In the middle of Adelphia's very public woes, one of its top lieutenants—senior vice president of operations Ann Montgomery—quietly resigned on May 1.

Montgomery, a 17-year cable-industry veteran, had only been with Adelphia since July 2000. She said the company's financial problems had nothing to do with her decision to leave. Instead, she said, "there's not a lot of career path upward within the company."

And now there might be other problems beyond the off-balance sheet debt. In published reports last week, there were allegations that Adelphia might have tinkered with its subscriber count as well.

Hopefully, that's not true. Adelphia might just have done something that other MSOs—like Charter Communications Inc. and AT&T Broadband—have recently done.

Charter recently wrote 159,000 deadbeat subscribers—who hadn't been paying their bills anyway—off its books. Likewise, AT&T earlier announced that it had lost 179,000 subscribers for the same reasons.

But it's mostly sad to see the death of an American dream, in which a scrappy entrepreneur like John Rigas—who had a devil of a time raising $300 to get Adelphia up and rolling 50 years ago—now sits on the sidelines, watching what was built over a lifetime quickly fall apart.

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