N.C. Towns Opts to Buy System

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Davidson and Mooresville, N.C., intend to take over the operation of the local cable system serving the two communities, as well as customers in neighboring Cornelius and the adjacent unincorporated areas of Mecklenburg County.

The communities have taken advantage of language in their local franchises that affords them the right to negotiate to buy the system, instead of having it transferred to another commercial operator. The language was inserted in the pact when Adelphia Communications bought the system from Prestige Cable in 1998.

TWC WANTED IT

The section was triggered when Adelphia went into bankruptcy. Adelphia's assets were purchased by Comcast and Time Warner Cable; the latter has been operating the system and intended to take ownership. The city councils in both towns voted Aug. 13 to take over the local system.

The municipalities originally intended to form a consortium including other localities, but support for such a venture changed. Huntersville (which would have been the largest municipal player in the group) voted to opt out and Cornelius exercised its right of first refusal but assigned its operating authority to Davidson and Mooresville, which will now make up the core of the municipal cable operation.

On Aug. 14, the Mecklenburg County Board of Commissioners, in a close vote split along party lines, approved a resolution to exercise its right to acquire its 1,500 to 2,000 customers. A second resolution, to assign management of those customers to the municipal consortium, passed on a 7-2 vote.

The four Republicans on the board have argued against creating an operation in competition with private industry; the five Democrats countered that broadband services are now “necessities of life” and no different than municipal utility operations, said county attorney Marvin Bethune.

“It's all done now, as far as I'm concerned,” he said of the system purchase.

Time Warner Cable opposed the purchase, but the final say was in the hands of the U.S. Bankruptcy Court for the Southern District of New York, which controls the fate of the former Adelphia assets.

Bethune said before the judge there made a ruling on the sale of the cities, Time Warner entered into a settlement with the communities to transfer the cable systems, based on physically separating the community owned property from Time Warner's plant in the region.

The court, on May 16, set a value of $3,810 per subscriber for the system. Under the settlement, according to information published by the towns, Time Warner must agree to release any employee who opts to work for the new cable operation, dubbed MI-Connection (for Mecklenburg and Iredell counties, and pronounced “My”).

The consortium and the cable operator will split the cost of physical separation, with Adelphia's share capped at $1 million, according to the communities.

The towns estimate the acquisition cost for the systems, which will serve about 10,500 customers at launch, will be $75 million.

MANAGER NEEDED

In addition to the per-subscriber cost, the city anticipates paying an outside entity to manage and operate the system, as well as assist with the transition from Time Warner.

The towns are in negotiations for another municipal cable operator, Bristol Virginia Utilities, to take that role, according to information from the towns and Bethune.

Mooresville (population 18,700) will be issuing the bonds to pay for the acquisition with Bank of America expected to finance the deal, according to data from the cities. Mooresville and Davidson (population 7,100) will each appoint members to the board of directors that will govern the system. The communities anticipate that the cost of the system will be covered by revenues generated from video and Internet consumers.

The municipalities are operating under a tight timetable. They have been given 120 days to complete the sale and its financing and sever the municipal system from TWC. Despite that hurdle, the consortium has aspirations beyond mere acquisition. The towns have told constituents that a full system upgrade is planned, from its current 680 Megahertz to 862 MHz.

Officials expect the improvements to be completed across the full system by 2009.

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