Tug of War Over Lucrative Cable TV Franchises Heats Up : Palmdale: The operator of the city’s system is battling with two builders who want to serve their proposed developments.
A high-stakes dispute over cable television service in Palmdale is drawing the city closer to a potentially costly legal battle that could jeopardize promised service improvements for thousands of local residents.
At issue is who will provide cable service for two proposed housing projects totaling 12,400 homes--the city’s current cable provider or two influential developers hoping to build the projects. It’s a deal worth up to $25 million.
The problem began when the city’s cable operator, Colorado-based Jones Intercable Inc., sought to renew its franchise, which expires next month. The renewal would have extended the franchise to Ritter Ranch and City Ranch, the two largest housing projects in city history, and it appeared headed toward routine approval until the two developers stepped in.
The City Council, responding to the developers, last month indicated that it would delete the two projects from Jones Intercable’s franchise area and instead hold a competition to award franchises there. Each developer hopes to win a franchise.
As a result, Jones Intercable is refusing to sign the 15-year renewal agreement that would have mandated significant service upgrades citywide.
Thursday night, amid the threat of potential court action by Jones Intercable, the council balked at creating new franchise areas for the planned 7,200-unit Ritter Ranch and 5,200-unit City Ranch projects, which are presently outside the city.
“It seems to me we’re between a rock and a hard place,” Councilman Joe Davies said as the council voted 5 to 0 to take another month to pursue a compromise that might avoid legal action by either of the rivals in the dispute.
Jones Intercable’s present agreement to serve the city--18,600 of 27,300 households now subscribe--will expire Feb. 11. And although no one expects cable service to be shut off if an agreement is not reached, city officials fear that a court battle could stall service improvements.
Among the improvements that could be threatened would be five new channels carrying a variety of programming, and better customer service.
However, Jones Intercable officials say they still plan to complete by March or April a yearlong, $2.7-million upgrade of the Palmdale system, expanding its channel capacity from 36 to 62.
City officials, meanwhile, fear that they might be dragged into a long and costly court fight over service for the two huge housing projects no matter which way they decide. Thus far, months of debate have not produced any approach acceptable to both Jones Intercable and the developers.
Entertainment industry executives Merv Adelson and Irwin Molasky, who helped build the upscale La Costa resort near San Diego, are the Ritter Ranch developers. The well-known development firm of Kaufman & Broad is the City Ranch builder.
Jones Intercable, which serves most of the Antelope Valley through various franchises, bought the Palmdale system from Tribune Cablevision Co. in 1986. Historically, any new territory annexed to Palmdale automatically has been added to the company’s franchise area without any competition.
Nick Nocchi, the cable system’s Antelope Valley general manager, said the company based its expansion plans on the expectation of serving the two huge housing developments once they are annexed by the city.
“That is the main reason we came to the Antelope Valley, to be in a high-growth area,” he said.
However, the Ritter and City Ranch developers believe the city’s own laws require an open competition for new cable service areas.
Jones Intercable officials rejected that interpretation, saying it could lead to chaos. But amid promises that that approach would gain the city the best service package for the two areas, council members last month agreed to carve them into new service areas. And that prompted Jones Intercable to refuse to renew its agreement with the city.
Underlying the dispute are simple questions of money. Cable systems can be lucrative businesses. They are valued based on their numbers of subscribers, anywhere from $1,000 to $2,000 per household served, cable industry officials said.
If all of the two project’s 12,400 housing units were built and served by cable today, that would translate into a top value of nearly $25 million. To the cable company, that’s a guarantee of future business. To the developers, it’s a potential added source of profit for their costly projects.
Once Jones Intercable refused to renew its franchise with the city, representatives of the two developers raised the ante by suggesting that Palmdale should consider opening up the entire city to a new franchise competition.
“I can guarantee you there will be somebody who will step up to the plate,” Peter Wenner, project manager for Ritter Ranch, told council members. “We certainly wouldn’t mind taking a look at something like that,” he added.
Jones Intercable bills itself as the 10th largest cable operator in the country, with 57 systems and about 1.4 million subscribers in 20 states. Officials of each of the developers say they have run cable television systems in projects they have built elsewhere.
