Adelphia Faces Loss of L.A. Franchises

Worried that the financial problems at Adelphia Communications Corp. are hurting the cable operator’s 250,000 local customers, City Atty. Rocky J. Delgadillo threatened Wednesday to revoke the company’s five Los Angeles franchise agreements because of contract violations.

Adelphia, the nation’s sixth-largest cable operator and the biggest in Southern California, is on the verge of filing for bankruptcy protection after a major accounting scandal. Federal and state regulators are investigating Adelphia because of disclosures that the company’s founding Rigas family borrowed $3 billion backed by the corporation without shareholder’s knowledge.

To stave off bankruptcy, Adelphia has been trying sell some of its assets, including the prized Los Angeles cable systems, but has not been able to strike a deal.

Former Los Angeles Mayor Richard Riordan has put together a team to explore the possibility of purchasing Adelphia if it goes into bankruptcy, according to sources involved in the effort.

Adelphia’s troubles were a central topic at Wednesday’s City Council meeting. Councilman Jack Weiss demanded that the city attorney’s office and the local cable regulatory board provide an exhaustive rundown of the city’s options regarding negotiations to renew Adelphia’s franchises. And he said he wants a strategy for the city if the cable operator files for bankruptcy protection.

“We may be able to threaten to revoke the franchises, but what good does it do us if it denies a quarter of a million people of television service?” Weiss said. “We need a comprehensive strategy to protect customers given the limited number of options we have.”

Adelphia is the only cable provider in Eagle Rock, Sherman Oaks, Boyle Heights, the East San Fernando Valley and West Los Angeles.

Various cable executives, city officials and bankruptcy experts say that customers probably will notice little change in service if Adelphia files for bankruptcy protection because a bankruptcy judge is unlikely to jeopardize the monthly bills for cable and high-speed Internet service that are Adelphia’s only source of revenue.

Yet the prospect of a bankruptcy has set off anxiety among Adelphia’s 3,000 local workers.

“Everyone’s on pins and needles,” said an employee who asked not to be identified. “There are new rumors every day. What happens if they sell the company or file for bankruptcy? Will I still have a job?”

Over the last three weeks, Adelphia let go subcontractors who were hooking up about half of the company’s new cable and high-speed Internet customers. That set off speculation within the work force that other bills might not be paid by Adelphia’s headquarters in Coudersport, Pa. An e-mail from a regional Adelphia manager instructed personnel to fuel up all company vehicles because of fears that Adelphia’s gasoline credit card bill had not been paid. For two days last week, some of Adelphia’s two-way dispatcher radios were shut down because of an apparent billing problem.

Adelphia officials said that all radios were back up by Friday afternoon and that local offices were doing their best to operate on a business-as-usual basis.

Yet Delgadillo said lapses in customer service have put the company in violation of its city contract. He complained about extended waits by customers on Adelphia’s telephone help lines and a failure by the company to provide digital services, such as high-speed Internet access, in all areas of its franchises.

Delgadillo said the city offered to help Adelphia in efforts to sell L.A. cable systems to ensure continued service and speed any sale.

At stake for the city is an estimated $7 million a year in Adelphia franchise fees. Cable operators pay the city 5% of their cable revenues every quarter. Adelphia recently paid the city about $1.7 million, and was late in making that payment, local officials said.

The city also worries that many Adelphia customers do not have digital services that are available elsewhere in Los Angeles. Only 50% of Adelphia’s L.A. customers can sign up for digital service.

Industry experts say a bankruptcy filing could further delay the digital conversion, spurring customers to defect to satellite and other alternative providers. Satellite TV rivals already are targeting Adelphia customers because of recent rate hikes and are contemplating new marketing campaigns.Another complicating factor for the city is that Adelphia’s five cable franchises expire Aug. 2. The city’s cable regulatory board is expected to vote July 8 on whether to renew Adelphia’s contracts.

“One option is to extend Adelphia’s contracts with conditions,” said Liza Lowery, the city’s recently appointed chief information officer, whose Information Technology Agency oversees cable regulation. Another option, she said, is to let Adelphia’s contract expire and put the company on a month-to-month deal.

Local cable executives say giving Adelphia a short-term extension might ensure that the city has a say should the company file for bankruptcy protection or sell the local cable system. The city must approve any franchise transfer.