Economy Snarls Cable In The West

Mid-atlatic's Expansion In The Red,fades To Black

March 24, 1991|By James M. Coram | James M. Coram,Staff writer

Mid-Atlantic Cable Co.'s plans to provide cable television service to about 500 homes in the western and central portion of the county have stalled indefinitely because of a money crunch, said company general partner John C. Norcutt.

Norcutt blames the economy, a decline in housing construction and the county's subdivision moratorium for the company's failure to meet its December construction deadline. The project, which was originally expected to cost $4.2 million, has costthe company $6.8 million so far, he said.

Norcutt will outline the problems at a public meeting Wednesday night of the Howard County Cable Advisory Committee.

After hearing from Norcutt in Wednesday's public meeting, the committee will decidewhat action, if any, to recommend to the County Council. That recommendation could be anything from granting the company an extension without penalty to suggesting that Mid-Atlantic be fined $300 a day until construction is complete.

According to its franchise agreement, Mid-Atlantic was to provide service to about 5,000 homes by the end of last year. Most of the construction will be finished by April 30, but Mid-Atlantic cannot afford to continue building to the remaining neighborhoods, Norcutt said.

Most of the subdivisions on the waiting list are in the western end of the county. Two subdivisions, Farside and the Chase, are in the center of the county.

County Council member Charles Feaga, R-5th, whose constituents are most affected by the delay, says he would be willing to give Mid-Atlantic two more years to complete service to his district. He also wants Cable Administrator James O'Connor to monitor the company's activities monthly.

Feaga said he thinks the council would go along with a two-year extension of the construction deadline as long as they see "progress" in Mid-Atlantic's "good intentions."

Annual payment of 5 percent of Mid-Atlantic's revenues to the county as a franchise fee -- less than $10,000 last year -- could be a "lucrative business for the county," Feaga said.

Council chairman C. Vernon Gray said he is aware of Mid-Atlantic's financial problems and favors an extension, provided it istied to the rates Mid-Atlantic charges for cable service.

As for how much of an extension, Gray said, "I want to wait for them to maketheir case and see their reasons for the delay."

Norcutt believesthe company would have met its construction deadline were it not forunanticipated problems.

Because of inflation and unexpected delays in getting state and county approval, Mid-Atlantic's construction cost was $1.4 million above the $4.2 million originally planned, Norcutt said.

The company also spent another $600,000 above what it planned in order to upgrade the system by increasing its capacity from 61 to 80 channels, Norcutt said. The change was necessary to meet demands expected in the next 15 years, he said.

"We're here for the long term," Norcutt said. "We're happy with the system. It's not just state of the art, it's the Maserati of cable systems. We have more channel capacity than anybody."

Broader changes in the economy, a decline in housing construction and the county's subdivision moratorium also were obstacles that prevented the company from meeting its construction deadline.

Those conditions have also led to a radical reduction in the eight-year projections the company gave its lenders, Norcutt said. In addition, the value of cable franchises has dropped about 33 percent since the Mid-Atlantic agreement was signed in November 1988, he said, making money even tighter.

He said the company plans to service the remaining subdivisions -- some have as few as eight homes -- as soon as money becomes available.

"The interest ratesare helping and we're hoping the housing will return to what it was before the moratorium," Norcutt said. "I'm guardedly optimistic."

The question of how long it will take to provide service to the remaining subdivisions is "problematical," Norcutt said, adding he did notwant to have the council read in the newspaper what he has not had achance to tell members privately.

Norcutt said the cost of bringing cable to the 14 remaining subdivisions would be "under $1 million."

The cost of running aerial cable along roads is about $15,000 per mile, and the cost of laying cable underground, which is required in subdivisions, is about $30,000 a mile, according to O'Connor.

Once the remaining subdivisions are tied into the system, Mid-Atlantic is required to install cable lines everywhere there are 20 homes per cable mile.

Norcutt wants the county to increase the minimum to 30homes per mile "as a matter of fairness." Howard Cable Television Associates Inc., which serves the more heavily populated eastern portion of the county, is only required to build at a density of 75 houses per cable mile.

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