L.A. City Council Approves Adelphia Rollback Order

Cable World, June 2, 2003

Byline: MAVIS SCANLON

Even as Adelphia Communications requested additional time to gather data to refute the city of Los Angeles's complaints that it overcharged customers, the City Council Friday morning unanimously approved a recommendation from the city's Information Technology Agency to roll back Adelphia's rates.

The order would reduce rates to 2001 levels, cutting monthly revenue and forcing the company into the unusual position of mailing rebate checks to almost 250,000 customers.

Adelphia will likely appeal the rate order to the Federal Communications Commission, according to a spokesman, setting off a review process that could take months. Adelphia says there was no way it could have delivered the certified data in the time frame the city demanded due to an ongoing audit of its financials and operating statistics. Repeated requests for an extension were denied, says Tom Carlock, Adelphia's newly hired regional VP of law and public policy.

Adelphia and the city also disagree over the number of channels on Adelphia's basic lineup. According to Carlock, the city says Adelphia includes 35 channels; Adelphia asserts there are 38.

"Since we believe there are errors in their analysis, [an appeal] would probably be the direction we go in," he says.

Revenue lost from the lower rates would be just a fraction of the $2.8 billion Adelphia generated in the ten months ended April 30, but it will sting nonetheless. Adelphia is lagging behind the industry on a revenue-per-subscriber basis; lower rates in L.A., Adelphia's largest system, will affect the company's efforts to boost that important metric. The ongoing revision of subscriber figures under new, more conservative accounting policies will also affect ARPU.

Still, with a companywide restructuring in process under new CEO Bill Schleyer, and last week's approval of the entire $1.5 billion debtor-in-possession financing package by a New York bankruptcy court, Adelphia finally has the sorely needed capital to complete the upgrade of its cable plant.

That, in turn, will allow not only Los Angeles but its systems throughout the country to offer high-speed Internet service and other advanced services on a wider basis.

In L.A., the best outcome would be "to move forward and address the performance concerns we have with the city," Carlock says. "Ultimately we will show them there is the commitment to get new products launched."

After filing for bankruptcy last June, Adelphia and its creditors agreed on the financing package in August, but because certain financial covenants had not been finalized, the MSO was limited to accessing $500 million of the financing. Adelphia submitted a long-term budget to the creditors in late April and gained access to the rest of the financing last week.

Let the upgrades begin.

THE NEXT QUESTION:

*What kind of customer backlash can Adelphia expect if it appeals an order to reduce rates?