District Cablevision Inc., a local minority-owned cable television firm, announced yesterday it is bringing a second major cable company, giant Cox Cable Communications, into a joint venture to bid for Washington's cable business.
Cable experts say the agreement between District Cablevision and Cox, the nation's fourth largest cable operator, will likely strengthen the company's position when the District seeks bids for its cable business sometime next year. The local firm had announced earlier that it is also allied with Tele-Communications Inc. (TCI) of Denver, the nation's biggest cable operator.
In another D.C. cable development, the City Council agreed Tuesday night to change a section in the cable bill that would have allowed the city to seize an unlimited amount of a cable operator's band width, or channel capacity, for city use.
The council agreed to limit to a maximum of 25 percent the amount of channel capacity that the city could expropriate. Final approval of a D.C. cable bill is expected later this month, opening the way for appointment of a citizens' commission to design the city's cable request.
Yesterday's announcement of the Cox agreement by District Cablevision President Robert L. Johnson points up a growing trend in the cable industry toward consortium bidding in financially risky urban markets.
Caught between rising costs, stiff urban regulation and competition from other TV technologies, cable companies are becoming increasingly hesitant about bidding for cities' cable business on their own, experts say.
Instead, the companies are banding together to spread the risk--and the financial burden--among several participants. "The problem in all the urban markets now is the cost of building the damn things," says Steve Effros, executive director of the Community Antenna Television Association, a national trade group. "This certainly makes District Cablevision a formidable bidder because they now have two deep pockets to draw on."
According to Johnson, Cox will contribute a minimum of $1.6 million, or 10 percent of the equity needed to build a $80 million cable system, in return for a 10 percent share of the partnership. TCI would contribute 30 percent of the equity, or at least $4.8 million, and District Cablevision's local investors would put up at least $8.5 million. The remainder of the partnership's stock is to be sold in public offerings if the company wins the city's franchise.
In return for their financial backing and professional experience, Johnson--whose firm is the only one to publicly express interest in winning Washington's franchise--was able to offer the two companies a group of minority investors that would virtually guarantee minority ownership for the cable venture, a feature that seems certain to win points with the City Council.
Under a bill awaiting final approval by the council, the city has indicated it will favor cable firms with significant minority ownership and provisions for minority employment. Johnson, who also heads a cable programming company called Black Entertainment Television, was among those who had argued for the minority ownership provisions.
Meanwhile, Fairfax County this week set June 28 as the date the county will decide whether to accept either of the two bids it has received for its cable business.