A subsidiary of the communications company that owns the Richmond newspapers was recommended yesterday for Fairfax County's cable television franchise, a monopoly that a consultant says could be worth $260 million in 15 years.
County government staffers endorsed a proposal by Media General Cable of Fairfax County Inc., but the government's own consultant gave only lukewarm endorsements to the two firms competing for the contract.
The staff recommendation should give the inside track to Media General, a $367 million Richmond-based communications firm that joined with five Northern Virginia investors to compete for the franchise against Fairfax Telecommunications Co. County supervisors are scheduled to make the long delayed award June 28, in which case some Fairfax homeowners could receive cable service within a year.
For more than three years the county has been the scene of a high-stakes competition that has involved many of Fairfax's most influential citizens. Although the county is considered one of the most valuable cable markets in the nation, only two firms bid for its franchise -- compared to the eight that Montgomery County is currently evaluating.
The Fairfax County staff and the consultant agreed yesterday that neither Media General nor FTC, which is a partnership between more than 130 area investors and the Colorado-based Telecommunications Inc., submitted ideal bids. Neither firm has built or operated a system as large as Fairfax County's will be and both may have underestimated the rates they will have to charge, according to the consultant. Both gave free stock to well connected local politicians and businessmen despite the county government's official disapproval of the use of so-called "rent-a-citizens," according to the consultant's report.
Media General, however, offered the best package of services at the best price, according to the staff. Both the staff and the consultant, CTIC Associates of Arlington, said Media General's major weaknesses -- chiefly in its engineering plan -- could be corrected.
"I don't want to be overly optimistic, but I think Media General is going to win," said company spokesman Steven Saferin. "Either Media General will win or they won't award a franchise." A spokesman for FTC declined comment.
County officials have said the award may have to be decided in the courts and FTC recently added two former Virginia state attorneys general to its battery of influential lawyers that already includes Virginia state Sen. Adelard L. Brault of Fairfax. Andrew P. Miller of Alexandria, an FTC stockholder and his successor, Anthony F. Troy of Richmond, now represent the firm.
Media General, which owns a cable system in Fredericksburg and daily newspapers in Richmond, Tampa and Winston-Salem, N.C., promised to string cable in most of the county within three and a half years. Subscribers could receive 59 channels for $2.95 per month, with access to two movie channels for an extra $7.95 each, or they could pay $10.95 for 100 channels with access to more pay stations.
FTC offered a similar number of channels, but the staff and the consultant said customers would have to pay more to get a similar package of channels. Both companies also offered the promise of two-way services that customers could use for shopping, banking and home security.
The Fairfax franchise also will cover the city of Falls Church and the towns of Vienna and Herndon.
"The gap in the problem areas are much more significant than usual," said cable consultant David Korte. "That's why we had a much harder time saying Company A is better than Company B . . . It becomes a matter of weighing the trade-offs, and that becomes very subjective."
The consultant said that Media General excelled in its program offering, prices and local access facilities and predicted revenues more realistically. FTC offered a superior design, the consultant said, and projected costs more realistically.
The consultant also said that customers may have to pay for the stock that the companies have given to their local investors. Media General's five local investors--builder Herbert L. Aman III, his wife, Sandra, developer Edwin W. Lynch Jr., real estate dealer Suzanne H. Paciulli, and lawyer Richard F. Kennedy--will receive two shares of stock for each share they buy, and their $400,000 purchases will be funded almost entirely by a bank loan guaranteed by Media General.
"It appears that the only true capital these local shareholders have at risk is the initial $6,000 they each invested," consultant's report states. The report predicts "that most if not all local shareholders" will sell out to the parent company in about five years.
The local shareholders of FTC stand to receive an even better return on their stock, according to the consultants. After investing about $870,000, those investors could receive between $42.5 million and $54.5 million during the 15-year life of the franchise, the consultant said.