The president of District Cablevision Inc. and an official of the national cable company offering to provide the bulk of DCI's financing said yesterday that DCI may need more concessions -- beyond those now being considered by the City Council -- to raise enough funds to build a cable television system here.
Without a clause in the city's cable franchise agreement allowing the firm to seek additional changes down the road, District Cablevision will not be able to secure at least $30 million in financing promised by the national firm -- Tele-Communications Inc. of Denver -- the cable executives said.
"TCI has informed DCI that a provision dealing with this issue is critical to its decision to provide equity for the system," District Cablevision president Robert L. Johnson said in a letter delivered yesterday to council member Betty Ann Kane (D-At Large), chairman of the council's cable television committee. "Particularly in the light of recent difficulties facing urban cable construction projects, DCI believes that TCI's request for assurance on this issue is entirely reasonable."
Johnson also told the committee at a hearing last night that DCI remains "fully committed to wire the entire city," but that if the project becomes economically unfeasible the company needs "something somewhere between going bankrupt and providing cable television."
John Sie, a vice president of Tele-Communications Inc., the nation's largest cable operator, told the committee his company wants "investment criteria" ensuring DCI it would not have to spend more than an average of $500 per home to wire the city. Individual homes could cost more to reach, but as long as the average is below $500 per house, his company could afford to continue its investment, he said.
Johnson told reporters at the panel session that DCI planned to conduct a market anaylsis and would begin wiring city neighborhoods that would not drive the construction costs above the $500 per home average.
Also at the hearing, several City Council members questioned Sie about the fact that TCI still had not given District Cablevision $196,000 of the money it had previously pledged. He responded by saying that without concessions sought by the local cable company, "the D.C. franchise economically is not viable, and TCI would decide not to participate and would take whatever legal consequences.
"Without the complete package of concessions requested by District Cablevision , TCI cannot commit to the upfront money," he said.
Mayor Marion Barry announced his support last week for a dozen major concessions sought by District Cablevision, but reasserted his administration's commitment to making the system available to all residents. Most members of the City Council also are committed to building a city-wide system.
Thus far, District Cablevision is seeking cost savings totaling $32 million, including reducing the number of residential channels from 78 to 54, delaying the activation of an institutional network and eliminating financial commitments to municipal and public programming.
Johnson told Kane's committee that his firm was unable to carry out its original plan to raise $30 million through a limited partnership offering.
He said his firm was advised by its local investment adviser, Johnston, Lemon & Co., that it could not expect to receive financing unless one of the nation's large cable operators became a major investor.
Johnson said that several major operators, including American Television & Communications Corp., United Cable and Columbia International, had declined invitations to become investors in the system.
Johnson said the operators were reluctant to get involved because District Cablevision would not agree to surrender control of the system and the proposed system contained a number of nonrevenue-producing requirements. He said the major operators also were concerned about the "disappointing performance of urban cable systems" in attracting customers.
District Cablevision provided the council yesterday with a report that shows the company has not collected $362,000 of the $2.2 million pledged by its shareholders. Last week, the director of the District's cable office said the outstanding amount was about $600,000.
District Cablevision's inability to raise the money has discouraged the Anacostia Holding Co., a subsidiary of the Anacostia Economic Development Corporation, from contributing $85,000 of its $100,000 pledge, according to company president Albert Hopkins.
"It would be almost as if we would be putting 85,000 good dollars behind $15,000 that are already lost," said Hopkins, adding that the money would be paid if District Cablevision were granted the proposed changes in the franchise.
According to District Cablevision's report, TCI, which has a 20 percent share of District Cablevision, paid $190,000 but still owes $196,000.
Funds still owed also include $40,000 of $50,000 pledged by William T. Johnson, a cable operator who holds franchises in Columbus, Ohio, and in Seattle and St. Louis; $25,000 of $100,000 pledged by Joseph H. Sharlitt, a local lawyer; $8,000 of $10,000 owed by Peter Barton, a vice president for TCI; $4,000 of $5,000 owed by local resident James Brown and $4,000 of $5,000 pledged by Theodis R. Gay, former chairman of the D.C. Democratic State Committee