Facing substantial losses and continuing operating problems, Montgomery County's cable company has asked to be relieved of promises it made two years ago when it won the franchise over eight competitors, a company official said yesterday.
Without the concessions, Tribune United Cable projects losses in excess of $100 million over the next 15 years. The company says it will have to cut back on services and defer regularly scheduled payments to the county or raise subscriber rates substantially in order to continue building and operating the system it promised.
The company official's statements come at a time when the parent Tribune Co. of Chicago has been trying unsuccessfully for months to find a buyer for the county cable television system. The company announced the sale last March, saying it needed the revenues to expand its commercial television holdings.
The contract's requirements to provide certain services that are costly and potentially unprofitable and the county's unwillingness to renegotiate the contract with Tribune United or a potential buyer are hampering efforts to make the sale, according to a company official.
Some county officials have charged that the company is purposely dragging its feet on contract obligations to cut its investment in the $150 million system. The company has spent $45 million so far to wire about 19,000 homes.
"They have been walking away from these financial obligations," said County Council member David L. Scull. "They have the wherewithal to carry out their promises. Of course, they'd rather not, but they have committed themselves, and should be held to their commitments."
The company has maintained that it intends to provide subscribers with the highest level of service, but also insists that without substantial modifications "the cable system simply is not economical," according to a series of letters the company has sent to the county, copies of which have been obtained by The Washington Post.
In one letter, Douglas H. Dittrick, president of Tribune Cable Communications Inc., the New Jersey-based cable division of the Tribune Co., said his company has "repeatedly" sought to explain the need for contract modifications to its Montgomery County system, only to be met with what he called inflexible demands for money the cable company owes the county under the terms of the contract "irrespective of whether there is any conceivable need or use for the funds. . . . "
Failure to grant concessions "will foreclose our options for making reasoned judgments for allocating resources. The logical course of action, in our judgment, is to defer those franchise obligations for which there is no demonstrable public need."
"There is a feeling to some extent that we are looked upon as a bank," said Michael J. Pohl, a spokesman for the company. "We are an ongoing concern, we are not a bank."
The company's financial health is at the heart of a series of disputes that have taken place between the county and the Tribune United Cable over the last several months involving the company's failure to meet several obligations in its contract.
The company is behind on its construction schedule and on the payments it owes the county for public access facilities, and has not even begun build an institutional cable network, valued at $18 million, according to county officials.
Under the terms of the contract, Tribune Cable is required to provide 32 channels as part of a limited-service package and 63 channels under a full-service package, in addition to 10 premium channels, such as HBO.
The contract also requires the company to provide a "flagship" county channel for public access television, municipal channels for Rockville and Takoma Park, educational and government access channels and studios and other facilities for public use.
To help pay for the public channels and facilities, the company is obligated under the contract to provide $8 million in grants and other funds. To date, the county has asked for $5 million. The company has provided $2.3 million but is delinquent on $1.5 million in payments, according to Alexander J. Greene, staff assistant to the county executive.
In a Sept. 19 letter, County Attorney Paul McGuckian declared the cable company in default on a laundry list of contract obligations. Among them was failure to construct the institutional network, equipment substitution without authorization, failure to provide the public access funds, and failure to provide hearing impaired channels and services.
"We are reasonable people, but we intend to see this contract carried out," said Greene. He said the county would be willing to negotiate specific items in the contract, but is unwilling to void the entire contract.
Some of Tribune United's projected losses were spelled out in a previously unreported confidential report from the company to the county last May. Cable company revenues over the 15-year life of the franchise contract originally had been estimated to be in excess of $790 million, but the latest projections show revenues falling short of that by $263 million, according to the report.
In a strongly worded letter in August, County Executive Charles W. Gilchrist informed TCCI that the county was not interested in negotiating a new franchise agreement and would expect any buyer to comply with all of its terms.
Montgomery County's plight is not unusual. In numerous other areas -- including the District of Columbia, Fairfax County, Boston and Detroit -- cable contractors have had to return to local officials and ask for relief, including new concessions and more money.