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Adelphia Plans to Fix L.A. Cable Systems Without Subcontractors

By: Patrick Maio

Dow Jones Newswires

LOS ANGELES -- An executive of Adelphia Communications (NasdaqNM: ADLAC - News) Corp. told a Los Angeles city panel its own internal work force will be used starting next week to fix a number of electrical- and construction-code violations in the city's cable system, including ungrounded metering boxes, dangling wires from telephone poles, and power supplies.

Subcontractors who were doing work to upgrade and build high-speed Internet and broadband services in the Los Angeles system were pulled from the job about a month ago when Adelphia encountered cash constraints, before the nation's sixth-largest cable company finally slipped into Chapter 11 bankruptcy protection Tuesday.

"No construction process would justify this," complained Dean Hansell, commissioner of the city panel, regarding the safety violations and pictures circulated at the Friday afternoon hearing.

Laurence Windsor, Adelphia's governmental affairs head in the Los Angeles area, said he didn't know when the subcontractors would be rehired to resume work on the 60% of the system still uncompleted in Los Angeles . Either way, an army of 142 Adelphia cable installers scattered throughout Los Angeles and Orange Counties would be pulled into Los Angeles to get the safety violations corrected immediately over the next one or two weeks.

Many of hundreds of violations first pointed out to Adelphia in March have been corrected, but the city panel is now demanding a timetable to get some of the lesser violations fixed.

Adelphia is quite literally fighting to save its five franchises within the city, which is considered the crown jewel of Adelphia's cable empire with more than 250,000 subscribers. There is no other alternative for Adelphia, which has been rumored to be in talks to sell parts of its cable systems in the U.S.to help raise cash and pay down debt. On Friday, Adelphia got clearance from a bankruptcy judge to allow the cable company to begin tapping a third of the $1.5 billion in new financing that it is seeking as a bridge loan to help it get through its financial mess.

The Los Angeles system is the cable-system island in the midst of more than 1.2 million subscribers that the Coudersport, Pa. , cable company claims in southern California . The city has threatened to revoke Adelphia's five licenses if it doesn't upgrade and complete construction of the high-speed Internet and broadband services in a timely fashion.

Adelphia's Mr. Windsor told the five-member board of commissioners of the Information Technology Agency that about 40% to 45% of the upgrades are completed throughout the city.

In an interview with Dow Jones Newswires, he explained that the construction to build out the system with its high-technology upgrades was greatly slowed in the past two years due to a logjam of work permits that couldn't be processed fast enough within the city's Public Works Department, as well as a moratorium throughout Los Angeles on the construction of "above-ground facilities" connected to telephone poles.

Consequently, Adelphia couldn't get power supplies installed on poles that were needed to power a high-speed data system that would more than double line capacity.

But the city's tolerance with Adelphia has run out.

In a Monday letter sent by Liza M. Lowery, chief information officer with the Information Technology Agency to Mr. Windsor, she wrote she wants Adelphia to provide a maintenance plan on getting the safety violations fixed and submitted to her office by July 1 .

"In the event that Adelphia does not demonstrate that it intends to implement such expeditious and thorough corrective action, ITA intends to embark upon breach proceedings, possibly leading to the revocation of the city franchises Adelphia currently controls," said the letter, obtained by Dow Jones Newswires.

Pictures of safety violations were distributed at Friday's hearing. One picture showed cable dangling from a telephone pole, nearly touching the ground, another showing a drooping cable and amplifier attached to a pole with a rope.

Mr. Windsor said the problems were corrected after they were bought to Adelphia's attention.

In a Wednesday letter from Ms. Lowery addressed to City Councilman Mark Ridley-Thomas, she argued about concerns regarding subscriber loss in Los Angeles to competing wireless providers, who pay no franchise fees to the city. A 5% decrease in 250,000 subscribers would result in financial losses to the city of over $300,000 annually, she wrote.

Ms. Lowery noted that Adelphia had been losing customers long before its financial problems became public. The company's subscribership in Los Angeles fell 5,991 to 252,440 between the first quarter of 2001 and 2002.

She added, "If Adelphia is not successful at restructuring itself into an economically viable entity, or if the service in the Adelphia franchise areas deteriorates substantially, the city may want to speak to potential investors about assuming the Adelphia franchise obligations."

-By Patrick Maio, Dow Jones Newswires; 323-658-3776; patrick.maio@dowjones.com