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RCN Cable files Chapter 11 bankruptcy

August 6, 2004

BY TAMMY CHASE Business Reporter


RCN Cable TV of Chicago Inc. filed for Chapter 11 bankruptcy reorganization, a little more than two months after its New Jersey-based parent, RCN Corp., filed for bankruptcy, because the telephone and cable company couldn't come to an agreement with the city of Chicago over broken promises to expand cable television service.

RCN has been in hot water with the city for defaulting on payments it owes to the city's public access television station, and for not fulfilling promises it made to expand service beyond the lakefront and Skokie when it came to town four years ago. RCN has blamed the financial decline in the telecommunications industry since 2000 for making it impossible to raise money for expansion.

Last winter, the city began fining RCN $1 million a day, and it now owes more than $150 million in fines, a spokeswoman for the city said.

According to its bankruptcy petition filed in New York on Thursday, RCN Chicago says it owes the city $169,000 related to its franchise agreements with Chi-cago, and owes the public access station $127,806. It did not list the fines.

RCN says the filing will not affect its telephone, cable or high-speed Internet customers. It also will not affect its newest offerings, digital cable and telephone service over Internet lines, also known as voice over Internet protocol. The company estimates it serves 100,000 households in Chicago. RCN is the second-largest cable company behind Comcast, which has more than 300,000 customers.

By having its Chicago subsidiary file for reorganization, RCN can more easily have a judge throw out the old franchise agreements and make the city negotiate new ones, said Tom McKay, RCN's assistant general manager in Chicago. He said RCN's subsidiaries in the other six cities it serves have been able to renegotiate franchise agreements, but it has been unable to do so with Chicago.

Chicago Commissioner for the Department of Consumer Services Norma Reyes in a prepared statement called the filing "curious since the company has consistently refused to negotiate in good faith with the city and CAN-TV [the public access channel] to reach an equitable settlement."

She said the city will make sure "RCN meets all of its obligations" to the city.

McKay said RCN, both the parent and the Chicago company, expect to file a restructuring plan by the end of August, and hope to emerge from reorganization during the final three months of this year.

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