The city and Cable Co-op
Publication Date: Wednesday Jan 31, 1996

The city and Cable Co-op

Palo Alto's interest is limited to the survival of local programming

In search of top quality cable television with strong local programming, the city of Palo Alto 10 years ago led a thorough and expensive quest for the best provider. The city set such high standards for the state-of-the-art cable system it desired that, in the end, only two bidders stayed in the contest. After a heated competition, the City Council in October 1985 awarded the Midpeninsula's cable franchise to the Cable Communications Cooperative of Palo Alto, Inc.

Now, a whole decade later, city officials find themselves revisiting a problem they thought they had solved. This time, though, it is not how to get strong local cable television programming, but how to save it.

Ten years into its 15-year contract with the city, Cable Co-op, in important respects, has delivered on its promise. It provides high quality cable service to 46 percent of the 57,000 addresses in its service area of Palo Alto, Menlo Park, East Palo Alto, Atherton and Stanford. The local program offerings--everything from high school sports to local movie reviewers to academic lectures to local entertainment and news reviews to local city councils and city commissions--is outstanding and award-winning. And particularly since the arrival two years ago of the current general manager, Brad Anderson, some vexing service complaints have been addressed.

The problem is that Cable Co-op's system is not financially viable. Faced with what Anderson describes as a "balance sheet from hell"--$37 million in debt that grows each year--the company predicts that in the absence of sale or refinancing, it will default in May 1998 when a $6.8 million payment is due.

The good news is that Cable Co-op has some time to work out a solution. We commend Anderson and his board for their candor in laying out the financial issues and the various options that lie ahead.

The most likely scenario would be sale of Cable Co-op to another cable company that could handle the debt and perhaps run the operation with economies of scale. Others have suggested that the cities in Cable Co-op's service area, particularly Palo Alto, should become a party to a sale or a refinancing of the company, or otherwise go into partnership to allow Cable Co-op to expand its business in the field of fiber optic communication.

It seems clear that the city of Palo Alto has no special interest in the survival of Cable Co-op per se, but does have some interest in the survival of local programming. Palo Alto certainly doesn't want to own a cable company, and there's no reason to think the city would be any more efficient at running it than Cable Co-op is. But presumably, some portion of the 46 percent of local households that now subscribe to cable do so because of the local programming. If Cable Co-op is sold, the city may want to get involved to a limited extent if that could ensure continuation of that programming.

As for Palo Alto investing $10 million to $12 million to install a fiber optic trunk parallel to Cable Co-op's existing trunks, we have strong reservations. As Public Utilities Commissioner Paul Grimsrud points out, there is uncertainty as to whether the fiber optic technology would quickly be superseded by even newer technologies. In any case, any possible investment the city makes in a telecommunications utility would have to stand on its own merits, independent of whether such an investment could offer Cable Co-op a way out of its financial troubles.

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