Regulators in several communities, already nervous from the Chapter 11 bankruptcy filing by Adelphia Communications Corp., had their confidence shaken further at the beginning of July when the MSO's checks bounced.
The checks were written to cover obligations such as franchise fees and institutional network construction.
An Adelphia spokesman said the pre-bankruptcy petition checks were dishonored in error. They had been drawn on accounts that were subsequently closed by the bankruptcy administrator. Now that the corporation has debtor-in-possession financing in place, all pre- and post-petition checks are being honored, he said.
"We are sorry for the inconvenience," said spokesman Stuart Fischer.
Indeed, a representative from Rialto, Calif., said a $97,050 franchise fee check cleared on a second try, according to Angela Perry of the telecommunications department.
"This is not a good sign. It certainly doesn't make your confidence go up," said Angela Rushen, media and communications administrator for Moreno Valley, Calif., where Adelphia serves 26,000 subscribers.
"Everyone tells us, 'We want to serve our customers, we want to be a partner to the city.' But something like this really shakes your confidence. Even if this was just a technical error, the timing is bad."
That's because most cities are in the middle of budget season and need to know the amount of cable revenue they can expect in their coffers. The loss of several thousand dollars is enough to send a small city into a panic.
Adelphia recently submitted its first-quarter franchise fee — which was due in March — only after threats of penalty by Moreno Valley. The city is out $168,831.63, until the bankruptcy administrator for the company can authorize a new check. When the check failed to clear, the city attorney and Moreno Valley's special counsel were notified.
Other communities that received bad checks include Gwinnett County, Ga., and Colorado Springs, Colo.
Colorado Springs received five different checks, totaling $151,000. City staff assistant Debbie Kuhn said the city was assured it would receive new checks on active accounts as soon as the dishonored checks were returned to the company.
The National Association of Telecommunications Officers and Advisors met with Adelphia representatives because of dishonored checks and to discuss other concerns by municipal regulators.
According to a memo from NATOA executive director Libby Beaty to the group's members, regulators were told July 10 that Adelphia has changed its accounting systems so that all future franchise fees will be placed into segregated financial accounts, "ensuring the unencumbered pass through of the amounts collected from subscribers directly to the local franchise authority."
Adelphia also told the municipal regulators that there would be no disruption of programming services for any local system "for the foreseeable future."
NATOA said Adelphia CEO Erland Kailbourne is planning to meet with local governments later this month. The date and location of the California meeting has yet to be set, according to the trade group.
