RCN Defaults on Payment it Owes City's CAN TV

From the Chicago Sun Times

Published January 14, 2004

By Tammy Chase, Business Reporter

RCN Corp., the money-losing cable, telephone and Internet company serving Chicago's lakefront, has defaulted on a payment it owes to Chicago's public-access television operation, CAN TV.

Princeton, N.J.-based RCN, which came to Chicago in 2000, was supposed to make a $215,000 annual payment as of Jan. 7 to meet its obligation to Chicago Access Network Television, said CAN TV executive director Barbara Popovic.

City legal officials were investigating Tuesday whether RCN has violated its franchise agreement with the city, and whether RCN has jeopardized its privilege of selling cable in Chicago.

In a letter to the city this week, RCN said it wants out of earlier promises it made to the city, specifically that it would expand in the Northwest Side and the Near South Side. RCN blames a "continued decline in the telecommunications market over the past year."

The $215,000 is not the only money that RCN owes CAN. RCN has held off on paying $430,000 that it owed CAN in 2003. That payment is not in default; it has been deferred while the city investigates RCN's claims that it can no longer afford to expand northwest and south. RCN doesn't believe it should have to pay money to CAN when it is scaling back expansion plans.

RCN's vice president of marketing, Marc Miller, said Tuesday that his company pays more money to CAN TV per subscriber than other cable companies and that RCN wants "a level playing field."

In all, the combined $645,000 CAN TV says it's owed by RCN represents a fourth of CAN TV's $2.4 million 2004 budget.

CAN TV last year reduced its full- and part-time staff by 30 percent to 32 people, 27 of whom are full-time, and cut expenses by 10 percent.

Popovic said she expects services will have to be cut again this year.

"The commitment was to pay for every area they have a franchise in," Popovic said.

The city's Department of Consumer Services and city lawyers are now investigating whether RCN has violated city law.

"RCN made a commitment to the city of Chicago and CAN TV to provide competition to cable customers and fund public access in the city," said consumer services spokeswoman Connie Buscemi. "Their decision to retrench on that commitment is very troubling."

RCN is the city's second-largest cable franchise, with 77,982 subscribers along the lakefront from Rogers Park on the north to just north of Hyde Park on the south.

Comcast, the largest, has 313,174 subscribers and is the only cable company that serves all of the city of Chicago.

The default isn't the first time the city has had trouble from RCN. The company reneged on $645,000 it owed CAN TV in 2002. By the fall of that year it had reversed its position and paid the money as the City Council was readying to impose penalties on the company.

RCN has never turned a profit since being spun off in 1997 from C-Tec Corp., which is part of what is now a Pennsylvania phone company.

Avis LaVelle, who recently became chairman of the city's cable commission, could not be reached Tuesday for comment.

back to top