Lakefront Cable Firm May be Fined

by City For Not Expanding

Chicago Sun-Times

Published February 6, 2004

By Art Golab, Staff Reporter

RCN Corp., the financially troubled lakefront cable company, could face fines of $750 a day from the city for failing to deliver on promises to expand service westward and for missing payments to Chicago's public access network, CAN-TV.

Consumer Services Commissioner Caroline Schoenberger said she will ask the Cable Commission to approve a resolution next Tuesday finding RCN in violation of its franchise agreements. That could allow the city to impose fines and even go after a $3.15 million performance bond posted by the cable company.

RCN got into trouble after it was awarded franchises to expand from the lakefront into Chicago's other three cable areas in December 2000. But the bottom fell out of the telecommunications industry, and RCN's stock plunged from $20 to about $1 today.

Claiming lack of funds, last year the company renegotiated its deal and got out of its obligation to build in Areas 3 and 4. Now it wants permission to stop building in Area 2, where it has only strung cable for 1,500 customers.

"I cannot deny that a contract was signed in good faith," said Michael Angi, general manager of RCN Illinois. "But the economic conditions of the company and of many companies in telecom in general have changed since the time that agreement was signed. We would love to be able to build -- we just do not have the cash at this point."

RCN also wants payments to CAN-TV to be based only on the customers it already serves. In January, it defaulted on a $215,000 payment to CAN-TV for Area 2, and owes an additional $19,000 in production grants.

Schoenberger, however, said the company has found money to upgrade its Area 1 operation to digital and that RCN is spending money in other cities. "So it's not like they are so broke," she said.

But city leverage over RCN may be reduced because since 2000, no other cable companies have shown interest in Chicago.

And Schoenberger conceded RCN is important because it's the strongest competitor to cable giant Comcast, which serves the whole city.

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