City Fining RCN $1 Million a Day

Chicago Sun-Times

Published February 24, 2004

By Tammy Chase, Business Reporter

The city of Chicago is levying $1 million a day in fines against cable and Internet company RCN Corp. from the nearly $10 million the company put up when it came to town four years ago, city officials said Monday.

On Saturday the city's cable commission decided to fine RCN after deciding RCN has not fulfilled promises to expand its network in the city, and because it defaulted on payments to a public access cable television station.

The city is taking the fines from RCN in the form of bonds and lines of credit that were part of the company's agreement to build out in Chicago, said Connie Buscemi, spokeswoman for the city's Department of Consumer Services.

The fines come a week after Princeton, N.J.-based RCN said it will file for Chapter 11 bankruptcy reorganization once it renegotiates its debt after it was unable to make a $10.3 million interest payment that was due to noteholders on Jan. 15. RCN has said it can't afford to expand its services in Chicago as it previously promised because the financial decline in the telecommunications industry since 2000 has left it unable to tap the markets for new money.

RCN on Monday would say only that it is working with the city on the matter toward some kind of resolution, and would not be more specific. "We don't anticipate customers to be impacted" by the fines or the bankruptcy, said Jim Downing of RCN's investor relations department.

The city will whittle down that $10 million by next week. Buscemi said the city's course of action "will be left up to the [city] law department to take whatever action they deem appropriate at that time."

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