City Slaps $1M Fine on Cable Company

Cable board insists RCN broke its promise to expand service, fund public access station

Chicago Journal

Published February 26, 2004

By Lydialyle Gibson

As of this weekend, RCN officials have earned more than a simple tongue-lashing from City Hall. Less than six weeks after the cable company defaulted on a payment to the local public access television station-the second such lapse in as many years-city officials slapped the firm with a set of steep, and retroactive, fines.

Voting in unison on Saturday members of the Chicago Cable Commission imposed penalties of more than $1 million per day for RCN's missed payment of $215,000 to West Loop-based CAN-TV and for its failure to expand service through-out most of the city. The fines' start date reaches back to Feb. 10.

Back in 2000, RCN executives signed a contract promising to unfurl 676 miles of cable across the West Side within five years. To date the company has laid just 3.54 miles, and last December, RCN officials wrote a letter to the city begging to be relieved of most of their contractual burdens. Last week, they announced the company would likely file for Chapter 11 bankruptcy Cable Commission officials remained unimpressed.

"They have failed to build out in cable franchise area two, and they will not build out in areas three and four," said Constance Buscemi, a spokesman for the city's Department of Consumer Services. "The city and CAN-TV have made every effort to work with RCN."

Next, she said, it's RCN's turn to act.

"The fines are in place, and the commissioners have ruled on it," Buscemi said. "If RCN wants to remedy the situation, that's something we look forward to.

"So does Barbara Popovic. So far, CAN-TV'S executive director has seen none of the $215,000 that was due Jan. 7. (Earlier this month, she did reject RCN's offer to call it even with a check for just over $5,000.)

"We're encouraged the city is taking this as seriously as we are," Popovic said. "Given the company's obvious commitment not to make good on its payments to CAN-TV I don't know what else there is to do. None of this is ideal. We should be talking about the financial reliability of our organization on into the future, not one check for $215,000."

For the last couple months, city officials have urged RCN to pony up that check before negotiating any changes to its city contract. Eighty-four percent of CAN-TV'S annual budget depends on payments from local cable companies, which pay $215,000 for each franchise area where they operate.

"If RCN had paid us the $215,000 before any of this happened and then said, 'Let's sit down and negotiate,' it would have been a very different approach from 'We're not paying.'"

From the beginning, RCN officials-who couldn't be reached as this paper went to press-have pleaded poverty. A nose-diving telecom industry left RCN strapped for cash at the very moment its ambitions led it to enlarge its city contract, executives say. Last week the New Jersey-based company announced it would seek bankruptcy protection after missing a $10 million interest payment. RCN's local subsidiary may or may not be affected.

Regardless, city officials are already looking at their watches and watching their mailboxes for $1 million checks. According to Buscemi, RCN posted more than $3 million in security bonds with the city one for each franchise area where the company expected to lay cable. Last Friday, RCN officials gave the city a $19,000 payment they'd also owed since early January.

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