It's not the recession or even competition from direct broadcast satellite that most worries cable veteran John Rigas, founder of Adelphia Communications. Rather, the threat of regulation and the challenge of keeping Wall Street's confidence and commitment are the two most pressing issues the cable industry faces, Rigas said.
Despite what he called a regulatory environment that's ?pretty good? at the present time, ?regulation is always something that's troublesome,? Rigas said, speaking in a one-on-one discussion with Spencer Kaitz, president and general counsel of the California Cable and Telecommunications Association, sponsor of the Western Cable Show held in Anaheim, Calif., last week. ?Generally speaking it's a no-brainer to say that regulation in any form is a negative,? said Rigas, who over a nearly 50-year career in cable built Adelphia into the sixth-largest operator, serving nearly 5.7 million subscribers.
Wall Street's continued confidence in the long-term health of the industry is also of critical importance. Operators, who over the last couple of years have undertaken massive system upgrades, have depended on the capital markets to fund the expenditures for those upgrades.
?We need that support? from the financial community, he said.
Adelphia's own debt is among the highest in the industry, but the company has been trying to reduce its leverage. To that end, Adelphia in November raised about $1 billion through a stock offering, the proceeds of which went to repay bank debt. Though the 30 million shares of stock Adelphia sold (Adelphia also sold convertible preferred shares) effectively diluted the company's shareholder base, the company's leverage ratios have been reduced, Rigas said, and its balance sheet has been shored up.
Rigas said he has yet to detect the effects of the recession on his company's business, echoing comments made earlier in the day by Glenn Britt, chairman and CEO of Time Warner Cable. Adelphia's core business is strong, Rigas says, as evidenced by the 12,000 digital cable customers and 5,500 cable modem customers Adelphia is adding a week. Those increases in digital and high-speed Internet access customers should help push up the monthly revenue per customer Adelphia sees to the $47 to $48 range from the $41 range, he added.
Rigas took a somewhat contrarian view of the growing acrimony between programmers and operators, saying that although there will be exceptions, the two camps have too much history and respect for each other ?to have it become contentious.?
Earlier in the day, Bill Schleyer, AT&T Broadband's new CEO, said ?with the proliferation of programming, that model doesn't work anymore. We have to sit down and work out a new model.? But Rigas took a softer approach, saying, ?at the end of the day, our position has been?we will make a deal. We need each other. We're a team.? He added that for all his years in cable, he has placed his bets on being able to continually offer more programming and more services. One example is the premium and subscription video-on-demand services Adelphia rolled out several weeks ago in Cleveland, Ohio. After a deployment to 1,000 people, the service is now available to more than 20,000 people, he said, a number that should grow as people become more familiar with the service.
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