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Do Not Adjust Your Set

TCI's plan to downgrade its upgrade gets a chilly reception.

The members of the Greater Metro Cable Consortium know Tele-Communications Inc. has a habit of making surprise announcements. But even veteran TCI watchers weren't ready for the bombshell dropped by company spokeswoman Margaret Lejuste during a group meeting last December.

"She simply said, 'The rebuild has stopped,'" recalls Norman Beecher, the attorney for the consortium, a federation of local cities that until Lejuste's abrupt announcement thought they were poised to get brand-new cable systems from the Greenwood Village-based conglomerate. "I think we asked whether that meant for good or not. Her response was that all they could say was that it stopped and they have no plans to go forward with it in the future."

Nearly two months later, the realization is beginning to sink in among the Denver-area cities dependent on TCI: In Denver, the cable revolution will not be televised. Work crews assigned to upgrade systems to the fiber-optic cable that could conceivably have delivered telephone service and Internet access through the same cable "pipe" have literally stopped in their tracks. And apart from ambiguous assurances about an alternate technology that might be able to pick up the slack, TCI is making few promises about whether cities will get the state-of-the-art cable systems they're expecting. "My experience with TCI is that there'll be fourteen different press releases before we actually get to what they're going to do," says a dubious Gary Casner, purchasing and telecommunications officer for the City of Westminster.

Oddly enough, it was TCI, not the cities, that raised expectations about the brave new world of cable service. When company chairman and chief executive officer John C. Malone waxed prophetic in 1992 about the "500-channel future," cities in TCI's backyard assumed they'd be first in line at the broadcast orgy. Even as recently as 1994 and 1995, when the fifteen-year contracts many cities had signed in the early 1980s were beginning to expire, "TCI was touting fiber optics at a great rate," says Beecher.

Today Malone has admitted to touting a lot more than he could deliver. Wall Street has responded by roughing up the company's stock, and once-mighty TCI also is awash in debt--$14 billion at last count, much of it lavished on fiber-optic rebuilds even as customers were threatening to desert in droves to direct-broadcast satellite TV. "The 800-pound gorilla has a large tab on his charge card right at the moment," says Richard Varnes, director of the cable-TV office for the City of Boulder, where voters last December rejected a proposed franchise agreement with TCI, forcing a new round of formal negotiations. "And the banks are noticing it."

So are viewers. In recent months TCI has taken to yanking popular services like Bravo and the Comedy Channel off the air in favor of channels it owns a stake in or those that are willing to pay in advance for air time. Viewers who aren't willing to shell out hundreds for a satellite dish can do little but kvetch: Thanks to the exclusive nature of cable contracts, they're stuck with what they've got.

Last December Malone's money crunch got so bad that the company layed off 2,500 people, roughly 6.5 percent of its workforce. TCI is also facing a class-action lawsuit in Denver District Court over its practice of slapping an across-the-board late fee onto overdue bills. According to plaintiff's attorney Ed Holub, late fees of up to $250,000 per month are assessed; a similar suit in Washington, D.C., resulted in a $7 million judgment against the company.

But fortunately for TCI, even as its financial picture has grown cloudy, market forces have turned down the pressure on the company to live up to its fiber-optics promises. For example, industry analysts predicted that the much-debated federal Telecommunications Act of 1996 would lead to cutthroat competition between cable companies and phone providers as the huge firms fought for one another's customers. Instead, the big boys have found it much more profitable to chase profits within their respective niches. Long-distance phone companies are horning in on local phone business, prompting local providers like US West to spend most of their time and money fending off the competition. With little to fear from the phone companies for the time being, cable firms have refocused their energies on their core cable businesses--and on pinching pennies.

"What the cable companies have done is kind of divided the country up," says Kelly Narde, assistant to the city manager in Littleton, where a dispute over contract provisions has dragged on since August 1995, prompting the city council to renew TCI's franchise in three- and six-month chunks. "They've said, 'You take the Denver market, we'll take the Pittsburgh market, you take Miami, we'll take L.A.' They've traded systems with each other like Monopoly pieces."

If the country is a game board, metropolitan Denver is shaping up to be TCI's equivalent of lowly Baltic Avenue: a plain neighborhood, without the frills. Malone's company has been gobbling up local cable contracts throughout the 1990s, and with its recent purchase of former Jones Intercable operations in Jefferson County and Broomfield, it now controls the cable signal in about 90 percent of the six-county metro area. That has allowed it to back away from fiber optics with little fear of being upstaged by a competitor. Yet company spokeswoman Lejuste insists that halting the fiber rebuild is actually a positive development for local cities and their television viewers.

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