Colorado Town May Sue AT&T For Broadband

foQ writes: "Avon, Colorado is suing AT&T over the lack of availability of cable-modem service in the town. I for one have been waiting a couple of years for the 'right around the corner' date they have been talking about. Here isthe story." AT&T appears to be meeting the letter of their agreement to make the local cable system "two-way," but perhaps not the spirit.

Comments

Business logic

[crow]

Many communities were given promises of broadband Internet when the franchise contracts came up for renewal. (You know those franchise fees listed on your cable bill? They go to your state or town.) The cable networks fully intend to provide these services, but doing so requires an investment in upgrading older equipment.

Now the problem is debt. Sure, if you look at it from the perspective of a single community, comparing the debt required to upgrade with the profit brought in by the new services makes it an obvious thing to do. Unfortunately, when you look at the total amount of debt that the cable company must assume to upgrade all the communities screaming for Internet access, it makes a huge impact on the company's financial statements. Investors are fine with debt up to a point, but too much makes them nervous, which hurts the stock value. After all, no matter how good the projections are, debt is risk.

So here in MA, AT&T has scaled back its expansion plans and raised rates. While the higher rates are bad for existing customers, they mean that the debt gets paid off sooner, leaving AT&T with more cash to invest in upgrades.

In the mean time, upgrades are continuing, and communities that make the most noise are the most likely to get moved to the top of the schedule.

Re:Business logic

[coyote-san]

So what? Why should any community that negotiated a contract in good faith give a flying fsck about the cable company's business concerns?

The bottom line is that the company got something valuable (the cable TV franchise) in exchange for promises. If it can't honor that agreement due to some unforeseeable event, and massive debt to honor all promises is *not* unforeseeable, then the contract should have escape clauses. These clauses may include fines, mandatory price reductions (both designed to change the economics of the situation to make it cheaper to comply with the contract than to breach it), or even early termination of the franchise agreement to replace the non-performer with another company.

If the company negotiated in bad faith (knowing that it never intended to honor the terms of the agreement), then that's a breach that warrants immediate termination of the contract.

If the company was honest and admitted that it couldn't provide service for N years, then it might lose the franchise.... and would probably get it back when the other company defaulted if they made impossible claims. Or it might prompt the community to identify alternative solutions to the problem.

... or is this yet another example of the New Feudalism where individuals are held to contracts even if they never agreed to them (AOL purchases recently discussed), while companies get a walk?