Charlottesville City Council unanimously passed a resolution last Monday declaring Adelphia Communications in violation of its franchise agreement with the city.
Despite the decision, negotiations are underway to renew Adelphia's franchise agreement, which expires in June.
"This doesn't start us off on a promising note," Vice Mayor Meredith Richards said.
Under the current agreement, in place since 1992, Adelphia pays the city a franchise fee equal to 5 percent of its gross revenues in exchange for the right to run cables on public land.
Adelphia has not reported its advertising revenue from 1999 to 2001, according to an independent auditor hired by the city. Using national averages for advertising revenues in a comparable market, the auditor determined Adelphia owed the city over $80,000 in fees, fines and interest.
An Adelphia representative present at the meeting made reassurances that the company was willing to cooperate with the city, even if it was found in violation of its franchise agreement.
Both parties are currently in the process of drafting a new agreement, the first revision of which will be made public at Council's May 5 meeting.
Council is requesting that Adelphia carry one less shopping channel and make available additional educational and foreign language programming.
Because the local market is relatively small, with approximately 40,000 city and county subscribers, it would take a long time for a potential competitor to recover startup costs.
"Any new provider will have to string new cable or buy it from Adelphia," Caravati said.
Albemarle County also is negotiating a franchise agreement with Adelphia. City Council offered to join with the County in a joint cable agreement, but the County Board of Supervisors declined. A cooperative arrangement could have increased the localities' bargaining power with Adelphia, Richards said.
Adelphia filed for bankruptcy protection last June, three months after disclosing over $3 billion in off-the-books lending to founder John Rigas and his sons. The Rigases resigned from their executive positions at the company in May and were federally indicted for fraud in July.
"I'm highly suspicious of the way the Rigases ran the company," Caravati said. Adelphia "will have to prove to me that their new management will be a whole lot better."
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