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Now it's underbuilding
By John M. Higgins
Broadcasting and Cable
2/19/01
Faced with a chilly market for raising money, two of the more formidable cable
overbuilders retreated last week, shelving once expansive plans to attack cable
operators.
Digital Access Corp. tabled its plans to simultaneously build video and phone
systems in four markets, shrinking back to just Nashville, Tenn. And powerhouse
RCN Corp. aborted its plan to wire the city of Philadelphia after struggling with city
officials for more than two years.
The pullbacks come amidst virtual shutdown of the capital markets for startup
telecommunications companies. Although cable companies have led the rebound
in the junk-bond market, investors still feel stung by recent wipeouts among
competitive local exchange carriers and DSL companies.
"In a very capital-constrained market, we need to deploy our equity-base dollars
as efficiently as possible," said Digital Access chief executive Joe CeCe.
RCN contends it was thwarted by Philadelphia politics, not moves to cut back on
expansion. The Princeton, N.J.-based company halved its initial $1.5 billion 2001
capital-spending plan.
Digital Access aimed its $450 million in equity bankroll at wiring four mid-size
markets: Nashville, Milwaukee, Indianapolis, and Kansas City, Mo. The company
had expected to borrow another $900 million.
But the frozen lending markets prompted Digital Access to notify officials in the
suburbs around Milwaukee and Indianapolis that construction is on hold. CeCe
pulled out of Kansas City in January after disputes with city officials.
"The initial builds go where we get the most immediate return on capital
spending," CeCe said. That's Nashville, where home densities are the highest and
Digital Access can string more of its plant on cable and bury less underground.
© 2001 Cahners Business Information ·
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