To keep growing, MI-C will need more dollars from towns

MI-Connection wants to double its subscriber base this fiscal year, but adding those customers will likely require an infusion of cash from Mooresville and Davidson, which own the cable system.

As forecast, the cable company, not yet two years old, continues to operate at a deficit with unaudited numbers showing last year's losses at $6.33 million, a figure that does not include June. Audited numbers are expected Nov. 1.

An aggressive marketing plan to generate revenue by adding subscribers includes hiring a new general manager by Nov. 1. The company has also reduced costs by laying off eight of its 42 employees.

But with a $22.5 million upgrade completed in April -- increasing bandwidth capacity and Internet speeds, as well as providing new services like telephone -- the company says it now has a product to market.

"The biggest obstacle going into this venture was getting the upgrade completed," says Chief Financial Officer Stacey Bright of Bristol Virginia Utilities (BVU), the company hired to operate the system for the towns.

With a new technologically advanced system, Bright said revenue numbers have begun increasing.

"We're no longer a cable company, we're a telecommunications company," Bright said during a meeting Monday with representatives of the Tribune. Other officials from MI-Connection, Davidson Town Manager Leamon Brice and Mooresville Director of Finance Maia Setzer also attended.

Although the number of subscribers has fallen to slightly less than when the towns purchased the system, Bright says the economic downturn played a part in erosion of their customer base as well as a stricter disconnect policy and inconveniences caused by upgrading a badly outdated system.

The towns jointly purchased the cable company in December 2007 from bankrupt Adelphia Communications for $80 million.

This year's MI-C budget already includes costs for adding 1,093 new subscribers, but Bright said the new strategy seeks to double that number and the company will be hiring a new general manager to oversee its implementation. Current GM James "Junior" Miller will continue as operations manager.

Bright said the MI-C Board later this month will consider a budget amendment – or a request for additional funding from the two towns -- to finance the extra expense of adding new subscribers.

Bright declined to specify the amount of money the MI-C board will consider for an amendment to the company's approximately $23 million budget, but she did say MI-C will be targeting both business and residential customers.

She estimated the cost of acquiring and hooking up one residential customer at $1,000 to $2,000, depending on the level of services. She estimated the cost of acquiring and servicing a small business park at $30,000 to $40,000.

At a minimum, adding 1,000 residential customers at a cost of $1,000 each would total $1 million. Currently, MI-C has few commercial customers.

Both Davidson's Brice and Mooresville's Setzer said money to finance MI-C's budget amendment could come out of the towns' fund balances, or reserve accounts.

"I think there is a commitment on the part of the towns to fund this," said Brice, explaining that the upgraded system not only gives residents a vastly improved product, but is also an investment in the economic future of both towns.

Despite public opposition to the original $80 million purchase of the cable system, the two towns approved the borrowing of an additional $12.5 million in August 2008. That money was needed to complete the upgrade when it was discovered that subscriber numbers were higher than original estimates.

In the Inter-Local Agreement, Mooresville is responsible for 70% and Davidson is responsible for 30% of the debt on the $92.5 million plus interest, should MI-Connection be unable to cover it for any reason.

Bright says MI-C will be making a $2.35 million loan payment on Sept. 15 with a second payment of an equal amount due in March.

The MI-C Board did not meet in July and postponed its August meeting until today at 7:30 a.m.