Cable, PUD deal hits snag
The Truckee-Donner Public Utility District voted 4-1 last week in favor of moving ahead with the process of design plans and bidding for a fiber-optic cable network in Truckee, despite recent news that USA Media was not ready to finalize their joint agreement.
Earlier this month, USA Media made a verbal agreement to build a fiber-optic network in Truckee jointly with the PUD. USA Media agreed to finance $600,000 of the $1.3 million project and lease almost half of the fibers from the district for their own purposes.
Last week, however, PUD staff and boardmembers received a letter from USA Media Regional Manager Roger Terneuzen indicating the company was unwilling to finalize the agreement based on three new issues: the timeline of project completion, protection from competing cable services and a district commitment to reimburse USA Media for lost revenues to system maintenance and restoration.
The information, which was presented last week at the regular board meeting, came as a surprise to some staff and boardmembers.
“To get this now is devastating,” PUD Director Jim Maass said at the meeting. “I expected tonight to approve the agreement. What happened between two weeks ago and this letter? Everything was on track, especially after a rocky start, and here comes this blind-siding us, right out of left field. I am really disappointed and concerned. My position is we go ahead and build a fiber and do what’s best for this town.”
According to TDPUD general manager Peter Holzmeister, USA Media proposed the following changes to its agreement:
– The annual rent for the fibers of $60,000 paid by USA Media would be reduced to $6,000 if the district or any other service provider offers competing cable television service.
– The district pay a penalty of $5,000 per day if the system is not available for use by USA Media by Dec. 20.
– The district will reimburse USA Media for lost revenues due to system maintenance and service restoration. The criteria for service restoration recognize that restoration of electricity is the highest priority, followed by the district’s Supervisory Control and Data Acquisition (SCADA) system, followed by restoration of USA Media service. If the district fails to work diligently in that manner, and a lack of diligence causes USA Media customers to be out of service, the district will reimburse USA Media for lost revenues.
“My concern has been to get the project built in a timely manner,” said Terneuzen. “As we came close to finalizing this document, it became obvious that I was up against the wall. They (the PUD) said they couldn’t get the construction done this year.”
Terneuzen said the three new provisions are “protections” for USA Media.
He wrote in the letter on Sept. 9, “…I explained in my commitment to the Town of Truckee and USA Media subscribers to have a fiber backbone in place to improve the reliability of my cable system, reduce long amplifier cascades and provide new services. I spoke about the importance of beginning construction on or about September 1, the obvious weather and environmental conditions in Truckee restricting year-round construction and the importance and necessity to complete the project in 1999.”
USA Media President Chris Hilliard was also at the meeting to help clarify some of the concern over the letter. He said the company is concerned that as a public agency, the district could have the power to hurt USA Media in indirect ways.
“We don’t want to be beholden to someone who owns our fiber and have them become our direct competitor,” he told district staff and the board. “It’s a control issue. It’s a matter of concern that we are turning over something very vital to our system. We’re trying to protect ourselves so we can continue to offer our services.”
Maass suggested that there was something more behind USA Media’s change in provisions and need to guarantee completion by the end of the year.
“Rumors are floating around this town that you’re going to sell the cable company before the end of the year,” Maass said.
The board voted to move forward with the plans for the fiber-optic cable network as scheduled, while continuing discussions with USA Media on the terms of the agreement. Directors Joseph Aguera, Ron Hemig, Jim Maass and Bob Jones voted in favor of moving forward, Pat Sutton voted against the motion.
“It may be we’re putting up a fiber-optic system that you’re helping push us toward, that we don’t need,” Sutton told USA Media officials.
Sutton suggested using a copper system instead. She also stated that she thought the district was moving ahead with the fiber-optic network without going through legal process.
“I believe we should not be doing this until we’ve gone through the LAFCo [Local Agency Formation Commission] process,” Sutton said. “I don’t understand why the district will not go through the process. I have some problems on the standpoint of the district not going through procedure to make things legal.”
The project is set to begin construction this fall, and Holzmeister said he expects the network will be up and running by the end of the year. He said he hopes the project will go to bid by the end of the month.
As of press time, USA Media officials said they still hope to work with the PUD on the fiber-optic system, but made no comment as to if they had made any progress discussing the issues that were raised at the meeting.
“I continue to be hopeful that we’re going to complete the negotiations,” said Terneuzen.
PUD staff could not be reached for comment earlier this week on the status of the negotiations.
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