May 13, 2004

Cable Company Planning $250,000 Upgrade in Memphis

Seven months after being limited to just a one-year contract extension by the Memphis City Council, Galaxy Cable came back to the bargaining table with a much improved offer.

Galaxy representative Justin Taylor told the council at the May 5 meeting that his company has approved a total system upgrade for the company’s cable television system.

“Last fall when I was here asking for a franchise extension you asked for a commitment from Galaxy,” Taylor told the council. “I’ve got some good news today. At the end of March we were given the green light for a complete system rebuild in Memphis.”

The proposal calls for removal of the existing copper coaxial cable and replacement with new fiber lines. The transition would also enable the company to offer high speed Internet service in addition to the improved cable reception and expanded television station offerings.

The project is expected to cost an estimated $250,000.

“It was not easy to pull this together when the money was not earmarked for this type of project in the budget,” Taylor said.

The upgrade proposal did not come without strings attached. Galaxy asked the city to approve the requested 15-year franchise extension.

Taylor stated a five-year extension would give the company the commitment it needed in order to begin the upgrade, but suggested the agreement be rolled over into a 15-year deal if the project was completed within one-year.

“If you stop and do the math, even if the company was making 100-percent profit each month on all the Memphis customers, it would take a long time to recoup this investment,” said Alderman Lucas Remley.

Taylor said the company is currently working on an upgrade project in Gallatin but anticipated the Memphis project could begin by June 1. He added that the anticipated completion date for Memphis would be September 1 if not sooner.

The upgrade would replace all the cable in the city. It would not make drop replacements to individual households except when necessary. The new fiber cable will allow an improved digital cable package to include pay-per view movies as well as expanded and improved premium movie channels. Taylor pointed out the package would add as many as five new channels as well.

Prior to moving to a vote, Taylor did point out to the council that the $250,000 project would require a price increase for the service. He indicated it would likely be $2.50 a month but could be slightly higher or lower. The current cable cost is $35.95 per month.

“We’re trying to keep the price increase to a minimal but we have to try to help pay the costs of the substantial expense for the upgrade,” Taylor said.

He noted that the company anticipated a slight customer loss due to the price hike, but noted the marketing plan anticipated a growth of up to 15-percent thanks to the new, improved services.

Taylor noted that the company had already shown a renewed commitment to the community providing improved service. He pointed out that until a satellite problem in April that the company’s customer service department had received fewer calls from Memphis customers every month since October 2003.

The final point Taylor highlighted was the service outages that will accompany the installation of new lines. He stated there will be sporadic downtime for the service over the month to five weeks it takes to install new line.

The council members discussed the economic impact the project would have, noting that the contractors for the job would be living and working in Memphis over those five weeks, bringing income to suppliers as well as service providers such as restaurants and hotels.

“Fifteen years sounds like a long time, but $250,000 is quite an investment on their part,” said Alderman Ron Gardner.

The rest of the council agreed, voting 4-0 to offer a five-year franchise extension, which would rollover into 15 years if the proposed upgrade was completed within a year.

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