Print Page  Close Window

SEC Filings

S-4
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4 on 04/01/1999
Entire Document
 
<PAGE>
 
   Upon the completion of our planned upgrades, virtually all of the cable
plant included in these systems will have a bandwidth capacity of 450 MHz or
greater and approximately 85% will have a bandwidth capacity of 550 MHz or
greater.
 
   We expect that our planned use of fiber optic technology as an alternative
to coaxial cable will play a major role in allowing us to consolidate headend
facilities and to reduce amplifier cascades, thereby improving picture quality,
system reliability and headend and maintenance expenditures. Fiber optic
strands are capable of carrying hundreds of video, data and voice channels over
extended distances without the extensive signal amplification typically
required for coaxial cable. We anticipate that the installation of fiber optic
cable will allow us, within the next five years, to consolidate from 80
headends in the Michigan Cluster, excluding the number of headends, to be
acquired in the Galaxy acquisition, as of December 31, 1998, on a pro forma
basis, to approximately 75 headends, excluding the number of headends to be
acquired in the Galaxy acquisition, and from eight headends in the New England
Cluster as of December 31, 1998, on a pro forma basis, to approximately six
headends.
 
   We have been closely monitoring development in the area of digital
compression, a technology that enables cable operators to increase the channel
capacity of cable television systems by permitting a significantly increased
number of video signals to fit in a cable television system's existing
bandwidth. We believe that the utilization of digital compression technology in
the future could enable us to increase channel capacity in certain systems in a
cost efficient manner. Such utilization of digital compression would generally
be implemented as part of system upgrades, where some portion of the additional
analog channels would be allocated to additional tiers of cable services. The
use of digital compression also could expand the number and types of services
offered and enhance the development of current and future revenue sources.
 
   For the cable industry, providing high-speed cable modems to residential and
business customers has recently become a viable source of additional revenue.
Cable modems provide Internet access at higher speeds and lower costs than the
technologies offered by other communication providers. For example, a 10
megabit cable modem provides Internet access at download speeds 350 times
faster than typical 28.8 kilobit dial-up phone modem connections. Cable
Michigan introduced cable-modem based Internet access in the Traverse City area
in 1998. Based on its success to date, we purchased assets of Novagate and
agreed to purchase Traverse Internet, a local ISP in the same market. We
believe that acquiring expertise from an incumbent ISP will allow us to offer
services in a more effective and timely manner. Based on our experience with
these acquisitions, we may seek to acquire additional ISPs.
 
Franchises
 
   Cable television systems are constructed and operated under fixed-term non-
exclusive franchises or other types of operating authorities, (which we
collectively refer to as "franchises") that are granted by either local
governmental or centralized state authorities. These franchises typically
contain many conditions, such as:
 
  . time limitations on commencement and completion of construction;
 
  . conditions of service, including the number of channels, the provision of
    free service to schools and certain other public institutions;
 
  . the maintenance of insurance and indemnity bonds; and
 
  . the payment of fees to communities.
 
   Certain provisions of these local franchises are subject to limits imposed
by federal law.
 
   On a pro forma basis, as of December 31, 1998, we held 473 franchises in the
aggregate, consisting of approximately 452 in the Michigan Cluster and
approximately 21 in the New England Cluster. As of the same date, none of these
franchises would have accounted for more than 5% of our total revenues on a pro
forma basis. Many of these franchises require the payment of fees to the
issuing authorities of 3% to 5% of "gross revenues" (as defined by each
franchise agreement) from the related cable system. The Cable Communications
 
                                       63