circumstances. Most of the Company's franchises can be terminated prior to
their stated expirations for uncured breaches of material provisions. See
"Legislation and Regulation."
The following table sets forth for the Systems the number of franchises by
year of franchise expiration and the number of basic subscribers and
percentage of the Systems' basic subscribers as of December 31, 1998:
Percentage of Subscribers of Systems'
Year of Franchise Number of Total (excluding Basic
Expiration Franchises Franchises equivalents) Subscribers
----------------- ---------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Prior to 2000........... 1 2.1% 3,680 2.9%
2000--2004 14 29.8% 52,244 41.3%
2005--2008 19 40.4% 44,133 34.9%
2009 and after.......... 13 27.7% 26,377 20.9%
--- ----- ------- -----
Total................. 47 100.0% 126,434 100.0%
=== ===== ======= =====
The Company believes that the Systems have good relationships with their
respective franchising authorities. However, renewals or extensions of
franchises may result in more rigorous franchise requirements.
The 1984 Cable Act provides for, among other things, procedural and
substantive safeguards for cable operators and creates an orderly franchise
renewal process in which renewal of franchise licenses issued by governmental
authorities cannot be unreasonably withheld, or, if renewal is withheld and
the franchise authority acquires ownership of the system or effects a transfer
of the system to another person, such franchise authority or other person must
pay the operator either: (i) the "fair market value" (without value assigned
to the franchise) for the system if the franchise was granted after the
effective date of the 1984 Cable Act (December 1984) or the franchise was pre-
existing but the franchise agreement did not provide a buyout or (ii) the
price set in franchise agreements predating the 1984 Cable Act. In addition,
the 1984 Cable Act established comprehensive renewal procedures which require
that an incumbent franchisee's renewal application be assessed on its own
merits and not as part of a comparative process with competing applications.
See "Legislation and Regulation."
The 1984 Cable Act also establishes buyout rates in the event the franchise
is terminated "for cause" and the franchise authority desires to acquire the
system. For franchises which post-date the existence of the 1984 Cable Act or
pre-date the 1984 Cable Act but do not specify buyout terms, the franchise
authority must pay the operator an "equitable" price. To date, none of the
System's franchises has been terminated.
The 1992 Cable Act prohibits the award of exclusive franchises, prohibits
franchising authorities from unreasonably refusing to award additional
franchises and permits them to operate cable systems themselves without
franchises. The 1996 Telecom Act provides that no state or local laws or
regulations may prohibit or have the effect of prohibiting any entity from
providing any interstate or intrastate telecommunications service. State and
local authorities retain authority to manage the public rights of way and
"competitively neutral" requirements concerning right of way fees, universal
service, public safety and welfare, service quality and consumer protection
are permitted with respect to telecommunications services.
Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment such as off-air television broadcast
programming, newspapers, movie theaters, live sporting events, interactive
online computer services and home video products, including videotape cassette
recorders. The extent to which a cable communications system is competitive
depends, in part, upon the cable system's ability to provide, at a reasonable
price to customers, a greater variety of programming and other communications
services than those which are available off-air or through other alternative
delivery sources and upon superior technical performance and customer service.