Prospects are dimming for cable TV competition in Buffalo.
American Broadband, a Boston-area company that planned a $125 million cable network in the city, has shelved the plans after its financial backer cut off funding, representative Donna Garofano said.
"Great Hill Partners has effectively put us on hold, meaning we can't spend any more money on developing new markets," said Garofano, American Broadband's vice president for government and public affairs.
The competitive or "overbuild" cable company missed a meeting of Buffalo's committee on telecommunications Thursday, scheduled to keep its application alive.
Common Council President James W. Pitts said he hopes American Broadband will renew its push into the city when capital sources return, providing an alternative for Buffalo's 80,000 cable subscribers.
A competitor "might help to curb some of the rate increases that are taking place," he said.
Dominant provider Adelphia Communications is raising basic rates in Buffalo by $3.50, to $35.50 a month, said general manager Thomas Haywood, spoke to the Common Council about the rates Thursday night. In the suburbs, rates are going up $3 to $38.50.
American Broadband's pullout emphasizes the high costs of providing cable service, he said.
"It does take a great deal of capital to start a cable company and to continue to grow," Haywood said. The company has spent $30 million to upgrade the city's cable system, he said.
The rate increase, Adelphia's first in 18 months, comes as a result of a 15 percent increase in labor costs and 50 percent higher programming costs, he said.
Cable "overbuilders" blossomed in the past few years, but they have yet to prove that they can thrive by competing with established systems. RCN Corp., a leading overbuilder based in New Jersey, recently said it will halt expansion to concentrate on making its existing markets profitable. American Broadband is still building its first system. It has cut its list of potential markets from 36 to two, in Baltimore and Rhode Island.
Last year, investors recoiled from cable overbuilders as part of a larger flight from cable and telecommunications industries, which have invested heavily in unproven markets.
But Garofano said American Broadband expects to return to an expansion mode when investors regain confidence.
"There's certainly not a problem with . . . Buffalo," she said. The overbuilder would be able to offer not one product, but three -- television, telephone service and high-speed Internet -- over its wires, justifying its investment.
Chad Hume, a cable industry expert at the state Public Service Commission, agreed. Cable technology's ability to draw on three revenue sources should make the overbuild idea economical, he said.
Haywood said that Adelphia faces competition even in markets where it's the only cable TV provider. In addition to satellite service and video rentals, the cable company faces competition from a proliferating array of entertainment choices, he said.
Adelphia, the nation's No. 6 cable TV company, has about 500,000 subscribers in its Western New York territory.