Rural cable spin-offs fairer than FairPoint

FairPoint Communications' acquisition of Verizon assets — with its arduous regulatory and operational hurdles — showed just how difficult it can be for rural providers to grow by taking on the unwanted properties of the nation's top telcos. But in the cable sector, where a different regulatory structure reigns, the process is much less harrowing and continues to feed the growth of rural companies. Last year, it even spawned a new start-up competitor to AT&T and Verizon in the Midwest.

Charter Communications, the country's third-largest cable provider, has shed a number of properties it inherited through acquisition sprees in the bubble years. About four years ago, it auctioned off some 400,000 subscribers, which were sold in chunks to a range of buyers. These asset sales continue, feeding smaller outfits such as Wave Broadband on the West Coast and NewWave Communications in the East. Perhaps the youngest company to build a business on these divested cable systems, Avenue Broadband, was created last year specifically to buy Charter assets.

Kay Monigold has been helping move unwanted assets off the hands of major cable providers for years. As a partner at the Buford Media Group — a company based in Tyler, Texas, that provides corporate administrative services to cable operators — Monigold helped equity investors Wicks Group acquire cable systems from Charter and Cox for a partnership called Allegiance Communications. Monigold personally arranged the capital to get such deals done, lining up investors and securing loans.

One day last year, Monigold learned of some systems in Illinois and Indiana (mostly the latter) that Charter was looking to unload. (Monigold gives all the credit for this discovery to her longtime contact, Carol O'Keefe, vice president of corporate development for Charter.) Rather than help some New York investment group acquire the properties, Monigold decided this time to do it herself, creating and leading Avenue Broadband.

Avenue wasn't the only interested buyer for the assets in question, though. Insight Communications, the country's eighth-largest cable operator, was a perfect fit for the Midwestern properties because it already operates in Indiana. But last year, Insight was dissolving a partnership it had with Comcast for Midwestern markets. The two cable companies were dividing up their subscribers — including many in Indiana — a process that distracted Insight from this particular asset sale, allowing Avenue to swoop in. Avenue was created in August 2007, but closing the acquisition took the entire year.