With more than 5.8 million subscribers in 37 U.S.

states and Puerto Rico, Adelphia

Communications Corporation is one of the nations leading cable service providers. Adelphia
achieved exponential growth in the 1980s and 1990s through aggressive acquisition strategies.
Having made significant investments in fiber optic technology in the 1990s, Adelphia has added
digital cable, high-speed Internet access, local and long distance telephone service, voice
messaging, and other related services to its repertoire of home and business offerings. The
company ran into significant trouble in 2002 when its fraudulent financial dealings and
accounting practices were exposed. As a result of the scandal, founder John Rigas and his family
ceded control of the company, and Adelphia filed for Chapter 11 bankruptcy protection. The
company then entered a period of reorganization.

The Growth of Adelphia and Cable Television: Early 1950s

to 1980s
The corporate roots of Adelphia Communications were inseparably linked with the Rigas family,
whose experience in the cable television business predated the incorporation of Adelphia
Communications by more than three decades. The patriarch of the family, John J. Rigas, first
entered the business during its nascence in 1952 when he started his first cable system in
Coudersport, Pennsylvania, with his brother Gus Rigas. The name chosen for the company
Adelphiais the Greek word for brothers, an apt corporate title for a business that would
employ generations of the Rigas family. Then in his early 20s, John Rigas entered an industry in
its infancy when he started Adelphia, unwittingly laying the foundation for what would become
one of the largest cable television companies in the United States. It would be years, however,
before the Rigas family could claim they stood atop a cable empire. Cable television was decades
away from enjoying widespread popularity, decades away from the years that would witness the
exponential growth in the number of subscribers across the country. Those days arrived during
the 1980s, when Rigas, with lengthy experience as a cable television operator, stood poised to
reap the rewards from an industry fast on the rise.
Although Adelphia Communications did not officially exist until 1972, the company entered its
inaugural year of business with a considerable head start over other fledgling cable operators.
The company served as an umbrella organization for the centralization of the various cable
properties owned by Rigas, and, consequently, was supported by more than 20 years of

experience from its outset. Adelphia Cablevision, Inc., the cable company started by Rigas in
1952, was the oldest of the five cable companies that Rigas reorganized into one company on
July 1, 1986. Joining Adelphia Cablevision were Clear Cable-vision, Inc., Indiana Cablevision,
Inc., Western Reserve Cable-vision, Inc., and International Cablevision, Inc., serving a combined
total of 200,000 subscribers.
Together these companies formed the new Adelphia Communications, a Coudersport,
Pennsylvania-based cable systems operator beginning business with $30 million in annual sales.
In less than a decade the companys sales volume would increase more than tenfold and its
number of subscribers would rise sixfold, as Rigas moved aggressively to expand his cable
television holdings. In the years ahead the five original components of Adelphia
Communications would be joined by a host of other established cable systems as Rigas, with his
three sons at his side, mounted an aggressive acquisition campaign.
The company achieved prominence early on in western Pennsylvania and in western New York,
where Rigas first established a presence in Niagara Falls in 1972. The addition of International
Cablevisionone of the five original companies that formed Adelphia Communications
elevated Rigass company to the number one position in western New York, giving the company
120,000 subscribers to add to its roster of customers. After taking Adelphia public in August
1986, Rigas completed the acquisition of three cable systems before the end of the year,
purchasing the Suburban Buffalo System from Comax Telcom Corp., the South Dade System
from Americable Associates, Ltd., and New Castle System from Cablenter-tainment, Inc.

Expansion Through Acquisitions in the Late 1980s

During the ensuing two years Rigas spearheaded the acquisition of more than ten cable systems,
bolstering Adelphias presence in western New York and extending its area of service into
neighboring states. By the end of 1989 the company owned cable television systems throughout
an eight-state region comprising Florida, Massachusetts, Michigan, New Jersey,Ohio,
Pennsylvania, Vermont, and Virginia. Adelphia lost money each year during its expansion, but
perhaps more important to the long-term health of the company was the manner in which it had
expanded.
A strategy had emerged during the first few years of the companys existence, one that dictated
the direction of its expansion during the late 1980s and continued to describe its physical growth

during the 1990s. Instead of purchasing cable systems merely for the sake of increasing the
companys magnitude, Adelphia targeted cable systems for acquisition that neighbored existing
Adelphia systems, striving to entrench the companys position through acquisition rather than
embracing as large a territory of service as possible. The benefits of grouping cable systems
together would manifest themselves as Adelphia entered the 1990s, making the company an
industry leader and reducing the sting of consecutive money-losing years.
Although the companys profitability had suffered as a result of the ambitious expansion, its
revenue-generating capabilities had not. From the $30 million generated in sales during its first
year, annual sales shot up to $131 million in 1988, increasing more than fourfold during a threeyear span. Further financial growth was expected as the companys physical growth continued
unabated, but as before, Rigas made it a practice to set his acquisitive sights on cable systems in
proximity to Adelphia systems already in operation. One significant acquisition was the purchase
of Jones Intercable in late 1989. Jones Intercable ranked as the third largest cable system
operator in western New York, an area where Adelphia already reigned as the largest cable
operator. Further, Jones Intercable in many cases operated in locations near towns that Adelphia
already served, making the acquisition a strategic boon to the companys plan to develop an
entrenched market position wherever it operated. Noting as much, Michael Rigas (John Rigass
son and Adelphias vice-president) elaborated on the companys acquisition of Jones Intercable
by remarking, Whenever possible we look for systems that are adjacent to other systems that
we own. Generally speaking, we try to cluster our systems together.
Another pivotal transaction completed in 1989 provided Adelphia with a powerful moneymaking business during the early 1990s. In 1989 the company entered into a partnership with
unaffiliated parties to form Olympus Communications L.P., a southeastern Florida cable
television joint venture that Adelphia managed for an annual fee. Comprising Adelphias own
South Dade System, which was acquired in late 1986, several neighboring cable systems in West
Palm Beach, and several cable systems that were acquired in 1989 from Centel Corporation,
Olympus Communications served roughly 250,000 subscribers and epitomized Adelphias
clustering strategy. During the first few years of its operation, Olympus Communications
performed admirably, recording double-digit revenue and cash flow growth.
In the wake of the Jones Intercable acquisition and the formation of Olympus Communications,
Adelphia began looking to acquire additional cable systems in specific areas, notably in Virginia;

West Palm Beach, Florida; Syracuse, New York; and Hilton Head, South Carolina. As the plans
for further physical expansion in the 1990s were being formulated, the company was also
investing its resources into improving the infrastructure of its various cable systemssomething
it had been doing since its formation in 1986. In January 1990, the company announced it would
start a five-year, $25 million system upgrade. Part of the upgrade consisted of the installation of
2,000 miles of cable, including a fiber-optic network that would double the number of available
stations from 36 to 72, give sharper television images, and lessen the chance of interrupted
service.

Enjoying National Prominence in the 1990s

Adelphias continued commitment to improving the quality and technological capabilities of its
cable systems stood as one of the hallmarks of its success during the early 1990s, proving to be
as instrumental to the companys rise as a national contender as its practice to cluster cable
systems together. Another definitive aspect of the companys success was its robust cash flow,
which in part was attributable to the economies of scale engendered by the concentration of its
cable properties. By 1992 Adelphia had transformed itself through acquisition and internal
growth into the tenth largest television cable systems operator in the countryup from the 25th
slot the company occupied in 1986but in terms of cash flow the firm placed second to no one.
Adelphias operating margin of 57 percent of revenues represented the highest percentage in the
U.S. cable industry, far higher than the industry average of 35 percent.

Company Perspectives:
At Adelphia, we recognize that our present and future success depends on each customers trust
in our ability to deliver quality products and service. Our goal is to earn our customers trust by
making sure that every customer is satisfied with the outcome of every contact (s)he has with our
people and service we provide. We have not completed our job until we meet this goal 100% of
the time.
Aside from the companys enviable cash flow performance, there were other characteristics of
Adelphias operations that were indicative of its success in the past and pointed to growth in the
future. By 1992 the company had invested nearly $350 million since its formation to achieve
what one industry analyst referred to as among the best channel capacities and addressability in

the industry. The companys cable systems were state-of-the-art, capable of providing a quality
of service that distanced Adelphia from competitors and kept its customers satisfied.
In terms of cash flow and technological capabilities, Adelphia held a decided lead over other
competitors in the cable industry as the company operated during the early 1990s. In terms of the
demographics of its markets, Adelphia also could boast superiority over many of the countrys
cable operators. Since its formation the company had targeted mid-sized, suburban markets,
carving a presence in communities where incomes were high and populations were expanding.
The strategy was paying dividends as Adelphia entrenched its position in these lucrative markets,
fueling the companys growth. Historically, the primary regions where the company operated had
demonstrated household growth rates that eclipsed the national average. By the early 1990s, after
years of consistent growth, Adelphias markets were recording household growth rates nearly 25
percent above the national average, further bolstering hope that the financial growth of the past
would continue into the future.
Sales in 1992 amounted to $267 million, up nearly ninefold from the total collected in 1986. In
1993, sales jumped to $305 million. To sustain this pace of financial growth, Adelphia looked to
physical expansion and resumed its acquisition program as it entered the mid-1990s. In 1994 the
company agreed to purchase all the cable systems owned by WB Cable Association, Clear
Channels Cable TV, and those owned by the Benjamin Terry family. In all, Adelphia gained
62,200 subscribers, a figure that paled in comparison to the nearly 1.5 million subscribers the
company served at the time, but the acquisitions strengthened the companys position in key
markets. The WB Cable system was situated in West Boca Raton, Florida, where Adelphia
served 300,000 subscribers. The Terry family cable systems were located in Henderson, North
Carolina, and the Clear Channels cable systems were located in the Kittanning, Pennsylvania,
area. Further additions to the Adelphia system were made in 1995, when the company agreed to
buy cable systems from four small operators that included southeastern Florida cable systems
owned by Fairbanks Communications, plus others owned by Eastern Telecom and Robinson
Cable TV in the Pittsburgh area, and cable systems in New England owned by First Carolina
Cable TV. Together, the acquisitions added 108,000 subscribers to Adelphias network, and each
conformed to the companys strategy of clustering its cable system holdings.
The late 1990s marked a period of feverish consolidation across the cable industry: companies
were merging, buying up smaller companies, and even exchanging systems with one another in a

race to optimize the efficiency of their customer clusters and maximize economies of scale.
During this period Adelphia made a number of key acquisitions that boosted the company into
the position of the nations sixth largest cable operator. In February 1999, Adelphia acquired
Frontier Vision Partners L.P., a company with operations in New England, Ohio, Virginia,
andKentucky and a total of 702,000 subscribers. The transaction cost Adelphia $550 million in
cash and $431.4 million in stock; further, the company assumed $1.1 billion in debt from
Frontier Vision. The following month Adelphia purchased Century Communications Corporation
for $3.6 billion plus the assumption of $1.6 billion of Centurys debt. The acquisition brought
Adelphia 1.6 million new subscribers in California, Colorado, and Puerto Rico. In April 1999,
Adelphia made a third billion-dollar acquisition with the agreement to purchase Harron
Communications Corporations cable systems in New England and Philadelphia. This transaction
cost Adelphia $1.17 billion in cash and added 300,000 subscribers to its roster. The aggregate
gain of these acquisitions pushed Adelphia over the five million customer mark, a significant
threshold for maximizing the benefits of an economy of scale.

Scandal Erupts: 2002

Adelphia continued to make other acquisitions and consolidation maneuvers through 1999 and
2000, bringing its subscriber base up to an impressive 5.5 million. Though the company was
heavily indebted after the succession of major purchases, analysts were looking favorably on
Adelphia as late as January 2002, noting that the company was well positioned for acquisition or
merger with another major cable company.

Key Dates:
1952:
John Rigas and his brother, Gus, found Adelphia with the purchase of their first cable
franchise in Coudersport, Pennsylvania, for $300.
1972:
The Rigas brothers incorporate their company under the name Adelphia, the Greek
word for brothers.
1986:

The Rigas family consolidates several cable properties under the Adelphia name and
takes the company public; a period of aggressive expansion through multiple acquisitions
is launched.
1989:
The company creates Adelphia Media Services to pursue advertising opportunities on
local, regional, and national fronts.
1991:
The company establishes Adelphia Business Solutions, a subsidiary, to provide a range of
communications products to the business community, including high-speed Internet
access, long distance phone service, and voice messaging.
1994:
Adelphia begins a new period of rapid acquisition.
1998:
Adelphia reaches a customer base of over two million subscribers.
2002:
Financial fraud scandal erupts at Adelphia; the Rigas family is ousted from the
companys board of directors; company files for Chapter 11 bankruptcy protection.
On March 27, 2002, however, Adelphia officials disclosed $2.3 billion in previously unrecorded
debt incurred through co-borrowings between Adelphia and other Rigas family entities under the
umbrella of the familys private trust, Highland Holdings. Under these loan agreements, the
Rigas entities were responsible for repaying the debt, but if they were unable to do so, Adelphia
would be liable. The revelations and the investigation that followed sent the company spiraling
deeper and deeper into a scandal that the Securities and Exchange Commission (SEC) eventually
called, one of the most extensive financial frauds ever to take place at a public company.
While the accounting omissions caused immediate investor concern, the loans themselves
seemed commensurate with company practices dating back to 1997 and thus not necessarily
illegitimate. Adelphia moved to delay filing its 2001 annual report and restate its financial results
for the past three years in order to clarify and properly account for the debt. Still, within a month
of the disclosure, Adelphia faced a 70 percent dive in its stock price, investigations by the SEC
and federal prosecutors in Pennsylvania and New York, and possible delisting from the
NASDAQ.

The Rigases, it appeared, had used much of the loan money to acquire Adelphia stock; they had
also used loan money to finance the purchases of cable properties separate from Adelphia. As the
scandal unfolded the litany of questionable dealings between the Rigas family and Adelphia
continued to grow: it included, but was not limited to, the purchase of office furniture for
Adelphia from a Rigas-owned company at exorbitant prices; the building of a private Rigas
family golf course with Adelphia funds; the Rigas familys exploitation of company airplanes
and other luxuries; and the maintenance of a chef and other family staff on Adelphias payroll.
While the Rigas family used company funds in numerous inappropriate ways, it also manipulated
the accounting of the transactions to create a falsely inflated picture of the companys financial
condition. By June 2002 it was revealed that the company had significantly overstated its cash
flow as well as the number of its cable subscribers for 2001.
The practical implications of the scandal for Adelphia were devastating. In a move aimed at
regaining the confidence of lenders and potential investors, a special committee of independent
directors and creditors forced the Rigas family to surrender control of the company, and Erland
E. Kailbourne was installed as chairman and interim CEO. The next step was to renegotiate loans
and sell off assets in order to stabilize the companys debt. But investing in the future of the
tarnished cable company proved to be too risky a venture for any of Adelphias potential buyers,
and after a month of scrambling to find alternatives, the company filed for Chapter 11
bankruptcy on June 25, 2002, with debts totaling $18.6 billion.
Despite the chaos, figures for June and July 2002 showed a solid performance for Adelphias
base business. With bankruptcy protection alleviating the immediate pressure to liquidate
valuable assets, the company hoped to reorganize and regain its footing. Still, at the close of
2002, the forecast for Adelphias future remained uncertain.

Principal Subsidiaries
Adelphia Cablevisions, Inc.; Clear Cablevision, Inc.; Indiana Cablevision, Inc.; Western Reserve
Cablevision, Inc.; International Cablevision, Inc.

Principal Competitors
AT&T Broadband; DIRECTV, Inc.; EchoStar Communications Corporation.

Further Reading
Adelphia Agreed to Buy, Television Digest, June 19, 1995, p. 7.
Adelphia Said It Had Agreed to Buy All Cable Systems Owned by WB Cable Assoc, Clear
Channels Cable TV and Benjamin Terry Family, Television Digest, November 7, 1994, p. 8.
Adelphia to Install Cable As Part of Upgrade, Business First of Buffalo, January 29, 1990, p.
10.
Fabrikant, Geraldine, A Family Affair at Adelphia Communications, New York Times, April 4,
2002, p. C1.
Fabrikant, Geraldine, and Andrew Ross Sorkin, Rigas Family Is Giving Up Voting Control of
Adelphia, New York Times, May 24, 2002, p. C1.
Fazzi, Raymond, Adelphia Cable to Expand Channel Offerings in Dover Township, KnightRidder/Tribune Business News, December 27, 1995, p. 12.
Fink, James, Adelphia Gets Bigger with Purchase of Jones Cable, Business First of Buffalo,
August 28, 1989, p. 5.
Lindstrom, Annie, Adelphia Sparks CATV Paging Industry, Telephony, January 16, 1995, p.
18.
Mehlman, William, Adelphia Cash Flow Margin Paces Cable TV
Industry, Insiders Chronicle, August 31, 1992, p. 1.
Jeffrey L. Covell