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USDTV Files for Chapter 7

Despite the backing of some of the country’s largest station owners, broadcast wireless cable company USDTV has run out of money and filed for Chapter 7 bankruptcy protection.

Two years after Salt Lake City-based USDTV rolled out its first market, the company has lined up just 16,000 subscribers to its low-cost, low-end packages of "cable" networks in four markets. But it burned through $26 million in equity invested last September by broadcasters including Fox Television Stations, Hearst-Argyle, and Lin Television and is loaded with an estimated $14 million in debt.

Control of the company has been surrendered to Alfred Guiliano, the federal bankruptcy court trustee in Delaware, where USTDV filed its bankruptcy petition.

John Carroll, an attorney representing the trustee, says that Guiliano is close to securing financing to keep USDTV's system going in hopes that it can be sold to an investor group.

One investor group is already negotiating to take over the company's assets and assume some of its debts, while Guiliano was contacted by a second group Tuesday.

USDTV's plan called for pooling the spare digital spectrum of three or four local broadcast stations in a market to air a package of “cable” networks to compete with cable and satellite TV operators.

Subscribers to the mini-wireless cable system could buy a special set-top box to see a dozen or so programming channels—plus all the local digital-broadcast services—even if they didn't have a digital TV.

Since 2004, USDTV has launched in Salt Lake City, Albuquerque and Las Vegas, and Dallas but lacked the cash for intensive marketing. The company has 7,000 customers in Dallas, 5,000 in Salt Lake City and 2,000 each in the other markets. Around 55% of those were from cable "nevers" that didn't subscribe to either cable or satellite TV but were drawn to USDTV’s low cost of $20 monthly.

USDTV CEO Steve Lindsley called those numbers "evidence of tremendous demand for an alternative to cable TV," adding that "we were well on our way to proving our business model." The problem, Lindsley contends, is that broadcast stations weren’t willing to make the financial commitment it would take to expand the system and market it properly.

"I believe this is another notch in the belt of big cable," Lindsley says. "They’ve won a battle not to have to provide a lower-cost alternative." However, cable operators have largely ignored the company, since it was making little impact on their operations.

The company hasn't detailed its debts. But one court document shows that creditors include a number of broadcasters owed money for leasing spectrum, including Sinclair and Ion Media, plus cable networks supplying programming, including Fox News, Scripps Networks and ESPN.