Lakeville still musing adding cable franchise<BR>

Lakeville still musing adding cable franchise

Posted 9/8/00

by Lori Hall
Staff Writer
Though state law has always made cable franchise agreements non-exclusive, until recently it has been cost prohibitive for multiple vendors to be in the same city.
Now, with increased Internet use and the introduction of fiber optic networks, companies can provide cable services along with Internet and telephone service. This bundled package can offer residents a reduced rate by using multiple services from one vendor, and the vendor receives revenues from three different services.
WideOpenWest (WOW), a new company building high band-width fiber-optic networks, approached the city of Lakeville this spring, applying for a cable communications franchise. WOW was the only company to submit an application after the city advertised its intent to franchise.
The City Council held a public hearing during its Sept. 5 meeting to receive input from WOW and other interested parties.
At the meeting, Brian Grogan, special counsel from Moss and Barnett, said the city must determine if WOW has the legal, technical and financial qualifications to operate in Lakeville.
If the city finds WOW to meet all of its qualifications, then the two parties would negotiate a franchise agreement. This is where it gets tricky for the city; there are no statutes providing standards for cable franchises for the city to compare WOW against.
Grogan said the city tried to get an accountant to review the qualifications, but no one would because of the lack of a standard.
Formed in November 1999, WOW currently has no operating cable communications system in any other cities. However, the company does have seven franchise awards from other cities and the city councils in Denver, Colo., and Boulder, Colo., have approved the awards of WOW franchises.
ěWe are attacking markets west of the Mississippi,î said WOW Vice President of Market Development Chris Julian.
WOW boasts a high-capacity fiber-optic broadband network. This network will offer consistently fast Internet use, digital cable television, and telephone services. One of the highlights of the companyís services is video-on-demand, which is a library of movies that subscribers can rent for 24 hours through their remote controls. The movies can be stopped, rewound and paused.
ěThe best part is you donít have to drive to the video store to return it,î said Julian.
By allowing another cable franchise in Lakeville, residents will benefit from the competition between the companies. Often competition results in better service, increased programming and reduced rates. However, the Federal Communications Commission (FCC) has found that the benefits of competition may be short-lived. Companies may lose revenues and go out of business trying to compete with each other.
The FCC recently found competing franchises have been awarded in 210 communities in 28 states.
Cable Coordinator Jeff Lueders said two cable companies could be viable in a city, but when any more than that are vying for the customer base, it is inevitable that not all of them will succeed.
Another company may already be edging in on the cable franchise, though it is going under the label of a telephone company. Hickory Tech, a telephone company out of Mankato, has expanded to be a data carrier and Internet access provider.
Hickory Tech is laying fiber in Farmington and approached the city three months ago about swinging through Lakeville and building a switching station just north of Lakeville High School on Ipava Avenue.
Hickory Tech is providing services to Farmington, will loop through Lakeville, go back to Farmington or Apple Valley, then go through Bloomington, Savage, Shakopee and Owatonna, according to Lueders.
Because Hickory Tech is under the Public Utilities Commission, it does not need a franchise agreement.
Lueders said Hickory Tech can be a potential competitor for WOW even though it does not offer television services. Because the company is already constructing its switching station, it will be able to start nabbing customers sooner.
ěTheyíre going to be in position to capture all the new homes on Ipava,î said Lueders. ěAs public utilities go in, they can drop their lines.Weíre going to have competition for phone and Internet from Hickory Tech as early as next year.î
Though Hickory Tech does not currently have digital television, it is piloting a project this year and it will have the bandwidth to support digital television, if and when the company decides to add it to its list of services.
Another potential competitor exists, although it has not applied in the city of Lakeville yet. Everest Communications has applied for cable franchises in all the surrounding communities, including communities in which WOW has applied.
Lueders said the city is being proactive and will contact Everest and inquire about its level of interest in Lakeville.
ěMy fear is that Everest drives WOW out of the area and we end up with no competition,î said Lueders.
Julian is optimistic about his companyís expansion into Lakeville.
ěOur speeds will be 175 times faster than present dial-up systems,î said Julian. ěWe think we can do a really, really fabulous job here in Lakeville. Charter is a heck of a good company. They arenít going to just fold up their tent and go away.î
Ellen Martin, operations manager for Charter Communication, was also at the City Council meeting. She told the council Charter would continue to support the city and Telecommunications Subcommittee.
ěWe wish to keep open communications with the city,î said Martin. ěWe will protect our assets and plans as they move forward with construction.î
Telecommunications Subcommittee and Franchise Subcommittee member Greg Stattman told the City Council that WOW does possess the requisite financial qualifications needed to operate in Lakeville.
Citing a wish to get communications from Denver and Boulder regarding the awarded franchises, the City Council decided to not act on a resolution granting the franchise request. Instead, the council moved to refer the issue back to the Telecommunications Commission to further consider the resolution.
The Telecommunications Commission will meet Sept. 12 and the issue will be brought back to the City Council Sept. 18.

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