Minneapolis gets first look at proposal to bring cable competition to city

Comcast van
Comcast spokesperson Mary Beth Schubert: “Any new provider entering the market should be held to the same requirements as our industry of bringing competition to all residents in the community, while also meeting existing state law statutes.”

A committee of the Minneapolis City Council will begin considering Monday whether to grant CenturyLink the right to bring cable television competition to the city.

Anyone hoping to see more cable options should expect a long process, though, one that will only start with the council’s decision.

CenturyLink has asked to be allowed to offer its service — called Prism — to Minneapolis with an intention of expanding it to other cities in the metro area. Minnesota would be the 11th state where the company is seeking to offer cable service. 

But the key question for the council may be how to navigate a legal conflict between traditional cable operators — known as incumbent carriers in industry speak — and new rivals such as CenturyLink. Minnesota state law requires that all franchisees have similar requirements, including a demand to build out their systems citywide within five years. That was done to assure that companies didn’t cherry-pick wealthier neighborhoods at the expense of poorer ones. In return, local governments gave companies exclusive franchises, which gave providers comfort that the massive investment to wire a city would pay off. 

Changes in federal telecommunications law, however, have disrupted that model. In order to bring more competition to telecommunications services, both Congress and the Federal Communications Commission have sought to lower the costs and burdens of entry for new competitors. Near the top of the list of things the feds have done to invite more competition is to do away with the so-called build-out requirements, since the expense of having to construct a citywide system without any guarantee of paying customers was a significant barrier to entry.

CenturyLink will argue that federal laws and rules preempt state law in Minnesota. “Unfortunately for residents of Minneapolis, we sit here in 2015, 23 years after the FCC abolished the idea of exclusive cable franchises, and not one provider has yet to successfully apply for and receive a franchise to compete with the incumbent,” the company wrote in response to questions from city regulators about their failure to address the requirement to build citywide. “That is the very barrier the FCC was trying to eliminate in its 2007 order. That is why CenturyLink is so confident in its position that [state law] is pre-empted.”

Comcast, the incumbent cable provider in Minneapolis, has argued something very different, of course. When the CenturyLink plan was announced last December, Comcast spokesperson Mary Beth Schubert released this statement: “We do business in a competitive environment every day. Any new provider entering the market should be held to the same requirements as our industry of bringing competition to all residents in the community, while also meeting existing state law statutes.”

CenturyLink could begin offering service by June, but litigation may result regardless of the city’s decision. CenturyLink’s proposal is also before other cities in the region, including the North Suburban Cable Commission, South Washington County Cable Commission, Columbia Heights and Northwest Suburbs Cable Communication Commission. The company has also had conversations with St. Paul, but has not made a formal application, said spokeswoman Joanna Hjelmeland. That city is set to consider a 10-year extension of Comcast of St. Paul’s franchise agreement on Wednesday.

All of this is happening while the market is undergoing a major transition. Comcast is transferring its Minneapolis operations to a new company that will be called GreatLand Connections, a move required by federal regulators as part of the proposed merger of Comcast with Time Warner Cable. No single company is allowed to control more than 30 percent of the national market.     

The public hearing on CenturyLink’s application Monday is before the council’s Ways and Means Committee. After a 14-day period, city staff will make a recommendation that it will return to the committee and then the full council for a decision. CenturyLink is proposing to offer the full compliment of cable services to about 30 percent of the city initially, adding to the system as the market dictates. If it becomes the dominant provider in the city — that is, if it ever has more than 50 percent of the customers  the company said it would meet with the city to develop a schedule for building citywide.   

“As we create a revenue stream from the sale of Prism to end users, we will use such revenues to invest in the network and to increase our Prism-enabled footprint,” CenturyLink states in its application documents. “We are more than willing to meet with the City on a periodic basis to review the Prism-enabled footprint in the City and based on success market, newly targeted areas for deployment.” 

In its application, the company maintains that competition will keep cable rates lower and improve service. “To the extent the incumbent does respond to Applicant’s market entry through promotional offers or other pricing changes, all citizens of Minneapolis will benefit from such competitive response, whether or not Prism is immediately available to each citizen because the incumbent cannot target its offers solely to those areas in which Prism is available,” CenturyLink asserts. It also argues that low-income and minority neighborhoods are prime customers of cable services. “Not offering services to minority, urban or low-income communities doesn’t make economic or business sense.”

As an illustration of how competitive the situation is, CenturyLink’s application includes several instances in which it asks that information not be released publicly under trade secret laws. And when it was asked to produce a map of the areas where its service will be initially available, the company balked. “As Franchisee has stated numerous times to the City, its map depicting its initial deployment of cable communications services in the City is extremely competitively sensitive and highly confidential, and Franchisee is not confident that it could be adequately protected even under the designation of a ‘Trade Secret.’ Accordingly, Franchisee respectfully declines to produce any such map in response to this inquiry.”

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Comments (12)

  1. Submitted by Wayne Coppock on 02/23/2015 - 11:03 am.

    Imagine that, Comcast demanding any potential competition have to adhere to rules it probably wrote and paid off legislators to implement.

    That said, I don’t think that pushing to have a competitor roll out city-wide is a bad thing. We need the competition desperately. I’m not really sure that CenturyLink is our best bet for a competitor that will actually compete and not collude, but it’s better than nothing I guess. Ideally I’d like to see the availability of individual television networks via internet streaming take off more quickly so all these companies become providers of a ‘dumb’ pipe that does nothing but provide bandwidth to do with as you please. The vertical monopoly of internet pipe/content provider/content producer all being a single company needs to stop.

  2. Submitted by Ray Schoch on 02/23/2015 - 11:26 am.

    Honor among thieves

    This Minneapolis resident and customer of both Comcast and CenturyLink is only mildly interested in whether Comcast has competition from CenturyLink for cable business. Comcast is fairly awful to deal with as a company (as opposed to its actual employees, who’ve generally been friendly and quite competent). CenturyLink is not notably different. The company is obtuse, the employees generally friendly and competent.

    Excuse my skepticism about “lower costs” if CenturyLink gets the necessary approval to construct a rival network. Using their own wires, or Comcast’s? If their own, I have visions of photos I’ve seen of Mumbai in India, with a birds’ nest conglomeration of wires running everywhere, phone poles groaning and leaning under the weight of multiple, often rival, connections to every residence, and local handymen making a decent living simply by being able to decipher the rat’s nest of cable. Service calls take months – not days, but months – to actually take place. If they use Comcast’s wires, I suspect Comcast will charge them enough for that use that cost savings to actual customers will be minimal, at best.

    Even if CenturyLink’s entry into the market doesn’t provoke the kind of electronic chaos of Mumbai, I’ve seen no evidence as a land-line phone customer that their service will be markedly better than what I currently receive from Comcast. I’m not necessarily arguing against granting CenturyLink the ability to compete in this market, just saying that most of the claims by the company regarding alleged savings to individual customers when compared to Comcast are probably illusory, and perhaps outright fiction.

    While the overpaid executives duke it out over whose ego is more justified by their company’s market share, and whose shareholders will be more richly rewarded as a consequence, it’s not difficult to see plenty of inconvenience for ordinary customers, and little in the way of cost savings for them. The airwaves over which television signals are broadcast are supposed to belong to the public, and I’m old-fashioned enough to still be annoyed by the reality of having to pay a private operator to see something on my TV screen that I’ve already paid for once.

  3. Submitted by Bob Quarrels on 02/23/2015 - 12:17 pm.

    Pet peeve

    As we sit, “23 years after the FCC abolished the idea of exclusive cable franchises,” there’s a line item on the Comcast bill, added to the upfront cost, for city franchise fee. Which begs the question, why should residents pay the city for Comcast’s right to squeeze out competition?

  4. Submitted by Connie Sullivan on 02/23/2015 - 12:19 pm.

    Are we to assume that this new CenturyLink cable service will be fiber-optic to the home? How fast will the speeds be?

    One despairs at the lateness of Minneapolis getting to honestly high-speed broadband, given the dominance of Comcast, a company that now does not serve the city well, and the city’s unfortunate agreement with U.S. Internet on wi-fi, where USI targets only part of Minneapolis for its new fiber-optic service. Something is really amiss, and one hopes Minneapolis starts playing hardball with these cable companies.

    • Submitted by Joe Musich on 02/23/2015 - 08:55 pm.

      yep !

      Great questions ! Especially wether Centruy Link will be fiber ! I would assume so since they do have fiber running in place in the city already. I want to know about bundling. Particularily phone and a minimal Tvee signal. I began to ask WSI about the plan for expansion last year, No answers to their difficult to access communications system if you do not already have service. I gues we do not need reminders of the ranking of the good old USof executive salaries of the standing of signal delivery to consumer, Not sure if this will improve much in terms of service.

      • Submitted by kyle pazandak on 02/25/2015 - 10:57 pm.

        Century link actually has very little fiber to the home capabilities right now. Also there aren’t alot of players that have lots of free time to place the fiber for them. The biggest providers (arvig, jaguar, and the like) are making hand over fist putting in fiber for schools, government, OET, and other you entities that you wouldn’t think own massive fiber networks.

        Point in case the 2 largest fiber networks are TIES an OET both are public entities.

    • Submitted by kyle pazandak on 02/25/2015 - 10:55 pm.

      it is either fiber to the home or fiber to the curb.

      Their current set up is fiber to the node. so about 200-400 households share a node that is sent 511E 11th st (east of the taken down metro dome) where it then gets sent into L3, Cogent, TW, and other nation wide providers for transport.

      Real speeds from this service are greater than 100mb/s and the video technically uses a different wave length of light over the same cable so tv has no affect on internet speed.

  5. Submitted by Mike Downing on 02/23/2015 - 12:59 pm.

    Competition is needed for the Twin Cities not only for Mpls

    Competition is needed for the Twin Cities not only for Minneapolis. While I applaud Minneapolis for pursuing competition to Comcast, I strongly encourage the North Suburban Cable Commission, South Washington County Cable Commission, Columbia Heights and Northwest Suburbs Cable Communication Commission to aggressively pursue competition to Comcast in order to increase customer options (rather than one size fits all) and decrease prices to the Twin Cities cable subscribers.

  6. Submitted by Matt Brillhart on 02/23/2015 - 03:16 pm.

    Density & Demographics (affluence)

    The article does not directly address the subject of why CenturyLink is less than enthusiastic about the citywide mandate, but I believe it boils down to two Ds: Density and Demographics (namely HH income). Take a look at US Internet’s fiber optic service coverage area in Minneapolis. It began in the Uptown area (highest population density in the region) and is now radiating outward through SW Minneapolis (high HH incomes and moderately high density).

    It makes perfect sense from a business standpoint. If they’re going to make the investment in the infrastructure, they’re going to tackle the areas first that have the largest number of paying customers per square mile. Some suburbs may find that they have neither the HH income nor population density to match the required investment for a fiber network, whether it’s CenturyLink or a local vendor like US Internet.

  7. Submitted by Gerald Abrahamson on 02/23/2015 - 07:58 pm.

    1996 all over again

    Telcos were split into two parts: Wires and Services.

    The Wires division provided uniform access to the customers to the service providers. The customers picked who provided the services they wanted.

    Do the same with cable companies.

  8. Submitted by jim hughes on 02/24/2015 - 04:56 pm.

    meaningful competition?

    Would this “competition” actually ever deliver bandwidth comparable to what’s available in more advanced nations – or just more of the same “blazing fast internet” and an endless shell game of bundling options and deceptive introductory pricing plans?

    I’m pretty sure we already know the answer.

    • Submitted by kyle pazandak on 02/25/2015 - 10:52 pm.

      It will

      The service is Fiber based using GPON technologies. It handles 100mb/s at its slowest speed (although you can slow it down further using traffic shaping). The system is passive optical and good for a 1gb/s. Although a formal standard will come out later this year using the same technologies but different optics for 10gb/s passive optical system.

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