The cable war is coming to St. Paul

REUTERS/Robert Galbraith
The issue is further complicated by Comcast’s decision to spin off its cable operations in the region to a new company GreatLand Connections — a requirement of its on-going merger with Time-Warner.

Now it’s St. Paul’s turn to referee the cable wars between Comcast and CenturyLink.

A month after Minneapolis received an application from CenturyLink to compete with incumbent cable provider Comcast for video and broadband customers, St. Paul is expecting a similar application from the company.

In preparation, the St. Paul City Council has hired legal expertise to guide it through the process, and has created a special committee of city staff to respond to the application. The same resolution set a $40,000 fee for any companies that seek to set up a competitor to Comcast.

Tarek Tomes, director of the office of of Technology and Communications, said CenturyLink has informed the city it will make its application formal by April 24, within the time period set up by the city ordinance. If it does, it will raise the same legal and political questions raised by the application in Minneapolis. Additional cable franchise authorizers in the region are either in the midst of or anticipating similar applications — and similar disputes.

Tomes said the process set up by the city council explains to potential applicants how to “knock on that door.” The city wants additional cable providers, he said. “We recognize that choice is a good thing for consumers and residents of St. Paul.”

Having more than one source for cable video services has driven down rates in the cities where competition exists. But there is an apparent conflict between state law and federal law as to how that can happen. And there is a lack of legal clarity over whether federal rules promoting cable competition preempt state and local laws that make that competition difficult. State law says that any competitor must meet the same rules and expectations as the traditional cable provider. The most-contentious of those rules are so-called build-out requirements, which demand that new providers offer services across the city within five years.

CenturyLink, with the apparent backing of several recent Federal Communications Commission rulings, argues that such requirements make it financially difficult — perhaps impossible — for competitors to build a rival system. Instead, CenturyLink proposes offering service to about 30 percent of Minneapolis, with expansion being mandated once it gains a set share of the market.

In its 2011 “State of the Cable Industry” report, the FCC credited the movement of some traditional telephone companies into video services with increasing choices for consumers. “Since 2005, the entry and extension of video delivery systems by AT&T, Verizon and CenturyLink may have had the most significant impact on competition,” the FCC report stated.

The agency’s 2007 order on cable competition highlighted build-out laws on the state and local level as impediments to competition: “Forcing new entrants to agree up front to build out an entire franchise area too quickly may be tantamount to forcing them out of — or precluding their entry into — the business,” the order stated.

Yet Minnesota state law is specific, mandating that construction of a system throughout an authorized franchise area must be “substantially completed” within five years.

This requirement for a “level playing field” has been stressed by Comcast, not surprisingly, which has used the issue to resist CenturyLink’s expansion onto its turf in other cities. Comcast’s argument — that a provider not obligated to serve an entire city could “cherry pick” neighborhoods and leave poorer residents behind — has resonated with some on the Minneapolis City Council.

CenturyLink
MinnPost photo by Peter Callaghan
CenturyLink has informed the city it will make its application formal by April 24.

Minneapolis staff and legal advisors have written to the council that the city should expect a legal challenge if it allows CenturyLink to come in with less-stringent build-out requirements than contained in state law. And the same staff and legal advisors have written to the city council that the city should expect a legal challenge if it requires CenturyLink to meet the full build-out requirements. 

Minneapolis city staff is in the midst of negotiating a franchise agreement with CenturyLink. Staff has said it will try to come up with rules that meet the federal requirement for more competition — and that also meet the state requirement for fair treatment between incumbent providers and new challengers.   

The issue is further complicated by Comcast’s decision to spin off its cable operations in the region to a new company GreatLand Connections — a requirement of its on-going merger with Time-Warner. St. Paul’s recent 10-year extension with Comcast, which settled fee and service disputes between the two, provides for the ownership transfer. That new agreement also contains language that anticipates CenturyLink’s application. In a section titled “Competitive Equity,” the agreement lays out a process for Comcast to request that its agreement be amended to reflect more-generous terms given to a new competitor. 

But it also exempts St. Paul from having to follow these so-called most-favored-nation provisions if the city is “ordered or required to issue a franchise on different terms and conditions.” That would come into play should CenturyLink sue to force less-stringent build out rules in any new agreement. 

If all that isn’t complicated enough, in St. Paul there’s an additional twist. Comcast’s regional vice president for government affairs is Emmett Coleman, also known as the brother of St. Paul Mayor Chris Coleman. Tonya Tennessen, the mayor’s communications director, said Tomes and his committee has led the negotiations on a Comcast franchise extension and will do the same with any CenturyLink application. 

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Comments (6)

  1. Submitted by Mike Schumann on 04/03/2015 - 11:05 am.

    Cable TV

    In the metro area, where over the air broadcasts are available, cable TV is not a necessity. The entire cable TV market in St. Paul and Mpls should be completely deregulated and anyone should be free to provide service where ever they find it profitable to do so.

    Internet service, on the other hand, is in today’s world a necessity. That’s a little tougher issue. Deregulation would be nice if it didn’t result in areas of the city that lacked any competitive offerings and resulted in price gouging. If that became a problem, a municipally operated system would always be an option.

  2. Submitted by Dennis Tester on 04/03/2015 - 01:19 pm.

    Municipally operated systems should never be an option

    Cable-based systems, whether for phones, TV or the Internet are antiquated if not obsolete. Satellite-based products for all three are available now making it unnecessary for government to pollute the marketplace – prolonging the lifespan of old technology.
    .

    • Submitted by Jonathan Ecklund on 04/03/2015 - 04:10 pm.

      Satellite internet is garbage internet. You might as well use a handset modem.

      I would be OK if I paid for high-speed internet as a utility.

    • Submitted by Pat Berg on 04/03/2015 - 04:14 pm.

      It snows here

      And if you’re unfortunate enough to have your dish mounted on your roof during a heavy snowstorm, you won’t appreciate having to haul a ladder out in that weather to hopefully get reception back without breaking your neck.

      Then there are the summer days when reception is lost due to heavy storms.

      Oh yeah – satellite is the answer to everything . . . . . .

  3. Submitted by Steve Hoffman on 04/03/2015 - 03:18 pm.

    Satellite internet is a very bad idea. Have you ever tried it? The latency between the time you push a key and the time the signal has traveled up to the satellite and back will drive you crazy. Ever tried to talk on a phone over a satellite link? Yeah, like that. You talk over each other. It’s awful.
    I was looking forward to terrible Comcast getting some competition … and then I spent a hellish TEN DAYS trying to get Mom’s house phone switched from CenturyLink (which doesn’t serve her new address) to a different carrier. Broken promises every day — “Tomorrow by 4pm, for sure!” — several days in a row. Always lots of excuses, most of them completely irrelevant and obviously read from a script.
    Maybe there’s something awful about all cable systems that prevents them from providing anything like decent customer service. Can’t figure out what it might be, though.

  4. Submitted by Scott Walters on 04/04/2015 - 05:56 pm.

    Internet should be all or nothing

    Allowing private providers to offer internet where they want, and then leaving presumably less affluent or less dense areas of the city to fend for themselves with satellite, dial-up, or mobile is a poor option. None of these is a viable alternative for more than casual entertainment uses.

    A municipal service that is forced to cover only the unprofitable zones, while the for-profits get to cherry pick is also a terrible option.

    An eventual requirement to cover the entire city seems very reasonable. I fear that CenturyLink will be able to enter the portions of the city they want (presumably the densest zones) and then price their product to remain just under the trigger market share to be required to build out their network.

    Mike’s right. This is a tough issue. Cable TV – who cares. Internet – a really big deal.

    Maybe a municipal system is the right way to go for internet. Internet access has become a public good, and it’s not like electricity. Electricity either works or it doesn’t, with very little grey area open for interpretation. “Good” internet access is in the eye of the beholder. What works just fine for me might be a business crushing failure for you.

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