Last May, when the Minneapolis City Council became the first local government in the region to allow CenturyLink to compete with Comcast for cable customers, it left two questions unanswered.
First, would CenturyLink offer its services to low-income neighborhoods — or just the wealthier parts of the city?
Second, would Minneapolis get sued?
A report to a council committee late last month looks like the first question has been answered. At a recent meeting with CenturyLink, city officials were told that the cable service offered by the company was available in all 13 city wards.
On the second question? While the city hasn’t gotten sued yet by Comcast over the agreement with CenturyLink, that doesn’t mean it might not still happen. The terms agreed to by CenturyLink and Minneapolis — while similar to those between the company and St. Paul and many other cities — are in conflict with state law.
Minnesota statute requires that any cable franchise granted by a local government or cable commission include a requirement that the entire jurisdiction be served within five years. That was meant to make sure companies don’t cherry pick customers — investing in higher-income areas that might be more likely to purchase expensive adds-ons.
But requirements that date to the era when cable companies often had monopolies in a jurisdiction have been determined illegal by Congress and the Federal Communications Commission. Today, local governments are not to impose rules that are a “barrier to entry,” and rules like mandatory build-out timelines put tremendous costs on potential competitors that have no guarantee of gaining enough customers to repay their investment.
Minneapolis instead required CenturyLink to be available to 15 percent of city households within the first two years. Once it captures at least 27.5 percent of customers in that zone, it is required to expand its service area in what’s termed “market-based success,” meaning that the company is allowed to gain customers before it must expand service to more of the city.
The company was also required to meet quarterly with city staff to show it is serving all 13 wards “including a significant number of households below the minimum income of the city.”
Michael R. Bradley, a Minneapolis attorney hired to help the city negotiate and monitor the agreement, told members of the Ways and Means Committee that CenturyLink has already exceeded the 15 percent requirement and is already capable of hooking up 30 percent of the city’s households.
Bradley said city staff was “very pleased with the meeting and the results. They have exceeded their two-year goal in the first six or seven months of holding the cable franchise.”
And the report from CenturyLink showed what Bradley termed “significant investment” by the company in neighborhoods such as in north Minneapolis.
In fact, Tyler Middleton, CenturyLink’s vice president of operations for the state of Minnesota, said the access is higher in the city wards with the highest areas of concentrated poverty. In Ward 4, which includes Camden, for example, 55 percent of households can receive the company’s cable service; in north Minneapolis’ Ward 5 it is 46 percent; and in Ward 9, which includes Phillips, it is 40 percent.
CenturyLink estimates that 29 percent of the 80,000 households currently able to sign up for the service are below the median income of $46,682 per year. “I think we’ve done a pretty good job of trying to adhere to that requirement,” Middleton said.
The company’s plan is to offer service to 100 percent of the city within five years. But Middleton said the company’s “penetration rate,” a measure of the percentage of households that can get the service that actually sign up, remains at just 3 percent. By comparison, Comcast is reported to have rates in the 40 percent to 45 percent range.
The company has agreements with 35 cities in the region — either individually or through multijurisdiction cable commissions, and is in negotiations with 34 others. More than 200,000 households in the region are capable of getting cable TV through CenturyLink and it expects to have it available to 400,000 by the end of 2016.
Minneapolis City Attorney Susan Segal said the city has not seen any lawsuits or notices of claims from Comcast over the cable franchise, nor she heard any “rumors or noises” of such litigation.
Council Vice President Elizabeth Glidden cast the sole vote against the CenturyLink agreement last May, saying then she thought the agreement should have required a broader rollout of the service. She also said the deal does not give the city enough enforcement power to make sure the agreement is kept.
“There wasn’t something in the report where I said, ‘Wow, that’s a big red flag,’” Glidden said. “It is kind of what I thought, that we wouldn’t get very much information or have the leverage to see what’s going on.” Glidden said she still thinks the agreement does not provide enough incentive for CenturyLink to serve the entire city.
Other Ways and Means Committee members expressed some concerns with the city’s fledgling competition for cable television. Council Member Blong Yang, of Ward 4, said there should be a retail outlet in north Minneapolis so residents don’t need to go downtown to pay bills or talk with staff. And Council Member Andrew Johnson said the promises of competition have yet to be realized.
“The prices are still way too high and the speeds are too slow in our city,” Johnson said.
Comcast has said that it believes any new entrants in the cable market in Minnesota should follow the same rules and requirements, especially the five-year build-out requirement. “The Minnesota Cable Act is clear that a cable provider is required to commit to serve an entire city,” Comcast spokesperson Jill Hornbacher said in a statement this week. “Comcast is proud to serve the city of Minneapolis. At Comcast, we do business in a competitive environment every day.”
She did not respond to a question about the company’s intentions regarding legal challenges of the Minneapolis agreement with CenturyLink.