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McLeod Starts Building in Des Moines

McLeodUSA has begun installing fiber optic plant in Des
Moines, Iowa, under a "pre-franchise" arrangement that paves the way for its
entry into the local cable market.

Des Moines officials recently agreed to allow McLeodUSA to
install the new fiber optic plant in the city's rights-of-way while the two sides continue
negotiating a second cable television franchise for Iowa's largest market.

The license agreement authorizes McLeod to string 120 miles
of plant on public property, which would later be used to offer video and telephone
services to the community of 195,000 residents.

With its plant in place, the Cedar Rapids-based telephone
company would presumably have a leg up when it finally inks a deal with Des Moines on a
franchise allowing it to compete against Tele-Communications Inc., the state's dominant
cable company.

Local officials last week said the unique agreement was
"the first step in finalizing" a deal with McLeod that would mirror the new
10-year franchise granted TCI.

"It passed without too much discussion," said Des
Moines city councilman Tom Vlassis. "I'd say we have some relatively minor and major
issues that need to be resolved. But they [McLeod] are thinking long-range. The fact that
they approached the city about this pre-franchise agreement indicates that they're
committed to the community."

Des Moines deputy city manager Rick Clark said that even if
talks on a cable franchise were to stall, McLeod could still use the newly installed plant
to deliver an array of telephone services in Des Moines. It already offers local and
long-distance phone service to 5,500 residences and 2,500 businesses in the city.

"But I'm optimistic that we'll reach an
agreement," Clark said. "There's strong support on the city council for bringing
in competition."

Once a deal is struck, the decision whether to allow a
second cable operator into the market is expected to go before the voters next spring.

TCI, which can only operate in the city's rights-of-way
under its existing franchise, declined to comment on the agreement.

"I think we'll keep our thoughts to ourselves on this
one," said a company spokeswoman.

So far, the MSO has taken a cautious approach to
McLeod's entry into the Des Moines market, insisting that it would rather compete
against a private entity than a locally financed municipal overbuild.

In the meantime, TCI is in the midst of a $20 million
rebuild of its local system, which will upgrade area suburbs to 450 megahertz, and all of
the metro area to 750 MHz, by the end of next year.

McLeodUSA officials did not return calls seeking comment.