Minnesota Ruling Could Aid Overbuilders

A Minnesota Court of Appeals has issued a precedent-setting
decision that experts said makes it easier for local governments to award competitive
cable franchises.

The court found that Bresnan Communications had "no
standing" to sue the city of Marshall, Minn., for issuing a franchise to Dakota
Telecommunications Group, a South Dakota-based outfit with plans to compete with the MSO
for cable subscribers, as well as with U S West in the local exchange.

The three-judge panel's unanimous decision was
released and effective March 16.

"This doesn't allow Bresnan to even bring its
case," said Brian Grogan, an attorney with Moss & Barnett, a Minneapolis-based
law firm that represented the city.

Bresnan had argued that the city acted without sufficient
evidence of DTG's financial ability to build and sustain a second cable network when
it awarded a second franchise.

However, in an unusual move, the court proclaimed that even
if Bresnan were allowed to contest the franchise, it would have lost because Marshall
"properly considered DTG's financial condition in granting its franchise."

The court also rejected Bresnan's contention that
DTG's franchise posed a "potential loss of profits" for the MSO -- one of
the grounds for Bresnan's appeal.

Instead, it found that the argument was not sufficient to
establish standing, because "the Cable Act was enacted to encourage such competition,
not to prevent an incumbent's loss of profits."

Bresnan officials said the company dropped its district
court case after DTG became a wholly owned subsidiary of McLeodUSA, a Cedar Rapids,
Iowa-based telephone company with its own cable systems.

"It was a level-playing-field issue," Bresnan
spokeswoman Suzanne Thompson said. "But it became a moot point, because obviously,
McLeodUSA does have the financial, legal and technical qualifications to operate a

Thompson said Bresnan only allowed the appeals court
process to play out because the case had already been briefed and argued.

However, Grogan said, the case in district court involved
alleged violations of the state's open-meetings law, and it was not relevant to the
appeals court case questioning DTG's qualifications.

He said the decision would undoubtedly be cited in
instances where other Minnesota cable operators might try to protect their local
monopolies by "drumming up" allegations about the qualifications of would-be

Although less likely, it could also be cited in other
states, "if the court in that jurisdiction decides to follow the same line of
thinking," he added.

DTG -- which has been certified by the Minnesota Public
Service Commission to offer phone service in various markets in the state -- has broken
ground in Marshall, and it hopes to begin providing service on a
neighborhood-by-neighborhood basis later this year.

Meanwhile, Bresnan has also dropped a defamation lawsuit
against DTG, which it filed because the company threatened to back out of the Marshall
deal due to the MSO's "anti-competitive actions."

"I've seen some fancy footwork, but nothing like
what Bresnan tried," said Bill Heaston, DTG's assistant general counsel. "U
S West didn't oppose our certification as a telephone operator. But Bresnan -- which
doesn't offer phone service -- did."

DTG currently offers cable to about 9,000 subscribers, with
hopes of upping that total to 20,000 when it begins offering service in Marshall and other
Minnesota communities.