Overbuilder Scores in South Dakota

A tussle over a cable overbuild franchise for Sioux Falls, S.D., has spilled into the aisles of the Legislature — and might end up allowing the competitor to avoid full-buildout requirements.

That competitor is PrairieWave Communications, an incumbent local-exchange carrier in Minnesota, South Dakota and Iowa that has overbuilt cable systems in 36 communities.

For its part, incumbent MSO Midcontinent Communications says a bill favoring PrairieWave passed the state Senate on Feb. 21 and was returned to the House (which overwhelmingly approved a prior version) to discuss changes.

The bill, HB1160, is only a few paragraphs long and states the legislature’s support for multiple franchisee holders while defining franchise terms.

Importantly, one section stipulates that franchises for newcomers will not be more favorable than those applied to the incumbent — but limits those level areas to rights-of-way access; public, educational and governmental channel facilities requirements; and franchise fees.

Midcontinent vice president of public policy Tom Simmons said PrairieWave already competes against cable without a need for franchise changes, and noted that the telco signed an agreement in January to become an open video system (OVS) provider in Sioux Falls.

“If it passes or fails, they will compete regardless in Sioux Falls,” said Simmons. “They’re being less than honest.”

Simmons also noted that one member of the House Commerce Committee, Rep. Bob Faehn (R-Watertown), works for PrairieWave, a fact he disclosed at the hearing, according to press accounts. (Faehn’s Web site identifies him as a commercial accounts manager; PrairieWave CEO Craig Anderson confirmed he is an employee.)

“His testimony was every bit as long as mine,” Simmons said.

PrairieWave’s Anderson said Faehn’s arguments were not critical to the House passage, as Faehn is a freshman.

While PrairieWave did sign an OVS agreement with Sioux Falls, “we were forced to go that route due to franchise [rule] confusion,” Anderson said.

OVS terms, which concern carriage rates and required bandwidth allocations, have not been solidified, making it hard to obtain financing, Anderson said. No construction has begun yet, he said.

PrairieWave would prefer a cable franchise — but not one which stipulates it must overbuild the entire city.

“That’s a $150 [million] to $200 million commitment. No overbuilder can do that,” Anderson said.

Incumbents made that kind of commitment. But Anderson said, “They had 30 years of monopoly profits to pay for it.”