Minn. Town to Vote on Municipal Overbuild

3/15/1998 7:00 PM Eastern

A small Minnesota community hopes to become the first town
in the state to build a municipally owned telecommunications network.

Breckenridge, Minn., a hamlet of 3,700 on the North Dakota
border, will hold an election April 7 to decide whether to build a fiber optic network
capable of offering cable television, local telephone and Internet-access services.

If approved, Breckenridge could soon be competing with
incumbent cable operator Tele-Communications Inc., as well as with U S West Communications
on the local-exchange telephony side.

However, Breckenridge voters must first give overwhelming
authorization to pursue the project.

Under state law, any municipality seeking to offer local
telephone service must get 65 percent of the votes cast in a special election.

If voters respond, Breckenridge would be the first
Minnesota community to authorize such a network. Moorhead, Minn., held a similar vote in
1996 that only garnered a 52 percent approval rating.

Mike Martin, director of the Minnesota Cable
Telecommunications Association, said cities already have the right to offer cable service,
but they would prefer to offer bundled packages of services that include local telephone

Meanwhile, Breckenridge Mayor Cliff Borth said the city is
not seeking to offer cable service because of dissatisfaction with TCI.

"I call it getting up with the times," Borth
said. "Fiber optics is the coming thing, and I feel that if we, as a city, don't
put it in, somebody else will."

Moreover, Borth said building the network doesn't mean
that the city will launch its own cable service. One option being considered is a
partnership that would allow TCI to offer cable over the city's network, he said.

"Just because we're interested in doing this
doesn't mean that we're going to cut them [TCI] out," Borth said.
"There's a lot of different ways to go. We're not sure which way we're
going to jump."

Greg Harrison, TCI's regional director for government
affairs, said the MSO will consider any "reasonable business partnership" with
the city, but he worried about the wording of a ballot initiative that gives the city the
right to offer any telecommunications services that it desires.

In addition, a recent newsletter sent to Breckenridge
residents to drum up support for the election openly pitched the proposed municipal
network as a competitor to TCI and U S West.

TCI, which operates a 1,200-subscriber system in
Breckenridge, is currently in franchise-renewal talks with the city.

"If this goes through, we're going to look at it
as being a competitor and respond in a business manner," Harrison said. "But
history shows that when we've been overbuilt, the number of customers taken from us
hasn't been enough to make the local system pay for itself."

And as TCI's subscriber numbers drop, the revenues
that the city collects from the MSO's franchise fees begin to dwindle, Harrison said.

In a related development, attempts by Minnesota
municipalities to ease their way into the telecommunications business suffered a setback
recently when a bill eliminating the 65 percent voter-approval requirement for building
locally owned networks failed to make it out of committee in the state House of

Martin said municipal utilities had pushed the proposal as
a way of allowing them to diversify in the face of competition resulting from the expected
deregulation of the electrical industry.

"I don't think that there's any doubt that
this bill will be back next year," Martin said. "There are 134 municipal
utilities in Minnesota, and they're all looking to diversify."

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