News

Des Moines Eyes TCI-McLeodUSA Showdown

10/04/1998 8:00 PM Eastern

Tele-Communications Inc. has been granted a new 10-year
cable franchise in Des Moines, Iowa, presumably setting up an eventual showdown with
McLeodUSA.

City officials, which held the third and final reading on
TCI's new franchise last week, will now turn their attention to striking a similar
deal with McLeodUSA, an Iowa-based telecommunications outfit that is already competing
against TCI in Cedar Rapids.

Once McLeodUSA's franchise has been negotiated, the
decision on whether to allow a second cable operator into the state's largest market
will likely go before the voters next spring, Des Moines City Councilman Tom Vlassis said.

"The idea is going to be to create as much of a level
playing field as possible," Vlassis added.

Under its new franchise deal, TCI paid $122,000 to settle
back franchise fees related to a federal court of appeals ruling last year, when the Fifth
Circuit overturned a 1995 Federal Communications Commission order allowing cable operators
to deduct franchise fees from gross-revenue calculations that are used to determine
payments to cities.

The MSO will also fork over $600,000 to cover renovations
at City Hall and the cost of upgrading the city's PEG-access (public, educational and
government) studios.

Vlassis believes that TCI had one reason for reaching a
quick resolution of the franchise issue: "McLeodUSA. There's no doubt that
competition is what pushed this forward. Last year, TCI's attitude was,
'We're just going to revamp the system, introduce digital and call that our
upgrade.'"

Shortly thereafter, however, the MSO launched a $20 million
upgrade of its local network that has increased capacity in the Des Moines suburbs to 450
megahertz, with all of the metro area expected to be at 750 MHz by the end of next year.

"This is a significant market," Vlassis said,
"and they're willing to spend the money to keep what they have."

Vlassis said McLeodUSA was willing to wait until TCI
negotiated its deal, which gave it time to pursue other markets in the state.

"Besides, they wanted to see what they were looking
at," in terms of the franchise that TCI received, Vlassis said. "And TCI is
happy because they're in place, and they wanted to get as much done as possible
before McLeodUSA comes in."

McLeodUSA plans a fiber optic network capable of delivering
video, phone and Internet-access service to the city's 190,000 residents. It already
offers local and long-distance phone service to 5,500 residences and 2,500 businesses in
Des Moines.

Meanwhile, on Oct. 21, TCI will give itself a leg up in its
race with McLeodUSA when it launches its TCI@Home high-speed Internet-access service in
the already-upgraded outlying areas.

"We're doing what we have to do," said Deb
Blume, regional communications director for TCI of Iowa.

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