An Alabama circuit court will decide whether the city of Lincoln can deny an operator a cable franchise while encouraging it to buy an obsolete municipal network.
In a case that will be closely watched, Coosa Cable, a small MSO with 10,800 customers in the surrounding area, is demanding that Lincoln officials issue a franchise that would lead to an overbuild of the town's municipal cable system.
Lincoln, meanwhile, wants to sell to an operator that would rebuild an antiquated 300-megahertz network into a system capable of delivering enhanced services to the town's 4,500 residents.
Ironically, the fight between Coosa and Lincoln is the only instance in recent memory in which a cable operator has sought to overbuild a municipal cable network.
In a Talledega County Circuit Court filing last week, Coosa said town officials violated section 541a of the Cable Act when they denied the company's request. That provision of the law prohibits local governments from "unreasonably" denying a competitive franchise.
"It's become clear that they were doing everything to stop competition," said Chris Cinnamon, managing partner with Bienstock & Clark, a Chicago law firm representing Coosa. "It's a shocking attempt by a municipal government to maintain a monopoly, and that clearly conflicts with federal law."
The litigation was filed as a countermove to a restraining order the city received when it discovered that Coosa had inadvertently installed its plant inside the city limits without the required franchise.
Coosa continues to argue it can provide enhanced services to Lincoln residents. It's spent $2 million on upgrades that have allowed it to offer high-speed Internet access to 4,000 of its customers.
"In the last year, we've seen business models that indicate a market will support multiple service providers," Cinnamon said.
Even so, the City Council denied Coosa a franchise last April, with one council member asking, "Why would we want competition?"
Mayor Lou Watson also insisted, "We don't have to issue a franchise."
When Coosa asked for public hearings on its request, a letter was dispatched informing the company that the council saw "no purpose" in pursuing the matter.
Instead, Coosa was encouraged to take part in the bidding process for the city's network.
"I hope your client will focus on an attempt to construct a proposal consistent with the city of Lincoln's current solicitation," said Victor Hayslip, an attorney with the Birmingham, Ala.-based law firm of Burr & Foreman, which represents the city.
Since he had not seen Coosa's lawsuit last week, Watson would not comment on the litigation. But he said that the town had right to "set terms and conditions" of any franchise.
Even though the municipal network dates back to 1983-and is considered obsolete by today's standards-it still represents a city asset, he added.
"The door has always been open (for Coosa to purchase the city's system)," Watson said. "But it's an asset and we're not going to give it away. That wouldn't be in the town's best interests.
"What we want is for a company that will come in with a good offer. If we don't get it, we may rebuild the system ourselves," he said.
But the city's rationale might not hold up in court, said one industry observer.
"The town is trying to monetize its asset," said John Mansell, cable analyst with Paul Kagan Associates. "But they'd better have a good reason for denying the franchise. It's like they prejudged the situation.
"I've got a feeling they became interested in selling after the other guy said he wanted a franchise," Mansell said.