Insight Loses Legal Challenge to Ky. Franchise


Louisville, Ky., did not breach its contract with Insight Communications Co. when it granted Knology Inc. the city's second cable franchise, a state appeals court ruled.

The Commonwealth of Kentucky Court of Appeals on June 27 upheld an earlier Jefferson Circuit Court ruling in the city's favor, in a suit brought by the operator.

Knology, a West Point, Ga.-based overbuilder, had answered Louisville's invitation to bid in 2000, and the two parties eventually negotiated a franchise that Insight then challenged as a violation of its arrangement.

Insight's franchise is nonexclusive, but the city is required to issue competitive franchises with terms neither more nor less favorable than that applied to the incumbent.

A spokesman for Knology declined to comment on the ruling, citing ongoing litigation.

Insight — which received a new 12-year franchise in 1998, with specific construction deadlines — argued that several aspects of Knology's deal gave it an edge over the incumbent.

For one, Knology's franchise has a 15-year term. Secondly, Insight was also held to a 15-month timetable on its rebuild, while Knology was given 54 months to complete its buildout.

And Insight objected to the fact it was required to perform a "simultaneous build" — improving all of its plant throughout the city all at once — while Knology could concentrate construction in a specific part of the city each year.

Insight also had 60 days, after notice from the city, to cure any defaults. Failure to do so has penalties up to franchise revocation.

But the penalties to Knology were set at $600 a day, the incumbent argued.

The parties tried to arbitrate an agreement, but both cable operators ended up suing.

Insight asked the circuit court for summary judgment on the issues, but Judge Lisabeth Hughes Abramson ruled that Knology's franchise terms were "substantially similar" to Insight's.

The court cited as precedent a Connecticut Supreme Court case. Connecticut's high court ruled that a "level playing field" claim should be based on an entire contract package, not an item-by-item comparison.

Further, a summary judgment can only be issued when the court finds there is no legally disputable issue.

Though Insight lost two legal rounds, it might have succeeded in keeping Knology out of Louisville.

A Knology spokesman said the company has not acted on the franchise due to the legal dispute. Insight executives were not available for comment by press time last week.

As the lawsuits progressed, Knology filed for Chapter 11 bankruptcy-law protection and is being reorganized.

Louisville is one of Insight's bigger markets, where it offers telephone service in addition to high-speed data, analog and digital video, video-on-demand services and HDTV versions of HBO, Showtime and several local broadcast affiliates.