Iowa Town Proposes Short Renewal, No Upgrade

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The city of Spencer, Iowa, has proposed a unique
franchise-renewal plan that absolves incumbent cable operator Triax Cablevision of any
upgrade requirements in the face of possible competition from a municipal utility.

Under the plan, Triax would not be required to upgrade its
cable network in Spencer, in exchange for accepting a three-year deal to continue serving
the community of 11,000 residents, located in the northwest corner of the state.

Legal experts believe that the plan saves the MSO the cost
of upgrading its 4,500-subscriber system, while buying time for the city to decide whether
to launch a municipal overbuild.

But if Spencer decides not to overbuild, regulators would
only have to wait three years -- rather than the traditional 15 -- before they could
require an upgrade, said Brian Grogan, a partner with Moss & Barnett, a
Minneapolis-based law firm representing the city.

"We don't want to bind ourselves to a long-term
deal if there's only going to be one operator," Grogan said, "and if
we're not requiring any capital outlays."

The city is studying the creation of a telecommunications
utility that would study the possibility of building a network capable of delivering local
phone, cable, long-distance and Internet-access services.

The utility's board of trustees is currently reviewing
the project, and it hopes to have a decision in a couple of months, Spencer Municipal
Utility general manager Neal Drefke said.

However, cable-industry executives were skeptical about the
city's "generosity."

"What they're trying to do is to make sure that
they don't have to obligate the municipal system to the same things that Triax is
obligated to do," said Tom Graves, executive director of the Iowa Cable
Telecommunications Association.

Graves said the city undoubtedly plans a system superior to
Triax's existing operations, thereby giving itself a competitive advantage over the
incumbent.

"But it's not going to work, because I think that
Triax is going to go ahead [with an upgrade]," Graves added.

Triax officials, who were preparing for two days of talks
with officials in Spencer last week, said no decision has been made on how the company
will proceed.

However, the MSO's franchise-renewal proposal does
include a clause calling for an upgrade to 750 megahertz, company spokesman Tom Bordwell
said.

In hopes of heading off an overbuild, Triax is proposing a
"partnership" that would allow the city to use the company's upgraded
network for municipal purposes, such as remote electrical-meter reading.

"That certainly makes more sense than competing on the
video side," Bordwell said.

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