Op Challenges OVS Rival in South Dakota

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Normally, pro-competition city councilmen such as those in Sioux Falls, S.D., would be happy right now.

The town of 130,000 residents has a competitive open-video-services provider, PrairieWave Communications, willing to submit to licensing under local ordinance in order to come into town under good terms.

But the local cable incumbent, Midcontinent Communications, asserts the OVS licensing ordinance would violate its franchise rights. The local cable franchise compels the city to allow in competitors only under “substantially similar terms.”

PrairieWave is licensed by the federal government to provide service and technically doesn’t need local permission to offer services, it contends.

Midcontinent counters that the city must make some local rules to ensure a level playing field. Due to the conflict, instead of approving an OVS ordinance on April 19, the city put off the issue for two weeks.

“The city council’s very confused,” said city attorney Gary Colwill. “I’m trying to find a way to keep us out of court.”

Technically, PrairieWave is already in town, noted CEO Craig Anderson. PrairieWave provides telephone and Internet services in 36 communities in South Dakota, Minnesota and Iowa.

It has an OVS license from the Federal Communications Commission and has expanded into cable, delivering video over its telephony plant in Canton, Madison and Watertown, S.D., where it already competes with Midcontinent.

It is in Sioux Falls by virtue of a recent property annexation by the city, which took in the land on which the company’s headquarters and other infrastructure lies, Anderson said.

The company has an extensive network of long-haul fibers and has launched cable using an “edge-out” strategy. It intends to offer cable only in smaller communities, edging into neighboring towns later.

PrairieWave wants to move into Sioux Falls proper, but only into the southern edge.

“We’re not in the position to raise $150 million for the buildout” of Sioux Falls, Anderson said. He added his company agrees to provide some of the services required of Midcontinent, such as local programming.

But Midcontinent believes its franchise means the city can only license PrairieWave if it is required to build out the whole community, as Midcontinent did, said vice president of public policy Tom Simmons. The cable incumbent did not object to PrairieWave in its other markets, he noted, as the company built out the entirety of those towns.

The competitor is enjoying success in Canton, both companies noted. PrairieWave’s cable/telephone bundle has about 60% penetration there, Anderson said.

Simmons noted that PrairieWave launched during a previous incumbent’s tenure, before Midcontinent upgraded. Midcontinent is winning back customers, he added.

Colwill will meet with both providers in the next two weeks in an attempt to address objections from both sides.

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