Cable Petty

Minneapolis settles its spat with Paragon--and gears up for another

It looked to be the culmination of four-plus years of bickering. Last week Paragon, Minneapolis's cable company, announced plans to upgrade its local network, seemingly putting an end to a protracted dispute with the city over high-speed Internet access. (In a symbolic though coincidental move this week, the company embraced a future of blitz-fast Internet services and the exponential entertainment potential of digital cable, dropping its moniker and taking on the name--and marketing might--of its parent company, Time Warner Cable.) As news of the Paragon--er, Time Warner--move spread, Minneapolis officials rejoiced, heralding the city as the winner in the standoff. "Paragon has been playing footsie with us for four years now," crows Tenth Ward council member Lisa McDonald. "We called their bluff."

But what McDonald and her cohorts seem happiest about having won--a chunk of high-speed data capacity--may be something the city won't ever get.

The tiff between the two entities stemmed from a sticky point in Minneapolis's franchise agreement with Paragon, which gave the city 25 percent of the capacity on the cable network. That portion currently amounts to about 30 channels, which are used for public education and government broadcasts. But if the cable company were to upgrade its network by stringing fiber-optic lines--chasing the millennial dream of packing e-mails, cable shows, and phone calls into the cable pipe and zapping them around--the network's capacity would stand to skyrocket. So would the city's allotment, a hitch that makes such an upgrade more complicated and less lucrative for Paragon. So for four years the two sides quibbled over how Paragon might pay the city to alter the agreement and scale back the city's share to a mere eight channels. The company offered $1.3 million in cash, but the city was asking for a $7 million network that would link its government buildings. Contending that the price was too steep, Paragon allowed its Minneapolis system to grow outdated.

Until now. In announcing plans for the upgrade, Paragon officials laid out how the new system will work when it is completed in 2001. The network will house about 200 channels, says Wayne Knighton, president of the company's Minnesota division, split between "A" cable and "B" cable. Commercial channels--local affiliates, movie networks, sports programming, etc.--will reside on the "A" side, along with the digital spectrum that will carry high-speed Internet and other services. The vast majority of the city's public-access channels, meanwhile, will be relegated to "B." Knighton says the company simply decided it would be cheaper to maintain the "B" cable and the city's capacity through 2004, when Paragon's franchise expires, than to buy back the capacity from Minneapolis. "It will cost us $200,000 a year to keep the "B" cable operational," he says. "It's not worth any more than that to us. There is a lot of potential that the city will get exactly nothing."

City officials argue that Minneapolis will be entitled to a quarter of Paragon's entire network capacity when the upgrade is complete--i.e., that the 25 percent figure includes the digital spectrum. "[The franchise agreement] specifically says capacity," notes Edie French, Minneapolis's cable officer.

Noting that digital cable capacity didn't exist back in 1982, when the franchise was granted, Paragon spokeswoman Kim Roden counters that the agreement pertains only to analog channels. Besides, adds Roden, the deal stipulates that the city's capacity be used for education and government channels--not for anything like high-speed Internet traffic.

As the fight now heads into a second phase, Paragon might find itself with a new ally. Steve Minn has watched the fracas for years, first from the dais of the Minneapolis City Council, where he served for five years, and more recently from his post as the state's commerce commissioner.

"If Minneapolis attempts to take ownership of the 25 percent, they're going to run headlong into our effort to take regulation out of their hands anyway," predicts Minn, alluding to his plan to urge the Minnesota Legislature to regulate the cable industry at the state level. Cities, Minn maintains, have no right to control Internet or telephone services that may run over a cable network.

"We'll take Paragon's side," he asserts. "At that point, if Minneapolis attempts to exert authority over bandwidth for Internet or local dial tone, we'll hold them up as a reason why state regulation needs to happen, and kick them out of it completely."

 
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