When big corporate incumbent providers fear a hint of competition from a new entrant, they pull out all the stops to quash any potential threat. One of the first lines of offense involves the courts. Iowa City now leases its fiber to Cedar Rapids based ImOn and to stop it, Mediacom is reprocessing an old argument. It didn't work the first time, but they are going for it anyway; this is another example of how cable companies try to hobble competitors; just stalling can be a "win."
A Lawsuit In Search Of An Offense
Mediacom has a franchise agreement with Iowa City to offer cable television services and it also provides subscribers the option to purchase Internet access and telephone services. As most of our readers are attuned to these matters, you probably already understand that just any old cable TV provider can’t come into Iowa City and set up shop. State and local law require them to obtain a franchise agreement, which often includes additional obligations in exchange for access to a community’s potential customer base.
According to a 2015 Gazette article, Mediacom provides annual payments for use of the public right-of-way, operates a local office, and provides free basic cable services to local schools and government buildings. These types of commitments are commonplace as part of franchise agreements and are small sacrifices compared to the potential revenue available to Mediacom.
ImOn started offering Internet access and phone services to Iowa City downtown businesses in January but the company does not offer cable TV services like it does in other Iowa municipalities. ImOn doesn't have a franchise agreement with Iowa City but Mediacom says that it should. They argue that, because ImOn has built a system capable of offering video service, it should also have to obtain a franchise agreement.
In August, U.S. District Court Judge Charles R. Wolle dismissed the case, stating in a nutshell:
"Although ImOn is constructing in Iowa City a system that may become capable of delivering cable programming, ImOn is not now delivering cable programming. Therefore, ImOn is not presently required to seek a cable franchise.”
Blast From The Past
This isn’t the first time this argument has echoed off the walls of a courtroom. Back in 2005, the U.S. Court of Appeals for the Eighth Circuit dismissed a similar case between Time Warner Cable (TWC) and the city of North Kansas City. The situation was similar, except the city had not yet decided whether to invest in the required head end to provide video over the fiber-optic network they wanted to deploy. At the time, a Missouri law required a vote if the community planned to build and own a system in order to offer cable TV services. TWC wanted the use the court for a pre-emptive strike: to bar the city from using the network for video services stating that they could not do so because they had never held a vote.
TWC's argument revolved around the question of whether or not the city owned or operated a cable television facility, which was in violation of state law. Since the network was not offering cable services and there was no head end yet - in fact they didn't even know if they wanted to invest in one - what really mattered was whether or not North Kansas City owned a "cable TV facility" without prior voter approval. In other words, were they building a network that was capable of offering cable TV services?
As in Iowa City, the court determined that the issue was not “ripe.” From the opinion:
It is factually undisputed that the City's fiber-optic network is not connected to the required head end facility to receive such signals nor is there any plan to acquire it. Thus, Time Warner's statutory claim rests on a contingent future event: the ownership or operation of a cable-television facility by the City; therefore, Time Warner's claim that a vote is required under Missouri law is not ripe in that the City does not currently own or operate a cable-television facility because the planned fiber-optic network will not be capable of transmitting cable-television signals and because the City recognizes that in order for it to provide cable-television services a public vote would be required.
Let's not put the cart before the horse.
Jeff Janssen, vice president of sales and marketing for ImOn said in December that if the provider’s plans change, they will take the necessary steps:
“Franchise agreements are all around cable TV,” he said. “Once we decide, or if we decided to offer cable TV in Iowa City, we would get that franchise agreement, we are required to.”
Every Tool In The Anti-Competitive Toolbox
Mediacom has approximately 4,500 employees and, like the other large corporate providers, they have a highly qualified regiment of attorneys. Not likely they missed the similarities between the North Kansas City and Iowa City cases, but there’s more than one way to win.
Traditionally, winning means presenting the facts and proving to the judge that they fit into the law and that your interpretation of how they work with the law is more correct than your opponent's. For companies like Mediacom and TWC, however, winning can also mean delaying your opponents project to drive up their costs or cool subscriber interest. In other words, going after the fruit before it is "ripe."
Winning may also mean forcing the other side to give up and walk away by driving up their legal costs or making them lose progress when construction is delayed and subscribers lose confidence in the project.
Big incumbents have become masters at using the courts for sabotage schemes, no matter how frivolous the perceived infringement. They sue or threaten to sue over poles, attempts to streamline, and what services a city can and cannot offer. The state legislatures that have passed laws restricting local authority have only helped massive telecoms and cable companies abuse the courts by providing vehicles for their lawsuits. At the same time, they have forced local governments to waste citizen funds and stalled Internet access, typically to the communities most desperate for it.