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Dave Olson, Published November 26 2013

And then there were two: Midco to enter Fargo market

FARGO – For years, Mike Williams has been getting several emails a month from people asking why Fargo has only one cable franchise.

And every time he got one, he dutifully forwarded it to officials at Midcontinent Communications, a Sioux Falls, S.D.-based company that offers cable, broadband Internet and phone services to the entire communities of West Fargo and Moorhead and businesses in Fargo.

Williams can stop with the email forwards.

Midcontinent announced Tuesday it will expand its full services to all of Fargo starting this spring, giving the city some competition for cable/Internet providers – a struggle for market share that can mean lower prices for consumers.

“Now is the right time,” Midcontinent President and CEO Pat McAdaragh said at the Tuesday news conference.

McAdaragh said one of the reasons Midcontinent delayed entering the Fargo market was the $55 million cost involved, and the fact the company went through a management buyout three years ago, which put a strain on finances, as did a number of acquisitions.

Pending regulatory approval by the city, the expansion will begin in the spring when the ground thaws. Midcontinent service will be available to business and residential customers in phases over four years as it builds its network in Fargo.

McAdaragh said that because of Midcontinent’s presence in West Fargo and Moorhead and the fact it is already serving business customers in Fargo, a good deal of infrastructure is already in place.

As of now, Cable One is the only cable provider in Fargo, other than the satellite services.

Staying sharp

Scott Geston, general manager for Cable One in Fargo, said the company was neither surprised nor worried about Midcontinent’s announcement Tuesday. He said Cable One welcomes the chance to compete with Midcontinent in Fargo just as it does elsewhere in the Fargo-Moorhead area.

“It (competition) makes businesses more sharp and in tune with customer demands and needs,” Geston said, adding that Cable One is focused on customer longevity and working to make sure its products are up to date.

The expansion of Midcontinent into Fargo had long been the subject of speculation, but as recently as October, company officials said a move into Fargo would be cost prohibitive.

McAdaragh said Tuesday that people living in the roughly 50,000 homes the company hopes to serve in Fargo can start registering now, though he said it has yet to be decided which neighborhoods will be connected first.

According to McAdaragh, the expansion could result in Midcontinent hiring 30-40 new employees to join the 30 full-time employees it already employs in Fargo-Moorhead.

Williams, who spoke at the news conference Tuesday, said the company’s modern equipment will be a welcome addition to the city’s franchise picture.

“We’re very happy to have Midcontinent choose Fargo,” Williams said, adding that the first step will be for Midcontinent to make a formal application for a franchise agreement.

Williams said the application will be considered by the city’s cable review committee, of which he is a member.

Franchise rules

The company plans to apply for a franchise in January and it said it anticipates the approval process will take about a month.

Federal law requires that a cable franchise “build out” to serve the entire city within a reasonable period of time, usually a few years.

Williams said in addition to covering the entire city, a franchise must also make sure the installation process is a safe one and that TV signal quality remains high.

Companies must also pay the city a franchise fee that amounts to 5 percent of their gross sales in the market area.

Williams said that for Cable One the fee has typically been between $900,000 and $1 million a year.

With a competitor entering the market, how much each company will pay in fees will depend on customer decisions, Williams said.

Cable face-offs rare

A spokesman for an agency in the Twin Cities that advocates for internet users said it is unusual for a city to have two cable providers competing against each other.

“Often the competition goes away; one of the companies may go out of business, they may consolidate. Very few cities have multiple choices,” said Christopher Mitchell, director of telecommunications at the Institute for Local Self Reliance in Minneapolis.

Mitchell said that while competition typically results in lower prices, in the case of Midcontinent versus Cable One, the battle may bring few benefits for consumers.

“It’s certainly fortunate to have more than one choice,” he said. “However, neither one of these providers is known for having the cutting-edge services that are exciting, in terms of 100 megabyte, or gigabyte, Internet access.

“So, in some respects Fargo is lucky, but not especially so,” Mitchell said, adding that when cable companies go toe to toe they often start to offer lower prices, particularly on introductory rates.

“People who want to switch cable providers every six months, or every year, can really save a lot of money just going back and forth,” Mitchell said.

Readers can reach Forum reporter Dave Olson at (701) 241-5555.