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Special report: Fargo examines its contract

Rob Lynch is tuned in to cable television. As the owner of a sports-themed restaurant, the Fargo Dog House, he's surrounded by TVs constantly airing a mix of ESPN and CNN. As a Fargo city commissioner and chairman of the cable TV review committee...

Rob Lynch is tuned in to cable television.

As the owner of a sports-themed restaurant, the Fargo Dog House, he's surrounded by TVs constantly airing a mix of ESPN and CNN.

As a Fargo city commissioner and chairman of the cable TV review committee, his desk is heaped with paperwork concerning Fargo's franchise agreement with Cable ONE, which expires in September 2004.

But at home, Lynch is a dish man.

Last year, after more than 20 years as a cable subscriber, Lynch cut the cord and signed up with DirecTV.

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Lynch, a Wisconsin native, wanted to see all the Green Bay Packer football games, a service catered to by DirecTV's "Sunday Ticket," which broadcasts the most complete lineup of games available.

"Sports programming, to me, is clearly the advantage to the dish," Lynch said.

Though his decision was "100 percent programming," he said as a customer he was concerned with cable rates.

As bills climbed, the explanation he heard was that rate increases compensated for the upgrade to digital reception. Lynch said his family didn't take advantage of everything the cable company offered in the digital package, and felt they were paying for things such as pay-per-view movies that they didn't use."The decision (to switch) was made a whole lot easier when expanded cable and DirecTV were the same price," Lynch said. "Actually, DirecTV was a little lower. It was easy to make that jump."

Negative response

Lynch's concerns with the state of cable are reflected by his constituents.

The city recently sent out 772 surveys to random residents and businesses asking for feedback on Cable ONE's services.

"What I've received is negative," Lynch said of the 313 responses and assorted complaints he's fielded. "What I've received is mostly cost- and programming-oriented."

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These concerns create a conflict for those who think it would be best for Fargo to just dump what they see as an insufficient current cable provider.

Yet Lynch said such a move would be easier said than done. Due to FCC regulations, the city's judgment cannot be contingent on two areas of concern -- pricing and programming.

The city can make general demands for things like more educational, entertainment or sporting channels, but cannot specify which networks the cable provider carries. Instead, the city's job is to make sure residents are properly served.When Cable ONE requested the city review the franchise agreement, a formality to initiate the process, Fargo Mayor Bruce Furness appointed a six-member Cable Review Committee to steer the negotiations.

The current franchise agreement lasts 10 years and brings in 5 percent of Cable ONE's gross receipts. Last year, Fargo's take was $788,000, which went to the city's general fund.Latino tier coming

Scott Geston, general manager of Fargo's Cable ONE, said quarterly customer satisfaction checks indicate subscribers are happy with services, though the market has tightened.

"The growth isn't what it was," Geston said. "People have more choices than they ever have. That's why we have to be good with customer service and programming availability."

In 1999, Cable ONE debuted a digital-plus package with additional programming unavailable to basic subscribers. Geston considers the digital package the biggest competitive upgrade besides its high-speed Internet service.

But results of the city's survey suggest subscribers want more range in programming, from the former Chicago mainstay WGN to niche sports networks like The Golf Channel and Outdoor Life Network, which features sports such as mountain climbing, cycling and bass fishing.

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Geston said changes are coming in the second quarter of 2003 but could not give a specific date. He anticipates adding a tier of Latino/Hispanic programming, the first Cable ONE has offered locally.

The lineup would include:

- Eight or nine general Spanish-language networks such as Telemundo or Univision.

- Two pay-per view channels of Hispanic movies or subtitled in Spanish.

The digital package will cost interested subscribers an additional $2.49 a month on top of basic digital. Geston plans to offer new subscribers an introductory plan of $25.95.

Some have asked if Cable ONE could offer distinct tiers, but Geston said that would entail installing expensive converters in homes.

"Pick-and-choose programming is not here yet, but it's coming," he said.

No rate increase

Certain programmers demand their product be offered on basic cable or not at all, Geston said. Such is the case with the sports mainstay ESPN, which two weeks ago announced it would raise rates 20 percent for the fifth time in as many years.

Geston said most other programming generally sees a 15 percent annual increase.

However, 2003 will be the first time in six years local rates won't go up. Though Cable ONE recently made $8 million in equipment upgrades, Geston cites consumer price sensitivity as the reason for not raising rates.

Still, Geston is considering adding popular channels such as Bravo, Lifetime Movies, Women's Entertainment and possibly The Golf Channel to the digital lineup.

These networks have proven profitable for Midcontinent Communications, which provides cable to markets across the Dakotas, excluding Fargo.

In Grand Forks, N.D., Midcontinent's basic, or "classic cable," lineup includes female-oriented stations WE and Oxygen, as well as entertainment networks E! and Bravo. The digital package includes Lifetime Movies and The Golf Channel, as well as BBC America, Style, Independent Film Channel and Sundance.

Cable ONE may be feeling the heat, as it added Fox Sports World and Fox Movie Channel on April 1.

"We go through contracts just like broadcasters," Geston said. "If a programmer starts demanding high prices on contract renewal, and we don't feel the interest is there, we'll pull it and replace it with something else."

Wild controversy

Cable ONE's decision to pull a popular station like the Food Network in fall 2000 riled customers. Even when the cooking channel returned in April 2002, the cable company took some heat because the move came at the expense of the E! entertainment network.

Those complaints paled in comparison to the several hundred Cable ONE received when Minnesota Wild hockey games disappeared in November 2001.

When the Minneapolis station, KMSP, became a FOX affiliate, programs were blacked out to avoid competition with the local FOX affiliate, KVRR.

Since January, the games have been available on FOX Sports North, which also airs the Minnesota Twins games.

But Geston said the Twins have indicated they will not sign a contract with FOX. Instead, games will air on the burgeoning Victory Sports, owned by Twins Sports Inc., which aims to rivals FOX's sports coverage in the Northern Midwest.

The move mirrors what has been happening in the New York metro area with Yankees Entertainment Sports Network.

Last year, the YES Network, in which New York Yankees' principal owner George Steinbrenner is the majority shareholder, blacked out the area's primary cable company, Cablevision, from showing the bulk of Yankees' games.

Cablevision balked at including the YES Network in its basic cable package, which would have cost $2 per each of its 3 million subscribers.

A last-minute agreement was reached this year, hours before the first pitch. The deal includes YES on a premium level, but expires at the end of the year.

At a Senate Commerce Committee meeting last week, cable executives pointed to rising costs of sports-based networks like ESPN and YES as the reason for increasing rates.

"I fail to understand why any customer should be forced to pay for programming they don't want," said Committee Chairman John McCain at the hearing.

The senator favors an "a la carte" proposal which would allow subscribers to pick which programming they want.

However, unless McCain can push such an idea through, Twins fans may have to look beyond cable next season for the majority of games.

"What sort of price is Victory Sports asking for? I don't think $2 is reasonable," Geston said. "I think you should allow people who really want it to bear the price of the product."

Hopes for change

All of which could mean more complaints to Lynch, who is still hearing about the Minnesota Wild blackouts.

Lynch said after the surveys have been studied, public hearings will be held at a yet-to-be-determined date, where residents can express their concerns and Geston can address questions.

"They need to let their elected officials know," Lynch said. "They're going to have a lot of opportunity."

Lynch said in light of the survey responses, the Cable Review Committee was considering appointing a citizen member.

Ultimately, Lynch looks at the franchise agreement as a working contract and hopes some concessions will be made.

"I would like to see some sort of basic offering of cable for a low cost," he said, suggesting it could include one news station, one sports station and one shopping network.

"I'm hopeful there can be changes beneficial to consumers and the cable provider as well," he said.

Readers can reach Forum reporter John Lamb at (701) 241-5533

For 20 years John Lamb has covered art, entertainment and lifestyle stories in the area for The Forum.
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