Cable Operators

Insight’s Right to Sue City Is Upheld

1/16/2005 7:00 PM Eastern

Insight Communications Co. won a legal victory in its battle against an overbuilder in Louisville, Ky., when an appeals court found that its legal challenge did not violate antitrust laws.

A federal court appeals panel held that Insight was pursuing its rights under the city’s cable franchise.

Knology Holdings Inc. sought a franchise to build a system in 2000. Incumbent Insight has a nonexclusive franchise, but one that stipulates that if another franchisee is selected, terms would be applied that were no more or less favorable than those applied to the incumbent.

Knology’s franchise contained language that put the overbuilder on notice that if Insight sought a declaration of rights challenging the terms of the franchise, Knology’s effective date of franchise would be suspended until a final resolution was reached.

Insight did challenge the franchise, suing the city and pointing out differences that, in its view, gave Knology an advantage.

Knology received a 15-year franchise; Insight’s initial pact was for 12 years. Knology had no buildout milestones to meet, but city officials compelled Insight to begin a city-wide upgrade in 2000 and complete it within 15 months. Knology got 54 months to build out its system.

Jefferson County Court and then the Commonwealth of Kentucky Court of Appeals ruled that the two pacts were “substantially similar.”

Knology countersued Insight and the city, claiming Insight’s suit and the city policy that suspended the effective date of Knology’s franchise violated the Sherman Anti-Trust Act, the Cable Act and the First Amendment.

A federal court in Louisville held Insight could be sued for antitrust charges — a finding that was overturned by the Dec. 29 ruling by a panel of judges from the U.S. Court of Appeals for the Sixth Circuit.

The appeals judges said the First Amendment and the Noerr-Pennington doctrine — which immunizes parties from liability under antitrust penalties when they petition authorities to take official action — protected Insight.

The court acknowledged the suit might have caused an anti-competitive result, but said that wasn’t Insight’s fault, citing the city government’s role.

Knology officials did not return calls for comment on the ruling.

The overbuilder has yet to act on its Louisville franchise, having recently emerged from the Chapter 11 bankruptcy shelter it sought in September 2002.

Insight general counsel Elliot Brecher called the ruling a big win for his company. He said the decision was “very clear-cut, well-worded, with good logic.”

September