News

Iowa City Wins Legal Round Over Buildout

10/22/2000 8:00 PM Eastern

Spencer, Iowa, has scored an early victory in its bid to build a $16 million telecommunications network over the objections of incumbent cable operator Mediacom Corp. LLC.

Clay County District Court Judge Dewie J. Gaul last week denied requests by Mediacom and area resident Justin Freeman Campbell for restraining orders preventing the city from proceeding with the project.

In denying the requests, Gaul said Spencer had not violated the Iowa Code by building the network, and that the lawsuits filed by Mediacom and Campbell, a Mediacom employee, were unlikely to prevail.

The judge "is basically saying, What's the point?" said Spencer Municipal Utilities information director Curtis Dean. "To get an injunction in Iowa, you have to show the court that you're likely to win. The court doesn't want to enjoin something if it doesn't see enough evidence to do so."

The denial does not affect the lawsuits, which allege that SMU violated the law by not requiring a franchise for its own network and by not adhering to the same regulatory requirements imposed on Mediacom.

The lawsuits also claim that SMU illegally loaned $8 million to its new telecom utility in the form of an "interfund" transfer from its electrical utility, presumably with no assurances the money would be repaid. The power utility then issued another $8 million in revenue bonds to complete the project's financing.

But in his four-page written opinion, Gaul ruled there was no violation of Iowa law, because the electric utility would repay the bonds. He also said the court did not believe that Mediacom would suffer "irreparable harm" if the injunctions were not granted, and that the case presented to the court "does not show that the plaintiffs are likely to succeed on the merits in regard to their claims."

"This is simply a first step, and not one that we weren't prepared for," said Eric Breisach, an attorney with Fleischman and Walsh, the legal firm representing Mediacom and Campbell. "We're looking at our different options. But we intend to continue with this case, because we believe that Spencer violated the law."

Meanwhile, Spencer has started testing its new network, which will be capable of delivering cable, high-speed Internet access and telephony to local residents.

Dean said about 200 residents are involved in the test. The town hopes to officially activate four of the network's 31 nodes by mid-November, providing cable service to 400 of the community's 4,700 households.

September