<PAGE>
                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                              FORM 10-KSB

    [X]   Annual Report under Section 13 or 15(d) of the Securities
          Exchange Act of 1934

          For the fiscal year ended December 31, 1997

    [ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
          EXCHANGE ACT OF 1934

     For the transition period from _________________ to _____________

                     COMMISSION FILE NUMBER: 333-22025

                   DAKOTA TELECOMMUNICATIONS GROUP, INC.
              (Name of Small Business Issuer in its Charter)

         DELAWARE                                    91-1845100
   (State or Other Jurisdiction       (I.R.S. Employer Identification No.)
of Incorporation or Organization)

         29705 453RD AVENUE
         IRENE, SOUTH DAKOTA                         57037-0066
(Address of Principal Executive Offices)             (Zip Code)

                              (605) 263-3301
             (Issuer's Telephone Number, Including Area Code)

    Securities Registered under Section 12(g) of the Exchange Act: NONE

Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes  __X__     No _____

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.  __X__

State issuer's revenues for its most recent fiscal year.  The issuer's
revenues for the year ended December 31, 1997, were $14,005,196.





<PAGE>
As of March 11, 1998, the aggregate market value of the common stock held
by non-affiliates of the issuer was approximately $21,961,587.50.  This
amount is based the price of $12.50 share for the registrant's stock as sold
by it in a registered offering on such date.

As of March 16, 1998, the issuer had outstanding 1,907,255 shares of Common
Stock, no par value.

Transitional Small Business Disclosure Format (check one)   Yes    No __X__

                    DOCUMENTS INCORPORATED BY REFERENCE

Part II, Items 5, 6 and 7, incorporate by reference portions of the
Registrant's Annual Report to Stockholders for the year ended December 31,
1997.





































<PAGE>

                                  PART I


ITEM 1.   DESCRIPTION OF BUSINESS.

     The Company is a Delaware corporation that was organized in 1997.  Its
predecessor was Dakota Cooperative Telecommunications, Inc., a stock-based
South Dakota cooperative association that was formed on April 3, 1952 (the
"Cooperative").  In July 1997,  the Cooperative was converted (the
"Conversion") into a South Dakota corporation, which was named Dakota
Telecommunications Group, Inc. ("DTG").  Immediately after the Conversion,
DTG was merged (the "Merger") with and into the Company.  The Company was
the surviving corporation in the Merger and assumed all of the operations,
assets and liabilities of DTG immediately before the Merger.  The mailing
address of the Company's principal executive office is Post Office Box 66,
29705 453rd Avenue, Irene, South Dakota 57037-0066.  Its telephone number
is (605) 263-3301.

BUSINESS

     The Company is a competitive local exchange carrier ("CLEC")
specializing in the design, construction and operation of broadband
telecommunications systems for communities in South Dakota and the
surrounding states.  The Company currently operates 13 exchanges in
southeastern South Dakota, four of which were built in 1997, incorporating
over 2,240 miles of copper plant, 300 miles of coaxial cable and
approximately 10,000 fiber miles of fiber optic lines.  The Company's main
growth strategy is to continue to expand and build new systems in South
Dakota, Minnesota, Iowa and Nebraska.

     The Company provides a full range of bundled telecommunications
products and services to its customers including switched local dial tone
and enhanced services, network access services, long distance telephone
services, operator assisted calling services, telecommunications equipment
sale and leasing services, cable television services, data networking
services, Internet access and related services and local area network and
wide area network ("LAN/WAN") services.  The Company's customer base
includes approximately 6,100 local service access lines, 5,500 cable
television subscribers, 7,000 Internet users, and over 2,000 active
LAN/WAN business customers located primarily in South Dakota,
Northwestern Iowa and Southwestern Minnesota.  The Company and its
predecessors have been engaged in the telecommunications business
since 1903.






                                      -2-
<PAGE>

     The Company has a long history of aggressive and proactive growth.
The Company was originally incorporated as a stock cooperative in South
Dakota on April 3, 1952, through the consolidation of several small
independent telephone companies in Southeastern South Dakota.  From the date
of formation through 1979, the Company operated principally as a telephone
company.  Today, the Company continues these operations and has expanded
into cable television and other related telecommunications services.  In
1979, the Company expanded into community antenna television (cable) ("CATV")
by building cable systems in its local markets.  In the mid-1980s, the
Company expanded into the cellular market through partnerships with cellular
companies serving the Company's market area.  The Company sold its rural
cellular operations in 1994 and its Sioux Falls, South Dakota operations in
1995, in an effort to focus on new wireless technologies.  The Company
expanded its cable operations in 1995 and 1996, and further expanded with
the acquisitions in 1996 of TCIC Communications, Inc. ("TCIC") (long distance
and operator services), Iway Inc. ("Iway") (Internet services), and in 1997 of
Futuristic, Inc. dba DataNet ("DataNet") (LAN/WAN integration services).  All
three companies continue to operate as wholly-owned subsidiaries of the
Company under the names DTG Communications, Inc., DTG Internet, Inc.
and DTG DataNet, Inc., respectively.  The Company has also entered into an
agreement to acquire by merger Vantek Communications, Inc. and Van/Alert,
Inc., two South Dakota corporations (collectively, "Vantek").  Vantek is a
leading mobile radio operator and operates one of the largest paging businesses
in South Dakota.  The Company anticipates that, subject to the satisfaction of
necessary conditions, the merger will be completed in mid 1998.  As a result of
this expansion, today the Company is a fully diversified telecommunications
services company, offering product and service bundles which currently cannot
be matched by any competitor in its existing and selected target markets.
The Company intends to continue to explore expansion through strategic
acquisitions and business alliances in an effort to facilitate the growth of
the Company.

     TELECOMMUNICATIONS INDUSTRY OVERVIEW.  From the formation of the
telephone industry in the late 1800s until the breakup of AT&T Corp.
("AT&T") in 1984, the telecommunications industry was largely dominated by
AT&T through its ownership and operation of the Bell operating companies.
Rural areas which provided little market share for AT&T were left to be
served by small independent telephone companies like the Company and its
predecessors.  In 1984, the structure of the industry was significantly
changed by the AT&T divestiture decree, which required the divestiture by
AT&T of its 22 Bell operating companies and divided the country into 201
local access and transport areas ("LATAs") (the "AT&T Divestiture Decree").
The Bell operating companies were combined into seven Regional Bell
Operating Companies ("RBOCs") and were permitted to provide local telephone
service, local access service to long distance carriers and long distance
("intra-LATA") service within the LATAs.  However, the Bell operating
companies were prohibited from providing inter-LATA long distance service,
or service between LATAs.

                                      -3-
<PAGE>
     The AT&T Divestiture Decree had a profound effect on the long distance
portion of the telecommunications industry in the United States.  To
encourage competition in the long distance market, the AT&T Divestiture
Decree and certain Federal Communications Commission ("FCC") regulations
require most local exchange companies ("LECs") to provide carriers with
access to local exchange service that is "equal in type, quality and price"
to that provided by AT&T and to allow customers to select their preferred
long distance service provider.  As a result, a large number of companies
specializing in long distance services entered the market.

     For each long distance call, the originating and terminating LECs
charge an access fee to the long distance carrier.  The long distance
carrier charges its customers a fee for its transmission of the call, a
portion of which covers the cost of the access fees charged by the LECs.
Access charges represent a significant portion of the Company's gross
revenues from its local exchange operations as well as a significant
portion of the Company's cost of providing long distance services.
Generally, the FCC and the states regulate such access charges.  The FCC
has undertaken a comprehensive review of its regulation of LEC access
charges to better account for increasing levels of local competition.

     In February 1996, President Clinton signed the Telecommunications Act
of 1996 (the "1996 Act").  The 1996 Act significantly changed the
telecommunications industry by (among other things) removing certain of the
restrictions concerning the provision of long distance service by the
RBOCs.  The RBOCs, however, are required to obtain specific FCC approval
and satisfy other conditions, including a checklist of interconnection and
other requirements applicable to LECs, prior to providing long distance
service in the regions in which the LECs provide local exchange service.
In addition, the 1996 Act opened local service telecommunications markets
to competition by preempting state and local laws to the extent that such
laws prevent competition in the provision of any telecommunications
service, and by imposing a variety of new duties on LECs to promote
competition in local exchange services.  Among other requirements, all
LECs, including the Company, are required, on a non-discriminatory basis,
to permit resale of their telecommunications services without unreasonable
restrictions or conditions.  The law and its accompanying regulations will
enable the Company, upon receipt of all necessary regulatory approvals, to
resell local telecommunications services in exchanges outside of the
Company's traditional service territories in addition to its existing long
distance services.  The basis upon which such local services will be
available to carriers, such as the Company, for resale are to be determined
in proceedings of various state public utilities commissions.  The Company
believes that the opening of the local telecommunications services market
to resellers provides the Company with significant growth opportunities
while posing a much smaller threat in its small rural local exchanges.

     BUSINESS STRATEGY.  The Company's business strategy is to attempt to
achieve continued growth through the construction and operation of new

                                      -4-
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broadband telecommunications systems and by developing and marketing a broad
array of competitively priced telecommunications services over these systems.
The Company's primary objectives in pursuing this strategy are to:

     (i)  develop new and enhanced products and services through upgrading
          the Company's existing network and expanding this network, where
          feasible, into new markets.  The Company substantially rebuilt
          its existing network in 1997 and plans to continue expanding this
          infrastructure in 1998;

     (ii) expand the Company's sales and marketing activities by increasing
          its advertising and promotional activities and enlarging its
          sales force to include direct and independent sales
          representatives and telesales marketing agents who would target
          commercial and residential accounts.  The Company intends to
          supplement its sales force by rebuilding its customer support
          functions, enhancing its strong field service operations and
          improving its direct billing capabilities; and

    (iii) expand its revenue base through selected acquisitions of
          companies and facilities in the telecommunications and cable
          television industries and other related industries.

     There can be no assurance that the Company will be successful in
implementing its business strategy or attaining the profitable growth that
is desired.

     LOCAL TELECOMMUNICATIONS SERVICES.  The Company's local
telecommunications services are provided directly by the Company.  As of
December 31, 1997, the Company provided services to approximately 6,100
access lines located in 13 communities in nine counties in Southeastern
South Dakota.  The Company's service area is generally rural, covering
approximately 1,100 square miles, with an average of 5.4 access lines per
square mile.  The Company is classified as a "rural company" under the 1996
Act and receives Universal Service Fund monies, although such funds
constituted less than one percent of the Company's gross revenues in 1997.

     The Company's local telecommunications services include: (i) local
dial tone; (ii) local private line and public telephone services (including
dial tone service for pay telephones owned by the Company and other pay
phone providers); (iii) dedicated and switched data transmission services;
(iv) the sale, installation and maintenance of customer premise equipment;
and (v) related services such as directory listing services.  In connection
with the Company's continuing strategy to provide a greater selection of
value-added products, the Company has also introduced advanced services such
as Caller ID, distinctive ringing, call waiting, call forwarding and
three-way calling.  The Company also introduced its new Distance Learning
program, which the Company currently anticipates by the fall of 1998 will
link 14 local schools with the University of South Dakota's School of

                                      -5-
<PAGE>
Education to allow these local schools to share interactive televised
classroom sessions.  The Company desires to implement a similar system to
link hospitals and medical clinics throughout rural communities in
Southeastern South Dakota.

     In addition to providing local telephone service, the Company also
provides network access services to national and regional interexchange
carriers ("IXCs").  Network access service refers to the link provided by
LECs between a customer's premises and the transmission facilities of other
telecommunications carriers, generally inter-LATA long distance carriers.
Examples of exchange access services include switched access and special
access services.  Network access revenues are billed directly to long
distance carriers based on the number of conversation minutes generated by
their customers located in the Company's exchanges.  The interstate portion
of these revenues is based on switched, common-line and special access
tariffs approved by the FCC.  The tariffs imposed by the FCC include end-user
access charges to residential and business customers.  State access is
based on similar rate structures that are subject to approval by the South
Dakota Public Utilities Commission.  Unlike many LECs, the Company does not
provide billing or collection services for interexchange long distance
carriers operating in the Company's local exchanges.

     In addition to its current local service business, the Company also is
attempting to position itself to resell local exchange services in
exchanges where it currently does not operate its own facilities.  The
Company has filed an application in South Dakota, and currently intends in
the future to file applications with the public utilities commissions in
several states, seeking authorization to resell local exchange
telecommunications products and services.  As of December 31, 1997, the
Company obtained local exchange resale authorization in South Dakota.  The
Company currently anticipates that it will have filed applications for
authorization to resell local exchange telecommunications services and
products in a number of states surrounding South Dakota by the end of 1998.
There can be no assurance that the public utilities commissions in other
states will authorize the Company to resell local exchange
telecommunications services and products in those states.

     Local service, including network access services, has historically
been the Company's core business. In 1997, revenues from local services
were approximately $5.4 million, representing approximately 39% of the
Company's aggregate revenues.  The Company currently anticipates that these
revenues will continue to account for a substantial portion of the
Company's revenues in the future, subject to possible regulatory change.
Although network bypass and alternative local access telephone service
providers are potential competitive threats to the Company, no significant
competition has occurred to date in the Company's incumbent local exchange
communities.  Competition is very active in the new communities the Company
enters as part of its CLEC expansion strategy.


                                      -6-
<PAGE>
     LONG DISTANCE TELECOMMUNICATION SERVICES.  The Company provides a wide
range of long distance telecommunications services to both residential and
commercial customers.  These services include: (i) basic long distance
calling service; (ii) voice and data services; (iii) dedicated private line
services; (iv) collect calling, operator assistance and calling card
services, including prepaid calling cards; (v) toll free or 800 services;
and (vi) switched and dedicated Internet access services.  The Company
offers these services individually and in combinations. Through combined
offerings, the Company is able to provide customers with added benefits
such as single billing, unified services for multi-location companies and
customized calling plans.

     The Company operates its own switches, develops and implements its own
products, monitors and deploys its transmission facilities and prepares and
designs its own billing and reporting systems.  All of the Company's
customers are identified by their telephone number, dedicated trunk or
validated access code, and have a rating which is used to determine the
price per minute that they pay on their outbound or inbound long distance
calls.  Rates typically vary by the type of service, the volume of usage,
the distance of the calls, the time of day that calls are made, the region
that originates the call and whether the product is being provided on a
promotional basis. In 1997, long distance revenues were approximately $3.5
million, representing 25% of the Company's gross revenues.  The Company
anticipates that its long distance revenues will continue to grow in 1998,
due to the building of new telecommunications systems and the Company's
sales efforts.

     The Company provides long distance services in various ways.  For
customers located in the Company's local South Dakota exchanges, long
distance services are provided primarily by the Company as part of its
local service.  For customers located outside of the Company's local
exchanges or using operator assisted services, all long distance services
are provided by DTG Communications, Inc., the Company's wholly owned
subsidiary.  Currently DTG Communications, Inc. is authorized to sell long
distance services in North Dakota, South Dakota, Iowa, Nebraska, Minnesota,
Montana and several other states.  However, most of the Company's long
distance revenues are derived from South Dakota.  Internet long distance
access services are provided by DTG Internet, Inc.

     WIRELESS SERVICES.  The Company is exploring the possibility of
expanding its existing telecommunications services by providing broadband
personal communications services ("PCS").  PCS is, from a customer
standpoint, similar to existing cellular radio services ("cell phones").
The primary difference between PCS and cell phones is that PCS is a digital
service rather than an analog service (although current cellular providers
are moving to digital service as well) using different technology and a
different licensed portion of the frequency spectrum.  The FCC has, between
December 1994 and January 1997, auctioned six blocks of frequency for PCS
that will compete with the two existing cellular licensees in each of the
FCC-designated markets.
                                      -7-
<PAGE>
     On December 13, 1996, the FCC adopted rules to permit geographic
partitioning and spectrum disaggregation for all broadband PCS licensees.
These rules will give the existing licensees and potential new entrants
greater flexibility to determine how much spectrum they will need for the
geographic areas in which they provide service.  The Company entered
negotiations with the winners of the A- and B-Block auctions for the
Minneapolis, Minnesota and the Des Moines, Iowa Major Trade Areas ("MTAs")
to partition or disaggregate portions of the blocks that cover areas of
interest to the Company in Southeastern South Dakota, Northwestern Iowa and
Southwestern Minnesota.  These negotiations have not reached a definitive
point, and there are no existing financial or other commitments between the
parties.

     The Company has an agreement to share frequency with US WEST Wireless
for participation in the PCS D- and E-Block auction.  This auction
concluded on January 14, 1997, with US WEST Wireless being the successful
bidder on BTA-421 (Sioux City) for the E-Block at $2.44 per population
point.  The Company's agreement covers 104,900 population points in the
Company's area of interest in Southeastern South Dakota and Northwestern
Iowa outside of the municipal boundaries of Sioux City.  The total
investment by the Company is $255,956.  The Company has entered
negotiations with US WEST Wireless for additional portions of the BTA, but
there is no assurance that these negotiations will be successful for the
Company.

     Currently, there are no active PCS operations in the Company's
markets.  The two cellular companies that cover the Company's market are
Western Wireless, Inc. d/b/a Cellular One and CommNet Cellular, Inc.
("CommNet").  Since there will be six PCS licensees competing with two
established cellular licensees in each market area, the Company expects the
wireless service market to be highly competitive.  The Company initially
plans to focus on the use of its PCS services to provide fixed wireless
services in its existing markets and surrounding areas, and to use the
wireless services as a complement and supplement to other services offered
by the Company.  The Company has not yet established its final PCS
development plan.  There can be no assurance that the Company will be able
to make wireless services a profitable part of its overall business.

     The Company had an interest in the Sioux Falls Cellular Limited
Partnership ("SFLP") together with several other independent telephone
companies and CommNet of Englewood, Colorado.  The Company had a nine
percent limited partnership interest, and a 20% interest in Dakota Systems,
Inc. ("DSI"), a South Dakota corporation, which in turn held a four percent
minority general partner interest in SFLP.  In 1995, the Company sold, at a
substantial gain over its initial investment, its entire interest in SFLP
and in DSI to the remaining partners and shareholders of DSI.  The
Company's decision to sell its interest was influenced by (i) the limited
control and influence available because of the structure of the limited
partnership and (ii) the Company's decision to focus on new technology and
new markets, including PCS.
                                      -8-
<PAGE>
     INTERNET SERVICES.  The Company is the largest provider of Internet
services in South Dakota.  The Company provides a wide range of Internet
services including Internet access options (both dial-up and dedicated),
Web page development and hosting services, Internet applications
development and training and consulting services to businesses,
professionals and other on-line services providers.  As of December 31,
1997, the Company hosted approximately 143 Web sites with an additional 6
sites under development.  The Company estimates that its access services
are used by approximately 7,000 users.  Total Internet revenues in 1997
were approximately $1 million, representing approximately 7% of the
Company's total gross revenues.

     In December 1994, Iway started its Internet operations, which the
Company purchased in December 1996.  Iway, now renamed DTG Internet
Services, Inc., operates as a wholly owned subsidiary of the Company.  The
Company anticipates that in the future it may attempt to consummate
additional acquisitions to expand its Internet service base.

     The Internet is a global collection of computer networks cooperating
to enable commercial organizations, educational institutions, government
agencies and individuals to communicate electronically, access and share
information and conduct business.  The Internet originated with the
ARPAnet, a restricted network started in 1969 by the United States
Department of Defense Advanced Research Projects Agency to provide
efficient and reliable long distance data communications among the
disparate computer systems used by government-funded researchers and
organizations.  Unlike other public and private telecommunications networks
that are managed by businesses, government agencies and other entities, the
Internet is a cooperative interconnection of many such public and private
networks.  The networks that comprise the Internet are connected in a
variety of ways, including public switched telephone network and high-speed,
dedicated leased lines.  Communications on the Internet are enabled
by transmission control protocol/Internet protocol ("TCP/IP"), an
Internet-working standard that enables communications across the Internet
regardless of the hardware and the software used.

     Recent technological advances, including increased microprocessor
speeds and the development of easy-to-use graphic interfaces, combined with
cultural and business changes, have led to the Internet being integrated
into the activities of a multitude of individuals and the operations and
strategies of numerous business organizations.  For example, a growing
number of employees within organizations have access to corporate networks,
thereby increasing the amount of electronic communication both within and
between organizations.  In addition, the rapid growth of the installed base
of home personal computers equipped with communication devices such as
modems has created the ability to communicate electronically from home.
These technological and business trends have led to an increase in the
number of on-line services and Internet access providers.


                                      -9-
<PAGE>
     More recently, the development of World Wide Web technology and
associated easy-to-use software has made the Internet easier to navigate
and more accessible to a larger number of users and for a broader range of
applications.  While there has been significant media interest in the use
of the Internet by consumers, business and professional organizations
currently represent a more significant percentage of Internet use.  These
organizations increasingly are recognizing that the Internet can enhance
communications, both among their geographically distributed locations and
employees, and with their business partners and customers.  In addition,
businesses are realizing that the Internet can enable many applications
which were previously unavailable or cost-prohibitive.  For example, small
and medium-sized businesses can establish and maintain a global presence
and market and distribute their products and services electronically.

     Despite the growing interest in the many commercial uses of the
Internet, the Company believes that many businesses, especially small
businesses, have been deterred from purchasing Internet access services for
a number of reasons, including: (i) inconsistent quality of service; (ii)
lack of availability of cost-effective high-speed options; (iii) limited
number of local access points for corporate users and customers; (iv)
inability to integrate business applications on the Internet; (v) need to
deal with multiple and frequently incompatible vendors; (vi) inadequate
protection of the confidentiality of stored data and information moving
across the Internet; and (vii) lack of tools to simplify Internet access
and use.

     To address the needs of small businesses in South Dakota and
surrounding states, the Company offers a comprehensive range of Internet
access options, applications, training and consulting services tailored to
meet the needs of small and medium-sized businesses and their customers.
The products and services provided by the Company include dial-up and
dedicated access, Web page development, Web page hosting, client software
and security products and training.  This array of products and services
enables Internet users to purchase access, applications and services,
including integration services, through a single source.  The Company's
products and services are supported by a technical staff that it believes
is highly experienced in Internet operations and services, especially as
they relate to small businesses.  The Company's objective is to continue to
develop and market value-added Internet services in the smaller markets in
South Dakota and the surrounding states.  Rates for the Company's Internet
services vary depending on the type and range of service options.

     CABLE TELEVISION SERVICES.  Through its subsidiaries, the Company owns
and operates 26 cable television systems located in Southeastern South
Dakota, Northwestern Iowa and Southwestern Minnesota ranging in capacity
from 300 to 750 MHZ.  As of December 31, 1997, these systems provide
service to approximately 5,500 subscribers.  No single community accounts
for more than 12% of the Company's total basic CATV subscribers.  Total
cable revenues in 1997 were approximately $1.5 million, representing
approximately 11% of the Company's total gross revenues.
                                      -10-
<PAGE>
     The Company believes that this geographic diversity reduces its
exposure to adverse economic, competitive and regulatory factors in any
particular community.  The Company has been engaged in the cable television
business since 1979.  In 1996, as part of its expansion strategy, the
Company acquired the assets of 19 of its total cable television systems,
accounting for approximately 3,600 of the 5,500 current subscribers.  The
Company anticipates that in the future it may attempt to consummate
additional acquisitions to expand its customer base and service markets.

     Cable television systems receive video, audio and data signals
transmitted by nearby television and radio broadcast stations, terrestrial
microwave relay services and communications satellites.  Such signals are
then amplified and distributed by coaxial cable and optical fiber to the
premises of customers who pay a monthly fee for the service. The Company
does not hold any dedicated spectrum licenses issued by the FCC related to
its cable television operations, although the Company believes that it holds
all other necessary licenses to operate its systems.  The number of channels
provided by the Company varies by service area.  The sources of the Company's
cable television programming consist of the signals received from national
television networks, local and other independent television stations that
operate in or near the Company's service areas, satellite-delivered
non-broadcast channels and public service channels and announcements.

     The Company provides programming to its subscribers pursuant to
contracts with programming suppliers.  The Company generally pays a flat
monthly fee per subscriber for programming on its basic and premium
services.  A number of programming suppliers provide volume discount
pricing structures and/or offer marketing support to the Company through
the Company's participation in a purchasing pool with other small cable
system operators.  The Company's programming contracts generally are for
fixed periods of time ranging from 3 to 10 years and are subject to
negotiated renewal.  The costs to the Company to provide cable programming
have increased in recent years and are expected to continue to increase due
to additional programming being provided to basic subscribers, increased
costs to produce or purchase cable programming, inflationary increases and
other factors.  Effective in May 1994, the FCC's rate regulations under the
Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act") permitted operators to pass through to customers increases in
programming costs in excess of the inflation rate.  Management believes
that the Company will continue to have access to programming services at
reasonable price levels, although there can be no assurance that the
Company can in the future maintain its access at reasonable price levels.

     Monthly fees for cable services vary depending on the nature and type
of service.  The Company offers a basic cable service package (primarily
comprised of local broadcast signals, popular national satellite channels
and public, educational and governmental access channels) and premium movie
channels.  The monthly fee for basic service generally ranges from $17.95
to $24.95 depending on the number of channels offered, and the monthly

                                      -11-
<PAGE>
service fee for premium channels is $7.95 per channel.  Also, the Company
generally assesses a nonrecurring installation charge of up to $35.00.
Customers are free to discontinue service at any time without penalty.  The
Company currently does not offer Pay-TV or "pay-per-view" services, but
anticipates doing so in the future as it upgrades the capacity of its
systems.

     The Company's cable television business is dependent to a large extent
on its ability to obtain and renew its franchise agreements with local
government authorities on acceptable terms.  The Company believes that it
has maintained good relations with its local franchise authorities.  The
Company has never had a franchise revoked and, as of December 31, 1997, all
of its franchises have been renewed or extended at their expirations.  Most
of the Company's present franchises had initial terms of approximately 10
to 15 years.  As of December 31, 1997, all of the Company's franchises have
been renewed or extended, generally at or prior to their stated expirations
and on terms which are acceptable to the Company.  In this regard, during
1996, the Company completed negotiations with 19 communities resulting in
franchise renewals.  Federal law, including the Cable Communications Policy
Act of 1984 (the "1984 Cable Act") and the 1992 Cable Act, limits the power
of the franchising authorities to impose certain conditions upon cable
television operators as a condition of the granting or renewal of a
franchise.  The Company has 26 franchises, three of which are up for
franchise renewal within the next three years.  No one cable television
franchise accounts for more than 10% of the Company's total cable
television revenue.

     Franchise agreements contain varying provisions relating to
construction and operation of cable television systems, including: (i) time
limitations on the commencement and/or completion of construction;
(ii) quality of service, including (in certain circumstances) requirements
as to the number of channels and broad categories of programming offered to
subscribers; (iii) rate regulation; (iv) provision of services to certain
institutions; (v) provision of channels for public access and commercial
leased-use; and (vi) maintenance of insurance and/or indemnity bonds.  The
Company's franchises also typically provide for periodic payments of fees,
generally ranging from zero to three percent of revenues, to the
governmental authority which grants the franchise.  Franchises usually
require the consent of the franchising authority prior to a transfer of the
franchise or a transfer or change in ownership or operating control of the
franchisee.

     Subject to applicable law, a franchise may be terminated prior to its
expiration date if the cable television operator fails to comply with the
material terms and conditions of the franchise.  Under the 1984 Cable Act,
if a franchise is lawfully terminated, and if the franchising authority
acquires ownership of the cable television system or effects a transfer of
ownership to a third party, such acquisition or transfer must be at an
equitable price or, in the case of a franchise existing on the effective

                                      -12-
<PAGE>
date of the 1984 Cable Act, at a price determined in accordance with the
terms of the franchise, if any.

     In connection with a renewal of a franchise, the franchising authority
may require the cable operator to comply with different and more stringent
conditions than those originally imposed, subject to the provisions of the
1984 Cable Act and other applicable federal, state and local law.  The 1984
Cable Act, as supplemented by the renewal provisions of the 1992 Cable Act,
establishes an orderly process for franchise renewal which protects cable
operators against unfair denial of renewal when the operator's past
performance and proposal for future performance meet the standards
established by the 1984 Cable Act.  The Company believes that its cable
television systems generally have been operated in a manner which satisfies
such standards and allows for the renewal of such franchises; however,
there can be no assurance that the franchises for such systems will be
successfully renewed as they expire.

     LAN/WAN SERVICES.  Through its DataNet subsidiary, the Company is a
leading provider of services and products designed to build and manage
personal computer network infrastructures for businesses throughout its
service territories.  The Company provides customized, integrated solutions
for its customers' distributed computing networks by combining a comprehensive
offering of value-added services with its expertise in sourcing and
distributing PCs, network products, computer peripherals and software from
a variety of vendors.  The Company endeavors to provide a one-stop source
for integrating the design and consulting, acquisition and deployment,
operation and support, and enhancement and migration of computer network
operations.  Typical services provided by the Company include the review of
customer system requirements; the selection, design and planning of system
components; the procurement, configuration, distribution, installation,
cabling and connectivity of complete computer networks; and operating and
network support services such as equipment adds, moves, and changes, repair
and maintenance, help desk operations, and network monitoring.   The
Company's LAN/WAN customer base extends to approximately 6,000 business
customers throughout South Dakota and the surrounding states, with
approximately 2,000 accounts active at any one time.  In 1997, total
revenues from LAN/WAN services was approximately $1.8 million, representing
approximately 13% of the Company's total gross revenues.  However, the
Company operated its DataNet subsidiary for only one month in 1997.  In
1998, the Company anticipates that revenues from this source will increase
substantially as a percentage of its total gross revenues.

     MAIN NETWORK OPERATIONS.  The Company provides its local services and
related long distance services primarily over its own network.  The Company
operates an advanced digital telecommunications network consisting of one
Lucent 5ESS switch with nine subtending switches for its local services
network, one Summa Logic digital switch for operator services and advanced
long distance services, leased transmission lines to complete calls for its
domestic and international long distance services and sophisticated network

                                      -13-
<PAGE>
management systems designed to optimize traffic routing.  The Company's
network encompasses approximately 2,240 miles of copper trunk lines and
customer connections and about 10,000 fiber miles of fiber optic cabling.

     The Company seeks to actively manage and improve its network.  The
Company spent approximately $10 million in 1997 to complete the deployment
of Synchronous Optical Network ("SONET") fiber rings within its network and
centralize and upgrade its switching equipment through the construction of
a new switching center and the installation of a Lucent 5ESS switching
platform with advanced digital switching technologies.  The Company
currently plans to continue to expand its SONET network backbone in 1998.

     SONET technology substantially increases the speed at which data is
carried on the Company's network, thereby allowing the Company to provide
high-speed multimedia applications and information services throughout its
network.  In addition, SONET permits the Company to install customer
circuits more quickly and improves monitoring of the network by
anticipating certain problems before they occur.  Further, when deployed in
a ring design, SONET allows the Company to provide its customers with
millisecond restoration of traffic in the event of a network outage.

     INTERNET NETWORK OPERATIONS.  The Company's Internet network is based
on leased circuits and frame-relay based network access to the Internet
National Access Points ("NAPs") in  Denver, Colorado, and Willow Springs,
Illinois (a southern suburb of Chicago).  This gives the Company full
physical redundancy to the main MCI Communications Corporation ("MCI")
Internet backbone.  This network is controlled by a Bay Networks router
located in the Company's Internet network operations center in Sioux Falls,
South Dakota.  Customers are able to access this network through dedicated
lines, by dialing into existing frame relay circuits or by placing a local
or long distance call (dial-up) through modems to the Sioux Falls switching
center.  Once connected, the customer's traffic is routed through the
operation center modem banks to the Bay Networks router and into the
Internet via the Company's NAP connections.

     The Company continues to upgrade its network infrastructure in
response to the increased number of customers purchasing Internet access
and Web page hosting services.  The Company also currently plans to
increase its NAP access speeds to handle larger levels of customer traffic
at higher data transfer speeds.

     CABLE NETWORK OPERATIONS.  The Company uses a combination of coaxial
cable and optical fiber for transmission of television signals to
subscribers.  Optical fiber is a technologically advanced transmission
medium capable of carrying cable television signals via light waves
generated by a laser.  The Company currently uses fiber optic technology to
serve ten communities with a single CATV head-end facility.  The Company
anticipates that it will convert several additional systems over the next
several years.  It is anticipated that the systems, which facilitate

                                      -14-
<PAGE>
digital transmission of voice, video and data signals as discussed below,
will have optical fiber to neighborhood nodes tied to the Company's
telecommunications network with coaxial cable distribution downstream to
subscribers' homes from that point.

     The balance of the Company's cable systems currently operate on a
stand-alone basis with each community system supported by its own signal
processing center, known as a cable "head-end."  A typical Company system
consists of signal receiving, encoding and decoding apparatus, distribution
systems and subscriber house-drop equipment.  The signal receiving
apparatus typically includes a tower, antenna, ancillary electronic
equipment and earth stations for reception of satellite signals.  Head-ends,
consisting of associated electronic equipment necessary for the
reception, amplification and modulation of signals, are located near the
receiving devices.  The Company's distribution systems consist of coaxial
cables and related electronic equipment.  Subscriber equipment consists of
taps, house drops, converters and analog addressable converters.

     In 1997, the Company rebuilt four of its cable systems using advanced
digital fiber optic/coax cabling techniques that allows it to offer both
cable television and additional telecommunications services, such as local
and long distance calling and high speed data transmission and Internet
access services, over the same network.  These systems are interconnected
to the Company SONET fiber optic network and switched from its new
centralized switching facility.  The Company also currently plans to
install digital advertising insertion equipment in its central switching
center.  This equipment would allow the Company to significantly enhance
the flexibility and reliability of its advertising sales.  These
enhancements enable the Company to offer increased programming channels
with a higher quality signal at a lower per channel cost.

COMPETITION

     The telecommunications industry is highly competitive and affected by
rapid regulatory and technological change.  Regulatory trends have had, and
may have in the future, significant effects on competition in the Company's
industry.  New technology is continuing to expand the types of available
communications services and equipment and the number of competitors
offering such services.  The Company faces actual and potential competition
in all of its businesses.  Most of the Company's competitors are large
companies which have considerably greater financial, technological,
marketing and other resources than the Company.

     The Company believes that the factors critical to a customer's choice
of a telecommunications services provider are cost, ease of use, speed of
installation, quality, reputation and, in some cases, geography and network
size.  The Company's objective is to be one of the most responsive service
providers in the telecommunications industry, particularly when providing
customized communications services.  The Company recognizes that it must

                                      -15-
<PAGE>
grow to be able to compete effectively in the changing telecommunications
industry and to avail itself of greater economies of scale and increased
scope in its transport and local access requirements and in its back office
operations.  It is for this reason that the Company expanded its business
through the purchase of additional cable television systems and the
acquisition of companies in the long distance and Internet long distance
industries (i.e., TCIC and Iway) and the DataNet acquisition.  These
additions have expanded the Company's product line and service abilities
and should enhance its ability to compete more effectively in its changing
business and regulatory environment.

     LOCAL SERVICE COMPETITION.  Historically, the Company's local
telephone operations have not experienced significant competition.  The
Company's local telephone operations may experience increased competition
from various sources, including resellers of the Company's local exchange
services, large end-users installing their own networks, IXCs, satellite
transmission services, cellular communications providers, cable television
companies, radio-based personal communications service companies,
competitive access providers and other systems capable of completely or
partially bypassing local telephone facilities.  In 1996, the South Dakota
Public Utilities Commission approved numerous applications to provide and
resell local exchange services, including applications made by the Company
to compete in other local exchanges throughout South Dakota.  Numerous such
applications are pending and the Company anticipates that other companies
will make additional filings.  The Company cannot predict the specific
effects of competition on its local telephone business, but intends to
attempt to take advantage of the various opportunities that competition
should provide, including expanding into additional market areas, if it is
able to do so.  The Company is currently attempting to address potential
competition by focusing on improved customer satisfaction, reducing costs,
increasing efficiency, improving its digital network, restructuring rates
and examining new product offerings and new markets for entry.

     LONG DISTANCE AND OPERATOR SERVICE COMPETITION.  The long distance and
operator services industries are highly competitive and dominated on a
volume basis by the nation's four largest long distance providers:  AT&T,
Sprint Corporation ("Sprint"), MCI Communications Corporation ("MCI") and
Worldcom, Inc. (formerly LDDS/Worldcom, Inc.) ("Worldcom").  These companies,
and many of the other long distance providers, surpass the Company in size
and available financial, technological, marketing and other resources.  All
of these companies potentially can compete with the Company in the long
distance and operator services markets in which the Company currently operates.

     In addition, the 1996 Act permits RBOCs to provide long distance
telecommunications services internationally and domestically in territories
outside of the RBOCs' respective local service regions.  RBOCs also may
provide long distance telecommunications services that are incidental to
certain other services, such as wireless and video services, in their local
regions.  The authority to provide long distance telecommunications
services originating outside of the RBOCs' respective regions does not
                                      -16-
<PAGE>
currently include calls that terminate in-region, such as private line
services, 800 services or any equivalent service, and allows the contacted
party to choose the inter-LATA carrier.  RBOCs are prohibited from
providing a full range of long distance telecommunication services in their
local regions until certain important conditions are met.  RBOCs own
extensive facilities in their regions and have long-standing customer
relationships and substantial capital resources, which permit them to
expend funds on technological and marketing improvements.  The Company
believes that in the future RBOCs will become substantial competitors for
long distance telecommunications services, especially in their local
regions.

     INTERNET COMPETITION.  The market for data communications services,
including Internet access, LAN/WAN services and on-line services, is
extremely competitive.  There are no substantial barriers to entry, and the
Company expects that competition will intensify in the future.  The Company
believes that its ability to compete successfully will depend on a number
of factors, including: (i) market presence; (ii) the ability to execute a
rapid expansion strategy; (iii) the capacity, reliability and security of
its network infrastructure; (iv) ease of access to and navigation of the
Internet; (v) the pricing policies of its competitors and suppliers; (vi)
the timing of the introduction of new products and services by the Company
and its competitors; (vii) the Company's ability to support industry
standards; and (viii) industry and general economic trends.  The Company
believes that its success in the data communications services market will
depend heavily upon its ability to provide high-quality Internet
connectivity and value-added Internet services at competitive prices.

     The Company's current and potential competitors headquartered in the
United States may be divided into the following three groups:  (i)
telecommunications companies, such as AT&T, MCI, Sprint, RBOCs and @Home (a
joint venture between Tele-Communications, Inc. and a venture capital
firm), and various other cable companies; (ii) other Internet access
providers, such as BBN Corporation ("BBN"), NETCOM On-Line Communication
Services, Inc. ("NETCOM"), PSINet, Inc. ("PSI") and other national and
regional providers; and (iii) on-line services providers, such as America
Online, Inc. ("America Online"), CompuServe Corporation ("CompuServe"),
Intuit Inc., Microsoft Corp. and Prodigy Services Company.  Most of these
competitors have greater market presence, engineering and marketing
capabilities, and financial, technological, personnel and other resources
than those available to the Company.  As a result, they may be able to
develop and expand their communications and network infrastructures more
quickly, adapt more swiftly to new or emerging technologies and changes in
customer requirements, take advantage of acquisition and other
opportunities more readily and devote greater resources to the marketing
and sale of their services.

     The Company expects that most of the major on-line services providers
and telecommunications companies will expand their current services to

                                      -17-
<PAGE>
compete fully in the Internet access market.  The Company believes that new
competitors, including large computer hardware, software, media and other
technology and telecommunications companies, will enter the Internet access
market, resulting in even greater competition to the Company.  Certain
companies, including America Online, AT&T, BBN and PSI, have obtained or
expanded their Internet access products and services as a result of
acquisitions and strategic investments.  Such acquisitions or investments
may permit these companies to devote greater resources to the development
and marketing of new competitive products and services and the marketing of
existing competitive products and services.  The Company expects
acquisitions and strategic investments by its competitors to increase, thus
creating significant new competitors.  In addition, the ability of some of
the Company's competitors to bundle other services and products with
Internet access services, such as the Internet service offerings recently
offered by AT&T and MCI, could place the Company at a further competitive
disadvantage.

     As a result of increased competition in the Internet access and on-line
services industry, the Company expects that it will continue to
encounter significant pricing pressure, which in turn could result in
significant reductions in the average selling price of its Internet
services.  The Company previously has reduced prices on certain of its
Internet access options and may consider doing so in the future.  There can
be no assurance that the Company will be able to offset the effects of any
such price reductions with an increase in the number of its customers,
higher revenue from enhanced services, cost reductions or otherwise.  In
addition, the Company believes that the data communications business, and
in particular the Internet access and on-line services businesses, are
likely to encounter consolidation in the near future, which could result in
increased price and other competition in the industry.  Increased price or
other competition could erode the Company's market share and could have a
material adverse effect on its business, financial condition and results of
operations.  There can be no assurance that the Company will have the
financial resources, technical expertise, marketing and support
capabilities or the expansion and acquisition possibilities to continue to
compete successfully in this or any market.

     CABLE TELEVISION COMPETITION.  Cable television competes for customers
in local markets with other providers of entertainment, news and
information.  The competitors in these markets include broadcast television
and radio, newspapers, magazines and other printed material, motion picture
theaters, video cassettes and other sources of information and
entertainment, including directly competitive cable television operations.

     Cable television service initially was offered as a means of improving
television reception in markets where terrain factors or distance from
major cities limited the availability of off-air television.  In some of
the areas served by cable television systems, a substantial variety of
television programming can be received off-air, including low-power UHF

                                      -18-
<PAGE>
television stations, which have increased the number of television signals
in the country and provided off-air television programs to limited local
areas.  The extent to which cable television service is competitive depends
upon a cable television system's ability to provide, on a cost-effective
basis, a greater variety of programming than that available off-air or
through other alternative delivery sources.  Regulatory changes also impact
competition in the cable industry.  Both the 1992 Cable Act and the
Telecommunications Act of 1996 (the "1996 Act") are designed to increase
competition in the cable television industry.

     There are alternative methods of distributing the same or similar
video programming offered by cable television systems.  Further, these
technologies have been encouraged by Congress and the FCC to offer services
in direct competition with existing cable systems.  A significant
competitive impact is expected from medium power and higher power direct
broadcast satellites ("DBS") that use high frequencies to transmit signals
that can be received by dish antennas much smaller in size than traditional
home satellite dishes ("HSDs").  There are multiple DBS providers offering
services in the United States, and at least one additional provider has
announced plans to provide DBS service in the future.  These services are
generally available throughout the continental U.S., including areas in
which the Company operates its cable systems.

     DBS has both advantages and disadvantages as an alternative means of
distributing video signals to a customer's home.  Among the advantages are
that:  (i) the capital investment (although initially high) for the satellite
and uplinking segment of a DBS system is fixed and does not increase with
the number of subscribers receiving satellite transmissions; (ii) DBS is
not currently subject to local regulation of service and prices or required
to pay franchise fees; and (iii) the capital costs for the ground segment of
a DBS system (the reception equipment) are directly related to, and limited
by, the number of service subscribers.  DBS's disadvantages presently
include:  (i) limited ability to tailor the programming package to the
interests of different geographic markets, such as providing local news,
other local origination services and local broadcast stations; (ii) signal
reception being subject to line-of-sight angles; and (iii) intermittent
interference from atmospheric conditions and terrestrially generated radio
frequency noise.

     Although the effect of competition from DBS services cannot be
specifically predicted, there has been significant growth in DBS
subscribers and the Company anticipates that such DBS competition will
increase in the future as developments in technology continue to increase
satellite transmitter power, decrease the cost and size of equipment needed
to receive these transmissions and enable DBS to overcome the disadvantages
discussed above.  Further, the extensive national advertising of DBS
programming packages, including certain sports packages not currently
available on cable television systems, will likely continue the rapid
growth in DBS subscribers.

                                      -19-
<PAGE>
     The 1996 Act eliminated the statutory and regulatory restrictions that
prevented telephone companies from competing with cable operators for the
provision of video services.  The 1996 Act allows local telephone
companies, including RBOCs, to compete with cable television operators both
inside and outside of their telephone service areas.  The Company expects
that it may face substantial competition from telephone companies for the
provision of video services, whether it is through the acquisition of cable
systems, the provision of wireless cable or the provision of upgraded
telephone networks.  Most major telephone companies have greater financial
resources than the Company, and the 1992 Cable Act ensures that telephone
company providers of video services will be able to acquire significant
cable television programming services.  The specific manner in which
telephone company provision of video services will be regulated is
discussed later in this Annual Report.  Additionally, the 1996 Act
eliminates certain federal restrictions on utility holding companies and
thus permits all utility companies to provide cable television services.
The Company expects that the elimination of these federal restrictions
could result in another source of significant competition in the delivery
of video services.

     Another alternative method of distributing cable television is
multi-channel, multi-point distribution systems ("MMDS"), which deliver
programming services over microwave channels received by subscribers with
special antennas.  MMDS systems are less capital intensive, are not
required to obtain local franchises or pay franchise fees and are subject
to fewer regulatory requirements than cable television systems.  The 1992
Cable Act also ensures that MMDS systems have the ability to provide all
significant cable television programming services.  Although there are
relatively few MMDS systems in the United States currently in operation,
virtually all markets have been licensed or tentatively licensed.

     The FCC has taken a series of actions intended to facilitate the
development of wireless cable systems as an alternative means of
distributing video programming, including reallocating the use of certain
frequencies to these services and expanding the permissible use of certain
channels reserved for educational purposes.  The FCC's actions enable a
single entity to develop MMDS systems with a potential of up to 35
channels, which permits the MMDS systems to compete more effectively with
cable television.  Developments in compression technology will
significantly increase the number of channels that MMDS can offer.
Further, in 1995, several large telephone companies acquired significant
ownership in numerous MMDS companies.  This infusion of capital into the
MMDS industry can be expected to accelerate its growth and its competitive
impact.  Recently, the Company has experienced increased competition from
an MMDS provider operating in several of the Company's existing cable
system communities.

     Within the cable television industry, cable operators may compete with
other cable operators or other entities seeking franchises for competing
cable television systems at any time during the terms of existing
                                      -20-
<PAGE>
franchises or upon expiration of such franchises in the expectation that an
existing franchise will not be renewed.  The 1992 Cable Act promotes the
grant of competitive franchises.  Furthermore, an increasing number of
cities are exploring the feasibility of owning their own cable systems in a
manner similar to city-provided utility services.

     Although there is no legal prohibition preventing long distance
telephone companies from providing video services, historically they have
not provided such services in competition with cable systems.  However,
such companies may prove to be a source of competition in the future.  The
long distance companies are expected to expand into local markets with
local telephone and other offerings (including video services) in
competition with RBOCs, which under the terms and conditions of the 1996
Act are permitted to enter the long distance service market subject to
satisfying certain requirements.

     In addition to competition for subscribers, the cable television
industry competes for advertising revenue with broadcast television, radio,
print media and other sources of information and entertainment.  As the
cable television industry has developed additional programming, its
advertising revenue has increased.  Cable operators sell advertising spots
primarily to local and regional advertisers.  To date, the Company's
advertising efforts have been limited to local public service announcements
due to the limited capabilities of its existing systems.  The Company
currently intends to expand its advertising efforts as it completes the
upgrade of many of its systems.

     The Company has no basis upon which to estimate the number of cable
television companies and other entities with which it competes or may
potentially compete.  There are a large number of individual and multiple
system cable television operators in the United States that are capable of
competing with the Company and that have substantially greater financial,
technological, marketing and other resources.

     The full extent to which other media or home delivery services will
compete with cable television systems may not be known for some time and
there can be no assurance that existing, proposed or as yet undeveloped
technologies will not become dominant in the future.

     LAN/WAN SERVICES.  The markets in which the Company operates its
LAN/WAN integration business are also intensely competitive.  Barriers to
entry are generally very low and many different types of technical service
providers are attempting to enter the PC network market.  There competitors
include mainframe and mid-range computer manufacturers and outsourcers such
as Digital Equipment Corporation, Electronic Data Systems Corporation,
Hewlett-Packard Company, and IBM.  Other competitors include regional Value
Added Resellers, systems integrators and third-party service companies.  The
Company expects to face further competition from new market entrants and
possible alliances between competitors in the future.  Most of these

                                      -21-
<PAGE>
competitors have greater financial, technical, marketing and other resources
than the Company and are therefore able to respond more quickly to new or
emerging technologies and changes in customer requirements or to devote
greater resources to the development, promotion and sale of their products
and services than the Company.  There is no assurance that the Company will
be able to successfully compete against current and future competitors.

REGULATION

     OVERVIEW.  The Company operates in a highly regulated industry and its
services are subject to varying degrees of federal, state and local
regulation.  The FCC exercises jurisdiction over all facilities of, and
services offered by, telecommunications common carriers to the extent that
they involve the provision, origination or termination of interstate or
international communications.  The FCC also regulates many aspects of the
Company's cable television operations.  The South Dakota Public Utilities
Commission retains jurisdiction over the Company's telecommunications
operations in South Dakota while other state public utilities commissions
regulate the intrastate aspects of the Company's long distance business in
their state.  Finally, certain cities and municipal governments regulate by
franchise the Company's cable television operations within their
jurisdiction.

     The regulation of the telecommunications industry is changing rapidly
and the regulatory environment varies substantially from state to state.
There can be no assurance that recent or future regulatory changes will not
have a material adverse impact on the Company.  Recent developments
include, without limitation:  (i) enactment of the 1996 Act which modifies
the AT&T Divestiture Decree restrictions on the provision of long distance
services by RBOCs between LATAs as defined in the AT&T Divestiture Decree;
(ii) FCC and state public utilities commissions actions changing access
rates charged by LECs and making other related changes to access and
interconnection policies, certain of which could have adverse consequences
for the Company's long distance and local service businesses; (iii) related
FCC and state regulatory proceedings considering additional deregulation of
LEC access pricing; and (iv) various legislative and regulatory proceedings
that would result in new local exchange competition.

     As the following discussion illustrates, the regulation of the
telecommunications and cable industries at the federal, state and local
levels is subject to the political process and has been in constant flux
over the past decade.  Material changes in the law and regulatory
requirements must be anticipated and there can be no assurance that the
Company's business will not be affected adversely by future legislation,
new regulation or deregulation.

     TELECOMMUNICATIONS ACT OF 1996.  On February 8, 1996, President
Clinton signed into law the 1996 Act.  Among other things, this legislation:
(i) permits RBOCs to provide domestic and international long distance

                                      -22-
<PAGE>
services in their own regions upon a finding that the petitioning RBOC has
satisfied certain criteria for opening up its local exchange network to
competition and that its provision of long distance services would further
the public interest; (ii) removes existing barriers to entry into local
service markets; (iii) significantly changes the manner in which
carrier-to-carrier interconnection arrangements are regulated at the federal
and state level; and (iv) establishes procedures to revise universal service
standards.

     The 1996 Act has particular relevance to the Company in four areas.
First, the 1996 Act creates a duty on the part of the Company to
interconnect its networks with those of its competitors and, in particular,
creates a duty on the part of the Company's local exchange operations to
negotiate in good faith the terms and conditions of such interconnection.
On August 8, 1996, the FCC released its FCC Interconnection Order.  In the
FCC Interconnection Order, the FCC adopted a national framework for
interconnection but left to the individual states the task of implementing
the FCC's rules.  The order is subject to petitions for reconsideration
filed at the FCC and petitions for review that have been consolidated
before the United States Court of Appeals for the Eighth Circuit.  On
October 15, 1996, the Eighth Circuit stayed substantial portions of the
FCC's order pending judicial review.  On November 1, 1996, the United
States Supreme Court denied applications to lift the stay.  On July 18,
1997, the Eighth Circuit overturned substantial parts of the FCC's order as
it relates to the ability of the FCC to set interconnection rates.  The FCC
has appealed the ruling to the Supreme Court, which has accepted the case
for hearing.  A decision is not expected before the end of 1998.

     Second, the 1996 Act contains a number of provisions that are intended
to reduce barriers to entry and promote competition in a variety of
telecommunications markets, including both long distance and local exchange
operations.  As a part of this effort, the 1996 Act provides a framework
under which RBOCs may enter the interexchange communications business from
which they were barred under the terms of the AT&T Divestiture Decree.
Under this framework, an RBOC may provide long distance services in the
states where it provides telephone service upon demonstrating to the
affected state regulatory authority and to the FCC that: (i) it faces
competition for local telephone service from at least one facilities-based
competitor and (ii) that it satisfies a 14 point checklist that would
purport to show that the affected RBOC's local exchange operations are open
to competition.  The 1996 Act establishes deadlines within which both the
affected state regulatory agency and the FCC must act upon applications
filed by an RBOC to enter the long distance business.  Certain of the RBOCs
already have taken steps to provide in-region long distance services, and
have filed applications with the FCC seeking authority to provide such
services in certain states.  The Company expects that most or all of the
RBOCs will file applications for authority to provide in-region long
distance service.  As of December 31, 1997, the FCC has rejected each of
those applications, however.  The RBOCs can provide long distance services

                                      -23-
<PAGE>
immediately in other states, and also with certain restrictions, cellular,
video and incidental services.

     Third, although the 1996 Act generally prohibits long distance
companies from marketing their services jointly with local telephone
services provided by an RBOC (at least until that RBOC is permitted to
enter the long distance business), it contains an exception for companies,
such as the Company, that serve less than five percent of the nation's
presubscribed access lines.  Thus, the 1996 Act permits the Company to
continue to market its long distance services jointly with local telephone
services whether provided by the Company or provided by an RBOC or
non-affiliated company.

     Finally, the 1996 Act modifies many of the regulations governing the
Company's cable television operations and addresses some of the issues
arising out of the combination of cable and telephone service.

     The Company cannot predict the effect that this legislation and the
FCC's implementing regulations, many of which are still forthcoming or
subject to judicial challenges, will have on the Company or the industry as
a whole.  However, the Company believes that it is positioned to pursue
business opportunities in the rapidly changing telecommunications market.

     LOCAL SERVICE REGULATION.  Historically, the Company's local telephone
operations have been governed by regulation and oversight of the South
Dakota Public Utilities Commission.  The South Dakota Public Utilities
Commission has had primary jurisdiction over various matters including
intrastate toll and access rates, quality of service, issuance of
securities, depreciation rates, disposition of public utility property,
issuance of debt and accounting systems used by the Company.  The Company
has, however, been statutorily exempt from many of these requirements by
virtue of its size.  The FCC historically has had primary jurisdiction over
the interstate toll and access rates of the Company and issues related to
interstate telephone service.

     The 1996 Act has substantially modified both the states' and the FCC's
jurisdictions in the regulation of local exchange telephone companies.  The
1996 Act prohibits any state legislative or regulatory restrictions or
barriers to entry regarding the provision of local telephone service.  The
1996 Act required the FCC to develop regulations to implement various
sections of the 1996 Act including: (i) the obligations imposed on
incumbent LECs to interconnect with the networks of other
telecommunications carriers (including competing telecommunications
carriers); (ii) unbundling of services into network elements; (iii)
repricing of their services at wholesale rates for the purpose of
permitting resale of those services; (iv) allowing other telecommunications
carriers physically to collocate their equipment on the premises of the
incumbent LEC; and (v) requiring telecommunications carriers to compensate


                                      -24-
<PAGE>
each other based on their own costs for the transport and termination of
calls on the other carriers' networks.

     As a rural telephone company, the Company is currently exempt from
certain of the foregoing obligations unless, in response to a bona fide
request, the South Dakota Public Utilities Commission removes that
exemption.  The Company, by petitioning the South Dakota Public Utilities
Commission, also may qualify for exemption from certain other obligations
under the 1996 Act.  In addition, pursuant to the 1996 Act, the FCC
instituted and referred to a federal-state joint board a proceeding to
recommend changes to the current method of subsidizing universal service to
assure the availability of quality telephone services at just, reasonable
and affordable rates.  The federal-state joint board released an initial
"recommended decision" on November 8, 1996, and on May 8, 1997, the FCC
released a Report and Order substantially adopting the Joint Board's
recommendations.  Appeals of the FCC's Report and Order have been
consolidated before the United States Court of Appeals for the Fifth
Circuit and currently are pending.  On July 18, 1997, the FCC issued a
further notice of proposed rulemaking to establish a universal service
support mechanism for non-rural carriers based on the forward-looking
economic cost of constructing and operating the network used to provide the
supported services.  The FCC has further indicated its intent to commence a
separate proceeding by October 1998 to establish forward-looking economic
cost mechanisms for rural carriers.  Non-rural carriers would begin to
receive support based on forward-looking economic cost on January 1, 1999,
whereas rural carriers would shift to such an approach beginning no sooner
than January 1, 2001.  The Company cannot predict the terms or the effect
that the FCC's actions will have on the Company or on the industry as a
whole.  However, the Company believes that it is taking proper steps to
reduce its exposure to potential declines in universal service support.

     The 1996 Act requires that all telecommunications providers (including
cable operators that provide telecommunications services) contribute
equitably to a universal service fund ("USF"), although the FCC may exempt
an interstate carrier or class of carriers if their contribution would be
minimal under the USF formula.  The 1996 Act allows states to determine
which intrastate telecommunications providers contribute to the USF.  The
purpose of the USF is to provide consumers in all regions, including low-income
consumers and those consumers in rural, insular and high-cost areas,
access to telecommunications and information services that are reasonably
comparable to those services in urban areas at reasonably comparable rates.
The Company is a contributor to, and a recipient of, USF funds.  The
Company currently anticipates that it will receive more from USF funding
than it will contribute.

     NETWORK ACCESS REGULATION.  The Company is subject to the jurisdiction
of the FCC with respect to its provision of interstate network access
services and certain related services.  The FCC prescribes a uniform system
of accounts for telephone companies, interstate depreciation rates and the

                                      -25-
<PAGE>
principles and standard procedures used to separate plant investment,
expenses, taxes and reserves of interstate services under the jurisdiction
of the FCC and of intrastate services under the jurisdiction of the
respective state regulatory authorities ("separations procedures").  The
FCC also prescribes procedures for allocating costs and revenues between
regulated and unregulated activities.  The FCC has indicated that it
intends to initiate a proceeding shortly to review separations reform.

     The FCC has prescribed structures for exchange access tariffs to
specify the access charges for use and availability of the Company's
facilities for the origination and termination of interstate long distance
service.  In general, the tariff structures prescribed by the FCC provide
that interstate costs which do not vary based on usage ("non-traffic
sensitive costs") are recovered from subscribers through flat monthly
charges ("subscriber line charges"), and from IXCs through usage-sensitive
Carrier Common Line ("CCL") charges.  Traffic-sensitive interstate costs
are recovered from carriers through variable access charges based on
several factors, primarily usage.

     On December 24, 1996, the FCC initiated a rulemaking proceeding to
address access charge reform.  On May 16, 1997, the FCC released its First
Report and Order adopting changes to the existing access charge structure.
With limited exceptions, those modifications apply only to price cap
incumbent LECs, which generally are the nation's largest telephone
companies.  In the First Report and Order, the FCC also stated its
intention to issue a subsequent Report and Order to provide additional
rules to implement access charge reform, and to initiate separate
proceedings to examine historical cost recovery issues and access charge
reform for rate-of-return carriers, such as the Company.  Appeals of the
FCC's First Report and Order have been consolidated before the Eighth
Circuit and currently are pending.  The FCC is continuing to review and
amend its rules in this area and there can be no assurance that the FCC
will not adopt rules that would have a material adverse effect on the
Company.

     The FCC authorizes a rate-of-return ("ROR") that telephone companies
such as the Company may earn on the interstate services they provide.  The
current ROR is 11.25% for companies remaining under ROR regulation.  The
FCC is currently considering changing the 11.25% ROR as a result of lower
market interest rates.  Effective January 1, 1991, the FCC replaced ROR
regulation with price-cap regulation for the RBOCs and GTE Corporation and
allowed all other companies that did not remain in the National Exchange
Carrier Association ("NECA") Common Line and Traffic Sensitive Pools the
option of price-cap regulation.  The Company, like most small local
exchange carriers, has elected to remain within the NECA tariff scheme.

     In 1992, the FCC initiated a rulemaking proceeding (CC Docket No. 92-135)
to address regulatory alternatives for mid-size and small LECs.  This
proceeding resulted in rules, adopted in September 1993, that provide for a

                                      -26-
<PAGE>
non-price cap form of alternative regulation.  The Company would be
eligible for this form of regulation.  The Company has not elected price
cap regulation for interstate purposes and continues to evaluate the
various forms of alternative regulation.

     The effect of the 1996 Act on the FCC's regulations concerning ROR
regulation and alternative regulation is not yet clear, although, as a
result of the enactment of the 1996 Act, the FCC is reexamining its rules
to reflect the provisions of the 1996 Act and the associated increased
competitive market conditions.

     The 1996 Act requires each LEC to continue to provide access services
in accordance with requirements effective on the date immediately preceding
the effective date of the 1996 Act, until those requirements are
specifically superseded by FCC regulations.  Pursuant to the 1996 Act, the
FCC established regulations to implement the interconnection, unbundled
access, resale and collocation requirements of the 1996 Act.  The 1996 Act
requires that interconnection and unbundled network elements be priced at
just and reasonable rates, based on costs, and that compensation for
transport and termination of traffic be reciprocal among carriers and be
just and reasonable.

     In addition to the matters discussed above, FCC rules also govern:
(i) the allocation of costs between the regulated and unregulated
activities of a communications common carrier and (ii) transactions between
the regulated and unregulated affiliates of a communications common
carrier.

     The cost allocation rules apply to certain activities that have never
been regulated as communications common carrier offerings and activities
that have been preemptively deregulated by the FCC.  The costs of these
activities are removed prior to the separations procedures process and are
assigned to unregulated activities in the aggregate, rather than to
specific services, for pricing purposes.  Other activities must be
accounted for as regulated activities, and their costs are subject to
separations procedures.

     The affiliate transaction rules govern the pricing of assets
transferred to and services provided by affiliates.  These rules generally
require that assets be transferred between affiliates at "market price," if
such price can be established through a tariff or a prevailing price
actually charged to third parties.  In the absence of a tariff or
prevailing price, "market price" cannot be established, in which case: (i)
asset transfers from a regulated to an unregulated affiliate must be valued
at the higher of cost or fair market value and (ii) asset transfers from an
unregulated to a regulated affiliate must be valued at the lower of cost or
fair market value.  The Company prices transactions to and between its
subsidiaries at cost where appropriate, and at fair market value where
appropriate.

                                      -27-
<PAGE>
     The FCC has not attempted to make its cost allocation or affiliate
transaction rules preemptive.  State regulatory authorities are free to use
different cost allocation methods and affiliate transaction rules for
intrastate rate-making and to require carriers to keep separate allocation
records.

     The Company's local and intrastate operations are regulated by the
South Dakota Public Utilities Commission.  Like many state regulatory
authorities, the South Dakota Public Utilities Commission is conducting
proceedings concerning the rules under which carriers may operate in an
increasingly competitive environment.  The issues that the South Dakota
Public Utilities Commission is examining include unbundling and
interconnection, dialing parity for intra-LATA (or short-haul) toll
traffic, number portability, resale of local exchange service and universal
service.  The 1996 Act has begun to have an effect on the timing and
outcome of proceedings in many states, including South Dakota.  The Company
actively monitors the South Dakota proceedings as well as the proceedings
in other states.  However, the Company cannot, at this time, predict how
these proceedings will ultimately be resolved and their effect on the
Company, or when a decision will be forthcoming.

     The Company's telephone operating subsidiaries currently receive
compensation from long distance companies for intrastate long distance
services through access charges or toll settlements that are subject to
state regulatory commission approval.  The South Dakota Public Utilities
Commission approved an intrastate access rate increase for the Company
effective December 10, 1996.  There are no rate requests of the Company
currently pending before any regulatory commission.

     LONG DISTANCE REGULATION.  The FCC has classified the Company as a
non-dominant IXC for purposes of all long distance operations conducted
outside of its existing local service exchanges. As a non-dominant carrier,
the Company may provide domestic interstate communications in these areas
without prior FCC authorization, although FCC authorization is required for
the provision of international telecommunications by non-dominant carriers.
Generally the FCC has chosen not to exercise its statutory power to closely
regulate the charges or practices of non-dominant carriers.  Nevertheless,
non-dominant carriers are required by statute to offer interstate and
international services under rates, terms and conditions that are just,
reasonable and not unduly discriminatory, and the FCC acts upon complaints
against such carriers for failure to comply with statutory obligations or
with the FCC's rules, regulations and policies.  The FCC also has the power
to impose more stringent regulatory requirements on the Company and to
change its regulatory classification, although the Company believes that,
in the current regulatory environment, the FCC is unlikely to do so.

     Historically, both domestic and international non-dominant long
distance carriers maintained tariffs on file with the FCC. Pursuant to this
requirement, the Company filed and maintained with the FCC a tariff for its

                                      -28-
<PAGE>
interstate and international services.  The Company also has obtained FCC
authority to provide international services through the resale of switched
services of various carriers.  On March 21, 1996, the FCC initiated a
rulemaking proceeding in which it proposed to eliminate the requirement
that non-dominant interstate carriers, such as the Company, maintain
tariffs on file with the FCC for domestic interstate services.  On
October 29, 1996, the FCC announced that, following a nine-month transition
period, long distance carriers were no longer required to file tariffs for
interstate domestic long distance service, and that the relationship
between carriers and their customers would be governed by individual
contracts.  Carriers also had the option immediately to cease filing
tariffs.  The Company did not elect to cease filing interstate tariffs.
Following a judicial stay of the FCC's detariffing order, the FCC on March
6, 1997, released a public notice stating that the tariffing rules in place
prior to December 22, 1996, are once again in effect.  Thus, nondominant
carriers providing interstate, domestic interexchange services, such as the
Company, continue to be required to file tariffs pursuant to the FCC's
rules.

     The FCC also imposes prior approval requirements on transfers of
control and assignments of operating authorizations.  The FCC has the
authority to generally condition, modify, cancel, terminate or revoke
operating authority for failure to comply with federal laws and/or the
rules, regulations and policies of the FCC.  Fines or other penalties also
may be imposed for such violations.  Although the Company believes that it
has complied in all material respects with applicable laws and regulations,
there can be no assurance that the FCC or third parties will not raise
issues with regard to the Company's compliance with applicable laws and
regulations.

     The intrastate long distance telecommunications operations of the
Company also are subject to various state laws and regulations, including
certification requirements.  Generally, the Company must obtain and
maintain certificates of public convenience and necessity from regulatory
authorities as well as file tariffs in most states in which it offers
intrastate long distance services, and in most of these jurisdictions, also
must file and obtain prior regulatory approval of tariffs for its
intrastate offerings.  Many states also impose various reporting
requirements and/or require prior approval for transfers of control of
certified carriers, and/or for corporate reorganizations; acquisitions of
telecommunications operations; assignments of carrier assets, including
subscriber bases; carrier stock offerings; and incurrence by carriers of
significant debt obligations.  Certificates of authority can generally be
conditioned, modified, canceled, terminated or revoked by state regulatory
authorities for failure to comply with state law and/or the rules,
regulations and policies of the state regulatory authorities.  Fines and
other penalties also may be imposed for such violations.



                                      -29-
<PAGE>
     At the present time, the Company is authorized to provide originating
long distance services to customers in all states except Alaska and Hawaii.
Those services may terminate in any state in the United States and may also
terminate in countries abroad.  Only 31 states have public utility
commissions that actively assert regulatory oversight over intrastate
services such as those currently offered by the Company.  Like the FCC,
many of these regulating jurisdictions are relaxing the regulatory
restrictions currently imposed on telecommunications carriers for
intrastate service.  While some of these states restrict the offering of
intra-LATA services by the Company and other IXCs, the general trend is
toward opening up these markets to the Company and other IXCs.  Those
states that permit the offering of intra-LATA services by IXCs generally
require that end-users desiring to access these services dial special
access codes which place the Company and other IXCs at a disadvantage as
compared to LEC intra-LATA toll service which generally requires no access
code.

     WIRELESS SERVICES.  The Company, through its wholly owned subsidiary,
Dakota Wireless Systems, Inc. ("DWS"), had a Spectrum Agreement with US
WEST Communications, Inc. ("US West") Wireless for participation in the
FCC's PCS D- and E-Block spectrum auction.  This auction concluded on
January 14, 1997, with US WEST Wireless being the successful bidder on
BTA-421 (Sioux City) for the E-Block at $2.44 per population point.  The
Company's agreement covers 104,900 population points in the Company's area
of interest in Southeastern South Dakota and Northwestern Iowa outside of
the municipal boundaries of Sioux City.  The Company has a total investment
of $255,956 in these licenses.  The Company has entered negotiations with
US WEST Wireless for additional portions of the BTA, but there is no
assurance that these negotiations will be successful for the Company.

     On December 13, 1996, the FCC adopted rules to permit geographic
partitioning and spectrum disaggregation for all broadband PCS licensees.
These rules give the existing licensees and potential new entrants greater
flexibility to determine how much spectrum they will need for the
geographic areas in which they provide service.  The Company has entered
negotiations with the winners of the FCC's A- and B-Block auctions for the
Minneapolis, Minnesota and the Des Moines, Iowa MTAs to partition or
disaggregate portions of the blocks that cover areas of interest to the
Company in Southeastern South Dakota, Northwestern Iowa and Southwestern
Minnesota.  These negotiations have not reached a definitive point, and
there are no existing financial or other commitments between the parties.
There can be no assurance that these negotiations will be successful for
the Company.

     Since there will be up to six PCS licensees competing with up to two
established cellular licensees in each market area, the Company expects the
wireless service market to be highly competitive.  The Company initially
plans to focus on the use of its PCS services to provide fixed wireless
services in non-metropolitan areas, and to use the wireless services as a

                                      -30-
<PAGE>
complement and supplement to other services offered by the Company.  There
can be no assurance that the Company will be able to make wireless services
a profitable part of its overall business.

     The licensing, construction, operation, acquisition and sale of PCS
networks, as well as the number of PCS, cellular and other wireless
licensees permitted in each market, are regulated by the FCC.  Federal law
prohibits the states from regulating the rates charged by wireless
telecommunications carriers (including PCS and cellular).  Although some
states have petitioned the FCC for authority to regulate wireless rates,
thus far no such petitions have been successful.  Federal law also
expressly prohibits the states from regulating the entry of wireless
carriers.  However, to the extent not otherwise preempted, the states are
permitted to regulate any other terms and conditions of wireless services,
including but not limited to customer billing information and practices;
consumer protection matters; bundling of service and equipment;
availability of wholesale capacity; and facilities siting issues.  There
can be no assurance that state agencies having jurisdiction over the
Company's business will not adopt regulations, impose taxes on PCS licenses
or take other actions that would adversely affect the business of the
Company.  Federal and state regulators also will determine important
aspects of the Company's operations, such as technical aspects of and
payments for interconnection with landline and other wireless networks.

     On July 26, 1996, the FCC released a report and order establishing
timetables for making emergency 911 services available by PCS and other
mobile services providers, including "enhanced 911" services that provide
the caller's telephone number, location and other useful information.  By
late 1997, PCS providers must be able to process and transmit 911 calls
(without call validation), including those from callers with speech or
hearing disabilities.  Assuming a cost recovery mechanism is in place, by
mid-1998 such providers must have completed actions enabling them to relay
a caller's automatic number identification and cell site, and by 2001 they
must be able to identify the location of a 911 caller within 125 meters in
67 percent of all cases.  State actions incompatible with these FCC rules
are subject to preemption.  Various parties have petitioned the FCC to
reconsider certain requirements imposed in the order.

     On August 1, 1996, the FCC released a report and order expanding the
flexibility of PCS and other commercial mobile radio services to provide
fixed as well as mobile services.  Such fixed services include, but need
not be limited to, "wireless local loop" services, for example for services
to apartment and office buildings, and wireless backup of private branch
exchanges ("PBXs") and local area networks, to be used in the event of
interruptions due to weather or other emergencies.  A petition for
reconsideration or clarification of aspects of the FCC's order presently
is pending.

     PCS licenses are granted for a 10-year period, at the end of which
period the licensee may apply for renewal.  The Company must obtain a
                                      -31-
<PAGE>
number of approvals, licenses and permits for the operation of its PCS
business, including land use regulatory approvals and licenses from the
Federal Aviation Administration in connection with its PCS towers.
Additionally, the wireless telecommunications industry is subject to
certain state and local governmental regulations.  Operating costs also are
affected by other government actions that are beyond the Company's control.
There is no assurance that the various federal, state and local agencies
responsible for granting such licenses, approvals and permits will do so or
that, once granted, those agencies will not revoke or fail to renew them.
Failure to obtain such licenses, approvals and permits would adversely
affect, delay commencement of or prohibit certain business operations
proposed by the Company.

     CABLE TELEVISION REGULATION.  The operation of cable television
systems is extensively regulated through a combination of federal
legislation and FCC regulations, by some state governments and by most
local government franchising authorities such as municipalities and
counties.  The 1996 Act also is expected to have a profound effect on the
regulation of cable television operations. This new law will alter federal,
state and local laws and regulations regarding telecommunications providers
and cable television service providers, including the Company.  The
discussion below summarizes the relevant provisions of the 1996 Act and
reviews the pre-existing federal cable television regulation as revised by
the 1996 Act.

     THE TELECOMMUNICATIONS ACT OF 1996.  The following is a summary of
certain provisions of the 1996 Act which could materially affect the growth
and operation of the cable television industry and the cable and
telecommunications services provided by the Company.  The FCC has
undertaken, and continues to undertake, numerous rulemaking proceedings to
interpret and implement the provisions discussed below.  It is not possible
at this time to predict the effects of such rulemaking proceedings on the
Company.

     CABLE RATE REGULATION.  Rate regulation of the Company's cable
television services is divided between the FCC and local units of
government, primarily the local municipalities in which the Company
provides services.  The FCC's jurisdiction extends to the cable programming
service tier ("CPST"), which consists largely of satellite-delivered
programming (excluding basic tier programming and programming offered on a
per-channel or per-program basis).  Local units of government (commonly
referred to as "local franchising authorities" or "LFAs") are primarily
responsible for regulating rates for the basic tier of cable service
("BST"), which typically will contain at least the local broadcast stations
and public access, educational and government ("PEG") channels.  Equipment
rates are also regulated by LFAs.  The FCC retains appeal jurisdiction from
LFA decisions.  Cable services offered on a per-channel or per-program-only
basis remain unregulated.  By virtue of its small size, the Company is
currently exempt from these regulations.

                                      -32-
<PAGE>
     Because of the Company's rate structure and small size, there is no
CPST regulation of the Company's rates at the current time.  If the
Company's cable operations were to increase above the thresholds
established in 1996 or if the Company were to change its rate structure
with respect to cable services, additional regulations may apply.  Those
additional regulations would include CPST rate regulations, which would be
triggered only by an LFA complaint.  An LFA complaint must be based upon
more than one subscriber complaint.  Prior to the 1996 Act, a FCC review of
CPST rates could be occasioned by a single subscriber complaint to the FCC.
The 1996 Act does not disturb existing or pending CPST rate settlements
between the Company and the FCC.  The Company's BST rates remain subject to
LFA regulation under the 1996 Act.  Existing law precludes rate regulation
wherever a cable operator faces effective competition.  The 1996 Act
expands the definition of effective competition to include any franchise
area where a LEC (or affiliate) provides video programming services to
subscribers by any means other than through direct broadcast satellite
service.  There is no penetration minimum for the LEC to qualify as an
effective competitor, but it must provide comparable programming services
(12 channels including some broadcast channels) in the franchise area.  By
virtue of its small size, the Company is currently exempt from most of the
regulations under the 1996 Act.

     Under the 1996 Act, the Company will be allowed to aggregate on a
franchise, system, regional or company level its equipment costs into broad
categories, such as converter boxes, regardless of the varying levels of
functionality of the equipment within each such broad category.  The 1996
Act will allow the Company to average together costs of different types of
converters including non-addressable, addressable and digital.  The
statutory changes will also facilitate the rationalizing of equipment rates
across jurisdictional boundaries.  These cost-aggregation rules do not
apply to the limited equipment used by "BST-only" subscribers.

     CABLE UNIFORM RATE REQUIREMENTS.  The 1996 Act immediately relaxes the
uniform rate requirements of the 1992 Cable Act by specifying that such
requirements do not apply where the operator faces effective competition,
and by exempting bulk discounts to multiple dwelling units, although
complaints regarding predatory pricing may be made to the FCC.  Upon a
prima facie showing that there are reasonable grounds to believe that the
discounted price is predatory, the cable system operator will have the
burden of proving otherwise.

     SYSTEM SALES.  The 1996 Act changes the definition of a cable system
so that competitive providers of video services will only be regulated and
franchised as a cable system if they use public rights-of-way.

     CABLE POLE ATTACHMENTS.  Under the 1996 Act, investor-owned utilities
must make poles and conduits available to cable systems under delineated
terms.  Electric utilities are given the right to deny access to particular
poles on a nondiscriminatory basis for lack of capacity, safety,

                                      -33-
<PAGE>
reliability and generally accepted engineering purposes.  On March 14,
1997, the FCC released a notice of proposed rulemaking to amend its rules
and policies governing pole attachments.  In its notice, the FCC proposed a
new formula for determining rates applicable to attachments on poles,
within ducts, conduit or rights-of-way by both cable systems and
telecommunications carriers until a separate methodology is proposed for
telecommunications carriers.  In the 1996 Act, Congress directed the FCC to
issue a new pole attachment formula relating to telecommunications carriers
within two years of the effective date of the 1996 Act, to become effective
five years after enactment.  On August 12, 1997, the FCC released a notice
of proposed rulemaking seeking comment on the implementation of a
methodology for determining pole attachment rates for telecommunications
carriers.  Those rules will result in higher pole rental rates for cable
operators.  Any increases pursuant to this formula may not begin for five
years and will be phased-in in equal increments over the fifth through the
tenth years.  This new FCC formula does not apply in states which certify
that they regulate pole rents.  Pole owners must impute pole rentals to
themselves if they offer telecommunications or cable services.  Cable
operators need not pay future make-ready on poles currently contracted if
the make-ready is required to accommodate the attachments of another user,
including the pole owner.

     CABLE ENTRY INTO TELECOMMUNICATIONS.  The 1996 Act declares that no
state or local laws or regulations may prohibit or have the effect of
prohibiting the ability of any entity to provide any interstate or
intrastate telecommunications service.  States are authorized to impose
competitively neutral requirements regarding universal service, public
safety and welfare, service quality and consumer protection.  The 1996 Act
further provides that cable operators and affiliates providing
telecommunications services are not required to obtain a separate franchise
from LFAs for such services.  The 1996 Act prohibits LFAs from requiring
cable operators to provide telecommunications service or facilities as a
condition of a grant of a franchise, franchise renewal or franchise
transfer, except that LFAs can seek institutional networks as part of such
franchise negotiations.  The 1996 Act clarifies that traditional cable
franchise fees may only be based on revenues related to the provision of
cable television services.  However, when cable operators provide
telecommunications services, LFAs may require reasonable, competitively
neutral compensation for management of the public rights-of-way.

     To facilitate the entry of new telecommunications providers (including
cable operators), the 1996 Act imposes interconnection obligations on all
telecommunications carriers.  All carriers must interconnect their networks
with other carriers and may not deploy network features and functions that
interfere with interoperability.  Existing LECs also have the following
obligations:  (i) good faith negotiation with carriers seeking
interconnection; (ii) unbundling, equal access and non-discrimination
requirements; (iii) resale of services, including resale at wholesale rates
(with an exception for certain low-priced residence services to business

                                      -34-
<PAGE>
customers); (iv) notice of changes in the network that would affect
interconnection and interoperability; and (v) physical collocation unless
the LEC demonstrates that practical technical reasons, or space
limitations, make physical collocation impractical.  The 1996 Act also
directs the FCC, within one year of enactment, to adopt regulations for
existing LECs to share infrastructure with qualifying carriers, and the FCC
released those regulations on February 7, 1997.  Under the 1996 Act,
individual interconnection rates must be just and reasonable, based on
cost, and may include a reasonable profit.  Cost of interconnection will
not be determined in an ROR proceeding.  Traffic termination charges shall
be mutual and reciprocal.  The 1996 Act contemplates that interconnection
agreements will be negotiated by the parties and submitted to a state
public utilities commission for approval.  A public utilities commission
may become involved, at the request of either party, if negotiations fail.
If the state regulator refuses to act, the FCC may determine the matter.
If the public utilities commission acts, an aggrieved party's remedy is to
file a case in federal district court.

     TELEPHONE COMPANY ENTRY INTO CABLE TELEVISION.  The 1996 Act allows
telephone companies to compete directly with cable operators by repealing
the previous telephone company/cable cross-ownership ban and the FCC's
video dialtone regulations.  This will allow LECs, including the RBOCs, to
compete with cable operators both inside and outside of their telephone
service areas.  If a LEC provides video via radio waves, it is subject to
broadcast jurisdiction.  If a LEC provides common carrier channel service
it is subject to common carrier jurisdiction.  An LEC providing video
programming to subscribers is otherwise regulated as a cable operator
(including franchising, leased access and customer service requirements),
unless the LEC elects to provide its programming via an open video system.
LEC owned programming services will also be fully subject to program access
requirements.

     The 1996 Act replaces the FCC's video dialtone rules with an open
video system ("OVS") plan by which LECs can provide cable service in their
telephone service area.  LECs complying with the FCC OVS regulations will
receive relaxed oversight.  The 1996 Act requires the FCC to act on any
such OVS certification within 10 days of its filing.  Only the program
access, negative option billing prohibition, subscriber privacy,
PEG, must-carry and retransmission consent provisions of the
Communications Act of 1934, as amended, will apply to LECs providing
OVS.  Franchising, rate regulation, consumer service provisions, leased
access and equipment compatibility will not apply.  Cable copyright
provisions will apply to programmers using OVS.  LFAs may require OVS
operators to pay franchise fees only to the extent that the OVS provider or
its affiliates provide cable services over the OVS.  OVS operators will be
subject to LFA general right-of-way management regulations.  Such fees may
not exceed the franchise fees charged to cable operators in the area, and
the OVS provider may pass through the fees as a separate subscriber bill
item.

                                      -35-
<PAGE>
     The FCC has adopted regulations prohibiting an OVS operator from
discriminating among programmers, and ensuring that OVS rates, terms and
conditions for service are reasonable and nondiscriminatory.  Further, the
FCC has adopted regulations prohibiting an LEC-OVS operator, or its
affiliates, from occupying more than one-third of the system's activated
channels when demand for channels exceeds supply, although there are no
numeric limits.  The 1996 Act also mandates OVS regulations governing
channel sharing, extending the FCC's sports exclusivity, network
nonduplication and syndicated exclusivity regulations and controlling the
positioning of programmers on menus and program guides.  The 1996 Act does
not require LECs to use separate subsidiaries to provide incidental inter-LATA
video or audio programming services to subscribers or for their own
programming ventures.  The validity of the FCC's rules currently is under
review in consolidated cases pending before the United States Court of
Appeals for the Fifth Circuit.

     While there remains a general prohibition on LEC buyouts of cable
systems (any ownership interest exceeding 10%), cable operator buyouts of
LEC systems and joint ventures between cable operators and LECs in the same
market, the 1996 Act provides exceptions to this prohibition.  A rural
exception permits buyouts where the purchased system serves an area with
fewer than 35,000 inhabitants outside an urban area.  Where an LEC
purchases a cable system, that system, in addition to any other system in
which the LEC has an interest, may not serve 10% or more of the LEC's
telephone service area.  Additional exceptions are also provided for
similar buyouts.  The 1996 Act also provides the FCC with the power to
grant waivers of the buyout provisions in cases where: (i) the cable
operator or LEC would be subject to undue economic distress; (ii) the
system or facilities would not be economically viable; or (iii) the
anticompetitive effects of the proposed transaction are clearly outweighed
by the effect of the transaction in meeting community needs.  The LFA must
approve any such waiver.

     ELECTRIC UTILITY ENTRY INTO TELECOMMUNICATIONS/CABLE TELEVISION.  The
1996 Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act.
Electric utilities must establish separate subsidiaries, known as exempt
telecommunications companies, and must apply to the FCC for operating
authority.  The Company anticipates that large utility holding companies
will become significant competitors to both cable television and other
telecommunications providers as a result of the 1996 Act.

     CROSS-OWNERSHIP AND MUST CARRY.  The 1996 Act eliminates
broadcast/cable cross-ownership restrictions (including broadcast
network/cable restrictions), but leaves in place FCC regulations
prohibiting local cross-ownership between television stations and cable
systems.  The FCC is empowered by the 1996 Act to adopt rules to ensure
carriage, channel positioning and non-discriminatory treatment of

                                      -36-
<PAGE>
non-affiliated broadcast stations by cable systems affiliated with a
broadcast network.  Previous satellite master antenna television ("SMATV")
and MMDS cable cross-ownership restrictions have been eliminated for cable
operators subject to effective competition.  By virtue of its small size,
the Company is currently exempt from these regulations.  The 1996 Act
preserves local television broadcasters' rights to signal carriage on cable
systems ("must-carry"), and clarifies that the geographic scope of must-carry
is to be based on commercial publications which delineate television markets
based on viewing patterns.  The FCC is directed to grant or deny must-carry
requests within 120 days of a complaint being filed with the FCC.

     CABLE EQUIPMENT COMPATIBILITY AND SCRAMBLING REQUIREMENTS.  The 1996
Act directed the FCC to establish an equipment comparability rule
emphasizing that:  (i) narrow technical standards, mandating a minimum degree
of common design among televisions, VCRs and cable systems, and relying
heavily on the open marketplace, should be pursued; (ii) competition for
all converter features unrelated to security descrambling should be
maximized; and (iii) adopted standards should not affect unrelated telephone
and computer features.  The 1996 Act directed the FCC to adopt regulations
which assure the competitive availability of converters ("navigation
devices") from vendors other than cable operators.  The FCC's rules may not
impinge upon signal security concerns or theft of service protections.
Waivers from these requirements will be available if the cable operator
shows the waiver is necessary for the introduction of new services.  Once
the equipment market becomes competitive, FCC regulations in this area will
be terminated.

     The 1996 Act requires cable operators, upon subscriber request, to
fully scramble or block at no charge the audio and video portion of any
channel not specifically subscribed to by a household.  Further, the 1996
Act provides that sexually explicit programming must be fully scrambled or
blocked.  If the cable operator cannot fully scramble or block its signal,
it must restrict transmission to those hours of the day when children are
unlikely to view such programming.

     PRE-EXISTING FEDERAL REGULATION.  The 1984 Cable Act and the 1992
Cable Act regulated the cable television industry and the vast majority of
that regulation remains unchanged by the 1996 Act.  The 1984 Cable Act
created uniform national standards and guidelines for the regulation of
cable systems.  Among other things, the 1984 Cable Act generally preempted
local control over cable rates in most areas.  In addition, the 1984 Cable
Act affirmed the right of franchising authorities (state or local, depending
on the practice in individual states) to award one or more franchises within
their jurisdictions.  It also prohibited non-grandfathered cable systems from
operating without a franchise in such jurisdiction.  The 1984 Cable Act:
(i) requires cable television systems with 36 or more activated channels to
reserve a percentage of such channels for commercial use by unaffiliated third
parties; (ii) permits franchise authorities to require the cable operator to
provide channel capacity, equipment and facilities for public, educational and
governmental access; and (iii) regulates the renewal of franchises.
                                      -37-
<PAGE>
     The 1992 Cable Act greatly expanded federal and local regulation of
the cable television industry.  Certain of the more significant areas of
regulation imposed by the 1992 Cable Act are discussed below.

     REGULATION OF PROGRAM LICENSING.  The 1992 Cable Act directed the FCC
to issue regulations regarding the sale and acquisition of cable
programming between multichannel video program distributors (including
cable operators) and programming services in which a cable operator has an
attributable interest.  The legislation and the implementing regulations
adopted by the FCC preclude most exclusive programming contracts (unless
the FCC first determines the contract serves the public interest) and
generally prohibit a cable operator that has an attributable interest in a
programmer from improperly influencing the terms and conditions of sale to
unaffiliated multichannel video program distributors.  Further, the 1992
Cable Act requires that such cable affiliated programmers make their
programming services available to cable operators and competing video
technologies such as MMDS and DBS, and to telephone company providers of
video services, on terms and conditions that do not unfairly discriminate
among such competitors.

     REGULATION OF CARRIAGE OF PROGRAMMING.  Under the 1992 Cable Act, the
FCC adopted regulations prohibiting cable operators from requiring a
financial interest in a program service as a condition to carriage of such
service, coercing exclusive rights in a programming service or favoring
affiliated programmers so as to restrain unreasonably the ability of
unaffiliated programmers to compete.

     REGULATION OF CABLE SERVICE RATES.  The 1992 Cable Act subjected the
Company's cable systems to rate regulation, except in those cases where
they face "effective competition."  The FCC was required to establish
standards and procedures governing regulation of rates for basic cable
service, equipment and installation, which were then to be implemented by
state and local franchising authorities.  The 1992 Cable Act also required
the FCC, upon complaint from a franchising authority or a cable subscriber,
to review the reasonableness of rates for CPSTs.  The 1996 Act amended the
1992 Cable Act to allow only LFAs to file complaints.  Services offered on
an individual basis, such as pay television and pay-per-view services, were
not subject to rate regulation.

     On April 1, 1993, the FCC adopted rate regulations governing virtually
all cable systems, which were revised on February 22, 1994.  Under these
regulations, existing basic and CPST service rates typically are evaluated
against benchmark rates established by the FCC and are subject to mandatory
reductions.  Equipment and installation charges are regulated based on
actual costs.  As noted above, the 1996 Act provides that rate regulation
of the CPST automatically sunsets on March 31, 1999.

     The FCC also allowed cable operators to elect to justify rates under
cost-of-service rules, which allow high cost systems to establish rates in

                                      -38-
<PAGE>
excess of the benchmark level.  The FCC's interim cost-of-service rules
allowed a cable operator to recover through rates for regulated cable
services its normal operating expenses plus a rate of return equal to
11.25% on the rate base.  However, the FCC significantly limited the
inclusion in the rate base of acquisition costs in excess of the book value
of tangible assets.  As a result, the Company pursued cost-of-service
justifications in only a few cases.  On December 15, 1995, the FCC adopted
slightly more favorable cost-of-service rules.

     The FCC's rate regulations generally permit cable operators to adjust
rates to account for inflation and increases in certain external costs,
including programming costs, to the extent such increases exceed the rate
of inflation.  However, a cable operator may pass through increases in the
cost of programming services affiliated with such cable operator to the
extent such costs exceed the rate of inflation only if the price charged by
the programmer to the affiliated cable operator reflects either prevailing
prices offered in the marketplace by the programmer to unaffiliated third
parties or the fair market value of the programming.  The FCC's revised
regulations confirm that increases in pole attachment fees ordinarily will
not be accorded external cost treatment.  The FCC recently adopted a method
for recovering external costs and inflation on an annual basis.  The new
method minimizes the need for frequent rate adjustments and the regulatory
lag problems associated with the previous rate adjustment methodology.

      The regulations also provide mechanisms for adjusting rates when
regulated tiers are affected by channel additions or deletions.  Additional
programming costs resulting from channel additions can be accorded the same
external treatment as other program costs increases, and cable operators
presently are permitted to recover a mark-up on their programming expenses.
Under one option, operators were allowed a flat fee increase ($.20) per
channel added to an existing CPST, with an aggregate cap on such increases
($1.20) plus a license fee reserve ($.30) through 1996.  In 1997, an
additional flat fee increase ($.20) was available, and the license fees for
additional channels and for increases in existing channels were no longer
subject to the aggregate cap. This optional approach for adding services
expired on December 31, 1997.

     The FCC adopted additional rules that permit channels of new
programming services to be added to cable systems in a separate new product
tier which the FCC has determined that it will not rate regulate at this
time.  The FCC also has adopted rules allowing operators to raise rates
based on costs incurred in connection with a substantial upgrade of the
cable system.  The FCC provided additional rate relief for small operators,
including the Company, and to any additional systems that the Company
acquires to the extent that the systems are already eligible for this
favorable treatment.

     REGULATION OF CUSTOMER SERVICE.  As required by the 1992 Cable Act,
the FCC has adopted comprehensive regulations establishing minimum

                                      -39-
<PAGE>
standards for customer service and technical system performance.  Local
franchising authorities are allowed to enforce stricter customer service
requirements than the FCC standards.

     REGULATION OF CARRIAGE OF BROADCAST STATIONS.  The 1992 Cable Act
granted commercial broadcasters a choice of must-carry rights or
retransmission-consent rights, and gave noncommercial educational
broadcasters must-carry rights.  By October 1993, cable operators were
required to secure permission from broadcasters that elected
retransmission-consent rights before retransmitting the broadcasters'
signals.  Local and distant broadcasters can require cable operators to
make a payment as a condition to carriage of such broadcasters' stations on
a cable system.  Established superstations were not granted such rights.

     The 1992 Cable Act also imposed obligations to carry local broadcast
stations for such stations which chose a must-carry right, as distinguished
from the retransmission-consent right described above.  The 1992 Cable Act
and the rules adopted by the FCC generally provided for mandatory carriage
by cable systems of all local full-power commercial television broadcast
signals selecting must-carry, including the signals of stations carrying
home-shopping programming and, depending on a cable system's channel
capacity, non-commercial television broadcast signals.  On March 31, 1997,
the United States Supreme Court upheld the constitutionality of the must-carry
provisions of the 1992 Cable Act.

     OWNERSHIP REGULATIONS.  The 1992 Cable Act required the FCC to:  (i)
promulgate rules and regulations establishing reasonable limits on the
number of cable subscribers which may be served by a single multiple system
cable operator or entities in which it has an attributable interest; (ii)
prescribe rules and regulations establishing reasonable limits on the
number of channels on a cable system that will be allowed to carry
programming in which the owner of such cable system has an attributable
interest; and (iii) consider the necessity and appropriateness of imposing
limitations on the degree to which multichannel video programming
distributors (including cable operators) may engage in the creation or
production of video programming.  On September 23, 1993, the FCC adopted
regulations establishing a 30% limit on the number of homes nationwide that
a cable operator may reach through cable systems in which it holds an
attributable interest (attributable for these purposes is defined as a five
percent or greater ownership interest or the existence of any common
directors), with an increase to 35% if the additional cable systems are
minority controlled.  However, the FCC stayed the effectiveness of its
ownership limits pending the appeal of a September 16, 1993, decision by
the United States District Court for the District of Columbia which, among
other things, found unconstitutional the provision of the 1992 Cable Act
requiring the FCC to establish such ownership limits.  On appeal, however,
the United States Court of Appeals for the District of Columbia Circuit
upheld the provision.  As a result, the Company's ability to acquire
interests in additional cable systems may be affected.

                                      -40-
<PAGE>
     On September 23, 1993, the FCC also adopted regulations limiting
carriage by a cable operator of national programming services in which that
operator holds an attributable interest (using the same attribution
standards as discussed above) to 40% of the first 75 activated channels on
each of the cable operator's systems.  The rules provide for the use of two
additional channels or a 45% limit, whichever is greater, provided that the
additional channels carry minority controlled programming services.  The
regulations also grandfather existing carriage arrangements which exceed
the channel limits, but require new channel capacity to be devoted to
unaffiliated programming services until the system achieves compliance with
the regulations.  Channels beyond the first 75 activated channels are not
subject to such limitations, and the rules do not apply to local or
regional programming services.

     In the same rulemaking proceeding, the FCC concluded that additional
restrictions on the ability of multichannel distributors to engage in the
creation or production of video programming presently are unwarranted.

     Under the 1992 Cable Act and the FCC's regulations, a cable operator
could not hold a license for MMDS and DBS systems within the same
geographic area in which it provides cable service.  The 1996 Act would
allow such ownership if effective competition exists in that geographic
area.

     The 1992 Cable Act contains numerous other provisions which, together
with the 1984 Cable Act, create a comprehensive regulatory framework.
Violation by a cable operator of the statutory provisions or the rules and
regulations of the FCC can subject the operator to substantial monetary
penalties and other significant sanctions such as suspension of licenses
and authorizations, issuance of cease and desist orders and imposition of
penalties.  Many of the specific obligations imposed on the operation of
cable television systems under these laws and regulations are complex,
burdensome and increase the Company's cost of doing business.

     COPYRIGHT REGULATIONS.  The Copyright Revision Act of 1976 (the
"Copyright Act") provides cable television operators with a compulsory
license for retransmission of broadcast television programming without
having to negotiate with the stations or individual copyright owners for
retransmission consent for the programming.  The availability of the
compulsory license is conditioned upon the cable operators' compliance with
applicable FCC regulations, certain reporting requirements and payment of
appropriate license fees, including interest charges for late payments,
pursuant to the schedule of fees established by the Copyright Act and
regulations issued thereunder.  The Copyright Act also empowers the
Copyright Office to periodically review and adjust copyright royalty rates
based on inflation and/or petitions for adjustments due to modifications of
FCC rules.  The FCC has recommended to Congress the abolition of the
compulsory license for cable television carriage of broadcast signals, a
proposal that has received substantial support from members of Congress.

                                      -41-
<PAGE>
Any material change in the existing statutory copyright scheme could
significantly increase the costs of programming and be adverse to the
business interests of the Company.

     PRIVACY.  The 1984 Cable Act imposes a number of restrictions on the
manner in which cable system operators can collect and disclose data about
individual system customers.  The statute also requires that the system
operator must periodically provide all customers with written information
about its policies regarding the collection and handling of customer data,
their privacy rights under federal law and their enforcement rights.  In
the event that a cable operator is found to have violated the customer
privacy provisions of the 1984 Cable Act, it could be required to pay
damages, attorneys' fees and other costs.  Under the 1992 Cable Act, the
privacy requirements are strengthened to require that cable operators take
such actions as are necessary to prevent unauthorized access to personally
identifiable information.

     STATE AND LOCAL REGULATION.  Because cable television systems use
local streets and rights-of-way, cable television systems are generally
licensed or franchised by local municipal or county governments and, in
some cases, by centralized state authorities with such franchises being
given for fixed periods of time subject to extension or renewal largely at
the discretion of the issuing authority.  The specific terms and conditions
of such franchises vary significantly depending on the locality,
population, competitive services and a number of other factors.  While this
variance takes place among systems of essentially the same size in the same
state, franchises generally are comprehensive in nature and impose
requirements on the cable operator relating to all aspects of cable service
including franchise fees, technical requirements, channel capacity,
subscriber rates, consumer and service standards, access channel and studio
facilities, insurance and penalty provisions.  Local franchise authorities
generally control the sale or transfer of cable systems to third parties.
The franchising process, like the federal regulatory climate, is highly
politicized and no assurances can be given that the Company's franchises
will be extended or renewed or that other problems will not be encountered
at the local level.  In connection with the franchise renewal process, LFAs
commonly request the provision of enhanced cable system technology as a
condition of franchise renewal. The 1984 Cable Act grants certain
protective procedures in connection with renewal of cable franchises, which
procedures were further clarified by the renewal provisions of the 1992
Cable Act.

     PROPOSED CHANGES IN REGULATION.  The regulation of cable television
systems at the federal, state and local levels is subject to the political
process and has been in constant flux over the past decade.  Material
changes in the law and regulatory requirements must be anticipated and
there can be no assurance that the Company's business will not be affected
adversely by future legislation, new regulation or deregulation.
Legislative, administrative and/or judicial action may change all or

                                      -42-
<PAGE>
portions of the foregoing statements relating to competition and
regulation.

     CABLE PROVISION OF INTERNET SERVICES.  Transmitting indecent material
via the Internet is made criminal by the 1996 Act.  However, on-line access
providers are exempted from criminal liability for simply providing
interconnection service; they are also granted an affirmative defense from
criminal or other action where in "good faith" they restrict access to
indecent materials.  The 1996 Act further exempts on-line access providers
from civil liability for actions taken in good faith to restrict access to
obscene, excessively violent or otherwise objectionable material.  On June
26, 1997, the United States Supreme Court held unconstitutional the
provisions of the 1996 Act criminalizing indecent online transmissions.

     REGULATION OF INTERNET SERVICES.  Internet-related services are not
currently subject to direct regulation by the FCC or any other United
States agency, other than regulation applicable to businesses generally.
The FCC recently requested comments on a petition filed by the America's
Carriers Telecommunication Association which requests that the FCC regulate
certain voice transmissions over the Internet as telecommunications
services.  Changes in the regulatory environment relating to the
telecommunications or Internet-related services industry could have an
adverse effect on the Company's Internet-related services business.  The
1996 Act may permit telecommunications companies, RBOCs or others to
increase the scope or reduce the cost of their Internet access services.
In its recent access charge reform proceeding, the FCC concluded that
incumbent LECs may not assess interstate access charges on information
service providers, but stated that it planned to address issues relating to
information service providers' use of the public switched network as part
of a broader set of issues under review in a related proceeding.  Given the
present unsettled nature of the regulation of Internet services, the
Company cannot predict the effect that the 1996 Act or any future
legislation, regulation or regulatory changes may have on its business.

     In addition to the regulatory uncertainties, the law relating to the
liability of on-line services providers and Internet access providers for
information carried on, disseminated through or hosted on their systems is
currently unsettled.  Several private lawsuits seeking to impose such
liability are currently pending.  In one action brought against an Internet
access provider, Religious Technology Center v. Netcom On-Line
Communication Services, Inc., the United States District Court for the
Northern District of California ruled in a preliminary phase that under
certain circumstances Internet access providers could be held liable for
copyright infringement.  The case has been settled by the parties.

     The 1996 Act prohibits and imposes criminal penalties and civil
liability for using an interactive computer service for transmitting
certain types of information and content, such as indecent or obscene
communications.  On June 12, 1996, however, a panel of three federal judges

                                      -43-
<PAGE>
granted a preliminary injunction barring enforcement of this portion of the
1996 Act to the extent that enforcement is based upon allegations other
than obscenity or child pornography as an impermissible restriction on the
First Amendment's right of free speech.  That decision was appealed to the
United States Supreme Court, which held the provisions unconstitutional.
In addition, Congress, in consultation with the United States Patent and
Trademark Office and the Clinton Administration's National Information
Infrastructure Task Force, is currently considering legislation to address
the liability of on-line service providers and Internet access providers,
and numerous states have adopted or are currently considering similar types
of legislation.  The imposition upon Internet access providers or Web
hosting sites of potential liability for materials carried on or
disseminated through their systems could require the Company to implement
measures to reduce its exposure to such liability, which may require the
expenditure of substantial resources or the discontinuation of certain
product or service offerings. The Company believes that it is currently
unsettled whether the 1996 Act prohibits and imposes liability for any
services provided by Iway should the content or information transmitted be
subject to the 1996 Act.

     The law relating to the liability of on-line service providers and
Internet access providers in relation to information carried, disseminated
or hosted also is being discussed by the World Intellectual Property
Organization in the context of ongoing consideration of updating existing,
and adopting new, international copyright treaties.  Similar developments
are ongoing in the United Kingdom and other jurisdictions.  The scope of
authority of various regulatory bodies in relation to on-line services is
currently uncertain.

     The Office of Telecommunications in the United Kingdom recently has
published a consultative document setting out a number of issues for
discussion, including the roles of traditional telecommunications and
broadcasting regulators with respect to on-line services.  The Securities
Investment Board in the United Kingdom is investigating the status of on-line
services and the transmission of investment information over networks
controlled by access providers.  Such transmissions may make an access
provider liable for any violation of securities and other financial
services legislation and regulations.  Decisions regarding regulation,
enforcement, content liability and the availability of Internet access in
other countries may significantly affect the ability to offer certain
services worldwide and the development and profitability of companies
offering Internet and on-line services in the future.  For example, it has
been reported that CompuServe recently removed certain content from its
services worldwide in reaction to law enforcement activities in Germany,
and it has been reported that an Internet access provider in Germany has
been advised by prosecutors that it may have liability for disseminating
neo-Nazi writings by providing access to the Internet where these materials
are available.


                                      -44-
<PAGE>
     The increased attention focused upon liability issues as a result of
these lawsuits, legislation and legislative proposals could affect the
growth of Internet use.  Any costs incurred as a result of liability or
asserted liability for information carried on or disseminated through its
systems could have a material adverse effect on the business, financial
condition and results of operations of the Company.

     SUMMARY ONLY.  The foregoing is only a summary of some of the present
and proposed federal, state and local regulations and legislation relating
to the Company's businesses.  Other existing federal regulations, copyright
licensing and, in many jurisdictions, state and local regulatory
requirements, currently are the subject of a variety of judicial
proceedings, legislative hearings and administrative and legislative
proposals which could change, in varying degrees, the manner in which the
Company operates.  Neither the outcome of these proceedings nor their
impact upon the Company can be predicted at this time.

EMPLOYEES

     As of December 31, 1997, the Company employed 161 employees, 142 of
whom were full-time employees and none of whom was subject to any
collective bargaining agreement.

ENVIRONMENTAL AND OTHER MATTERS

     Except for site-specific issues, environmental issues tend to impact
members of the telecommunications industry in consistent ways.  The United
States Environmental Protection Agency ("EPA") and other agencies regulate
a number of chemicals and substances that may be present in facilities used
in the provision of telecommunications services.  These include
preservatives which may be present in certain wood poles, asbestos which
may be present in certain underground duct systems, and lead which may be
present in certain cable sheathing.  Components of the Company's network
may include one or more of these chemicals or substances.  The Company
believes that in their present uses, none of such facilities of the Company
poses any significant environmental or health risk that derives from EPA
regulated substances.  If EPA regulation of any such substance is
increased, or if any facilities are disturbed or modified in such a way as
to require removal of the substance(s), special handling, storage and
disposal may be required for any such facilities removed from use.

RECENT DEVELOPMENT

     In December 1997, the Company and its wholly owned subsidiary DWS
entered into an agreement to acquire by merger Vantek Communications, Inc.
and Van/Alert, Inc., two South Dakota corporations (collectively,
"Vantek").  Vantek is a leading mobile radio operator and operates one of
the largest paging business in South Dakota.  Under the terms of the merger
agreement, Vantek will be merged with and into DWS, which will continue its

                                      -45-
<PAGE>
existence as a wholly owned subsidiary of the Company, operating both DWS'
current PCS business and Vantek's existing mobile radio and paging
business.  The merger is subject to various conditions, including the
receipt of regulatory approval relating to license transfers.  The Company
anticipates that, subject to the satisfaction of necessary conditions, the
merger will be completed in mid 1998.


ITEM 2.  DESCRIPTION OF PROPERTY.

     The tangible assets of the Company include a substantial investment in
telecommunications and cable equipment.  The net book value of the
Company's fixed assets was $25.4 million as of December 31, 1997.
No single property represents 10% or more of the Company's total assets.

     The principal properties of the Company do not lend themselves to
simple description by character and location.  The Company's investment in
property, plant and equipment consisted of the following at December 31,
1996 and 1997:
                   DAKOTA TELECOMMUNICATIONS GROUP, INC.
                              (IN THOUSANDS)
<TABLE>
<CAPTION>
  FIXED ASSETS                                       1997                      1996
  ------------                                       ----                      ----
<S>                                               <C>                       <C>
Telecommunications Plants                          $ 23,948                  $ 16,923
Cable Systems                                         5,352                     4,870
Other Equipment                                       4,327                     2,510
Land and Buildings                                    3,014                     1,604
Construction in Progress                                289                       354
</TABLE>

     Telecommunications plant consists of switching equipment, transmission
equipment and related facilities, aerial cable, underground cable, conduit
and wiring.  Cable systems consist of head-end, distribution and subscriber
equipment.  Other equipment consists of public telephone instruments and
telephone equipment (including PBXs) used or leased by the Company in its
operations, poles, furniture, office equipment, vehicles and other work
equipment.  Land and buildings consist of land owned in fee and
improvements thereto, principally central office buildings.  Other property
consists primarily of plant under construction, capital leases and
leasehold improvements.

     The Company's rights-of-way for its telecommunications and cable
transmission systems are typically held under leases, easements, licenses
or governmental permits.  All other major equipment and physical facilities
are owned in fee and are operated, constructed and maintained pursuant to


                                      -46-
<PAGE>
rights-of-way, easements, permits, licenses or consents on or across
properties owned by others.

     The Company believes that standard practices prevailing in the
telephone industry are followed by the Company's telephone operating
subsidiaries in the construction and maintenance of plant and facilities,
and that all properties presently being used for operations of the Company
are suitable, well maintained and adequately equipped for the purposes for
which they are used.  Substantially all of the Company's properties are
subject to mortgage liens held by the Rural Telephone Finance Corporation
("RTFC").

     The following property is owned in fee by the Company and its
subsidiaries:

          Headquarters building - Irene, South Dakota
               13,000 sq. ft., single story brick structure, with 11,800
               sq. ft. for offices, and 1,200 sq. ft. for storage.
               Originally built in 1977 and expanded twice since then.

          Main warehouse - Irene, South Dakota
               5,000 square feet, metal structure.

          Service building - Irene, South Dakota
               3,000 square feet, metal structure, with 600 sq. ft. in
               office space and the balance in storage.

          Network switching center - Viborg, South Dakota
               7,000 sq. ft., single story brick structure, on six-acre
               site in an industrial park.

          Network service building - Lennox, South Dakota
               1,360 sq. ft. for switching, 2,000 sq. feet for storage.

          Switching and equipment buildings
               Irene, South Dakota - telephone 900 sq. ft.
               Wakonda, South Dakota - 800 sq. ft.
               Gayville, South Dakota - 600 sq. ft.
               Parker, South Dakota - 1,400 sq. ft.
               Alsen, South Dakota - 1,000 sq. ft., plus 400 sq. ft. for
               storage.
               Flyger, South Dakota - 900 sq. ft.
               Worthing, South Dakota - 1,100 sq. ft.
               Beresford, South Dakota - 700 sq. ft.
               Hurley, South Dakota - 900 sq. ft.
               Sundowner site - Sioux Falls, South Dakota - 100 ft.
               wireless equipment tower with a 250 sq. ft. on a 2.5 acre
               site.


                                      -47-
<PAGE>
     The following property is leased by the Company:

          Beresford, South Dakota - 250 sq. ft. (office)
          9th & Phillips site - Sioux Falls, South Dakota - approximately
          5,500 sq. ft. (office).
          DataNet office lease - Sioux Falls, South Dakota - approximately
          7,175 sq. ft. (office).

     The Company also has various CATV equipment buildings, all of which
are small (less than 300 sq. ft.) and most of which are on leased land in
various communities served by the Company.  All properties owned by the
Company are subject to liens for loans obtained in the ordinary course of
business.


ITEM 3.  LEGAL PROCEEDINGS.

     There are no material pending legal proceedings against the Company.
The Company is subject from time to time to legal proceedings and claims
that arise in the ordinary course of business and frequently participates
in regulatory proceedings in front of the South Dakota Public Utilities
Commission and the FCC.  However, in the opinion of management, none of
these proceedings is material to the Company's consolidated financial
condition or results of operations.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     There were no matters submitted to a vote of security holders during
the fourth quarter of the period covered by this report.


                                  PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The information under the caption "Stock Information" on page S-36 of
the Registrant's Annual Report to Stockholders for the year ended December
31, 1997 is here incorporated by reference.

     On December 1, 1997, the Company issued 320,000 shares of Common Stock
valued at the time at $4 million to the shareholders of DataNet, two
individuals who were existing shareholders of the Company, in connection with
the acquisition by the Company of all of the outstanding shares of capital
stock of DataNet.   The Company relied on the exemption provided in Section
4(2) of the Securities Act of 1933, as amended, for this issuance.

     On December 22, 1997, the Company sold 98,426 shares of Common Stock to
the Dakota Telecommunications Group, Inc. Employee Stock Ownership Plan

                                      -48-
<PAGE>
("ESOP") for $1 million.  Proceeds were provided by a loan secured by the ESOP
and guaranteed by the Company.  The Company relied on the exemption provided
in Section 4(2) of the Securities Act of 1933, as amended, for this issuance.


ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

     The information under the caption "Management's Discussion and
Analysis or Plan of Operation" on pages S-7 through S-16, inclusive, of the
Registrant's Annual Report to Stockholders for the year ended December 31,
1997 is here incorporated by reference.


ITEM 7.   FINANCIAL STATEMENTS.

     The Consolidated Financial Statements, Notes to Consolidated Financial
Statements, and Independent Auditors' Report on pages S-17 through S-35,
inclusive, of the Registrant's Annual Report to Stockholders for the year
ended December 31, 1997 are here incorporated by reference.


ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     Not applicable.

























                                      -49-
<PAGE>
                                 PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

     The Company's Board of Directors is divided into three classes, which
are as nearly equal in number as possible.  Each class of directors serves
a successive three-year term of office.  Biographical information
concerning the persons who are directors or executive officers of the
Company is presented below.  Except as otherwise indicated, all of the named
individuals have had the same principal employment for over five years.
Executive officers are appointed annually and serve at the pleasure of the
Board of Directors.

     DIRECTORS WITH TERMS EXPIRING IN 2000

     Thomas W. Hertz (age 51) has been a director and Chief Executive
Officer and President of the Company since its formation (February 1997),
was Chief Executive Officer of the Cooperative from July 1996 until the
Merger and was General Manager of the Cooperative from December 1995 until
the Merger.  Prior to December 1995, Mr. Hertz was an attorney in private
practice with the law firm of Ulmer, Hertz & Bertsch, P.C.

     Palmer O. Larson (age 74) was a director of the Cooperative from 1976
until the Merger and has been a director of the Company since its formation
(February 1997).  Mr. Larson is a semi-retired agribusiness (farm) owner
and operator.

     John (Jack) A. Roth (age 66) was a director of the Cooperative from
1970 until the Merger and has been a director of the Company since its
formation (February 1997).  Mr. Roth retired as an agent for State Farm
Insurance in Parker, South Dakota, after working as an insurance agent for
33 years.

     DIRECTORS WITH TERMS EXPIRING IN 1999

     Ross L. Benson (age 63) was a director of the Cooperative since 1980
until the Merger and has been a director of the Company since its formation
(February 1997).  Mr. Benson is an agribusiness (farm) owner and operator.

     Dale Q. Bye (age 67) was a director of the Cooperative from 1975 until
the Merger and has been a director of the Company since its formation
(February 1997).  Mr. Bye is a semi-retired agribusiness (farm) owner and
operator.

     James H. Jibben (age 47) was a director of the Cooperative from 1988
until the Merger and its Chairman of the Board from 1995 until the Merger
and has been a director and Chairman of the Board of Directors of the
Company since its formation (February 1997).  Mr. Jibben was President of

                                      -50-
<PAGE>
the Cooperative prior to the Merger.  Mr. Jibben is an agribusiness (farm)
owner and operator.

     DIRECTORS WITH TERMS EXPIRING IN 1998

     Craig A. Anderson (age 42) has been a director and Executive Vice
President, Chief Financial Officer and Treasurer of the Company since its
formation (February 1997) and was Executive Vice President - Marketing and
Chief Financial Officer of the Cooperative from January 1, 1997 until the
Merger.  Prior to January 1, 1997, Mr. Anderson was Vice President -
Marketing of the Cooperative from September 1996 to January 1, 1997.  From
January 1994 until September 1996, Mr. Anderson was an independent business
consultant and from May 1994 until December 1995 he attended the University
of South Dakota, earning a Masters of Business Administration and Masters
in Professional Accounting.  From November 1992 until January 1994, Mr.
Anderson was a director and Vice President - Chief Financial Officer and
Secretary of the Austad Company (a catalog retailer of golf equipment).
From July 1989 to September 1992, Mr. Anderson served as a director and
Vice President - Chief Financial Officer, General Counsel and Secretary of
Dial-Net, Inc. (a long distance reseller).

     Jeffrey J. Goeman (age 40) was a director of the Cooperative from 1988
until the Merger and has been a director of the Company since its formation
(February 1997).  Mr. Goeman is President of and has owned and operated
Goeman Auction Service and Real Estate, Inc. in Lennox, South Dakota (a
real estate brokerage and appraisal and auction firm) since 1980.

     Jeffrey G. Parker (age 51) has been a director of the Company since
July 1997.  Mr. Parker's principal occupation is as the President and Chief
Executive Officer of Parker Transfer and Storage, Inc., a transportation
and storage company with which he has been associated since 1969.  Mr.
Parker also serves as President of Slip and Trip, Inc., a service provider
to Parker Transfer and Storage, Inc. and as a director of HF Financial
Corp.  Mr. Parker served as Vice President of TCIC from 1990 until 1996 and
as President of TCIC during 1996.

     John A. Schaefer (age 72) was a director of the Cooperative from 1974
until the Merger and has been a director of the Company since its formation
(February 1997).  Mr. Schaefer is retired.  He formerly was an agribusiness
(farm) owner and operator.

     OTHER EXECUTIVE OFFICERS.

     Timothy Dupic (age 43) is the Secretary of the Company, a position he
has held since July 1997.  Mr. Dupic also serves as Vice President of
Operations of the Company, a position he has held since January 1996.
Prior to that time, Mr. Dupic worked in management of the National Exchange
Carriers Association and currently serves as an outside director of that
organization.

                                      -51-
<PAGE>
     As of the date of this report, directors and officers of the
Company and persons beneficially owning more than ten percent of the
outstanding shares of Common Stock were not subject to the reporting
obligations of Section 16(a) of the Exchange Act.


ITEM 10.  EXECUTIVE COMPENSATION.

     The following table shows certain information concerning the
compensation paid to Thomas W. Hertz,  President and Chief Executive
Officer of the Company, and Craig A. Anderson, Executive Vice President,
Chief Financial Officer and Treasurer of the Company, for services rendered
to the Company or the Cooperative, as applicable, during the years ended
December 31, 1997, 1996 and 1995.  No other executive officer of the
Company or the Cooperative earned cash compensation in excess of $100,000
during 1997.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                               LONG-TERM COMPENSATION
                                                                ----------------------
                                                                         AWARDS
                                                                ----------------------
                                          ANNUAL COMPENSATION      NUMBER OF SECURITIES    ALL OTHER
                                          -------------------
NAME AND PRINCIPAL POSITION     YEAR       SALARY    BONUS<F1>      UNDERLYING OPTIONS  COMPENSATION<F2>
---------------------------     ----       ------    -----          ------------------  ----------------
<S>                            <C>       <C>        <C>                  <C>                <C>
Thomas W. Hertz                 1997      $129,808   $15,000              123,980            $15,702
 President and Chief            1996       118,940        --                   --              1,439
 Executive Officer              1995        20,455        --                   --                 72


Craig A. Anderson               1997      $ 96,154   $ 7,500              123,980            $ 7,105
 Executive Vice President,      1996        28,725        --                   --              1,195
 Chief Financial Officer
   and Treasurer<F3>
_________________________________
<FN>
<F1>     This column represents the cash value of shares of Common Stock awarded to the above individuals.

<F2>     All other compensation represents (i) premiums paid by the Company or the Cooperative, as applicable, for life
         insurance on Mr. Hertz ($1,445 in 1997) and Mr. Anderson ($1,445 in 1997), and (ii) Company or Cooperative
         contributions to pension and 401(k) plans for Mr. Hertz ($14,257 in 1997) and Mr. Anderson ($5,660 in 1997).

<F3>     Mr. Anderson began his employment with the Cooperative on September 15, 1996.
</FN>
</TABLE>

                                      -52-
<PAGE>

     The following tables set forth information regarding stock options
granted to the named executive officers during the last fiscal year and
stock options held by the named executive officers at the end of the last
fiscal year.  None of the named executive officers exercised any stock
options during 1997.

<TABLE>
<CAPTION>
                      OPTION GRANTS IN LAST FISCAL YEAR

                                               PERCENT OF TOTAL
                      NUMBER OF SECURITIES     OPTIONS GRANTED
                            UNDERLYING         TO EMPLOYEES IN
      NAME              OPTIONS GRANTED<F1>      FISCAL YEAR         EXERCISE PRICE      EXPIRATION DATE
--------------        ---------------------    ----------------   -------------------    ---------------
<S>                          <C>                   <C>                   <C>                <C>
Thomas W. Hertz               123,980               46.3%                 $ 6.19             12-31-2006

Craig A. Anderson             123,980               46.3%                 $ 6.19             12-31-2006
________________________________

<FN>
<F1>     To provide an incentive for Thomas W. Hertz, Chief Executive Officer
         and General Manager of the Cooperative, and Craig A. Anderson,
         Executive Vice President-Marketing and Chief Financial Officer of
         the Cooperative (collectively, the "Optionees"), to operate the
         Cooperative to promote the Cooperative's long-term growth and
         profitability and to help align their economic interests with those
         of the Cooperative's members and security holders, effective as of
         January 1, 1997, the Board of Directors of the Cooperative adopted
         stock option agreements granting options to each Optionee to
         purchase up to an aggregate of 767 shares of Cooperative preferred
         stock at a price of $1,000 per share.  Upon consummation of the
         Conversion and Merger, these options automatically became options to
         purchase Common Stock (converted on an approximately 80.8-to-1
          basis).  Thus, Mr. Anderson and Mr. Hertz each hold options to
         acquire 123,980 shares of Common Stock at a price of $6.19 per
         share.

         The options call for delayed vesting so that 20 percent of each
         option became exercisable on July 25, 1997. Thereafter, an
         additional 20 percent of each option becomes exercisable on each
         anniversary date of the stock option agreements if the Optionees are
         then employed by the Company until the total number of shares
         subject to each option become exercisable.  Thus, 40 percent of the
         options have become exercisable as of the date of this report.
         Each option remains outstanding for ten years from the date it was
         granted.  The options are non-transferable.

                                      -53-
<PAGE>
        Under the terms of the stock option agreements, the options are not
        incentive stock options under Section 422 of the Internal Revenue
        Code of 1986, as amended (the "Code").  The options were not subject
        to tax when they were granted.  Upon exercise, the Optionee will
        recognize compensation income in the amount of the spread between
        the market value of the options and the option exercise price.  The
        Company will receive a corresponding deduction.  The option price
        must be paid in cash or shares of stock of the Company, valued at
        the market value on the date of exercise.

        On a fully diluted basis, assuming that all vesting periods and
        other restrictions contained in the options have been satisfied or
        lapsed and all the options were exercised in full, each Optionee
        would own approximately five percent of the total number of shares
        of the Company's outstanding Common Stock.  The exercise price of
        the Company's Common Stock under the stock option agreements is
        $6.19 per share.
</FN>
</TABLE>

<TABLE>

<CAPTION>
                                             FISCAL YEAR-END OPTION VALUES

                                     NUMBER OF                         VALUE OF UNEXERCISED
                          SECURITIES UNDERLYING UNEXERCISED           IN-THE-MONEY OPTIONS AT
                              OPTIONS AT FISCAL YEAR-END                 FISCAL YEAR-END <F1>
                          ----------------------------------      ---------------------------
      NAME                EXERCISABLE        UNEXERCISABLE         EXERCISABLE    UNEXERCISABLE
--------------            -----------       --------------        ------------  --------------
<S>                        <C>                  <C>              <C>             <C>
Thomas W. Hertz             49,592               74,388           $  312,925.57   $  469,388.28

Craig A. Anderson           49,592               74,388           $  312,925.57   $  469,388.28


<FN>
<F1> Based on a market value of $12.50 per share at December 31, 1997, adjusted to reflect the two-for-one stock split.
</FN>
</TABLE>

     During 1997, the Cooperative compensated its directors at the rate of
$500 per regular monthly board meeting attended, $250 per special board
meeting attended and $100 per special telephonic board meeting attended.
Directors also are provided with travel and accident insurance at a cost of
$125 per year per director.  Directors are eligible to participate in the
medical reimbursement plan.  These compensation arrangements were continued
by the Company after the Merger in July 1997.  In 1998, directors will also

                                      -54-
<PAGE>
be compensated at the rate of $250 for attendance by teleconference at
regular monthly board meetings.

     Under the Company's 1997 Stock Incentive Plan, each director of the
Company who is not an employee of the Company (a "Non-Employee Director")
will be entitled to receive semi-annually, on June 30 and December 31 of
each year, stock options to purchase 400 (as adjusted to reflect the effect
of the stock split) shares of Common Stock at 100 percent of the market
value on the date of grant.  The stock options will be issued for a term of
ten years.  The formula grant provisions for Non-Employee Directors may be
amended by the Board of Directors not more than once every six months, other
than to comport with changes in the Code, the Securities Exchange Act of 1934,
as amended (the "Exchange Act") or the rules thereunder.  Non-Employee
Directors may pay the exercise price using previously held shares of Common
Stock to the extent that other plan participants are permitted to do so.

     In November 1997, the Board of Directors adopted the Director Stock
Plan of 1997, under which each Non-Employee Director who has or will have
served more than five years on the Board of Directors of the Company
(including service as a director of the Cooperative) will receive a one-time
award of 2,000 shares (as adjusted to reflect the effect of the stock
split) of Common Stock.  This award was payable on January 1, 1998 to
directors who had previously served five years, and will be payable on the
fifth anniversary of service to all other non-employee directors.

EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS

     EMPLOYMENT AGREEMENTS.  The Cooperative entered into separate but
substantially identical Employment Agreements ("Agreements") with its Chief
Executive Officer and General Manager, Thomas W. Hertz, and its Executive
Vice President-Marketing, Chief Financial Officer and Treasurer, Craig A.
Anderson (the "Executives").  Upon consummation of the Merger, the Company
assumed the Agreements according to their terms.

     Each Agreement is for a three-year term of employment.  However, the
employment term under each Agreement will be automatically extended for an
additional year at the end of each year, unless either party gives written
notice that the employment term under the Agreement is not to be extended
further, in which case the employment term under the Agreement will expire
at the end of two additional years, except that the employment term under
the Agreement will also be extended automatically for three years following
the date of any Change in Control (as defined in the Agreements) occurring
during the employment term under the Agreement.  The current terms of the
Agreements are until December 31, 2000.

     The Agreements provide minimum salaries of $135,000 per year for
Thomas W. Hertz and $100,000 per year for Craig A. Anderson, and also
provide for an annual bonus to each of the Executives equal to fifteen

                                      -55-
<PAGE>
percent of the increase, if any, in corporate net income over prior year
net income. "Net income," for purposes of the bonus calculations, is pre-tax
net income before depreciation, amortization and other non-cash
expenses, before annual bonuses under the two Agreements and after
eliminating the effect of extraordinary items.  Under the formula, no
bonuses were paid for 1997.

     Under the Agreements, the Company or the Executive may terminate the
Executive's employment at any time upon 30 days' notice.  If the Company
terminates the Executive's employment involuntarily during the term of the
employment under the Agreements other than as the result of a Disability or
for Cause, or if the Executive terminates the employment for Good Reason
during the employment term under the Agreements, the Agreements entitle the
terminated Executive to Severance Pay. "Disability" is defined as the
Executive's inability to substantially perform his duties for a continuous
period of nine months. "Cause" is defined as willful and continued failure
by the Executive to substantially perform his duties after notice of the
deficiency, or willful misconduct by the Executive that is materially
injurious to the Company and occurs without good-faith belief by the
Executive that the action was in the best interests of the Company.
Termination for Cause requires the affirmative vote of two-thirds of the
Board of Directors.  "Good Reason" is defined to include: (i) a material
breach by the Company of the Agreements or any other agreement with the
Executive; (ii) assignment to the Executive of duties inconsistent with his
position; (iii) removal of the Executive from his position; (iv) relocation
of the Company's principal executive offices outside a 60-mile radius from
Irene, South Dakota or any requirement by the Company that the Executive be
located other than at the executive offices or that he engage in
substantially increased job related travel; or (v) failure of the Company
to obtain the agreement of any successor to assume the Agreements.  The
Executive may not terminate his employment with Good Reason without first
giving the Company notice and ten days' opportunity to cure any occurrence
constituting Good Reason.

     "Severance Pay" under the Agreements consists of continuation of the
Executive's salary, bonus and benefits for the unexpired employment term
under the Agreements at the time of the termination (with a minimum annual
bonus each year equal to that of the year before the termination),
reasonable out-placement services and immediate vesting of all restricted
stock and stock option rights.  Severance Pay is not reduced by any
post-termination employment or other income of the Executive. If the Executive
dies while entitled to receive Severance Pay, the remaining Severance Pay
is to be paid to the Executive's estate.  If a termination entitling the
Executive to Severance Pay occurs after a Change in Control, or if the
Company defaults on Severance Pay obligations, the monthly salary and bonus
payments are accelerated and become payable immediately in a lump sum.

     The Agreements prohibit the Executive from competing with the Company
during his employment, and after his employment while he is receiving

                                      -56-
<PAGE>
Severance Pay.  The Executive may end the post-employment noncompetition
period at any time by renouncing any right to further Severance Pay.

     The Agreements provide for payment of the Executive's reasonable legal
fees and expenses incurred in seeking to enforce the Executive's rights
under the Agreements, to the extent the Executive is successful in his
claims, with payment made contemporaneously but with the Executive required
to repay any amount to which he is ultimately found not to be entitled.
The Agreements also provide that the Company will make the Executive whole
for any taxes, interest or penalties incurred by the Executive on account
of the characterization of any payment to which the Executive is entitled
from the Company as an "excess parachute payment" under Section 280G of the
Code or any successor provision of the Code, so that the net payments to
the Executive after all such taxes, interest and penalties will be the same
as if no such characterization had occurred.

     INDEMNITY AGREEMENTS.  The Company has entered into indemnity
agreements with each director and executive officer of the Company
(collectively, "Leaders").  The indemnity agreements indemnify each Leader
against all expenses incurred in connection with any action or
investigation involving the Leader by reason of his or her position with
the Company (or with another entity at the Company's request).  The Leader
will also be indemnified for costs, including judgments, fines and
penalties, indemnifiable under Delaware law or under the terms of any
current or future liability insurance policy maintained by the Company that
covers the Leaders.  A Leader involved in a derivative suit will be
indemnified for expenses and amounts paid in settlement.  Indemnification
is dependent in every instance on the Leader meeting the standards of
conduct set forth in the indemnity agreements.  If a change in control or
potential change in control occurs, the Company will fund a trust to
satisfy its anticipated indemnification obligations.

     STOCK PLAN PROVISIONS.   The Company's 1997 Stock Incentive Plan
provides that, unless the Board or the Compensation Committee of the Board
of Directors determines otherwise, upon a "change in control" of the Company
as defined in that plan all outstanding stock option and other awards of
stock and restricted stock shall become immediately exercisable and fully
vested and nonforfeitable.  In addition, upon a change in control of the
Company, the Compensation Committee may, in its discretion, determine that
some or all participants holding outstanding stock options shall receive cash
in lieu of some or all of the stock subject to such options in an amount equal
to the excess of the highest price per share actually paid in connection with
the change in control of the Company over the exercise price per share
under such options.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth information concerning the number of
shares of Common Stock held by each stockholder who is known to the
                                      -57-
<PAGE>
Company's management to be the beneficial owner of more than five percent
of the outstanding Common Stock as of March 16, 1998.

<TABLE>
<CAPTION>

           NAME AND ADDRESS                             AMOUNT AND NATURE OF
         OF BENEFICIAL OWNER                           BENEFICIAL OWNERSHIP OF            PERCENT
           OF COMMON STOCK                          SHARES OF COMMON STOCK<F1><F2>     OF CLASS<F3>
        --------------------                      -------------------------------      ------------
<S>    <C>                                                     <C>                      <C>
        Gery Baar                                               171,014                  9.0%
        c/o Dakota Telecommunications Group, Inc.
        P.O. Box 66
        Irene, South Dakota 57037-006

        Douglas English                                         171,014                  9.0%
        c/o Dakota Telecommunications Group, Inc.
        P.O. Box 66
        Irene, South Dakota 57037-0066

        Jeffrey G. Parker                                       120,326                  6.3%
        c/o Dakota Telecommunications Group, Inc.
        P.O. Box 66
        Irene, South Dakota 57037-0066
_______________________________

<FN>
Footnotes begin on page 41.

</FN>
</TABLE>


     The following table sets forth information concerning the number of
shares of Common Stock held as of March 16, 1998 by each of the Company's
directors, each of the named executive officers and all of the Company's
directors and executive officers as a group.












                                      -58-
<PAGE>
<TABLE>
<CAPTION>
                             AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
                                       OF COMMON STOCK<F1><F2>
                             ------------------------------------------
                                SOLE          SHARED
                             VOTING AND      VOTING OR         TOTAL           PERCENT
                             DISPOSITIVE    DISPOSITIVE      BENEFICIAL          OF
NAME OF BENEFICIAL OWNER        POWER         POWER<F4>       OWNERSHIP       CLASS<F3>
------------------------     -----------     ---------        ---------     -------------
<S>                             <C>           <C>             <C>              <C>
Craig A. Anderson<F5>            56,044         ---             56,044          2.9%

Ross L. Benson<F6>                2,400          300             2,700           <F*>

Dale Q. Bye<F6>                   2,664         ---              2,664           <F*>

Edward D. Christensen, Jr.<F6>    3,330         ---              3,330           <F*>

Jeffrey J. Goeman<F6>             2,400        1,642             4,042           <F*>

Thomas W. Hertz<F5>              57,256         ---             57,256           2.9%

James H. Jibben<F6>               2,912         ---              2,912           <F*>

Palmer O. Larson<F6>              2,586         ---              2,586           <F*>

Jeffrey G. Parker<F7>           120,326          ---           120,326           6.3%

John A. Roth<F6>                  4,184          164             4,348           <F*>

John A. Schaefer<F6>              2,784         ---              2,784           <F*>

All directors and executive
 officers as a group
 (12 persons)                   258,106        2,106           260,212           12.9%
_______________________________

<FN>
<F*>Less than one percent

<F1>     The numbers of shares stated are based on information furnished by
         each person listed and include shares personally owned of record by
         that person and shares that, under applicable regulations, are
         considered to be otherwise beneficially owned by that person.  Under
         these regulations, a beneficial owner of a security includes any
         person who, directly or indirectly, through any contract, arrangement,
         understanding, relationship or otherwise has or shares voting power or
         dispositive power with respect to the security.  Voting power includes

                                      -59-
<PAGE>
         the power to vote or to direct the voting of the security.
         Dispositive power includes the power to dispose or to direct the
         disposition of the security.  A person also will be considered the
         beneficial owner of a security if the person has a right to acquire
         beneficial ownership of the security within 60 days.

<F2>     In connection with the acquisitions by the Cooperative of
         TCIC and Iway, the Cooperative entered into Standstill
         Agreements (the "Standstill Agreements") with each of the
         former shareholders of TCIC and Iway (collectively, the
         "Sellers").  The Sellers received shares of Cooperative preferred
         stock and warrants to purchase additional shares of Cooperative
         preferred stock.  Under the Standstill Agreements, the Sellers agreed
         to refrain from certain actions, including: (i) acquiring any Common
         Stock in excess of five percent of the Company's Common Stock
         outstanding at any time during the term of the Standstill
         Agreements, with certain exceptions such as the sale or transfer of
         shares among the Sellers; (ii) making or participating in any
         "solicitation of proxies," as that term is defined in Regulation 14A
         under the Exchange Act; (iii) forming, joining or participating in a
         "group," as that term is defined in Section 13(d)(3) of the Exchange
         Act, with respect to any Common Stock; (iv) initiating or
         participating in any stockholder proposal to be voted upon by the
         holders of the Company's Common Stock or calling any special meeting
         of stockholders of the Company; (v) depositing any shares of the
         Company's Common Stock into a voting trust or subjecting such shares
         to a voting agreement; or (vi) seeking in any way to gain control of
         the Company or its Board of Directors or seeking to influence the
         Company's management or policies.

         The Standstill Agreements further provide that the Sellers will not
         dispose of any shares of the Company's Common Stock (with certain
         exceptions) except in accordance with certain provisions of the
         Standstill Agreements.  The Standstill Agreements grant to the
         Company a "First Purchase Option" to buy all, but not less than all,
         of the Sellers' shares of the Company's Common Stock that they wish
         to sell ("First Option Shares") for a period of three years following
         the date that the Cooperative preferred stock was converted into
         shares of the Company's Common Stock.  Under the First Purchase
         Option, if a Seller desires to sell any of the person's shares of
         Common Stock, the Seller must first notify the Company, which then
         has 30 days to determine whether to purchase the First Option Shares.
         If the Company exercises its option, it must purchase all of the
         First Option Shares.  If the Company does not exercise its First
         Purchase Option, the Seller who gave the notice may then sell those
         First Option Shares to a third party at the same price specified in
         the person's initial notice to the Company.  However, if the Seller
         fails to sell the First Option Shares to a third party within 60 days
         after the Company's option expires, then the process must start over.

                                      -60-
<PAGE>

         Under the Standstill Agreements, in the event that a third party
         makes a tender offer (a "Tender Offer") for shares of the Company's
         Common Stock, then the Sellers must grant the Company an option (the
         "Tender Offer Option") to purchase all, but not less than all, of the
         shares that the Sellers wish to sell in the Tender Offer.  This
         process works much the same as for a First Purchase Option, except
         that the deadlines are shorter.  In addition, if a competing tender
         offer arises prior to the closing of the sale pursuant to the Tender
         Offer Option at a higher per-share price, the Sellers can withdraw
         their notice of the Tender Offer Option, after which the process
         starts over.  The price per share pursuant to the Tender Offer
         Option is the product of: (i) the number of shares subject to the
         Tender Offer Option with respect to which the Company exercises its
         option, multiplied by (ii) the Tender Offer price per share as in
         effect on the last day specified in the Tender Offer on which the
         offeror may accept shares of the Company's Common Stock for payment
         or exchange.  If the Company fails to exercise its Tender Offer
         Option, then the Sellers can sell their shares in the Tender Offer,
         but at a price not less than that specified in the notice of the
         Tender Offer Option.

         The provisions of the Standstill Agreements described in the first
         paragraph above apply for a period of five years beginning on
         July 25, 1997.  The provisions described in the second paragraph
         above apply for three years after July 25, 1997.  The Standstill
         Agreements do not contain any specific termination provisions.

         In connection with the DataNet acquisition, the Company entered
         into Standstill Agreements with the former shareholders of DataNet.
         The terms of these Standstill Agreements are substantially the same
         as those of the Sellers' Standstill Agreements with the exception
         that the various time periods, instead of running from July 25, 1997,
         run from the date of the DataNet Standstill Agreements.

<F3>     The percentages reflected in this column were computed with reference
         to a total of 1,907,255 shares of the Company's Common Stock
         outstanding as of March 16, 1998 plus, where applicable, options to
         purchase shares of Common Stock currently outstanding that are
         currently exercisable or that may be exercised within 60 days.  The
         number of shares outstanding does not include an aggregate of 593,262
         shares of Common Stock that are issuable to former holders of
         Cooperative common stock and capital credit accounts upon satisfaction
         by them of the exchange and informational conditions to the issuance
         of such shares.

<F4>     These numbers include shares over which the listed person is legally
         entitled to share voting or dispositive power by reason of joint
         ownership, trust or other contract or property right, and shares held

                                      -61-
<PAGE>
         by spouses and children over whom the listed person may have influence
         by reason of relationship.

<F5>     The number of shares includes options to purchase shares of Common
         Stock exercisable within 60 days held by the following persons:

                         NAME                             NUMBER OF SHARES
                         ----                             ----------------
                     Craig A. Anderson                           52,832
                     Thomas W. Hertz                             52,832

<F6>     Includes (i) 2,000 shares awarded as outside director compensation
         for serving as a director for five years or more, issued effective
         January 1, 1998, and (ii) options to acquire 400 shares that are
         immediately exercisable and were granted pursuant to the Company's
         1997 Stock Incentive Plan.

<F7>     Includes (i) shares acquired pursuant to the exercise of options
         granted in connection with the acquisitions of TCIC and Iway, and
         (ii) options to acquire 400 shares that are immediately exercisable
         and were granted pursuant to the Company's 1997 Stock Incentive Plan.

</FN>
</TABLE>


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Directors and officers of the Company, businesses they own or represent,
and members of their immediate families purchase services from the Company and
its subsidiaries in the ordinary course of business.  Rates and charges for
these services are the same as those available to the general public.

     In connection with the Cooperative's acquisition of TCIC and Iway, the
Cooperative issued to the Sellers shares of Cooperative preferred stock which
automatically upon consummation of the Merger were converted into 189,454
(as adjusted for the stock split) shares of Common Stock.  In addition, the
Sellers collectively received warrants that were converted into warrants to
purchase an additional 77,912 (as adjusted for the stock split) shares of
Common Stock.  These warrants were exercised in full in January 1998.
Jeffrey Parker, a director of the Company, was a shareholder of TCIC and
Iway prior to the Cooperative's acquisition of TCIC and Iway.  As a result
of those acquisitions, Mr. Parker received shares of Cooperative preferred
stock which were converted into 54,078 (as adjusted for the stock split)
shares of Common Stock upon consummation of the Merger and warrants that
were converted into warrants to purchase an additional 24,668 (as adjusted
for the stock split) shares of Common Stock.  Mr. Parker was also the
holder of the Company's promissory note in the principal amount of $45,000,
which note was paid in full in December 1997.  In addition, Mr. Parker, as

                                      -62-
<PAGE>
a former shareholder of TCIC and Iway, guaranteed a $330,000 loan by
Norwest Bank to the Company that was made in connection with the
acquisitions of TCIC and Iway.  This loan was paid in full in December 1997.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

     (a)  EXHIBITS.  The following exhibits are filed as part of this 10-KSB:

3.1       Certificate of Incorporation of Dakota Telecommunications Group,
          Inc., a Delaware corporation.  Filed as Exhibit 3.1 to the
          Registrant's Report on Form 10-QSB for the quarter ended June 30,
          1997 and here incorporated by reference.

3.2       Bylaws of Dakota Telecommunications Group, Inc., a Delaware
          corporation, as amended.

4.1       Certificate of Incorporation of Dakota Telecommunications Group,
          Inc., a Delaware corporation.  See Exhibit 3.1 above.

4.2       Bylaws of Dakota Telecommunications Group, Inc., a Delaware
          corporation, as amended.  See Exhibit 3.2.

4.3       Rights Agreement, dated as of July 22, 1997, between the Company
          and Norwest Bank Minnesota, N.A., which includes the form of
          Rights Certificate as Exhibit A and the Summary of Rights to
          Purchase Preferred Stock as Exhibit B.  Filed as Exhibit 4.3 to
          the Registrant's Report on Form 10-QSB for the quarter ended
          September 30, 1997 and here incorporated by reference.

4.4       Standstill Agreement dated November 27, 1996, among Dakota
          Cooperative Telecommunications, Inc. and the Selling Shareholders
          of TCIC Communications, Inc.  Filed as Exhibit 4.7 to the
          Registrant's Form S-4 Registration Statement that became
          effective on June 13, 1997 (the "S-4 Registration Statement") and
          here incorporated by reference.

4.5       Standstill Agreement dated November 27, 1996, among Dakota
          Cooperative Telecommunications, Inc. and the Selling Shareholders
          of I-Way Partners, Inc.  Filed as Exhibit 4.8 to the S-4
          Registration Statement and here incorporated by reference.

4.6       Dakota Cooperative Telecommunications, Inc. Form of Warrant
          Agreement.  Filed as Exhibit 4.11 to the S-4 Registration
          Statement and here incorporated by reference.



                                      -63-
<PAGE>
4.7       Dakota Cooperative Telecommunications, Inc. Form of Option
          Agreement.  Filed as Exhibit 4.12 to the S-4 Registration
          Statement and here incorporated by reference.

4.8       Agreement Regarding Stock (I-Way Partners, Inc.) dated November
          27, 1996.  Filed as Exhibit 4.13 to the S-4 Registration
          Statement and here incorporated by reference.

4.9       Agreement Regarding Stock (TCIC Communications, Inc.) dated
          November 27, 1996.  Filed as Exhibit 4.14 to the S-4 Registration
          Statement and here incorporated by reference.

4.10      Dakota Telecommunications Group, Inc. Common Stock Certificate.
          Filed as Exhibit 4.16 to the S-4 Registration Statement and here
          incorporated by reference.

4.11      Dakota Telecom, Inc. Loan Agreement with Rural Telephone Finance
          Cooperative dated January 29, 1996.  Filed as Exhibit 4.34 to the
          S-4 Registration Statement and here incorporated by reference.

4.12      Dakota Cooperative Telecommunications, Inc. and Dakota Telecom,
          Inc. Loan Agreement with Rural Telephone Finance Cooperative
          dated June 24, 1997.  Filed as Exhibit 4.31 to the Registrant's
          Report on Form 10-QSB for the quarter ended June 30, 1997 and
          here incorporated by reference.

4.13      Dakota Cooperative Telecommunications, Inc. and Dakota Telecom,
          Inc. Mortgage and Security Agreement with Rural Telephone Finance
          Cooperative dated June 24, 1997.  Filed as Exhibit 4.32 to the
          Registrant's Report on Form 10-QSB for the quarter ended June 30,
          1997 and here incorporated by reference.

4.14      Dakota Cooperative Telecommunications, Inc. and Dakota Telecom,
          Inc. Pledge and Security Agreement with Rural Telephone Finance
          Cooperative dated June 24, 1997.  Filed as Exhibit 4.33 to the
          Registrant's Report on Form 10-QSB for the quarter ended June 30,
          1997 and here incorporated by reference.

4.15      The Company has several classes of long-term debt instruments
          outstanding in addition to those described in Exhibits 4.11 through
          4.14.  The amount of these classes of debt outstanding on December 1,
          1997, does not exceed 10% of the Company's total consolidated assets.
          The Company agrees to furnish copies of any agreement defining the
          rights of holders of any such long-term indebtedness to the Securities
          Securities and Exchange Commission upon request.

10.1      1997 Stock Incentive Plan.<F*>  Attached as Appendix J to the
          Prospectus and Ballot/Proxy Statement filed as part of the S-4
          Registration Statement and here incorporated by reference.

                                      -64-
<PAGE>
10.2      Form of Indemnity Agreement.<F*>  Attached as Appendix K to the
          Prospectus and Ballot/Proxy Statement filed as part of the S-4
          Registration Statement and here incorporated by reference.

10.3      Employment Agreement of Thomas W. Hertz.<F*>  Filed as Exhibit
          10.3 to the S-4 Registration Statement and here incorporated by
          reference.

10.4      Employment Agreement of Craig A. Anderson.<F*>  Filed as Exhibit
          10.4 to the S-4 Registration Statement and here incorporated by
          reference.

10.5      Early Retirement and Consulting Agreement of Robert R.
          DeNeui.<F*>  Filed as Exhibit 10.5 to the S-4 Registration
          Statement and here incorporated by reference.

10.6      The registrant is a party to a number of loan contracts that are
          material to the registrant's business (included in Exhibits 4.11
          through 4.14).

10.7      Amendment to Articles of Incorporation of Dakota Cooperative
          Telecommunications, Inc.  Filed as Appendix A to the Prospectus
          and Ballot/Proxy Statement filed as part of the Form S-4
          Registration Statement and here incorporated by reference.

10.8      Agreement and Plan of Merger.   Filed as Appendix B the
          Prospectus and Ballot/Proxy Statement filed as part of the S-4
          Registration Statement and here incorporated by reference.

10.9      Merger Agreement dated November 27, 1996, between Dakota
          Cooperative Telecommunications, Inc., Dakota Acquisition Corp. #2
          and I-Way Partners, Inc.  Filed as Exhibit 2.3 to the S-4
          Registration Statement and here incorporated by reference.

10.10     Merger Agreement dated November 27, 1996, between Dakota
          Cooperative Telecommunications, Inc., Dakota Acquisition Corp. #1
          and TCIC Communications, Inc.  Filed as Exhibit 2.4 to S-4
          Registration Statement and here incorporated by reference.

10.11     Dakota Telecommunications Group, Inc. Employee Stock Ownership
          Plan.  Filed as Exhibit 10.2 to the Registrant's Report on Form
          10-QSB for the quarter ended September 30, 1997 and here
          incorporated by reference.

10.12     Dakota Telecommunications Group, Inc. Director Stock Plan of
          1997.  Filed as Exhibit 10.12 to the Registrant's Form SB-2
          Registration Statement (Registration Statement No. 333-43709)
          filed February 4, 1998 (the "SB-2 Registration Statement").
          Here incorporated by reference.

                                      -65-
<PAGE>
10.13     Merger Agreement dated October 10, 1997 by and among Futuristic,
          Inc., Dakota Telecommunications Group, Inc., and DTG DataNet,
          Inc.  Filed as Exhibit 2 to the Registrant's Report on Form 8-K
          dated December 9, 1997 and here incorporated by reference.

10.14     Merger Agreement dated December 5, 1997 by and among Dakota
          Telecommunications Group, Inc., Dakota Wireless Systems, Inc.,
          Vantek Communications, Inc. and Van/Alert, Inc.  Filed as Exhibit
          10.14 to the Registrant's Form SB-2 Registration Statement.
          Here incorporated by reference.

13        Annual Report to Stockholders for the year ended December 31, 1997.

21        Subsidiaries of Registrant.

23        Consent of Independent Auditors.

24        Limited Powers of Attorney.

27.1      Financial Data Schedule for year ended December 31, 1997.

27.2      Restated Financial Data Schedule for quarter ended September 30,
          1997.
[FN]
<F*>      Management contract or compensatory plan or arrangement.
</FN>
A copy of any exhibit listed above will be furnished to any stockholder of the
Company without charge upon written request. Requests should be directed to
Craig A. Anderson, Executive Vice President and Chief Financial Officer, Dakota
Telecommunications Group, Inc., P.O. Box 66, Irene, South Dakota 57037-0066.

     (b)  REPORTS ON FORM 8-K.  No reports on Form 8-K were filed during
the fourth quarter of the period covered by this report.

















                                      -66-
<PAGE>
                                SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                              DAKOTA TELECOMMUNICATIONS GROUP, INC.
                              (Registrant)


                              By   /s/Thomas W. Hertz
                                   Thomas W. Hertz
                                   President and Chief Executive Officer


     In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.


*/s/Ross L. Benson                                 March 31, 1998
Ross L Benson, Director


*/s/Dale Q. Bye                                    March 31, 1998
Dale Q. Bye, Director


*/s/Jeffrey J. Goeman                              March 31, 1998
Jeffrey J. Goeman, Director


*/s/James H. Jibben                                March 31, 1998
James H. Jibben, Chairman of the
Board and Director


*/s/Palmer O. Larson                               March 31, 1998
Palmer O. Larson, Director


*/s/Jeffrey G. Parker                              March 31, 1998
Jeffrey G. Parker, Director


*/s/John (Jack) A. Roth                            March 31, 1998
John (Jack) A. Roth, Director


                                      -67-
<PAGE>
*/s/John A. Schaefer                               March 31, 1998
John A. Schaefer, Director


/s/Thomas W. Hertz                                 March 31, 1998
Thomas W. Hertz, Director, President
  and Chief Executive Officer (Prinicipal
  Executive Office)


/s/Craig A. Anderson                               March 31, 1998
Craig A. Anderson, Director, Executive
  Vice President, Chief Financial Officer and
  Treasurer (Principal Financial and Accounting
  Officer)


<F*>By/s/Thomas W. Hertz
     Thomas W. Hertz
     Attorney-in-Fact






























                                      -68-
<PAGE>
                             INDEX TO EXHIBITS



NUMBER    EXHIBIT

3.1       Certificate of Incorporation of Dakota Telecommunications Group,
          Inc., a Delaware corporation.  Filed as Exhibit 3.1 to the
          Registrant's Report on Form 10-QSB for the quarter ended June 30,
          1997 and here incorporated by reference.

3.2       Bylaws of Dakota Telecommunications Group, Inc., a Delaware
          corporation, as amended.

4.1       Certificate of Incorporation of Dakota Telecommunications Group,
          Inc., a Delaware corporation.  See Exhibit 3.1 above.

4.2       Bylaws of Dakota Telecommunications Group, Inc., a Delaware
          corporation, as amended.  See Exhibit 3.2.

4.3       Rights Agreement, dated as of July 22, 1997, between the Company
          and Norwest Bank Minnesota, N.A., which includes the form of
          Rights Certificate as Exhibit A and the Summary of Rights to
          Purchase Preferred Stock as Exhibit B.  Filed as Exhibit 4.3 to
          the Registrant's Report on Form 10-QSB for the quarter ended
          September 30, 1997 and here incorporated by reference.

4.4       Standstill Agreement dated November 27, 1996, among Dakota
          Cooperative Telecommunications, Inc. and the Selling Shareholders
          of TCIC Communications, Inc.  Filed as Exhibit 4.7 to the
          Registrant's Form S-4 Registration Statement that became
          effective on June 13, 1997 (the "S-4 Registration Statement") and
          here incorporated by reference.

4.5       Standstill Agreement dated November 27, 1996, among Dakota
          Cooperative Telecommunications, Inc. and the Selling Shareholders
          of I-Way Partners, Inc.  Filed as Exhibit 4.8 to the S-4
          Registration Statement and here incorporated by reference.

4.6       Dakota Cooperative Telecommunications, Inc. Form of Warrant
          Agreement.  Filed as Exhibit 4.11 to the S-4 Registration
          Statement and here incorporated by reference.

4.7       Dakota Cooperative Telecommunications, Inc. Form of Option
          Agreement.  Filed as Exhibit 4.12 to the S-4 Registration
          Statement and here incorporated by reference.

4.8       Agreement Regarding Stock (I-Way Partners, Inc.) dated November
          27, 1996.  Filed as Exhibit 4.13 to the S-4 Registration
          Statement and here incorporated by reference.

<PAGE>
4.9       Agreement Regarding Stock (TCIC Communications, Inc.) dated
          November 27, 1996.  Filed as Exhibit 4.14 to the S-4 Registration
          Statement and here incorporated by reference.

4.10      Dakota Telecommunications Group, Inc. Common Stock Certificate.
          Filed as Exhibit 4.16 to the S-4 Registration Statement and here
          incorporated by reference.

4.11      Dakota Telecom, Inc. Loan Agreement with Rural Telephone Finance
          Cooperative dated January 29, 1996.  Filed as Exhibit 4.34 to the
          S-4 Registration Statement and here incorporated by reference.

4.12      Dakota Cooperative Telecommunications, Inc. and Dakota Telecom,
          Inc. Loan Agreement with Rural Telephone Finance Cooperative
          dated June 24, 1997.  Filed as Exhibit 4.31 to the Registrant's
          Report on Form 10-QSB for the quarter ended June 30, 1997 and
          here incorporated by reference.

4.13      Dakota Cooperative Telecommunications, Inc. and Dakota Telecom,
          Inc. Mortgage and Security Agreement with Rural Telephone Finance
          Cooperative dated June 24, 1997.  Filed as Exhibit 4.32 to the
          Registrant's Report on Form 10-QSB for the quarter ended June 30,
          1997 and here incorporated by reference.

4.14      Dakota Cooperative Telecommunications, Inc. and Dakota Telecom,
          Inc. Pledge and Security Agreement with Rural Telephone Finance
          Cooperative dated June 24, 1997.  Filed as Exhibit 4.33 to the
          Registrant's Report on Form 10-QSB for the quarter ended June 30,
          1997 and here incorporated by reference.

4.15      The Company has several classes of long-term debt instruments
          outstanding in addition to those described in Exhibits 4.11
          through 4.14.  The amount of these classes of debt outstanding on
          December 1, 1997, does not exceed 10% of the Company's total
          consolidated assets.  The Company agrees to furnish copies of any
          agreement defining the rights of holders of any such long-term
          indebtedness to the Securities and Exchange Commission upon
          request.

10.1      1997 Stock Incentive Plan.<F*>  Attached as Appendix J to the
          Prospectus and Ballot/Proxy Statement filed as part of the S-4
          Registration Statement and here incorporated by reference.

10.2      Form of Indemnity Agreement.<F*>  Attached as Appendix K to the
          Prospectus and Ballot/Proxy Statement filed as part of the S-4
          Registration Statement and here incorporated by reference.




                                      -2-
<PAGE>
10.3      Employment Agreement of Thomas W. Hertz.<F*>  Filed as Exhibit
          10.3 to the S-4 Registration Statement and here incorporated by
          reference.

10.4      Employment Agreement of Craig A. Anderson.<F*>  Filed as Exhibit
          10.4 to the S-4 Registration Statement and here incorporated by
          reference.

10.5      Early Retirement and Consulting Agreement of Robert R.
          DeNeui.<F*>  Filed as Exhibit 10.5 to the S-4 Registration
          Statement and here incorporated by reference.

10.6      The registrant is a party to a number of loan contracts that are
          material to the registrant's business (included in Exhibits 4.11
          through 4.14).

10.7      Amendment to Articles of Incorporation of Dakota Cooperative
          Telecommunications, Inc.  Filed as Appendix A to the Prospectus
          and Ballot/Proxy Statement filed as part of the Form S-4
          Registration Statement and here incorporated by reference.

10.8      Agreement and Plan of Merger.   Filed as Appendix B the
          Prospectus and Ballot/Proxy Statement filed as part of the S-4
          Registration Statement and here incorporated by reference.

10.9      Merger Agreement dated November 27, 1996, between Dakota
          Cooperative Telecommunications, Inc., Dakota Acquisition Corp. #2
          and I-Way Partners, Inc.  Filed as Exhibit 2.3 to the S-4
          Registration Statement and here incorporated by reference.

10.10     Merger Agreement dated November 27, 1996, between Dakota
          Cooperative Telecommunications, Inc., Dakota Acquisition Corp. #1
          and TCIC Communications, Inc.  Filed as Exhibit 2.4 to S-4
          Registration Statement and here incorporated by reference.

10.11     Dakota Telecommunications Group, Inc. Employee Stock Ownership
          Plan.  Filed as Exhibit 10.2 to the Registrant's Report on Form
          10-QSB for the quarter ended September 30, 1997 and here
          incorporated by reference.

10.12     Dakota Telecommunications Group, Inc. Director Stock Plan of
          1997.  Filed as Exhibit 10.12 to the Registrant's Form SB-2
          Registration Statement (Registration Statement No. 333-43709)
          filed February 4, 1998 (the "SB-2 Registration Statement").
          Here incorporated by reference.

10.13     Merger Agreement dated October 10, 1997 by and among Futuristic,
          Inc., Dakota Telecommunications Group, Inc., and DTG DataNet,


                                      -3-
<PAGE>
          Inc.  Filed as Exhibit 2 to the Registrant's Report on Form 8-K
          dated December 9, 1997 and here incorporated by reference.

10.14     Merger Agreement dated December 5, 1997 by and among Dakota
          Telecommunications Group, Inc., Dakota Wireless Systems, Inc.,
          Vantek Communications, Inc. and Van/Alert, Inc.  Filed as Exhibit
          10.14 to the Registrant's Form SB-2 Registration Statement.
          Here incorporated by reference.

13        Annual Report to Stockholders for the year ended December 31,
          1997.

21        Subsidiaries of Registrant.

23        Consent of Independent Auditors.

24        Limited Powers of Attorney.

27.1      Financial Data Schedule for year ended December 31, 1997.

27.2      Restated Financial Data Schedule for quarter ended September 30,
          1997.
_____________________
[FN]
 <F*>     Management contract or compensatory plan or arrangement.
</FN>
























                                      -4-