OpportunityIowa. A nonprofit group created by Clark McLeod, founder and former chief executive of McLeodUSA. OpportunityIowa supports communities in Iowa voting to form municipal communications utilities.
Project Taxpayer Protection. A group that opposes telecommunications utilities. The group is financially backed by Mediacom and private donations. Its co-chairmen are Richard Johnson, a former state auditor, and Gerald Bair, a former state revenue director.
Citizens for Common Sense Solutions. Another group that opposes telecommunications utilities. The group, registered in Iowa as a political action committee, shares a Newton address with Iowa Telecom.
A. Voting to form a telecommunications utility, or even an electric utility, does not automatically commit the city to building any system, according to Iowa law. The vote authorizes the formation of a board, which can examine the matter. The board can also decide not to proceed with a utility system.
A. Financing through general obligation bonds must go to voters for approval. Iowa Telecom spokesman Dan Eness says a city could pursue financing through revenue bonds, which do not require a vote. That's true, says John Bilsten , general manager of Algona Municipal Utilities. But issuing revenue bonds requires public hearings.
A. They're not supposed to. Iowa law says a telecommunications utility cannot use general fund money. Telecom operations are supported by telecom revenue.
A. No. Iowa utilities are specifically prohibited under state law from using funds or revenue from electric, gas, water, sewage or garbage services to support telecommunications systems. The telecommunications system can take a loan from another utility, which must be paid back with interest.
A. Municipal communications utilities serve customers. By law, the ICN serves only government entities, such as schools and the military. Also, the ICN is a nonprofit. Telecom utilities, though city-owned, would seek profit to sustain their operations.
Richard Johnson, co-chair of Project Taxpayer Protection, says the municipal movement would create "mini-ICNs" across the state. Johnson contends the ICN has been a taxpayer drain. But the ICN has paid off all its debt as of March. It is supported by revenues from services, not tax money, ICN spokeswoman Tami Fujinaka said.
A. Prices are generally competitive with other providers; in many cases they're cheaper. Project Taxpayer Protection says municipal utilities disguise the true costs and price their services below cost. But Iowa law requires municipal utilities to adopt rates that reflect the true cost of providing the service.
Municipal utilities say they can offer lower prices because they don't have to meet the same profit demands as private companies. According to the Iowa Association of Municipal Utilities, residential customers in Cedar Falls save more than $2 million annually; customers in Spencer save $1.7 million annually.
Consumers can see telecommunications competition in the new choices that were unavailable just a few years ago. Phone companies now offer television service. Cable companies have phone service. Both offer high-speed Internet access.
But one of the fiercest competitive battles marking Iowa's telecommunications landscape won't be determined in the market. It will be decided in the voting booth. On Tuesday, 32 Iowa communities will vote whether to form municipal telecommunications utilities.
Municipal supporters say the vote is about preserving their rights. Private companies say it's about risks. The vote puts Iowa in the national debate about whether cities should offer phone, Internet and cable television services.
The vote comes nearly a year after Marion businessman Clark McLeod announced plans for OpportunityIowa, a nonprofit group advocating municipal telecommunications utilities.
At the time, McLeod promoted city-owned fiber-optic networks. Speedy fiber optics, he said, could help draw economic development to rural Iowa. More than 40 communities initially joined with OpportunityIowa. The 32 communities voting on Tuesday got enough signatures to put the proposal on ballots.
McLeod's proposal was condemned by companies like Qwest and Mediacom. Charles King, a regional vice president for Mediacom, said government shouldn't compete against the private sector.
"We don't think it's appropriate for local government to get into the business of providing service when private business is providing those services today," he said.
The current debate reached a peak this year with municipal projects proposed in large cities like Philadelphia, but Iowans have discussed the issue for decades.
In Iowa, 27 cities offer some form of telecommunications service. Rural areas, in Iowa and elsewhere, have long posed challenges for service providers. Distances between sparsely populated communities means it costs more to serve fewer customers.
The private sector has stepped in to fill gaps left by larger companies. The rural nature of the state is one reason why Iowa has nearly 150 independent phone companies, said Dave Duncan, president of the Iowa Telecommunications Association. Many of those companies now offer cable television in addition to Internet and voice services.
But in some places, cities fill the gap. The Northwest Iowa communities of Sanborn and Hartley have had city-owned cable television systems since the 1980s because the private sector declined to enter that market.
"No one would come in and build it. The towns were too small," said D.J. Weber, general manager of the Community Agency, the municipal telecommunications utility serving those communities as well as Primghar and Paullina in O'Brien County.
Bob Haug , executive director of the Iowa Association of Municipal Utilities, said the feeling that services in rural areas were not maintained and upgraded motivated cities to pursue municipal elections in places like Spencer, Cedar Falls and Algona.
There are plenty of examples of government offering services also offered by the private sector, such as universities and municipal hospitals, said Betty Zeman , spokeswoman for Cedar Falls Utilities.
But there are key differences between the OpportunityIowa communities and the cities now providing service, said Richard Johnson, former state auditor and co-chairman of the Mediacom-funded Project Taxpayer Protection.
The cities now offering municipal telecommunications didn't start from scratch. They already had municipal utilities in place providing services such as electricity, water and natural gas. Also, municipal gas and electric utilities don't compete against other gas and electric utilities. Telecommunications is rife with competition.
Starting any telecommunications service is expensive, particularly given the rapid changes in technology, said Max Phillips , Qwest's state president for Iowa. Cities don't have the expertise to start and keep up telecommunications services.
Plus, the formation of municipal telecommunications utilities could discourage the private sector from entering or upgrading rural markets, Phillips said.
Many of the Iowa communities that voted to form a municipal utility were seeking alternatives to phone company GTE and cable company TCI. Both companies were based out of state and had developed a reputation for poor service in Iowa. But those companies have since been replaced by companies that have invested millions in Iowa's telecommunications infrastructure.
GTE is now Iowa Telecom, a company headquartered in Newton. Much of TCI's former territory is now served by Mediacom. Although Mediacom is based in New York, the company serves small cities and rural markets exclusively. Iowa makes up Mediacom's largest customer base.
Like Iowa Telecom, Qwest is investing in its network to launch Internet service through DSL, or digital subscriber lines, throughout all of its Iowa territory. All three companies insist they are willing to work with residential and business customers. If there's a need, let us know and we'll try to fill it, Mediacom's King said.
Municipal telecommunications utilities could actually provide opportunities for private companies, said Tara Howard, an analyst for Boston technology research firm the Yankee Group. In a recent research report, Howard said allowing communities to build out their own networks could spare private companies the expense of building in those rural areas. Companies save money and get access to more customers.
Duncan, of the telecommunications association, said his group believes the private sector should provide telecommunications. But he left the door open for cooperation with cities. In some cases, resources can be shared. For example, 13 independent telephone companies receive cable television signals through equipment owned by Spencer Municipal Utilities. Nine companies send calls through Spencer's telephone switching equipment.
Sharing resources allows small players to maintain a competitive presence in the telecommunications market, said Spencer's Rodas. Spencer also shares resources as a member of the National Cable Television Cooperative, a group that negotiates for cable programming on behalf of small cable providers. Mediacom is a member of that group.
This summer, Marshalltown entered into a partnership with Mediacom. Marshalltown was one of the initial OpportunityIowa communities. City leaders said broadband could be a key factor distinguishing the city and boosting economic development. They did not want to commit to a fiber-optic network, and this spring, the city launched a trial of free wireless Internet service in downtown.
Mediacom will take over the wireless system under the partnership, making it the cable company's first wireless broadband. Mediacom is also offering a new tier of lower rates for residential and business customers.
In signing the agreement, the city also had to drop its efforts to form a municipal telecommunications utility. But afterward, Mayor Floyd Harthun said what happened in his city shouldn't influence others.
A few miles down the road, Nevada is bringing the issue to a vote. Rick Schreier , a member of OpportunityNevada, said it's been hard to get residents involved because there is no "telecommunications crisis" in the city.
He has no issues with Iowa Telecom. But he added that he and other residents remember when the phone company was GTE. And in the future, the phone company could be owned by a company that does not invest in rural communities. Schreier said Tuesday's vote is insurance.
Under Iowa law, communities vote to form a municipal communications utility. The vote does not commit a city to building infrastructure or spending money. It authorizes the formation of a board that would research the issue.
To date, 54 Iowa communities have voted on the municipal utility question; 51 have passed it. But only 25 moved forward with construction. In some communities, said the municipal utilities association's Haug, the vote itself was enough to drive the private sector to invest in their communities.
The Iowa Telecommunications Association's Duncan said the process is backwards. Communities should have a feasibility study first so voters know exactly what they're voting on and how much it will cost. Citizens are ill-served because they don't have enough information.
Weber, manager of the municipal system in O'Brien County, took a different view. Of course private companies are going to study a market to determine if it's profitable, he said. But feasibility studies cost money. Why should cities spend money to study something if they haven't first determined whether people have any interest in studying it?
Many OpportunityIowa communities have distanced themselves from that group's fiber-optics vision. Clark McLeod also owns FiberUtilities, a for-profit company that would consult on municipal fiber projects. Several cities have said that even if they pursue fiber, they won't necessarily commit to McLeod's company.
The municipal debate has turned the technology discussion into a political one with many of the communities in question blanketed with television advertisements and mass mailings. The election campaign fervor carried over from an Iowa legislative session during which the state's telecommunications industry tried to pass a measure requiring feasibility studies of telecommunications utilities.
Brad Skinner, chairman of OpportunityAltoona, said community leaders have had several discussions on partnering with Mediacom. But he said the community is still moving forward with a vote because there is a fear laws could change and remove that option. The municipal movement across the country this year has prompted new state and federal legislative proposals on the issue.
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