Should Dubuque pursue public telecom?

The truce with Mediacom might be over after the company received a state franchise agreement under a 2007 law.

The Telegraph Herald

BY M.D. KITTLE, Telegraph Herald ASSISTANT CITY EDITOR

December 29, 2009

 

Hawarden, Iowa, is a little town with a big reputation for being a pioneer in Iowa municipal telecommunications.

The northwest Iowa community of about 2,500 people more than a decade ago built a $4 million cable system, only to be temporarily shut down by an Iowa Supreme Court injunction. Hawarden survived the court's order prohibiting municipalities from being in the telecommunications business, and in many respects blazed the trail for publicly run cable, Internet and phone service in Iowa.

That's something the city is quite proud of.

"The biggest news in Hawarden is our municipal telecommunication system we call HiTec for Hawarden Integrated Technology, Energy and Communications," the city's Web site once boasted. "It is the first municipal cable, telephone and high-speed data transfer utility in Iowa."

More than 11 years after the court reversed its decision and ruled with municipalities, 28 Iowa communities operate cable systems -- including Bellevue's telecom utility, bringing fiber-optic service to every home in the Jackson County community.

It seems a kind of uncomfortable truce is in force between public and private cable providers. Tempers have cooled since late 2005, when voters in a number of Iowa communities, including Dubuque, approved ballot questions granting the right to create municipal systems. The statewide campaign, which saw a furious and expensive battle fought between Mediacom and public-system interests, didn't generate a wave of public telecom utilities, but it did offer a little more enticement in negotiating cable franchise agreements.

In Dubuque, the fires have flared again. Mediacom recently informed the city it had applied for and received a state franchise agreement based on a 2007 Iowa law, which provides incumbent companies an opportunity to nullify the municipal agreements if a competitor applies for a state franchise. The company, fyreSTORM Fiber and Cable, applied for a state franchise in April, listing 298 Iowa communities, including Dubuque, as potential places of business.

The city has cried foul, disputing the competition claim and pointing to fyreSTORM's lack of infrastructure in Dubuque.

Some have suggested the city revisit the idea of exploring publicly run cable.

"I think we had a mandate from the citizens in 2005 that they wanted to look at doing something different, given by referendum a 2-1 charge to at least explore a (municipal utility)," Councilman Ric Jones said earlier this month.

Just how serious that threat is remains to be seen.

Bellevue City Administrator Loras Herrig, who has led the city's cable system upgrade, said municipalities owe it to their citizens to provide services that private enterprise won't. But he advises Dubuque to proceed with caution, warning "it's not all roses when you look at a municipal system."

Herrig knows well the headaches. Costs to build Bellevue's fiber-to-home utility have more than doubled since the initial loan package, and the price continues to rise. While arguably state-of-the-art, the system has been plagued with glitches, much to the dismay of subscribers, who will see a significant hike in cable rates next month.

Mediacom asserts the tens of millions of dollars it has spent on infrastructure in the cities it serves proves a disincentive to communities considering the expensive investment of launching a publicly run cable system.

"We just had three communities in Minnesota beg us to take them over," said Tom Larsen, Mediacom's vice president of legal and public affairs. "They couldn't operate them anymore; the expense was too great."

Larsen sent the TH a copy of a letter from the city of Taconite, Minn., which sings the praises of the cable provider and its willingness to initiate service after the city could no longer meet the capital needs of its 48-year-old cable system.

Telecom providers, such as Qwest, point to what they believe is the most glaring example of failed public cable systems: The Utah Telecommunication Open Infrastructure Agency, also known as UTOPIA. Its critics say the nearly bankrupt fiber-optic network has failed to live up to its high-minded acronym.

Of late, the public provider has taken heat from customers and consumer advocates who charge UTOPIA failed to inform subscribers that their contracts are backed by liens on their homes.

UTOPIA proponents said groups led by private telecom providers, fearing competition, are engaging in scare tactics.

Max Phillips, president of Qwest's Iowa operations, insists public utilities have no business being in the business of telecom, that it boils down to a fairness question. Qwest and other telecom providers point to the power public utilities have over rights-of-way, and the burden all taxpayers -- especially those who don't subscribe to the service -- pay to subsidize government-run systems.

"Our perspective on it is we'd rather not have local governments compete against the private sector, when the private sector is willing to provide the service," said Phillips, president of Qwest's Iowa operations. "It's a capital-intensive business, and cities have a difficult time keeping up with technology and investments."

Bob Haug, executive director for the Iowa Association of Municipal Utilities, argues public cable systems are keeping up, despite intense competition from private providers with deep pockets.

Haug charges private telecom providers have failed to deliver the technology Iowa needs to compete.

"I think Iowa is in a communications backwater," he said. "There are Third World countries that have better systems than we do."

Hawarden's cable system, like the others in Iowa, couldn't exist without taxpayer support. But City Administrator Gary Tucker said a decade later, Hawarden citizens remain proud of their cable system.

"It would be a very sensitive issue if you'd bring it up today," he said. "They're proud of the delivery of the service and quality they have. There are no regrets."