Should municipalities establish commercial enterprises just because they can? That's a public-policy question that Pennsylvania's cable trade group — with the example of Kutztown in mind — wants the Pennsylvania General Assembly to address.
Critics note that the borough's broadband operation was built to compete against an established commercial cable operator, Service Electric Cable TV, that already offered up-to-date services, including high-speed Internet access — and, soon, HDTV.
"I agree with the premise" that cities move into private enterprise "for the sake of economic development. But the sensible way is to partner with industry, not replace it," said Pennsylvania Cable & Telecommunications Association president Dan Tunnell.
"Kutztown did it backward. They planned to build a system, then looked for partners," he said.
He also questioned whether the municipal operation would truly attract new business. In Tunnell's view, the city must recognize that it is more than 12 miles away from the nearest highway — over bad roads.
As discontent grew among cable lobbyists, the owner of the Lehigh Valley Heath Club faced similar angst: He was trying to compete with ever-expanding community centers that cut prices without facing the same tax burden, according to Tunnell.
That businessman convinced lawmakers to float a bill — the Government Competition Against Private Enterprise Act — which the state's cable industry is enthusiastically promoting.
Duplicate bills — HB298, sponsored by Rep. Pat Browne (R-Allentown), and SB321, backed by Sen. Charlie Dent (R-Lehigh) — would both limit municipalities to "necessary services." The bills state that private enterprise is necessary to the health of the state.
The measure would allow private companies to partner with cities to provide services, but the bidding process must be open to the public.
If passed, the measures would prevent Kutztown from expanding its competitive broadband operation. And competitive providers now underway would be required to perform annual audits and publicize the results.
If a company finds that its locality is planning to offer a service already sold privately, it can bring a civil action for injunctive relief under the measure. And one current draft of the bill would allow courts to award damages.
One supporter of the state bills is a surprise: the mayor of Kutztown.
"I agree with" the bills, Mayor Jerry Marino said. "I don't think cities should be in the private sector."
With respect to his city's relationship with Service Electric, the mayor added, "We have to have open books. How can we compete with open books? They can see our strategy and their books are closed."
Marino was elected in November 2001, after the telecommunications project was approved. He noted that the original plan called for the city to merely be a landlord, renting capacity to cable, telephony and data providers. But no cable company came forward to participate in the project, he said.
But even if the operation had gone according to that plan, however, Marino would still have opposed it.
"I agree we shouldn't be in the business … we don't have enough customers," he said.
The legislative effort has already drawn strong opposition.
"The language is too broad to know the true effects," said Pennsylvania League of Cities and Municipalities government-affairs representative Amy Sturges. "It really could effect everything we do.
"Cities provide trash, sewer and water services and the bill makes it look as if cities would have to bid all those activities out 'if practicable.'
"It is quite important [to stop the bill] because it is so broad. If it passed in its current form, it could have devastating effects," she said.
There are some businesses in which government shouldn't get involved, such as owning a movie theater, Sturges said. At the initial hearing, legislators indicated that golf courses may also be beyond the scope of needed services.
"Definitely a line needs to be drawn," she said, but a city needs the flexibility to provide services for which its citizens are clamoring.
Industry's argument against services like municipal cable-TV systems are not new, claim other opponents.
Jim Baller, an attorney who advises cities on broadband projects, points to articles in Moody's Magazine
and American Investments.
The essays have titles like "Municipal Ownership: Always a Failure" and "Municipal Ownership a Delusion."
The date on the magazines: November 1906.
But cities that do proceed into the broadband sector make their intentions known in a public forum, utilize existing public infrastructure and generally build a richer telecommunications environment than their private sector rivals.
"They own the utilities. Why shouldn't they use them?" he asked.
It's good public policy to save citizens money, Baller said, asserting that low-cost municipal broadband services has saved impacted citizens $30 million over the last several years.
Service Electric's corporate manager of administration and telecommunications Gary Day scoffs at such figures. For what Kutztown paid to build duplicative services, they could have given all their residents cable free for five years, or provided a $5 discount for 34 years, he countered.
The PCTA supports the measures, though Tunnell predicted the legislature would take a more surgical approach to the bills now pending. He expects lawmakers to edit the measures to give cities more freedom, noting that the association will closely monitor the process to make sure its interests are protected in later versions of the bill.
Regional hearings will be held about the legislation. Lawmakers aren't expected to vote on either version until late summer.