Iowa cable operators last week were celebrating the anticipated passage of legislation that prohibits municipal governments from issuing a sweetheart franchise deal to a competing entity.
Gov. Tom Vilsack is expected to sign a bill spearheaded by the Iowa Cable Telecommunications Association that will presumably force any incoming competitor to live with the same franchise arrangements as the incumbent operator.
Critics said the new law will stifle competition by preventing municipal officials from requiring that a newcomer build a state-of-the-art network if a similar demand was not originally included in the incumbent's franchise.
"Everybody knew it would be bad for competition," said a source familiar with the political horse-trading that went on. "But we were told that AT&T [Broadband] wanted it, and AT&T was going to get it."
Even so, industry executives said the final bill was a watered-down version of what had been proposed. In its original form, the bill indicated that an incoming operator could not be issued a franchise that was "more favorable, or less burdensome" than the one imposed on the community's existing operator. The final version, however, said cities "should not give undue preference" to the new operator.
"It's not as good as it was," said ICTA executive director Tom Graves. "They don't make it clear what specifically is 'undue preference.' Still, they (local officials) have to have a pretty good reason why they're giving somebody else a better deal."
Oddly enough, municipal officials opposing the bill agreed to a provision calling for geographic parity between two operators. Under that clause, an incoming company will have to serve the same areas as the entrenched operator.
"That's good for us. They won't be able to come in and take the cream," Graves said. "They're going to have to serve the same areas that we're forced to serve."
Passage of the bill marked the second time in as many years that Iowa operators have managed to convince lawmakers that they were being competitively disadvantaged. Last year, the industry pushed legislation calling for equal franchise requirements in a host of Iowa cities building, or preparing to build, municipal telecom networks. This time around, municipal officials objected to the latest law on grounds that it was unfair to impose the same requirements on a new operator "as a cable company that has been there for years."
"If you're a new operator, you have no cash flow, no subscribers," said Susan Lowe, an assistant city attorney in Des Moines. "How are you going to ante into the game?"
Lowe, who lobbied against the competitor's bill, said the geographic parity clause would provide incumbent operators with a sure way to keep the competition out.
"All they have to do is get one of their employees in Timbuktu to request service," she said.
