The Iowa State Supreme Court has withdrawn an opinion that
it issued in 1998, and it now says it is appropriate for municipalities in the state to
operate telephony utilities.
The ruling gives dozens of cities that are seeking to
expand their utility offerings a leg up over competitors such as Tele-Communications Inc.,
as the municipalities can now offer multiproduct packages to consumers, including video,
data and telephony.
The discussion over municipal telephony began when the city
of Hawarden -- a community of 2,500 on the state's northeast border -- expanded its
cable build to include provision of telephone services.
The city had begun signing up customers when what is now
known as the Iowa Telecommunications Association challenged and stopped the move.
The telephone lobby argued that the state law enabling
cities to get into telecommunications services did not have the word "telephone"
in it. Therefore, the group argued, cities are precluded from that particular business.
The district court agreed, as did the state Supreme Court,
But attorneys for Hawarden asked for a rehearing, directing
the court to four legal points that the city believed were overlooked. The primary
argument: Federal law supercedes state policy, and the national statute specifies that
cable providers can be telephone companies. Therefore, the city said, since it offers
cable, it can offer phone service.
Hawarden city clerk Tim Waddell said the community might
reinstitute telephone service by April 1, but that date is dependent on the speed of its
service company, Heartland Telecommunications of Mankato, Minn.
The city anticipates that the telephone offering will
heighten competition even further in the town. Hawarden began its cable overbuild of TCI
in 1997, and it has 600 customers, compared with 840 reported to the city by TCI.
Hawarden's basic package is slightly more expensive
than TCI's. The city charges $21 for 46 basic channels, compared with $18.95 for
TCI's 40 channels. TCI only offered 24 channels until the city began competing.
But Waddell said the city touts its quality and service in
its marketing pitches.
At least 38 Iowa communities, most the size of Hawarden,
have passed referenda paving the way for overbuilds, mostly in communities served by TCI,
according to Graham Gillette, spokesman for Pioneer Holdings, a vendor that assists cities
in building and operating their networks, then provides billing services.
"These towns will never benefit from competition
unless the cities can get involved," Gillette said.
A cable overbuild is key to that, as all other services
branch off the cable coaxial plant, he added.