Iowa Town Says Overbuild Is Doing Fine

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Officials in Muscatine, Iowa, dismissed rumors last week
that the city's new municipal cable network has failed to catch on with 24,000 area
residents.

Actually, Muscatine Power & Light has activated 1,500
subscribers since March, an average of 250 new signups per month. It hopes to have 3,000
by the system's one-year anniversary, public-relations and utilities manager Gary
Wieskamp said.

Meanwhile, cable executives are keeping a close eye on the
Muscatine system, since any signs that it's not attracting enough subscribers would
lend support to the industry's contention that municipal overbuilds are not
economically viable.

Wieskamp attributed scuttlebutt about the network's
performance to a recent board of directors meeting, during which he expressed frustration
that area residents had been slow to realize that they own the new telecommunications
utility.

"We're a municipal utility, just like the
electrical and water utility," he said. "I wanted people to understand that. Why
should they subscribe to another company when they own one that provides the same service?
But we're not disappointed in our performance. We are meeting our projections."

Local residents voted by a 94 percent margin last year to
authorize the creation of a municipal telecommunications utility that would compete
against AT&T Broadband & Internet Services.

However, Deb Blume, regional communications director for
TCI of Iowa, a unit of AT&T Broadband, said reaction to the MSO's system
improvements indicated that Muscatine is having problems attracting customers.

"[Consumers] are telling us that they're happy
with what we've done, and that they see no reason to switch," Blume said.
"So I would have to question the city's numbers and whether they're making
their projections."

TCI had upgraded its local network to 750-megahertz
capacity before the Muscatine system launched, adding several channels and introducing TCI
Digital Cable. It plans to roll out AT&T@Home cable-modem service in the fourth
quarter, Blume said.

"We came into this market with a mission: to provide
the best products at the best price. The early results show that people are staying with
us," she added.

Blume declined to say how the local overbuild has affected
AT&T Broadband's subscriber base.

Wieskamp, meanwhile, said Muscatine's analog service
-- which offers 67 expanded-basic channels for $25.75 per month, compared with 53 channels
for $23.84 for the TCI system -- has achieved 20 percent penetration.

A $12.95, 20-channel digital tier was running at 26 percent
penetration among 10,000 area households, he added.

After doing limited marketing while nodes were being
activated, Muscatine now plans more extensive advertising in the coming weeks, he said.

Billed as a "Reliable Neighbor," the goal is to
associate the telecommunications service with the local water and electrical utilities,
which have been serving Muscatine for more than 100 years, Wieskamp added.

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