Seek the Truth About Competition


Let me first state that municipally provided telecommunications service is a legitimate, thriving and viable business venture. The 1996 Cable Act allows "any entity," including a municipality, to enter the telecommunications business.

The Cable Act's intent was to encourage head-to-head, wire-for-wire competition, which would allow the market place to improve customer service, implement timely technological upgrades and keep monopolistic pricing in check.

Should a municipality compete against a private provider? This question can lead to a debate over philosophical beliefs. MSOs complain that such competition advances a "creeping socialism" that goes against the American free-enterprise system.

In the present cable telecommunications world, the "invisible hand" that keeps the monopolist in check doesn't exist. The Cable Act of 1992 tried to reign in and regulate the growing monopoly actions and attitudes of the cable companies, and to provide some level of consumer protection. The result of this past regulation is practically nonexistent today.

What is lost in today's debate over municipal providers is the fact that past practices of some MSOs are to blame for the public outcry for competition. Operators were draining the rural "cash cows" which were providing in some cases better than 50% cash-flow margins. In the early 1990s, many smaller rural communities decided to begin taking an active role in making the technological revolution a reality in their communities rather than wait another 10 years for their franchise to expire.

While many communities have opted to provide their own competitive services, others are drafting service standards that force monopoly incumbent providers to improve their services.

The California Public Utilities Commission drafted a "Telecommunications Consumer Bill of Rights." In this monopoly-dominated market, consumers want choice — the ability decide who will provide them with services. It is a choice that should be respected by the industry and lawmakers.

Now that there are many successful municipal telecommunication systems in existence, MSOs have begun touting the fallacy of municipal failure and how such systems are "risky business ventures," "huge tax burdens," "playing by unfair franchise rules" and "enjoying huge municipal tax advantages." A new tactic is to claim that a "level playing field" doesn't exist.

I would agree that there isn't a level playing field; that the large MSOs have the advantage of a field tilted in their favor. The advantages come in the form of lower programming rates, better bulk-buying opportunities, operating and technical experience and the ability to go below cost to support a system in a competitive market.

Independence Light & Power follows the same franchise agreement as our competitor, pays franchise fees, pays the city a fee in lieu of taxes, never uses tax dollars and utilizes synergies that naturally occur when one also runs an electric utility.

It appears that municipal overbuilds are so successful here in Iowa, private providers have attempted to persuade legislators to pass a law that would stop any new municipal competition and limit existing providers from implementing technological advances in the future. This bill was defeated, as legislators were able to see past this monopolistic ruse to eliminate the only true head-to-head, wire-for-wire competition that exists here in Iowa.

Without strict government regulations to control telecommunications providers' monopoly power, competition from municipal telcos is the only viable option available to many communities.

If someone is seeking the truth, they will find municipal telecommunications providers are legitimate, self-sustaining, and real competitors that have won customer loyalty through responsive customer service, timely deployment of technological advances and reasonable pricing.