State Bill Challenges City-Owned Broadband Utilities

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Iowa Senate Study Bill 3009 (SSB 3009), proposed last month by Senator Dan Dawson, chairman of the Iowa Senate Commerce Committee, threatens access to financing for municipal broadband networks and challenges competitive pricing. The bill removes the current provision allowing municipal utilities to establish market-based prices for competitive telecommunications services and adds a provision prohibiting cities from marketing or bundling other products or services in addition to telecommunications services.

Opposing the bill are the Waterloo Telecommunications Utility Board, Cedar Falls Utilities (CFU), the City of Decorah, and the Iowa Association of Municipal Utilities who, according to The Courier, say the bill is unfair to cities in competition with private providers. 

“We want to make sure we’re competitive,” said Mike Litterer, Director of Customer Service and Business Development for CFU.

Tim Whipple, legal counsel for the Iowa Association of Municipal Utilities, said the elimination of market-rate pricing would hamstring a municipal system facing a rate battle with a private service provider. “Sometimes, in a competitive scenario where an incumbent service provider is providing steep discounts in an attempt to lure customers, our members need to be able to temporarily drop prices to compete,” Whipple said in an email.

“The big incumbent providers can unfairly leverage customers in other communities (they serve) to subsidize steep discounts in a municipal utility town,” he added. “If our members can’t lower their prices to compete, it’s simply not fair.”

Mediacom Communications, a national cable company that offers connectivity to nearly two-thirds of Iowans, supports the bill and argues that regulations are necessary to prevent taxpayers who are not using the municipal communications services from having to subsidize them.

Mediacom spokesman Thomas Larsen, said, “Even if you don’t use the telecom’s services, you are being forced to subsidize it through your electric rates. We believe Senate Study Bill 3009 helps to close that loophole.”

Although companies like Mediacom suggest SSB 3009 will level the playing field, Whipple argued that SSB 3009 is actually intended to make it more difficult for municipal broadband networks to compete with private companies. “City utilities are not really a threat to the big incumbent providers as long as those providers provide good service at fair rates,” he countered.

The Courier reported the bill is currently with the Committee on Commerce Subcommittee waiting for a hearing.

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