Despite state laws requiring referenda and public reporting, Iowa is home to successful municipal networks, which have been undeterred by these potential stumbling blocks. A bill in the Iowa Senate, however, may present a new barrier discouraging new networks in places where Iowans need it the most. In communities where Internet access companies aren't offering the caliber of services residents and businesses need, the proposal would restrict the possibility of competition.
Earlier this month, State Senator Dan Dawson, R-Council Bluffs, introduced Senate Study Bill 3009, which is supported by Mediacom, a national cable company that offers connectivity to nearly two-thirds of Iowans. The bill threatens cities’ access to financing for municipal broadband networks and challenges their ability to set competitive prices. This would impact cities with long established networks, like Cedar Falls and Coon Rapids, as well as communities that have recently decided to move forward with broadband plans, like Fort Dodge, Vinton, and Waterloo.
Tim Whipple, General Counsel for the Iowa Association of Municipal Utilities, which opposes SSB 3009, wrote in an email:
While community-owned broadband may not work for all communities, cities should have the opportunity to begin providing these services without having undue restrictions placed on them . . . especially in areas where incumbent providers aren’t properly investing.
Bill Brings New Barriers
Senator Dawson chairs the state Commerce Committee and introduced SSB 3009 as a proposed committee bill.
As currently written, the bill would make a number of additions and changes to the current state law governing municipal telecommunications utilities, severely limiting cities’ financing options. Notably, it would prohibit a loan from the general fund or another municipal utility, such as the electric department, to the municipal broadband network at an interest rate lower than the “prevailing market rate.” Currently, arrangements like this are allowed as long as the city is not supporting or subsidizing the network’s ongoing operations. SSB 3009 would also set an upper limit on interest rates for outside financing as well as prevent a municipal broadband utility from accessing a city’s facilities and services at a lower cost (and vice versa).
Further provisions in SSB 3009 would prevent cities from bundling telecom services with other utilities and remove municipal authority to offer market-based prices for Internet access, possibly raising subscriber costs.
“Anti-Competitive and Anti-Consumer”
Iowa state law already requires local governments to make some broadband utility information public and to hold referenda before starting a new municipal utility or issuing bonds to build a community network. Though many cities in the state have overcome these hurdles and now offer high-quality Internet access to their communities, the proposed changes could hamstring both existing and planned municipal broadband networks.
SSB 3009, which Whipple described as “anti-competitive and anti-consumer,” could raise prices for subscribers and drastically limit cities’ ability to finance the construction or expansion of a community network. “City utilities don’t have shareholders or access to venture capital. The only tools they have for financing are public bonds,” Whipple pointed out. “City utilities in Iowa need more financing tools, not fewer.”
Though companies like Mediacom may suggest these changes are necessary to 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.
As of this writing, the bill is in the Committee on Commerce Subcommittee waiting for a hearing. Members of the Subcommittee are Vice Chair Carrie Koelker, Tony Bisignano, and Roby Smith. Read the full text of SSB 3009 below or follow the action on the Iowa Legislature’s website.
Image of the Iowa Senate by Miles530 [Public domain]