MYTH: Municipal communications utilities have an unfair advantage over private companies.

FACT: State laws keep the playing field level between municipal and private providers.

Over the past several years, the Iowa legislature has repeatedly affirmed support for the existence of municipal telecommunications utilities.

Support has come with conditions demanded by private cable and phone companies to “level-the-playing- field.” Most of the conditions that limit municipal telecommunications utilities are contained in section 388.10 of the Iowa Code. Many of the charges leveled against municipal telecommunications utilities allege inequities that have been dealt with in the law. We believe it is unethical for the opponents who successfully sought these legislative restrictions to claim discrimination as though they didn’t exist.

1999
In 1999, the Iowa legislature clarified that a city could establish a municipal telecommunications utility. (1999 Iowa Acts ch. 63) The bill was an “agreed to” bill between the municipal utilities and the telephone companies. All of the charges that are being leveled at cities have been addressed in this and subsequent legislation.
The 1999 legislation did the following:
•Stated that it was the intent of the legislature to specifically provide that cities in Iowa can own and operate telecommunications systems.
•Amended the definition of city utility in section 362.2, subsection 6 to include “telephone or telecommunications systems or services offered separately or combined with any system or service specified in this subsection or authorized by other law”.
•Allowed for protection from open records/ meetings law for the discussion or release of “competitive information”.
•Created section 388.10, imposing provisions that the private utilities claimed would “level-the-playing- field” between them and municipal utilities. The first series of prohibitions were all aimed at preventing the city from cross-subsidizing from one city service to another.
a. It prohibited the use of city General Fund money AND any funds generated from any other utility service for the ongoing support of the city system.
b Required that the city telecom utility must pay reasonable cost for the use of any city facility, equipment or services.
c. The city can’t offer reduced utility services if the customer accepts telecommunications services from the city utility. i.e. you can’t offer cheaper water rates to customers if they also take the telecommunications service.
• Section 388.10 also required to city to do following:
a. Prepare and maintain records showing the FULL cost accounting for the system, including amount and source of capital for initial construction or acquisition.
b. Adopt rates that reflect the “actual cost” of providing the service.
c. Be subject to ALL the same requirements of the city that another provider would be subjected to.
• Section 427.1 was amended that specifically required that “facilities of a municipal utility that are used for the provision of local exchange services” are subject to property tax.
• Section 476.1B was amended to require that the municipal utilities providing local exchange service must comply with certain IUB regulations.

A separate bill passed in 1999 that codified an agreement between the Iowa Cable and Telecommunications Association and the municipal utilities. It gave private cable companies their version of a level playing field. Iowa Code section 364.3, subsection 7 was amended to require that a city which operates a cable communications system must manage the right-of-way on a competitively neutral and nondiscriminatory basis. The city must pay the same fees and charges and comply with other requirements as would be imposed on any other cable provider. 1999 Iowa Acts, ch. 33. This legislation followed a 1998 law that generally restricts local government authority in regulation of public rights-of-way. Section 480A.3 specifically sets forth the fees that can be imposed. Section 480A. 5 provides for arbitration with local governments in the event of a dispute. The legislation standardized the fees that local governments could charge for use of the right of way and provided a process for dispute resolution. 1998 Iowa Acts ch. 1148.

2004
In 2004, two separate bills were passed and agreements worked out on both bills.
• The first was brought forward by Mediacom and for all practical purposes amended the provisions of section 388.10 (from 1999) to include the provision of cable services. Prior to that time, the cross-subsidization and disclosure requirements applied only to a city utility offering local exchange services. 2004 Iowa Acts, ch. 1048.
• That legislation also provided that a city must have an annual audit to determine whether the city is in compliance with the provisions of section 388.10.
• The second bill was brought forward by the Iowa Telecommunications Association, consisting of the private telephone providers. This bill also required an audit of compliance with section 388.10 and required that all audit information be subject to the open records requirements of chapter 22. 2004 Iowa Acts, ch. 1022.
• The bill imposed a sales tax on goods, wares or merchandise sold to or services furnished in conjunction with the provision of municipal communications services.