THE TRUTH
about Muscatine Power and Water’s Communications Utility

History of Muscatine’s Municipal Communications Utility
In 1996, a community task force headed by the Muscatine Chamber of Commerce and the Muscatine Development Corporation completed a study indicating that Muscatine's residents were unhappy with Muscatine's current communications providers, Qwest and TCI. Residents also were concerned that the current providers would not install high-speed data capabilities in Muscatine because it is a relatively small market The task force presented their findings to our Board and asked our Trustees to consider becoming a communications utility.

The task force identified the following key components as to why MP&W should become a communications utility:

1. To support economic development in Muscatine, including industrial, commercial and residential.
   • A greater part of revenues will remain in Muscatine
   • A municipal system will provide competition for existing communication providers and spur providers to deploy additional services to Muscatine
   • A communications system is a necessary part of doing business. It allows for exchange of information. It is "required infrastructure," the same as municipal streets, fire protection, electricity, water and sewer services.
   • A state-of-the-art computer networking and enhanced CATV system will be provided with the new municipal system.
2. To enhance the "Quality of Life" in Muscatine by providing improved integrated communications services.
   • The municipal communications utility will be operated for the greatest benefit of the people of Muscatine. Communications services will be available to ALL residents of Muscatine.
   • Competitive pricing will result in lower rates to allow more citizens to take advantage of available services. This high level of quality of service at a competitive price will allow for more consumer disposable income.
   • This is a win/win situation for our citizens as services in conjunction with pricing are very important to their daily lives.
   • The potential exists for MP&W to enter the telephony market. This should encourage existing competition to improve the level and quality of service currently provided in Muscatine.
   • The MP&W communications system will be a multiple user application system.
3. To enable interpersonal networking capabilities throughout the entire community through the use of higher speed technology.
   • The MP&W system will provide a communication system that will be capable of linking centralized functions, thereby allowing for economies of scale for all interested parties.
• Two-way communications opportunities will be provided from the home or business without tying up a phone line.
• The system will provide for the 2-way video capabilities as the next technology in Muscatine for businesses and schools.
4. To support MP&W needs to be competitive in a deregulated environment.
   • The municipal system will allow MP&W the opportunity to expand its services and provide to its customers, a Municipal Area Network, high speed data services and cable modems, Internet access, E-Mail, enhanced cable TV, automatic meter reading, load management, automated billing, real time pricing and video conferencing.
   • The municipal communications system will allow for MP&W and customer interface to be expanded to the fullest potential.
5. To allow for local management and determination of the services to be offered, technologies to be provided, communication infrastructure to be installed and the level of state-of-the-art technology.
• The new municipal utility will allow for local control through citizen input through the Board of Water and Light Trustees
• The municipal communications utility will be a not for profit organization
• A municipal system will provide services and opportunities currently not available nor cost effective for a private entity to provide.
• The Board of Trustees has a history and a strong commitment to the citizens of Muscatine of being responsive to community needs.
• It will be a municipal system that will support new communications applications.
• A municipal system will allow for the newest technologies to be brought into a community in a prudent manner.

Impact on Rates of Other Utility Services

Claims that Muscatine is raising electric and water rates to subsidize the unforeseen costs of operating an expensive communications utility are grossly inaccurate. Since we've been in the telecommunications business our Electric Utility has had only one price increase. That increase of 4.6% occurred in September of 2002. This increase was due to required capital expenditure requirements as well rising operating and maintenance cost obligations. Prior to 2002, the last increase was 3.7% in 1995, and prior to that we had a 7% decrease in 1993.

Our Water Utility has had biennial revenue adjustments that date back to the early 1990's. With our Water Utility being debt free, these revenue increases are also necessary to meet on-going operating expenses and capital expenditure requirements.

Electric and Water price increases to subsidize our Communications Utility? Not even close to being the truth.

Communications Utility Financial Performance

One of the most common financial standards used in the telecommunications industry is “EBITDA” – Earnings, Before Interest, Taxes, Depreciation and Amortization. A positive EBITDA means a company is producing revenue (cash) to cover the daily operating expenses of running a business. We turned a positive EBITDA in 2001, two short years from our CATV launch in March, 1999.

The anti-municipal campaign also states that municipal-owned communications systems results in a negative rate of return for taxpayers. In Muscatine there has not been any tax dollars spent in the establishment and operation of our Communication Utility, nor will there be. Financing is based strictly on a loan from our Electric Utility with a very favorable return on investment.

Savings For Consumers

When Muscatine launched our Internet service in late 1999 we also launched our AdvantageOne program whereby we provided our customers with a bundled price discount on their Electric , Water and Communications services. The amount of the discount was dependent on the amount of services they purchased from us. This program was discontinued June 30 2004 as a result of the passage of the Mediacom Bill. Savings in the form of discounts to our customers from inception of the program until the end of June 2004 amounted to approximately $1.6 million.

Since our acquisition of Mediacom in early 2003 our CATV customers have saved $2,140,771 as a result of our competitive and reasonable pricing. This assumes our customers would have been served by Mediacom if not by us, and paying the same price for basic/expanded basic services as Mediacom customers in the Quad-Cities. From a high speed cable modem perspective our customers have saved $255,033 in the past eighteen months as compared to customers in the Quad-Cities area with similar service.

Success Stories

One of our first Municipal Area Network (MAN) success stories occurred early in 1998, (even before we had our entire communications infrastructure installed) after we were approached by two Muscatine industries wanting to take advantage of our MAN services. HON, or first MAN customer transferred a test file that took over five minutes using traditional lines, but less that 30 seconds with our direct fiber optic connection,

In terms of utility efficiencies, we use our communications infrastructure to provide Automatic Meter Reading, (AMR) for several of our industrial and commercial customers. This also allows us to provide value added information for our customers. We're also in the process of installing a new SCADA system and will be utilizing our communications infrastructure to provide more bandwidth and speed for monitoring purposes, providing a high speed data link between our A/O Center and our Generation site, as well as a co-link phone system between our power plant units.