Magazine article Nation's Cities Weekly

A Few Towns Build Their Own Cable Companies: Some Local Cheers for 'Creeping Socialism.'

Magazine article Nation's Cities Weekly

A Few Towns Build Their Own Cable Companies: Some Local Cheers for 'Creeping Socialism.'

Article excerpt

Harlan, Iowa--In an America where free-enterprise advocates have routed their critics, few people would expect local governments to plunge into competition with the private sector in the fast evolving information industries. Yet that is what is happening in a growing number of communities.

From old mill towns like Holyoke, Mass., to port cities like Tacoma, Wash., to suburbs like Newnan, Gal, south of Atlanta, voters and local officials are telling their municipal utilities to go ahead and invade private-business turf, starting with the cable-television industry.

Residents of these towns are fed up with rising cable rates, lack of control over programming and the industry's slow pace at upgrading networks, according to utility officials. Increasingly, they also worry about the economic impact of long delays in getting residents and local businesses easy access to high-speed Internet links, inexpensive video-conferencing and other electronic building blocks of economic growth.

"The sentiment is that this is just as important as offering water," said Jeff Strane, a manager at Newnan's utility. "Atlanta is a tier-one city, but things they get there take years to trickle down to Newnan."

The movement seems to be strongest in Iowa. Early this year in Alta, 88 percent of the voters supported the creation of a municipal video and tele-communications network, despite a campaign by the local cable-television company, a unit of TeleCommunications, Inc., calling it "creeping socialism n The vote was 91 percent in favor in Spencer, even though the incumbent cable company, Triax Cablevision, outspent proponents 130 to 1. TCI, based in Englewood, Colo., adopted a low profile in the recent election in Muscatine, on the Mississippi River, where the vote was 94 percent in favor of public competition.

"People feel abandoned by large companies that are too busy merging and competing for business in other areas," said Robert Haug, executive director of the Iowa Association of Municipal Utilities.

TCI and other critics warn that innovations in technology are likely to make investments like Harlan's obsolete long before the debt piled up to finance them can be paid off. They argue that only densely populated cities can generate sufficient electronic traffic for competing video networks. And they say that the local governments will inevitably be drawn into disruptive conflicts over what citizens see on the public network and how they use it.

"When they sell these things to the public, they downplay the risks," said Tom Graves, the spokesman for the Iowa Cable and Telecommunications Association, whose 230 members include the major cable-television operators and telephone companies. In some cases, Mr. Graves said, public utilities enjoy special tax and finance breaks.

Cable companies have responded to the consumer revolt by cutting rates and improving local service. In Harlan, a quiet town of 5,000 surrounded by cornfields, that makes for some lively competition. Harlan spent $3.8 million to build a fiber optic and cable network that passes every home and business. It has signed up more than 1,000 cable customers in its first year, despite TCI's opposition.

Services the town's utility says it might add in the future include local telephone competition for the GTE Corporation, teleconferencing and home-security monitoring.

Despite worries that municipal utilities are out of their depth in information technology, Harlan residents so far see only benefits. Corey Nelson, one of Harlan's early Internet customers, was thrilled at taking just three minutes to download the latest version of NetMeeting, a chat-room program. It took a friend in Pennsylvania nearly an hour, he said. "And with this system, I don't use the phone line so I can still make or receive calls,n Mr. Nelson added.

"This is opening up the world to our kids," said Ken Sprague, the technology coordinator for the local school district, who can now simultaneously connect 290 students at three schools to each other or the Internet. …

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