Iowa Towns in Internet’s Fast Lane

It’s a long way from here to Hollywood, which is one reason Jim Mudd likes this town of 35,000.

His marketing company, the Mudd Group, makes TV commercials, video e-mails and website content that it ships to TV stations and customers around the country over communications connections as fast as anything available in Chicago or Los Angeles.

“Many TV commercials once made in California now come from Canada because it’s cheap,” Mudd said. “In Iowa, we can make them even cheaper.”

The Mudd Group uses high-speed fiber-optic lines supplied by the Cedar Falls Utility, a municipal operation that offered affordable high-speed data connections years before the local cable TV operator or phone company did.

Municipalities from Lafayette, La., to Philadelphia are moving to provide residents with broadband connections. The initiatives, which proponents say boost the local economy, are spurring intense battles across the nation with cable and phone companies, which believe the competition is unfair.

The issue is whether it’s appropriate for government entities to use taxpayer money to invest in infrastructure that is also a commercial technology because it’s offered by cable and phone companies.

These commercial providers have taken the fight to the Iowa Legislature, where this spring they nearly won passage of a law making it more difficult for cities to build and finance communications networks. Meanwhile, a group called Opportunity Iowa is urging towns across the state to hold elections this fall to establish municipal utilities for enhanced communications technology, so they will be in place should state lawmakers enact a future ban.

Municipalities like Cedar Falls jumped into action a decade ago, when community leaders perceived that information infrastructure would be vital to economic success in the new century. They decided that if left to market forces, small hamlets would be among the last to get connected to the information superhighway.

They also reasoned that Iowa, which has one of the nation’s most literate populations and lowest costs of doing business, should get the intelligent work that big companies outsource to India and other foreign countries.

Max Phillips, Iowa president of Qwest Communications International Inc., said the interests pushing the community fiber-optic programs are misguided because people should focus on the speed and quality of service, not the medium that carries it.

“They propose building a four-lane highway to every home in town,” Phillips said, “when what they really need is a sidewalk.”

But for small towns struggling to connect to the modern communications system, getting left behind is akin to being passed over as a train stop when the nation’s railroads were built.

Mudd, for instance, who refers to his company as “115 people working together in a cornfield,” said optical fiber from the Cedar Falls Utility means that “we can enjoy the peace and quiet and tap into the great Iowa work ethic” while doing business nationwide.

Nearby, in the Cedar Falls industrial park on the edge of town, another business, Woolverton Printing Co., uses fiber-optic lines to receive files that contain entire catalogs to be printed. The firm sets up each job and sends proofs to the customer electronically for approval, said David Hartley, Woolverton’s sales manager.

“A big part of our business is direct mail,” Hartley said. “The customer wants a turnaround of 24 to 48 hours. We don’t have time to send stuff by FedEx.”

Almost 200 miles away, Spencer, a town of 11,000, offers high-speed Internet service that is keeping some downtown merchants healthy, said Tim Frank, who operates an online marketing firm.

A Spencer shoe store and a men’s clothing store are selling more high-end merchandise on the Internet than in their downtown locations, he said.

Spencer’s municipal utility started offering high-speed Internet in 2000. It sells a business 5 megabits a second for about $60 a month, Frank said. Before the municipal service was available, getting a T-1 line from the local phone carrier, Qwest, cost as much as $1,200 a month, he said.

The improved and cheaper service from the municipal utility has many Spencer merchants looking at e-commerce, he said.

“I just put a jewelry store and a piano store online last month, and both got sales already,” Frank said. “I bet we’ll be putting new clients online at the rate of one a month for the next year.”

In Des Moines, Charles King, senior vice president with Mediacom Communications Corp., is unimpressed.

King said his firm serves more than 300 Iowa communities, including Spencer, with cable TV and high-speed Internet. It spent more than $1.8 billion acquiring, upgrading and interconnecting all these cable systems to give customers in small towns the same state-of-the-art service enjoyed by urban residents, he said.

The Spencer utility built its communications system with money borrowed at favorable rates from its electricity and water operations, King said. It uses profit from its long-distance telephone access charges to subsidize cable TV and Internet operations, which has caused Mediacom to reduce its cable charges to remain competitive.

In the future, King said, Mediacom will begin offering Internet telephony to counter Spencer’s phone-income advantage.

Opportunity Iowa’s campaign to spread municipal communications utilities throughout the state is wrong, King said.

“Opportunity Iowa spreads FUD -- fear, uncertainty and doubt,” he said. “Many of these communities are struggling economically. Opportunity Iowa comes in to tell them that fiber is what they need to be competitive. It wants to promote building stuff that’s already there.”

Opportunity Iowa is headed by Clark McLeod, an entrepreneur who founded McLeod USA, a phone carrier based in Cedar Rapids with which he is no longer affiliated. McLeod also runs Fiber Utilities of Iowa, a firm that will build and operate fiber systems for municipalities that want them.

McLeod said that over the years, 55 Iowa communities have held elections on the question of establishing communications utilities, and 51 cities established such utilities, but only about 20 actually provide communications service.

McLeod estimates that about 45 community groups affiliated with Opportunity Iowa are looking at whether to put the question of establishing a municipal utility on the ballot in November.

Even among Iowans who aren’t eager to start a municipal broadband utility or connect every home and business with fiber, there is appetite for more technology than the private sector is offering.

In Marshalltown, a town of 26,000 in central Iowa, business leaders were looking for a way to attract new businesses, and they hit upon offering free wireless broadband downtown. The local economic development organization spent $35,000 to buy equipment, and the county pays monthly Internet fees.

The service began two months ago and already is getting more than 1,000 hits a month.

A small accounting firm started last month JULY in downtown Marshalltown by Mike Steffen and his wife uses the free Wi-Fi connection for its computers.

“We really need high-speed connections when we’re preparing income tax returns,” Steffen said Steffen. “It’s a real help to a start-up business.”