In the News

Published January 1, 2006

Muscatine, Iowa Muni Broadband Forecasts $1.7M Shortfall in 2006

In December, Muscatine (Iowa) Power & Water (MP&W) forecast a net loss of $1.7 million in 2006 for its municipal broadband and cable TV operation and said it expects to raise cable rates 7.8 percent at some point this year.

The report contradicted published statements in October by Jay Logel, general manager of MP&W, that the municipal operation was on target to make positive net cash flow goals for the coming year. Logel had dismissed as “misleading and very inaccurate” a Heartland Institute report that predicted both the shortfall and the rate increase.

Logel’s statements came in the run-up to the November elections, which saw municipal broadband initiatives on the ballot in 32 Iowa communities. Seventeen of those communities approved referenda authorizing their respective municipalities to explore broadband plans. None of them authorized any spending beyond the cost of feasibility studies.

The Muscatine system was one of three Iowa municipal broadband systems profiled by Dr. Ronald J. Rizutto, professor of finance at the University of Denver, in “Iowa Municipal Systems: The Financial Track Record,” released by The Heartland Institute in September. (See “Report Reveals Hidden Costs of Iowa Muni Broadband,” IT&T News, November 2005.)

New Orleans Promises Free WiFi

New Orleans will deploy free wireless broadband citywide as it rebuilds in the wake of last fall’s Hurricane Katrina. The city will own and operate the system, built largely from equipment donated by Tropos Networks, a major supplier of WiFi networking gear.

Embattled New Orleans Mayor C. Ray Nagin sees the effort as an attempt to jump-start recovery by making living and doing business in the city as attractive as possible. Critics, including Ted Balaker, an urban policy analyst at the Reason Foundation, say that while WiFi will bring a glitzy cachet and some badly needed positive media coverage to the recovery effort, New Orleans should be focusing on more critical priorities, such as securing federal funding for stronger levees.

Telecom Tax Legally Vulnerable

Companies increasingly are winning court challenges to the 3 percent federal excise tax on telecommunications services, Forbes reported in November. The latest victory came in October, when a district judge ordered the Internal Revenue Service to refund Hewlett-Packard $6.2 million, plus interest, collected under the tax, which was passed in 1898 for the purpose of raising funds for the Spanish-American War.

Since early 2004, seven federal district court judges and one appeals panel have ruled the tax has been wrongly collected. In addition to HP, OfficeMax, Honeywell, AOL, and Amtrak have won cases, according to Fortune. More big companies, including Wal-Mart, Home Depot, JPMorgan Chase, and United Technologies, have filed suit.

The IRS is appealing all seven district court rulings.

Wireless Industry Accounts for $92 Billion of GDP in U.S.

The wireless industry has become a strong driver of the U.S. economy, comparable to the U.S. automobile industry, according to an international market analysis firm.

In a study commissioned by the Cellular Telecommunications Industry Association (CTIA), the U.S. wireless industry trade group, U.K.-based Ovum found 3.6 million jobs were directly and indirectly dependent on the U.S. wireless telecommunications industry in 2004. That year, the wireless industry generated $118 billion in revenues and contributed $92 billion to the U.S. Gross Domestic Product (GDP), a figure comparable to the U.S. automobile industry’s impact on the economy.

Over the next 10 years, Ovum predicts, the wireless industry will create an additional 2 to 3 million new jobs, adding a cumulative additional $450 billion in GDP.

The report also finds U.S. consumers get more value for services than consumers in Europe. For example, if the average wireless consumer in America spends $54 per month on wireless voice and data services, that consumer would pay approximately $125 for the same services in the European Union.

Steve Titch ([email protected]) is senior fellow – IT and telecom policy for The Heartland Institute and telecom policy analyst for the Reason Foundation.