Muscatine Power & Water

Published December 5, 2005

Dear Editor:

Muscatine Power & Water’s announcement that it projects a $1.7 million loss for its municipal broadband and cable TV operation in 2006 and will need to raise rates is unfortunate, but comes as no surprise to those who have followed the municipal broadband scene.

This September, The Heartland Institute issued a research report by Dr. Ronald Rizzuto, professor of finance at the University of Denver, that analyzed the financial performance of MP&W’s broadband operation since its inception, concluded that it would continue to lose money and that MP&W would have to raise rates.

MP&W was among those who attacked the report as anti-muni disinformation. In an Oct. 1, 2005, op-ed in the Muscatine Journal, Jay Logel, MP&W general manager, decried the report as “misinformation” and called Rizzuto’s prediction of a rate increase as “misleading and grossly inaccurate.” Further, Logel, said MP&W was “on target to meet our current positive operating and net income projections.”

Moreover, these comments came as other communities in Iowa were preparing to vote on whether to pursue municipal broadband initiatives of their own. Financial performance of these systems, and the true cost they impose on the community, was being hotly debated. By stating that its investment in a municipal system was “was and continues to be the right decision for Muscatine,” Logel and MS&W were urging other Iowa cities and towns to follow their example in sanctioning municipal-owned systems.

Now, just three weeks after the election, MP&W has shown that Rizzuto’s report, far from being misleading and inaccurate, was dead on. MP&W is indeed still losing money and will have to raise rates. It owes an explanation for this sudden reversal of fortune not just to the ratepayers in Muscatine, but to all those in Iowa who voted in favor of municipal broadband based on MP&W’s earlier statements about its own financial health.

Steven Titch

Steven Titch ([email protected]) is senior fellow – IT and telecom policy for The Heartland Institute, a national nonprofit organization based in Chicago, and managing editor of IT&T News, a monthly newsletter addressing technology and telecommunications policy issues.