Utility Feasibility Study (Municipal)
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MEMORANDUM
August 29,2005
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT: Municipal Communications Utility Feasibility Study
Attached is a disk containing the Municipal Communications Utility Feasibility Study
completed by Vernon Research Group, Virchow Krause & Company, and Columbia
Telecommunications Corporation.
A work session with the consultants for the Municipal Communications Utility Feasibility
Study has been scheduled for Monday, September 12, 2005 at 6:30 p.m. in the
Carnegie-Stout Library Auditorium.
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Michael C. Van Milligen
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cc: Barry Lindahl, Corporation Counsel
Jeanne Schneider, City Clerk
Cindy Steinhauser, Assistant City Manager
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MEMORANDUM
August 29, 2005
TO:
The Honorable Mayor and City Council Members
FROM:
Michael C. Van Milligen, City Manager
SUBJECT: Municipal Communications Utility
On August 15, 2005, the City Council voted to place the following question on the
November 8, 2005 ballot in response to a petition submitted by a citizen's group called
OpportunityDubuque:
"Shall the City of Dubuque, Iowa, be authorized to establish a municipal
utility to provide communications services, including but not limited to local
exchange telephone services, long distance telephone services, Internet
access services, and television services?"
The City has now received the results of a Municipal Communications Utility Feasibility
Study conducted by Vernon Research Group, Virchow Krause and Company, and
Columbia Telecommunications Corporation.
The study states, "... we recommend that the City of Dubuque consider offering a
wireless, high-speed Internet offering priced at or below $25 per month." The study also
states, "The Internet has changed the way we teach, learn, conduct business and
communicate. This transformation has just begun and as it continues to develop, the
Internet will become less of a luxury and even more of an integral part of our lives. In
order to ensure the development of the availability of high-speed Internet, municipal
involvement may be required."
The first step necessary for the City of Dubuque to be able to follow this
recommendation to consider enhancing communications services to the citizens and
businesses of Dubuque is to seek citizen approval for the authority of the City to
establish a municipal communications utility. After voter approval of the utility, the City
can explore issues related to timing and financing and partnerships that would make
such an endeavor economically feasible, should it be necessary.
The current projections for a wireless system indicate a five-year cash shortage of
$1,067,000. However, the cost to deploy fiber to support the proposed wireless network
is approximately half of the total $8 million implementation costs. If the City of Dubuque
acquires a long-term dark-fiber lease, it reduces the implementation costs, and may
allow positive cash flows to occur. McLeod USA has available dark-fiber and is willing to
negotiate a lease or purchase agreement with the City of Dubuque.
The City of Dubuque hired Vernon Research Group, in partnership with Virchow Krause
& Company and Columbia Telecommunications Corp., to conduct an in-depth and
objective market and technology feasibility study of the creation of a municipal
communications utility. Over 400 Dubuque residents and 100 businesses were
surveyed from June 29 through July 12, 2005. Residents were randomly drawn from a
sample acquired by the researcher from a professional sampling firm. Businesses were
randomly drawn from the entire list of Dubuque Area Chamber of Commerce members,
and are felt to be representative of all businesses in the area. Government and
education respondents were al~o contacted from a list of government and educational
users. Within the margin of error for the survey, the surbey does not show a loss over
the five year period. For the operation of wireless system, the survey shows a projected
$33,238 profit.
If the voters approve the referendum authorizing the City to establish a municipal
communications utility, the taxpayers will be completely protected from any financial
exposure. In order to obligate the City to any financial commitment for a municipal
communications utility, a second referendum requiring a 60% voter approval will be
necessary. Currently, there is no intent to seek such a referendum or to obligate any
City funds. Instead, the plan is to provide additional communications services to the
citizens and businesses of Dubuque by seeking public/private partnerships and timing
the provision of additional services, should that continue to be necessary, with
advances in technology and decreases in the cost of electronics to stage the provision
of services in an affordable fashion.
The preferred outcome, of course, would be that Qwest and Mediacom would provide
state-of-the-art, affordable, universally available services to the citizens and businesses
of Dubuque. Voter approval of a municipal communications utility may provide and
incentive for these firms to provide such services.
The City of Dubuque has a history of providing competitively-priced utility services:
. The City of Dubuque has the second-lowest water rate of comparable Iowa cities.
The highest-ranked city-Iowa City at $30.34 per month-is 119% higher than
Dubuque's rate and the average of these other cities-$19.03 per month-is
39% higher than Dubuque.
. The City of Dubuque is tied for second-lowest sanitary sewer rate of comparable
Iowa cities. The highest-ranked city-Iowa City at $31.82 per month-is 121%
higher than Dubuque's rate and the average of these other cities-$19.03 per
month-is 32% higher than Dubuque.
· The City of Dubuque has the lowest monthly refuse rate of comparable Iowa
cities. The highest-ranked city-Ames at $20.50 per month-is 136% higher
than Dubuque's rate, and the average of these other cities-$13.27 per month-
is 53% higher than Dubuque.
· The City of Dubuque has the fourth-lowest stormwater utility rate in the state.
The highest-ranked city-Des Moines at $5.83 per month-is 226% higher than
Dubuque's rate and the average-$2.32 per month-is 30% higher than
Dubuque.
OpportunityDubuque has petitioned the City Council to place the question of the
authority of the City to establish a municipal communications utility. In its petition,
OpportunityDubuque said:
"OpportunityDubuque is a citizen led movement helping our community
learn about a communications utility as essential infrastructure. The goal
of OpportunityDubuque is to help educate our citizens regarding this
important topic, and to take the first step by establishing a
communications utility via a referendum vote this November 2005."
"OpportunityDubuque does NOT currently support any plans to finance,
build or deploy a communications utility. Rather, we are working to ensure
that our community has the OPTION to do so should it be proven feasible
and appropriate. Establishing this logical extension of local government
(the utility) will merely allow the community of Dubuque to further study,
assess and investigate whether the construction and/or operation of such
a utility is indeed feasible and appropriate for our community."
Mediacom and Qwest have combined forces to lobby federal and state legislators and
local communities to inhibit the right of citizens to form a municipal communications
utility. The vote in November 2005 may be the last chance that the citizens of Dubuque
have to create an incentive for Mediacom and Qwest to provide state-of-the-art,
affordable, universally available communications services by authorizing the City to
establish a municipal communications utility.
USA Today recently interviewed the Chief Executive Officer of Nextel, Tim Donahue,
who is forming a strategic partnership with Sprint. Donahue was quoted as saying
"Wireless broadband is coming, and it's coming fast." In a separate article from Knight
Ridder Newspapers, Internet television was described as "the biggest money-making
portal of all."
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However, apparently Mediacom and Qwest think cities like Dubuque already have
adequate communications services. In an August 21, 2005 Chicago Tribune article,
Max Phillips, Iowa President of Qwest Communications, said, "They propose building a
four-lane highway to every home in town, when what they really need is a sidewalk."
In the same article, Charles King, Senior Vice-President of Mediacom Communications,
said that he thinks the spread of municipal utilities is wrong, while he admits, "Many of
these communities are struggling economically."
Without the possibility of competition from a municipal communications utility,
Mediacom and Quest will continue to provide Dubuque with a sidewalk instead of a
four-lane highway.
The City Council has adopted five year goals that include as a goal "Improved
connectivity, transportation and telecommunications." The City Council also has
adopted Opportun"ityDubuque as a priority for this year.
I respectfully recommend Mayor and City Council support of a resolution urging citizens
to support the ballot question authorizing the City of Dubuque to establish a municipal
communications utility.
(YzJ ~rJi_
Michael C. Van Milligen
MCVM/jh
Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
Randy Gehl, Public Information Officer