POWER UTILITIES FILLING INTERNET SERVICE NICHE
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The conventional wisdom that small towns are the boonies in today’s communications boom is turned on its head in places like Glasgow, Ky., where nearly half of the 6,000 residents have high-speed Internet service at rates city slickers would envy.

In Glasgow, the local electric utility is offering speedy Web hookups for as little as $24 a month, plus 50-channel TV viewing for a mere $13.50.

In hundreds of small communities, communications services are coming from the local water, power or gas utility - outfits as familiar to citizens as the hardware store on Main Street.

Over the years, these utilities have discovered their networks of wires, plumbing or gas lines are handy, too, for offering cable television or phone service. Now they are getting in on the Internet as well.

While no federal law prohibits public utilities from providing this service, the telecommunications industry is hollering foul. “We feel that we shouldn’t be competing against the entity that regulates us,” said Steve Kipp of AT&T Broadband, which has challenged public utilities in a number of places.

Private companies say it is not fair for utilities to use tax dollars to operate an Internet service at a loss -as many do - or at a break-even cost that the industry could never hope to match.

The government, for example, can lay telecommunications equipment for free on its own land but could charge private companies millions to do the same, says Bill Bates of the United States Telecom Association, a phone lobbying group.

Municipal officials say if they did not bring Internet service to rural America, no one would, or at least not affordably. “Iowa is just not a big market,” says Patti Cale, energy services coordinator at the Iowa Association of Municipal Utilities. “If we are going to have state of the art service, it seems in some cases municipalities are going to have to be the provider.”

Private companies are not rushing in to places like Paragould, Ark., population 23,000, where the power company plans to supplement its cable and regular Internet services this fall with high-speed Web access for $35 a month. “Why should our communities do without until they decide they want to enlighten us?” asked Larry Watson, chief executive officer of City Light, Water and Cable in Paragould. People “are not going to wait 20 years for the Internet or other services we can provide.”

At least 357 public power systems offer communications services, according to the American Public Power Association. Eighty-two offer cable and 82 offer Internet service.

Officials contend fast connections for a small community are a necessity to attract business. In places where private companies already compete, utilities say their presence drives down costs.

Just days before the Electric Plant Board in Glasgow turned on its cable service, the existing company suddenly dropped its rates. Instead of charging consumers $14.95 for 26 channels, it offered 50 channels for $13.50.

“What 10,000 cities have in common is they all hate their cable operators,” said William Ray, the board’s chief executive officer. The competition proved so fierce that last year, the private cable operator asked to have its remaining subscribers bought out by the utility.

Similar results in other towns have prompted the private sector to seek legislative help. In nearly a dozen states, companies and industry groups have lobbied for laws that limit or bar public utilities from offering communications services, despite a 1996 federal law that sought to open the door for new competitors in the local phone and cable markets.

Arkansas utilities cannot sell dial-tone phone service to residents. Utilities in Texas are prohibited from offering telecommunications services, even indirectly through a third party. Florida law levies special taxes on telecommunications offerings from public entities, which opponents say ultimately raises consumer bills. At the same time, the telecom association says it wants broader federal legislation to ensure that government and private entities must abide by the same rules.

Cities have unsuccessfully petitioned the Federal Communications Commission to step in, and are challenging some state laws in court. They argue that the private industry measures are meant to block them from the market and are unnecessary because other safeguards are in place.

In many communities, residents have to vote to allow local utilities to expand into the telecommunications business. On top of that, utilities are typically overseen by an elected board or city council - bodies that are accountable to the public through elections, said Jane Dunn Cirrincione, a lobbyist for the American Public Power Association. Municipalities “are not getting into this on a whim. They are not getting into this to make money,” she said.

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