A spokesperson for the Cedar Falls Utilities says a report that’s critical of city-owned cable and internet services is inaccurate. University of Denver finance professor Ronald Rizzuto says he wrote the report after studying the systems in Cedar Falls, Muscatine and Spencer for the Heartland Institute. Betty Zeman, the marketing manager of the Cedar Falls Utilities, says, “The Heartland Institute is actually a special interest group that advocates privatization of government services, and they don’t disclose their funding sources. So, we think it’s reasonable to assume that they were funded by private cable and telephone companies to produce this study.”
Rizzuto says citizens should be wary of municipal cable and internet services because they aren’t run like a business and offer their products at prices below market value. Zeman disputes that. She says, “That’s absolutely not true, and I would encourage anyone to look at our financial reports which are reviewed by an independent auditor and open to the public. What you’ll see if you’ll look at those statements is that are revenue was about seven million dollars and we brought more than a million dollars to the bottom line. So I think that the public understands pretty well that you don’t earn a million dollars by charging rates that’re below cost.”
Rizzuto also says that money is taken from the city’s electric utilities to subsidize the operation of the communications utility. Zeman again says that’s not true. She says no tax revenue and no revenue earned by the electric, water or gas utility has ever been used to pay for the communications utility. She says the communications utility does have a loan from the electric utility at the market rate.
Zeman says Cedar Falls communications utility began making a profit by its third year of operation in 1998. She says that profitability has continued.
She says, “We earned a net profit of 981-thousand dollars in 2003, we earned more than a million dollars in 2004 an we’re on track to ear more than a million dollars this year. So the charges that our utility is not profitable are simply wrong. Now it is true that you don’t make money the first couple, three, maybe four or five years in this business. Because you have to you have to spend a lot of money up front to build your plant before you can start signing up customers and earning revenue. So it does take a few years for earnings to catch up.”
Zeman says they’ve been able to roll out some services, such as high-speed cable modems, before their private competitors. Zeman says their regular prices are less than their competitors and below the statewide average cost, while the company is profitably run.