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The face of competition: Four fight for biz in Harlan, Iowa

Thu, 03/28/2002 - 7:00pm
Chris Clayton

Copyright 2002 Knight Ridder/Tribune Business News

Copyright 2002 Omaha World-Herald

Omaha World - Herald…03/28/2002

From LexisNexis

Many rural communities have few options when it comes to phone, cable or Internet service.

But Harlan has a communications smorgasbord.

Right now, the town has three phone companies, three high-speed Internet providers and two cable TV companies. Each has big plans, but there are doubts about how a town of 5,300 can keep dividing its market among new service providers.

"You can only divide the pie so many times," said Tom Conry, general manager for Farmers Mutual Cooperative Telephone Co.

Until last fall, Harlan residents had just one company that offered local phone service — Iowa Telecom, based in Newton, Iowa. That changed in October, when the city-owned Harlan Municipal Utilities began offering phone service along with cable TV and high-speed Internet access.

In November, a Shelby County company moved in. Farmers Mutual Cooperative Telephone Co. has been in business for 97 years in surrounding rural Shelby County, but since at least the 1950s, the cooperative had been shut out of Harlan. By controlling the rural area, Farmers Mutual had a service area shaped like a doughnut around the city of Harlan. Last November, Farmers Mutual moved into Harlan.

"We were here and decided to fill the doughnut hole," Conry said.

Plans already were rolling for Harlan Municipal to enter the phone market when GTE sold its Iowa assets in 2000 to Iowa Telecom, which serves 420 towns in Iowa but none quite like Harlan.

"They are unique in the fact there are three local telephone competitors in that market," Julie White, a spokeswoman for Iowa Telecom, said of Harlan. "I'm not aware of any other situation in the state where there are three."

Tom Gaffigan, general manager for Harlan Municipal, said the town's 2,400 households won't be able to support three phone companies for long.

"I don't think the mathematics are there to support profitability," he said. "I don't see three of us serving a town this size."

Last week, Harlan's local newspaper held a home show. All three telephone companies, along with cable TV provider Mediacom, had booths. Local media also are getting a steady advertising boost.

Along with phones, Farmers Mutual, Harlan Municipal and Iowa Telecom all offer some type of high-speed Internet access, either through DSL or cable lines. Each company has its own system of broadband pipe or fiber-optic service.

Mediacom, which bought AT&T's Iowa cable businesses last year, is spending $300 million over the next three years in Iowa to upgrade service.

Harlan was one of the first towns to get the upgrade. The cable provider also will become the town's fourth high-speed Internet provider later this year.

"We will deploy it in Harlan this summer," said Debora Blume, a spokeswoman for Mediacom.

The competition is good for consumers, who are receiving discounts and competitive pricing. But the battle already is taking a toll on the businesses.

Last week, Harlan Municipal borrowed $400,000 from its gas and electric divisions for its phone-service program. The loan was needed because setbacks in engineering, legal disputes and portability — the ability of people to switch phone service but keep their same number — forced the company to delay offering phone service.

Harlan Municipal's board of directors already has talked about pulling out of the phone business. But if the utility were to walk away, it would still have a large capital investment to pay off, Gaffigan said. The utility couldn't expect any type of buyout from a competitor, either, he said, since the market already is saturated.

"They aren't going to buy our telephone business if we put it up for sale because they know we could die a natural death," Gaffigan said.

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