ERMUSR OTHER BUSINESS 03-18-2003

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NINS11111 111171,111 MINNESOTA MUNICIPAL UTILITIES ASSOCIATION 12905 Highway 55 • Suite 212 • Plymouth, MN 55441-3859 • 763.551.1230 • 800 422 0119(MN( • Fax 763.551.0459 Municipal Telecommunications Few would argue that a modem telecommunications infrastructure is key to economic growth in the 21St century. Yet, many areas of our state are without this infrastructure, which is necessary to keep a community economically viable. The state's municipal electric utilities and small and rural telecom providers share much the same perspective on broadband deployment in Minnesota, a fact that emerged during testimony before the House Regulated Industries Committee on Jan. 29, 2003. One member of the Minnesota Association of Rural Telecos testified that his company began offering DSL three years ago because a local Polaris dealer needed it to remain in business. The company didn't do a business plan. It made the investment because broadband access was vital for the community. But small, local telecos are not present in all parts of the state. And they have only have so much money to invest in broadband deployment. Another small telephone company manager told the Regulated Industries Committee in an Oct. 30, 2001 hearing that broadband deployment in Greater Minnesota was cost prohibitive without subsidization. Minnesota's dominant local exchange carrier—Qwest—reported a preliminary net loss of $35.9 billion in 2002 and a net loss of$4.8 billion in 2001. The company testified before the Minnesota Public Utilities Commission Feb. 4 that it did not view DSL deployment in Greater Minnesota as a good business decision. Cities without broadband access should not be relegated to the economic backwaters. The Legislature can allow cities to better control their own economic destiny by: • Removing barriers to entry for municipal telecommunications efforts. • Giving municipals specific authority to enter into joint telecommunications ventures with other entities. • Giving cities an opportunity to bid on local exchanges, if they are to be sold. Remove barriers to entry. Like many local phone companies, municipals view broadband access as a service necessary to ensure economic viability. To foster broadband access, we must be allowed a reasonable opportunity to provide telecommunications services ourselves. That means reducing the 65 percent super- majority referendum requirement to provide phone service contained in current state law with municipal authority upon a vote of the city council. Removing the super-majority to provide phone service requirement will give cities leverage with incumbent telephone (and cable) companies, because the companies will realize that if they don't move to