Consultant: Telecom plan feasible

The Advocate story that interviews the LUS consultant Doug Dawson, points out a few of the happy consequences of being big:

“LUS’ size makes the plan more financially feasible than other communities that have done similar projects, Dawson said.

The reason: economy of scale.”

Dawson means mostly that one-of-a-kind purchases like backend electronics are spread over more users and that larger purchases in fiber optics, as elsewhere, get a volume discount. True enough.

But that simplest of all demographic advantage over other communities, size, will likely render other benefits as well. Anyone wanting to do a proof-of-concept shakedown for a well-funded consumer-oriented project over broadband will look first to size and for those that want a large sample size Lafayette, as the largest municipal build out of high bandwidth optical fiber will instantly be in the running. Specialty services that anticipate that only 2 to 10% of the population will ever purchase will likewise need a large installed base to make even a trial sensible.

But Lafayette’s demographic advantage doesn’t stop with size. Lafayette will also be the most diverse city to sport a municipal fiber optic network that makes its services available to every citizen. Most fiber builds are in cities that, lets look at it straight on, are whiter than carrera marble and most often wealthy enough to afford it as well. Wealth and community cohesion have been almost prerequisites for fiber to date. And even when those prerequisites are met a corporate provider does not price fiber cheaply or run it to the poorer parts of town. Lafayette will have a larger percentage of minority and poorer citizens than any community with a comparable broadband infrastructure. Should LUS follow through with its commitments to foster the ownership of inexpensive computers more of the barrier to entry for wide adoption of fiber by all segments of the community will be removed than will be the case in other locale. Lafayette will offer a window into a community which is 25 years ahead of its time in terms of widespread adoption of broadband technology basics.

—The demographic advantages that Lafayette will bring to the table will go far beyond volume discounts on start-up equipment.

A high-fiber diet; Fiber-optic lines are taking root in smaller towns, bypassing cities like Baton Rouge.

Doug over at LUSFTTH has turned up what appears to be an old Baton Rouge Business Report article from late August. Missed it then but is sure is fun to look over now that our fiber project teeters on the edge of a full committment. It sounds like maybe the capital city is a little envious?

Fiber to the home is gaining momentum first in smaller cities. That’s a turnabout from the usual deployment of new technologies, which generally start in denser areas where there’s more money to be made before being rolled out to less profitable markets.

Smaller cities like Lafayette are getting fiber because their public utilities, owned by the residents, already have the poles and lines that make it more economical to run fiber…

Kind of a nice turnaround, isn’t it?

Tri-Cities Reinforcement

The Lt. Governer of Illinois steps in to back the Fiber for Our Future Initiative.

It’s great stuff and applies to our situation as well as to the mess in Illinois. I’ll let him speak, he does a good job:

From the Beacon:

Saying he wanted to ensure a “fair fight,” Illinois Lt. Gov. PatQuinn came to Geneva Thursday to announce his support for the citizens group Fiber For Our Future and the Tri-Cities broadband referendum on the ballots in Batavia, Geneva and St. Charles on Nov. 2.

Quinn warned voters about expensive direct mail and other advertisements by SBC telling them not to vote for the referendums. Those ads, he said, are paid for with their customer’s dollars and don’t tell the whole story.

He compared Fiber For Our Future’s battle against SBC to the biblical story of David and Goliath.

“The citizens are going against these big Goliaths with all the money, and the Goliaths are going to tell us their way,” he said. “Remember who won? We believe in competition in America. If big companies can define the 21st century and say it’s only their way, we could end up really getting socked as consumers.”

“Instead, trust local officials, trust people who are from the community, trust people who really want to have the kind of wide open competition that our country believes in,” he said.

From the Daily Herald:

[Quinn] held up a photocopy of one of the direct-mail pieces from SBC and said the companies were going to spend a lot of money to squash the referendum.

The direct-mail piece suggests the referendum question puts taxpayer money at risk, even though in St. Charles and Batavia, the question prohibits the use of tax-backed financing, and in Geneva, the ordinance backing the question does.

“The people who ought to decide the future are the people who live in the community,” Quinn said.

The venerable Chicago Tribune also runs an informative story but you’ll have to register to get at it.

Its always nice when state-level politicians get it. (Lafayette has benefited immensely from the quiet support of Governer Blanco.) This should help the citzen’s initiative which has been massively outspent on the publicity front by the phone and cable companies.

If you can help, they can still use the money. Check out the PayPal donation bug on their homepage.

Incumbents Running Scared: An Economic Analysis

One thing that comes through in qoutes from Huval in the [not online] Advertiser Advocate article “LUS plan changes look of telecommunications,” and in the feasibility study itself is a pretty steely-eyed determination to out-compete the incumbents on both product and price. The LUS strategy will be simple and competitive: offer more for less. Should LUS do this consisitently, and I have no doubt they can and will, they will be the dominant carrier in their footprint. A footprint, incidently, which Huval hints may expand into the parish. (Mayor Langlinais of Broussard is undoubtably happy to “hear” this said publicly.)

This story implicitly raises the question of whether Lafayette will have multiple fiber optic networks in the end. My own thoughts on this are on the record: I believe that it is unlikely.

Consider: One thing that LUS’ strategy has done is to cut off a retreat into low-end products—analog telephone and video—for both incumbents. LUS’ projected equipment buys make it clear that they intend to provide these legacy services indefinitely. LUS has also cut off any attempt to colonize high-end services: LUS’ fiber, its committment to advanced services such as Voice Over Internet Protocal and Video on Demand make it clear that there will be no room at the top of the heap for the incumbents to reap special profits off of high-end customers. There will be no uncontested areas of profit for the established incumbents. None. They wil have to decide to compete head to head with an entity that has the trust of local people, that is pumping its profits directly back into the community (in the form of lowered prices, government revenues, local construction, and local jobs), that is offering a superior product in each category, and that is offering it for a lower price. In the face of such daunting competition it has to decide to dump a big chunk of change into a small town (by its lights) ahead of schedule (or face LUS being the established incumbent when it gets around to it). It will have to spend this money anticipating that it will never have the percentage of the market that it enjoys anywhere else it will choose to spend its fiber dollars.

In a nutshell: the incumbents will have to choose to invest heavily and early in a place where they can never expect their rate of return to equal what that same investment will garner almost anywhere else.

I don’t expect them to do it. No matter what they say in the next month or so… it just doesn’t make financial sense and that is all they are really about. (Unlike LUS which does have other, community-based values that might well lead them to persevere in a similar circumstance because they value low prices for citizens and the community development consequences.)

But, the objection can be raised, “They really expect LUS to fail; they will simply do what private enterprise does and out-compete the governmental body.” No. Honestly that won’t happen and the incumbents won’t believe it unless they’ve taken to drinking themselves the koolaide they’ve been offering the public. I know this flows against ideological correctness and may seem counterintuitive but that sort of reasoning substitutes ideology for a dispassionate analysis of what really is—and businesses like those the incumbent have haven’t survived by believing their press releases. If you need evidence look no further than the fact that the Cox and BellSouth have so frantically opposed the very idea. They know, they know very well, that once this is built LUS will hold all the cards.

LUS will not have to make a profit. Break-even is good enough. It isn’t good enough for any private enterprise. Not only that, private companies have to make their money back pretty quickly. They most certainly can’t wait twenty five years. LUS can. LUS will stretch it out that long without batting a eyelash.

The raw, and terrifying truth is that the competitive advantage that LUS holds over its competition is that it actually cares about its citizen/consumers. It is willing to cut its profit to naught to benefit them. It is willing to wait for a very long time to get its money out–if it benefits them.

And that is why the incumbents are running scared. As well they ought.

Attribution corrected 10:10 10/22/04

The Advocate Follows Up on Fiber News

The Advocate’s Kevin Blanchard does two follow-up stories on Tuesday’s release of LUS’ the fiber optic network feasibility study. On the front page of the Acadiana section is “LUS feasibility study shows planned course.” On the financial end the story does a quick summary of the plan’s take rates, break-even dates, cost categories, and revenue sources. The print version has nice graphic of the projected movement to a positive cash flow by 2011.

More interesting to readers, i suspect, will be the political aspects, with Durel again showing strong support for the idea saying that “There’s been overwhelming support for what LUS is doing.” and the administration plans to “proceed as fast as we can.” On the incumbent side of the equasion Durel dismisses expected opposition:

… anything those companies say now will likely be “smoke and mirrors,” … “After all these months, none of them came forward with a plan, a vision for the future,” Durel said.

The inside story, “LUS plan changes look of telecommunications,” [not online] (with an informative sidebar on the services that LUS will be offering) takes note of the changing landscape of telecommunications in Lafayette, noting Cox’s upcoming triple play and BellSouth’s changed regulatory status in regard to its established fiber to the curb strategy. The truth of the matter is that both of these strategies have been in the works for a long time and that the difference that LUS’ plan might make is chiefly in regard to moving Lafayette to the head of the line for these developments rather than leaving it to its “normal” place way down queue. (On the likelihood of that, more later.)

News From the Tri-Cities

The Daily Herald, a Tri-Cities region newspaper carries an interesting and useful report that goes a long way to undercut the claims about municipal telecommunications networks that the incumbents everywhere use to try and frighten communities.

Most usefully the article notices that municipal utilities have a very different understanding of what constitutes success than do their corporate rivals:

“But when it comes to defining success, it’s clear there’s a much different point-of-view between towns such as Glasgow and telecom giants such as SBC and Comcast.

Some of the towns seem far more concerned with building a better community than paying off their debt. They view telecom services as public utilities that can be funded by proceeds from other utilities. And, they believe, without their efforts, residents and local economies would have lost millions of dollars as they sat on the sidelines of the digital revolution.”

While the story also repeats the canards of the Freedom and Progress Foundation studies without directly contradicting them (canards we attacked in reference to the fiber forum and Bristol, Virginia’s system) it does provide a good view into the the way that communities and municipal providers see the story and will allow readers to form a bette

The lead case in the series of case studies in this report was Billy Ray of Glasgow, Kentucky. Billy Ray, readers will recall, was our second interviewee, after Annie Collins of the Tri-Cities. He hits home runs with some of his facts: the Glasgow cable TV utility hasn’t raised rates since 1989, with prices remaining at $14.95 for a full complement of digital channels, it now offers 4 megabit-per-second Internet access for about $25 per month, and the difference between average cable rates nationwide and what Glasgow’s customers pay for it means that more than $30 million has stayed in the local economy. The Progress and Freedom Foundation may not think that is success but I’d bet that most of the citizen/consumers of Glasgow do.

It’s good to see reporters starting to look beyond incumbent propaganda, however dressed up in academic garb, and dig into real cases to uncover some sense of the truth about these issues.

Now if we could just convince the Advertiser to show the same sense of responsibility toward the educational functions of reporting….

Feasibility Plan Media Roundup

The media have posted their digests of LUS’s feasibility study. (I posted the basics on the voting date and public forums from last evening’s council meeting yesterday) They are worth a pretty careful read. What’s new is in the details rather than the basic direction of the proposal.

The new version of the feasibility study has a more realistic breakdown of adoption rates, and target market penetration for various services than the previous draft version released under pressure from Cox. Other interesting tidbits for those who are following closely include hoped-for bond rates, break-even points for the (25 year) bonds, breakdowns on the proportions of the money going to various hardware installations and the like.

At the Advocate: Council sets fiber-optics plan vote

At the Advertiser: LUS fiber study released; no fees finalized

At LUSFTTH—Doug posts a bit on what to expect in the coming weeks from the opponents. I feel sure that we’ll see more disinformation.

Doug also expects FTTH announcements from the incumbents. I doubt it—suggestions that they might, intimations that really they’d already planned to do so, flashy stuff on what they might do if they decided on a wholely different business and technological strategy here than in the rest of their footprint—we might hear about that sort of stuff.

But actual announcements, No, I’d be very surprised. The incumbent strategy if FUD, Fear, Uncertainty and Doubt, and they don’t seem to have it ’em to actually compete. Their strategy at every level from the federal to the municipal is to pursue monopoly power and to frighten and mislead anyone who might stand in their way. An example: In my judgment the incumbents nation-wide, with BellSouth leading the way, have just run a number on Chairman Powell and the FCC. They’ve crawfished out of previous deals they’d made to allow access to competitors in order to get into the long distance market by holding the threat of not running fiber to the home over the FCC. Powell caved on that, giving in to both to the demand to cut competitors off their system and to giving FTTH regulatory status to mere fiber to the curb, in effect subsidizing BellSouth’s current strategy without requiring them to give up anything or speed up deployment at all. Craven. The FCC is supposed to be the one running the show on our behalf—not acting as agents for the monopolies they are supposed to regulate. We need some new commissioners and with any luck we’ll get that soon.

Tri-Cities Locked in Battle

The outrageous incumbent campaign in the Tri-Cities continues. You ought to take a little trip over to the Fiber For Our Future website for a vision of just how dirty telecom and cableco’s can fight when they get a chance.

The incumbents have poured money into a fear-based public relations fight to shut down a referendum that would allow locals to seek private funding to build a pooled municipal utility. If the funding cannot be found the build will simply not occur.

The basic issue of truth in advertising aside, at least the fiber for our future folks have got to have the advantage on the basis of design sense. You really ought to take a look at the latest mailer. The designer should be taken out back and given a stern talking-to.

Of course its pretty easy to lie to the public and generate unwarranted fear when the opposition has about 3,000 dollars to oppose a corporate blizzard of glossy mailers, daily full-page newspaper ads, and push polls. On the other hand the good guys’ big media buy has been a clutch of yard signs. Geez…you can give to the cause via PayPal at the Tri-Cities Broadband home—and get a chance to look at their full gallery of incumbent misinformation.

Mark your Calendars

The city-parish council and the LPUA have set a date, tentatively, for a vote on adopting LUS’ fiber-optic feasibility study: November 16th.

The feasibility study, received from the Competitive Communications Group, will be discussed on both the 9th and the 16th. The statement read at the council emphasized that the procedure was to designed to conform to Act 736 the inaptly named, Local Government Fair Competition Act. You can look to the Act 736 for information about what the feasibility study must cover as well as what it need not reveal (“commercially sensitive marketing information.”)

All signs are that the feasibility study will handily be adopted by the council but that will hardly be the end of the matter. If history in other locales is any guide—and it certainly has been to date—the incumbent providers will attempt any delaying tactics they can muster with legal entanglements being the tool that comes easiest to hand.