Behind Closed Doors

Friday’s edition of the Kansas City Star’s Midday Business Update included some interesting comments from the chairman and CEO of Cox Enterprises, Inc. This is the company owned by the Cox family and its heirs that is buying out the 38 percent of the stock of Cox Communications (the cable and telecom company) now held by the public.

Cox Enterprises, Inc., is going to pay $7.9 billion to buy back that stock. To give some sense of both the size of the deal and the size of Cox Communications, $7.9 billion would pay for 79 fiber to the premises projects the size of that proposed by LUS (that is, 79 projects costing $100 million each). It also means that Cox Communications is valued by Cox Enterprises, Inc., as being worth almost $21 billion (using $7.9 billion for 38 percent as the basis for the calculations).

So, for Cox Communications, it is not a question of being able to afford to build out a fiber to the premises network in Lafayette, it is a matter of not wanting to do so.

Cox Enterprises, Inc., must be a huge firm. And it is. But, because it’s privately owned by the Cox family and heirs, it would be difficult to determine what that company is worth — or even how it conducts its business.

On the day that Cox Enterprises, Inc., announced it was taking Cox Communications private, the hired guns brought into Lafayette to accentuate the negative about the LUS plan prattled on about the superiority of accountability within corporations versus that inside government. Guess they don’t read newspapers or watch any TV, otherwise they may have noted that corporate accountability ain’t what it used to be — or, at least, what we think it used to be.

Not one of the panelists appeared even willing to conceed that the notion of corporate responsibility to communities had any merit.

But, what is clear is that Cox’s cable and telecom division will be less accountable to communities and the publics they ostensibly serve as a result of their stock being taken out of publicly traded markets.

Cox Enterprises, Inc., CEO & Chairman Jim Kennedy, was quoted in the Kansas City Star as saying that swallowing Cox Communications would likely slow the parent company’s buying habits. Could it constrain its capital spending as well?

As a quasi-independent company, Cox Communications has had to live according to the plans and projections it laid out in its various public filings. It also had to retain and control some of its profits, which enabled it to do things like upgrade networks and deploy new services. Now, as a privately held vassel of its parent company, the cash cow that is cable services could represent a very tempting pool of revenue that could be used to maintain other, less profitable segments of the company. Which ones? We don’t know because the parent company, Cox Enterprises, Inc., is privately held and is not required to divulge its financial data to the outside world.

No doubt, milking the cable systems dry is not the intent of the family in taking Cox Communications private. But, $7.9 billion is a lot of money and it is a significant amount of debt. If the national economy falters and things like the company’s newspaper division goes soft, or maybe the television stations, or the auto auction business — that money being generated by the Cox cable systems could look like a great life boat for those other segments of the company.

And, why not? After all, the Cox family will only have to answer to itself now.

A little distance and a little preview

Kevin Blanchard writes an opinion piece for the Advocate that allows us to back off the strum und drag of the recent fiber news.

His piece is a structured series of questions that focus not on the ideological clash that has dominated the news but on the gritty political, regulatory, and economic intersections that shape and constrain the way the issue will develop. It reminds its reader of the fundamental issues and at the same time gives us a nice little preview of what the reporter is working on.

(To see why I might think commending a style of “opinion reporting” is worthwhile please take a look at the painful contrast presented by what the Advertiser’s Decker did with the Chamber’s mealy-mouthed, take no discernable position on anything that could actually lead to realizing a vision “position paper” concerning broadband. Decker says “The page-and-a-half policy is running over with vision.” He isn’t being ironic. He is missing the point.)

Here’s the parts of the Advocat story I found most interesting,:

At the intersection of Regulation and Economics:

“How will LUS be affected by regulations being hammered out by the Public Service Commission? …Will the PSC set those minimum rates so high as to make LUS’ business plan less workable… How much can Cox and BellSouth lower prices to compete with eventual LUS service, without triggering anti-trust laws or the ire of the PSC or the Federal Communications Commission?”

Damn good questions, each and every one. Maybe we ought to start tracking contributions to the PSC members’ reelection funds?

At the intersection of Politics & Economics:

“How does New Orleans fit into the equation?”

Blanchard suggests that Nagin’s visit to Lafayette earlier this summer might not have been just about some sort of general “cooperation” between cities but might have also been an opening for asking for Lafayette’s help in driving telecommunication services down I-10’s dark fiber to New Orleans. Apparently a plan stalled by arcane New Orleans politics to put fiber in the downtown sewers is involved. (No, I am not making that up. How could I?) A far-fetched connection? I think so, but then it is Louisiana

And I’ve always wondered what BellSouth and Cox were afraid of that warrants the thermonuclear level of response we’ve seen. A regional Lousiana fiber network linking cities a la Utah’s Utopia project might be part of it. And wouldn’t New Orleans be the biggest possible plum…

At the intersection of (city) Politics & (city-parish) Politics

What would happen if the Lafayette Public Utilities Authority — made of up five city-parish councilmen who mainly represent the city — approves the LUS plan, but the council rejects it?

Apparently the charter gives control of LUS to the LPUA but any bonds would rely on the authority of the City-Parish. Who controls? Who knows. And I called New Orleans’ political problems arcane.

Well worth the read, go get it. I’m gonna look forward to the stories coming down the line.

Nobody wants FTTH?

Nobody wants fiber? Hey, download the Fios brochure (pdf) that FTTH subscribers are getting in Dallas as Verizion rolls out real broadband in Dallas this August. CNet describes the initiative. Somebody in Dallas must be more credible than the citizens of Lafayette. They want it and they are getting it.

One of the more irritating things that BellSouth and Cox are doing is telling the folks of Lafayette, poor ignorant children that we are, that we really don’t want fiber. We want some sorta “services” that they already offer and children they will take care of our real needs, needs which they understand. Trust ’em. That was mostly implicit until the “Academic” Broadband (not fiber, didn’t wanna talk about that) Forum when Menefee, local tech guru, staightforwardly asked if BellSouth and Cox would committ to building a fiber to the home network if the people of Lafayette voted “51%” to do so. There was a lot of hemming and hawing but the facts were clear: that’s not the way they make decisions. (It is the way local governments make decisions.) It’s about their judgement as to how much profit can be made here versus other, “better,” ways to spend their money. (Which, I hasten to point out, includes profits made off Lafayette business.) (See Mike’s coverage of that Dog and Pony show)

Anyway, BellSouth and Cox might not find Lafayette’s fiber business worth spending the money to secure but that’s not because fiber just isn’t economic or, as they imply, that wise business heads aren’t doing it. Real players in the game, like Verizon, are embracing FTTH. Now you might think that Dallas is a big city. And it is. (And I for one don’t want to live in Dallas or Houston.) But it isn’t only the big guys: Louisiana’s own EATel (East Ascension TELephone) is rolling out FTTH in Ascension and Livingston as we speak. Its not about size. It’s about vision.

It’s not about scary new “maybe” technologies (that are mostly directly dependent on fiber). It’s not about “uneconomic business plans” —unless you think that Verizon and EATel are fools. Really folks, it’s about money. And Cox and BellSouth think they can make more money with the profits they take here by spending it elsewhere. That’s sensible, good business practice. It can even be reasonably argued that the law requires they be “good stewards” and maximize their shareholders’ profits.

But that doesn’t make LUS wrong in its judgment that a healthy dose of Fiber is good for Lafayette.

And to imply otherwise is just condescending.

Hypnotic, Hallucinogenic Fantasies

I really ought to make some sort of remarks on Eric Benjamin’s antiLus/goberment tirade in this week’s “Marijuana” edition of The Times of Acadiana. But its hard to know exactly how to think about it. When I first saw it I was really pissed. For a full 10 minutes. Then I read it again, and while still angry, puzzlement and confusion took over. The thing is just too hallucinogenic to be treated really seriously. Whatever the guy was smoking he really ought to cut down on whatever he’s mixing in. Oh yea, and in the print version the article is placed facing a particularly misleading full-page anti-fiber Cox ad. A mean-spirited observer might think that sows a little doubt about the Times’ objectivity. How dumb was that placement?

The opinion piece presents itself as satire that features an oily salesman trying to sell you a pig in a poke. But the weird, hallucinogenic right-wing fantasy it occupies is hypnotizing in that horrific watching-the-poisonous-snake-coil-to-strike way: User fees are new taxes. People who buy services like this (and water and electricity) therefore pay more taxes than their neighbors. You won’t get to watch the Sopranos. The local government is the one to be afraid of if you go to the Al Jeezera site. (Can you say misdirected? I cite the Patriot Act for your reasonable, legal locus of fear on this count. For the city to track you would be illegal, but not for your “Justice” department.) And then there is this particularly disconnected moment when Lester U Smiley (really, that’s the salesman’s name) says:

“What’s more,” he continues, “after we’re through with fiber-optics we’re moving on to roads and infrastructure, then to trash collections, police, fire and the schools.”

Hunh? That just floored me. The successful local provision of these essential natural monopoly services is the rhetorical and logical basis for making sure the fiber monopoly is locally controlled. Doesn’t he understand who provides these services locally? Local Goberment, Eric. …He really, really needs to cut way back. Hypnotic strangeness.

However, the angry part of my reaction remains: the article, done in the brand new general manager’s personal column (he’s been in Lafayette just a month), is an unbelievable pastiche of far right fear mongering, misdirection, and outright lies. Just introducing these poisonous little memes into the public discourse, especially in a context where no one has to take responsability for it since it can all be laughed off as a stupid joke, is criminal.

(You know there used to be these things called editors and publishers at papers that took responsibility for them. But apparently nobody bothers with that stuff at the Times any more. Maybe it’s that with Gannett owning it they really aren’t the ones responsible. …Hmmn, like local utilities, maybe local newspapers ought to be locally owned; else they never have anyone making decisions who really has to live with the consequences of their actions. These guys are all angling for a job at a bigger Gannett paper. Like the Advertiser. As general manager (aka business manager) this little bit of journalistic poison probably won’t affect Benjamin’s performance reviews. He can probably count on moving on to something better if he doesn’t get caught with his hand in the till.)

But read it yourself; it really is fascinating in that hypnotically horrifying little way. And maybe you can tell me what he is thinking.