More unnecessary city spending

Obviously no change in Salisbury's bond rating has be made yet, or they would have trumpeted it all over the news with dancing in the streets (and city hall). The timing is certainly not good for borrowing money for this venture. With gas and food prices at record levels, now is not the time to launch this entertainment project that is a luxury. Many of the users that were anticipated simply will not materialize now. But, hey, the headstrong Salisbury City Council has their mind made up. Increased taxes can always make up the difference. City residents won't mind will they? How many voted in the last city election?

Look before leaping

Government does not efficiently provide any service. Local government is even worse. Private companies will provide a service if enough people want a service to make it profitable. Governments don't worry about that, as they will always raise taxes on everybody to benefit the few. So be wary!! Do all the Salisbury residents want to pay for something that many will never use? Many will not be able to afford it. Then will those that can't afford it be given reduced prices, or free service at additional taxpayer expense? Phone service is now subsidized to many homes. Fiber to the home may be the next subsidized service. We had better think of all of this before rushing headlong into it.

Jerry W.

We'll it's been 5 days since their trip. So where's that shiny new bond rating they spent twenty grand to seek? In this economy, it seems bonding companies will be sizing up the merits of a project, too. I wondered how hard the Wall Street guys laughed after Salisbury's delegation left? They probably gave every assurance that the City was committed to tax increases and as many annexations as possible in order to cover its burdgeoning debts.

Jerry

Actually capitalism and the private market is not in play here as Timewarner has a monopoly over the local hard-wired cable market. No other provider can provide hard-wired tv services, only satellite can compete in the TV arena - however satellite cannot provide hard-wired internet. Timewarner has little incentive to provide fiber services locally or in any small area/community. They would have to spend millions tearing up their cable and putting in fiber. They would not do this in such a small part of their market that is probably less profitable than larger areas such as Charlotte, further they would have to do it countrywide in all of their markets and their board and shareholders would have to approve of the strategy. There is no competition in this market - it is a monopoly - the traditional rules of capitalism and open competition don't apply here. Verizon has a new fiber service called FIOS which has great reviews. However Verizon is only targeting highly populated areas for this service so they can get the best return. Salisbur may not see the same services from the private market as supplied in Silicon Valley and the West Coast for several decades if not longer. As a tech geek this is going to be a great service and I commend Salisbury for having the guts to move on it.

MH

Auditor, that’s a great question and to be honest…I was an opponent to government participating in telecom up until a few years ago. Here are a couple of points (and have many more) as to why I’ve changed my position. First, it’s more than simply having access to bandwidth -- it’s having access to affordable bandwidth. The cheaper the bandwidth, the higher the value, the higher the value, the more people will subscribe, the more people that subscribe, the greater the positive impacts on your community -- from education, energy and healthcare to productivity and your community’s ability to compete globally (google –> Metcalf’s Law). Last week I talked with the folks in Jackson, TN who have over 50% of their community on a city-owned fiber network and they said that their rates are at least 35% cheaper than their neighboring communities for better services. Why government? The telecom infrastructure created at the turn of the century was in part subsidized by the government through the Universal Services Fund. This government sponsored program paid the incumbent (AT&T, a monopoly at the time) to build telephone networks into rural areas that simply were not economical to build to. We’ll have the same issue with fiber. It’s simply doesn’t make “free market” economic sense in some parts of the country to build fiber to each home just as it wasn't a 100 years ago. Lastly is the issue of timing, once the “free market” starts building next-generation networks, they’ll build markets that are most lucrative first, just as Verizon went to Manhattan. And as I mentioned previously, it’s going to take community leadership such as what you see in Salisbury to make these networks happen verses waiting for the incumbents to make the commitment to build in Salisbury. With that comes the possibility of being left behind as people and jobs move to areas that have this 21st century technology. How long will it take for the “free market” to build fiber networks in Salisbury? Can your community afford to wait 5 or 10 years, possibly being last…or worst, not at all? Only you as a community can answer that.

Auditor

When and if business and the public want or need this service, then private enterprises will provide. This is called Capitalism. I doubt than many homes or business need or even know the difference in gigabytes or megabits. Business that need high speed can buy connectivity to everything from T1 to OC192 lines. When has government been better or cheaper running a business than private for profit companies? When will we find out the result of this boondoggle? How much did it cost and what is the payback to taxpayers?

Better think Twice

If the Salisbury City Council annexes more of the county, they will have to run a lot more cable to more widely dispersed areas than at present. That will raise their cost well above the 30 million figure. Why want Mark Lewis' bank loan the money to the city? Many people will wait until the economy improves before adding an expensive fiber optics system to the household bills. Maybe this system is something that only the more affluent city residents will want. What about the ordinary people? Are they being asked to pay for something that few will want or can afford right now?

Jerry

Spending 5 minutes googling city bond ratings and understanding what they are all about will tell you that improving a city's credit/bond rating can save hundreds of thousands of dollars when it comes to borrowing money. It seems very prudent that you would want to try to improve it before trying to get financing. That is the reward.

Liz

I read that the People's Republic of Asheville couldn't make fiber optics work, financially. Perhaps MH could add that to his or her case studies. Or perhaps it would be worth continuing to ignore, since their socialistic experiment flopped.

Eugene

With the housing market and credit markets in the tank, and gas, food, and most other necessities up quite a bit, the projected hookups to the fiber system may be a lot less than anticipated. Of course, the City Council can always raise ther tax rate - or maybe look for annexation targets.

MH

With all due respect...I have no skin in the Salisbury Fiber game. I don't work for the city, I don't live in the city and I have no business with the city and quite frankly, don't care how many people went to NYC or where they ate. I do care that our country is falling further behind our global partners in access to affordable Internet. I also now that the incumbents (AT&T) will refuse to invest in new infrastructure while there's no threat to their 100 year old infrastructure...cities in the U.S. are one of the few entities with the resources to make things happen as the incumbents sit on their hands and milk their aging assets. Currently there are more than 45 cities in the U.S. providing fiber optic networks and many more exploring the possibilities. Many of these networks such as Bristol, VA have been net income positive within 4 years of launch. Cities such as San Francisco, Seattle and Portland, OR are in late stage discussion of community owned fiber networks.

Jerry

The "ubiquitous deployment" of excuse-makers for the Salisbury junket to NYC is impressive. In fact, it was probably written by a person with a college education, one who was allowed time by his or her City bosses to spend a few hours researching and compiling the response. But it fails to answer two questions: Why was a delegation of 9 people necessary? And, what rewards to the taxpayers of Salisbury were realized by the expenditure? The Post hasn't yet followed up with a front page article about how the Wall Street moguls kissed their feet and handed over the best interest rate available for the $33 Million proposal. I'm curious why the City of Salisbury PR machine hasn't prepared a press release to that effect, unless they got the door slammed in their faces. I'd also be curious to know where they dined? How expensive were their meals and hotel rooms, compared to the struggling taxpayers back home who were pinching pennies and nervously watching our IRA's dwindle on Monday? Did they enjoy the cultural scene in NYC by going to any plays, concerts, or art exhibitions? I hope there are lots of FOIA requests. The public has a right to know.

MH

The City of Salisbury’s leadership are courageous visionaries and on point with a fiber to the home initiative. Here’s a couple of interesting points with regards to bandwidth and the role fiber optics will play in a global society. Cable modems and DSL have physical limitations with regards to how much bandwidth they can support. This is not technology but the limits of physics. Cable modems today are reduced to the combining of TV channels over their coaxial cables to offer broadband and typically limited to less 10 mbps -- shared by hundreds of your closest neighbors. This capacity limitation can easily be seen in the large number of High-Definition channels offered by satellite TV providers verses what your local cable company can offer. There’s only so much you can put on a cable, TV or Broadband. DSL has similar capacity limitations and the speed is directly proportional to the distance of the copper cable. Fiber optic cables have virtually unlimited capacity. There’s no doubt the demand for bandwidth will continue to grow just as it has over the 10+ years…remember when turbo 56kb was fast? As more Internet content moves to video-rich media (including HD) and more traditional TV services move to the Internet (just as music did), the demand for bandwidth will only accelerate, far beyond what cable and DSL can even remotely support. A typical streaming HD TV stream will require 6 to 10 Mb, already more than what typical cable and DSL can support. Fiber optic cable is the only technology that can support the bandwidth demands of the future. There’s a economic considerations… The Brookings Institute says a 1 percentage point increase in broadband penetration in a state, employment is projected to increase by 0.2–0.3% per year. MIT found that communities in which mass-market broadband was available experienced more rapid growth in (1) employment, (2) the number of businesses overall, and (3) businesses in IT-intensive sectors. Sacramento Regional Research Institute states a 3.8 annual percentage point increase in the proportion of the adult population using broadband. California could see a net cumulative gain of 1.8 million jobs and $132 billion of payroll over the next 10 years. Criterion Economics study found that ubiquitous adoption of current-generation broadband technologies would result in a cumulative increase in gross domestic product of $179.7 billion, while sustaining an additional 61,000 jobs per year over the next 19 years. The study projected that 1.2 million jobs could be created if next-generation broadband technology were rapidly and ubiquitously deployed. And in Lake County, FL, their econometric model shows that they experienced approximately 100% greater growth in economic activity—a doubling—relative to comparable Florida counties since making its municipal fiber broadband network generally available to businesses and municipal institutions in the county. In a global economy…the World Information Society Report (United Nations & International Telecommunications Union) ranks the U.S as 16th out of the top 20 Counties for Broadband penetration and ranked 8th in price for bandwidth at $0.49 per 100 kilobits. Korea is ranked 1st in penetration at a price of $0.06 per 100 Kilobits. If we are to compete in a global economy we must be at parity with our global partners. Inherently, more bandwidth such as that offered by fiber reduces the price per 100 kilobits thus increasing the value to the end-user and ultimately an increase in broadband penetration, putting at par with other countries. And then there’s green…Preliminary findings from a PriceWaterhouse Coopers’ report last week states… “Updating the last mile in America's telecommunications networks with high-bandwidth, direct fiber optic connections to homes and businesses will deliver substantial environmental benefits in the short term - outweighing the environmental costs of deployment in as little as six years.” In its methodology, PwC applied only one prospective benefit of deploying FTTH networks, that beyond 2010 an estimated 10 percent of the working population with FTTH service would telecommute an average of three days a week because bandwidth improvements will make working from home more feasible. More employers will adopt telecommuting as increased bandwidth (and quality) will allow employers to store files on corporate servers verses storing files remotely on a PC’s / Laptops. Why Cities? Educause estimates that it will take $100bn to build fiber to every home in the U.S. Only Verizon has committed capital to building fiber optic networks at $18bn and that only addresses about 5% of the U.S. homes. AT&T, Comcast, Time Warner and others have yet to commit any money to building fiber to the home networks. They will only do so when they are absolutely forced to by leadership such as what you see at the city of Salisbury. A hundred years ago, many communities across the country established electric cooperatives or city owned electric companies to provide electric services to communities were investor-owned electric utilities couldn’t justify the economics to invest. This same principal will apply to fiber optic networks. These fiber optic networks will be considered an essential utility such as roads, water and electric have in the past.

Jerry

Auditor, don't wait for the Post to use the Freedom of Information Act to get records of expenses for their delegation's NYC junket. Under North Carolina's FOIA, any citizen can get it, and the City may NOT ask the reason for the request. So have at it. You may find this article interesting, too: http://www.freedomforum.org/templates/document.asp?documentID=7402

Auditor

Why did the city of Salisbury have to send nine people to NY to find out there is a problem in the credit markets? Check this Post story out. Kannapolis delays selling bonds amid market turmoil I hope the Post will use the Freedom of Information Act to get the expense accounts for this boondoggle. The taxpayers need to know how much it cost them to send this group on this unnecessary trip.

Jerry

According to Yahoo Finance, Assured Guaranty’s stock has varied from a 52-week high of $29.46 per share down to $15.50 (today’s after hours closing price). Moody’s Credit Service stock has varied from a 52-week high of $55.99 to $31.02, but was up a full 2.29% in after hours trading to $31.73. Perhaps that was on the news that David Treme and Susan Kluttz will be meeting to discuss a $33 Million tax giveaway project with them at 11:30 tomorrow morning. (LMAO) Maybe the City's delegation will arrive on Wall Street just in the nick of time to make a difference, if the executives have time to worry over its Fiber to Home project.

RPR

Auditor is right. Now would be the time for entrepreneurial investors to consider the future, let's say 6 years from now, when the whole she-bang can be bought for $3 to $8 Million. But watch what business entity gets to buy this failed project for pennies on the dollar. I predict cronyism.

Auditor

If fiber would be so successful, don't you think a private company in that business would provide it? Watch out taxpayers, this is another money pit. The city can raise taxes to keep the service rate low for some time. However, if this is a great opportunity, why does the city have to get involved? The $30 M has already turned into $33M and it will end being much more than that. If this gets off the ground, follow the money. See what firms/people are involved. If the operating revenue ever covers the expense, plus the bond payment, pigs will fly.

Jan

Will, I'm certain that with $33 million in tax funds to back them, Salisbury can and will drop their internet prices lower than Time-Warner. What is uncertain is how the City would be able to negotiate a competitive price with ESPN and other networks. So you might get the channels that broadcast Pat Robertson and Truth Temple, along with the local lineups. More interesting though is the fact that any competitor can get a T1 line for under $30,000 (less than 0.1% of the city's investment), then sell internet access to DSL customers via telephone connection. And a medium to big size company could easily drop their internet rates to ten dollars a month, if the City wanted to "play" in the competitive marketplace. Once that happens, the City's profit projections evaporate, and the whole thing is just one big tax subsidy for something they'd be better off avoiding. The City could opt instead for a T1 line, and FREE wireless access to those living or working withing 1/4 mile from downtown. It would cost under $100,000, and would be an effective means of attracting small and medium size businesses to the downtown area.

Will

Timewarner Cable dsl is the worst service I have ever been a customer with. If the City can provide this at a competitive price I will sign up in a heart beat.

Jan

With the advancement of T1 and DSL capabilities, what tangible advantage would the average Salisbury consumer have with a fiber optic connection? With the high likelihood that DSL would suffice for most consumers, wouldn't the government-run franchise merely lower the costs to consumers for a DSL connection by providing additional competition? Is that lower price worth the tax increases necessary to make payments on a $33 million bond? The city leaders appear poised to go forward with this initiative regardless of the profits or losses, because the elected board is not capable of challenging statistics presented by City staff, which prides itself on "innovative" ways to increase their department budgets, and make regional news. (Reminiscent of the 150-annexation, eh?) At the end of the day, if Moody's and S & P were analyzing this plan from a private entity, they'd reject it wholesale as too risky because of consumer ability to choose from among the lower-cost alternatives. The primary reason this particular proposal will be given consideration is due to the City's "good credit rating (ie - its commitment to raise taxes in order to guarantee payment), irrespective of the projected profitability of the venture. So the "high" bond rating is not a Wall Street estimate of how great a business plan the City has devised---but more a test of how high they'd be willing to raise property taxes in the event this idea turns out not to have been so "hot." And with your property values slipping in this not-so-hot economy, the real risk will lie with taxpayers, not the bond underwriters.