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John Locke brief: Salisbury fiber-optic project ‘risky’ for taxpayers

By Mark Wineka
mwineka@salisburypost.com
A conservative think tank in Raleigh has written a “regional brief” arguing that Salisbury officials are irresponsibly risking taxpayer money on their fiber-optic cable utility now under construction.
The $30 million project intends to start offering television, telephone and Internet services to Salisbury residents and businesses next year.
The John Locke Foundation brief is titled “Salisbury’s Fiber-Optic Cable System: Another Corporate Welfare Project Paid for by Average Taxpayers.” The brief contends that Salisbury is being overly optimistic about its fiber-optic cable system’s ability to achieve a 28 percent subscriber level, which would allow it to be self-sustaining and not dependent on city tax dollars.
Read the entire brief at www.johnlocke.org.
The position paper also argues that Salisbury’s staff has made a critical mistake in recommending fiber-optic cable over wireless technology and that the system will end up benefitting businesses more than individual consumers.
“The city should be managing its essential services before taking on such risky and expensive ventures with taxpayer money,” the paper concludes.
“Hopefully Salisbury will be able to avoid the downfalls of other cities and benefit their citizens instead of increasing the burden on taxpayers.”
The John Locke Foundation wrote a similar brief against the city of Wilson’s “Greenlight” fiber-optic cable system, which launched last year.
Another conservative group, the N.C. chapter of Americans for Prosperity, also has taken a position against municipal broadband efforts by supporting industry-supported legislation now being studied in Raleigh.
Dr. Michael Sanera, an adjunct political science professor at N.C. State, was co-author for the John Locke Foundation piece on Salisbury.
In an interview Monday with the Post, Sanera said people should ask, “What are the qualifications for government doing this?”
City staff and City Council members have little expertise in this high-tech world they are entering, he said.
In Salisbury and elsewhere, officials have tried to make up for their lack of knowledge by hiring consultants who are notoriously in business to obtain high-paying government contracts, Sanera said.
Salisbury and Wilson used the same consultant, Uptown Services LLC, to do their fiber-optic feasibility studies.
Consultants always tell city officials what they want to hear, whether it be about convention centers, whitewater parks or cable utilities, Sanera said.
If the Wilson and Salisbury projects prove to work, would the foundation still be against government’s getting into the cable business? Sanera said it probably would.
Though city officials disagree, the position paper claims the television and telephone quality Salisbury will offer will not be appreciably better than what private companies already have in place.
In addition, the highest Internet speeds available through fiber-optic cable will have a price tag too high for most residential subscribers, the brief claims.
The John Locke Foundation says city taxpayers fit into the equation because they ultimately are responsible for paying back the debt on 20-year bonds for the utility’s startup.
The position paper says if Salisbury fails to attract enough subscribers, “the city has indicated it would increase the property tax rate by 9.5 cents on every $100 of assessed property value to cover any shortfall.”
“That would represent a 16 percent increase over the current tax rate,” the foundation said.
What Salisbury officials have said differs, however. (See related story.)
Sanera contends the city is being too optimistic about achieving a 28 percent subscriber penetration ó what the city says would make the utility self-sustaining ó because many people favor laptop computers and are willing to trade lower speeds for the mobility of wireless Internet.
He said wireless technology, especially the rapidly growing WiMax (Worldwide Interoperability for Microwave Access) systems, “could make it very difficult for the city to live up to its paid-by-subscribers promise.”
“In every case,” Sanera told the Post, “the cities say subscribers will pay for this. The reality is, taxpayers are on the hook.
“If all the grandiose plans don’t work out, their taxpayers will have to pay the bill.”
Sanera’s position paper also argues that not all Salisbury households have computers. If a computer ownership of 50 percent is assumed for Salisbury, based on 2007 Census data, “then 56 percent of the households that own computers would need to sign up for Salisbury’s fiber-optic system to pay for the entire cost,” according to Sanera.
The foundation cites other cities whose fiber-optic cable systems have failed to attract enough subscribers and ended up raising rates, taxes, or both, or ended up selling the systems to the private sector.
The position paper gives examples of Lebanon, Ohio; Provo, Utah and Ashland, Ore.
In previous months, Salisbury City Council has heard of successful municipal broadband efforts in Wilson, Dalton, Ga., and Lafayette, La. Sanera asked whether they countered those messages by bringing in cities which failed.
Sanera predicted businesses will want the increased capacity and speed of fiber-optic cable, but individual residents will find the price too expensive. When that happens, the average homeowner will be subsidizing business, which amounts to “another government giveaway,” Sanera said.
As for the local accountability a city system would have, Sanera said,” I don’t care if I’m calling Mars,” as long as he receives adequate service response from the private provider he has called.
Government bureaucracies are generally less responsive, he said.
Overall, Sanera said, Salisbury should not be risking taxpayer money on a high-tech, rapidly changing industry.
He said city officials are “really sticking their necks out” in a technical area that’s changing all the time. Nobody could have predicted 10 years ago the advances already available today, he added.

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