The city of Salisburyís financial director says trying to judge Fibrantís progress against original projections would be misleading, and he is updating the business plan.
This is Salisburyís first experience with a fiber-to-the-home network. Is it common practice to change the business plan once a business is launched? Letís look at the situation.
The cable industry spread the message that residents would be on the hook for millions in city debt when the city network went belly up. They cited surveys claiming that residents wanted to vote on the project. The industry also pushed for state legislation aimed at stopping the cityís fiber-to-the-home network.
That sounds like the city of Salisburyís experience as it launched Fibrant. But those are actually steps Terry Huval, director of utilities for Lafayette, La., described to a Salisbury audience in early 2009. He said existing cable providers used every means necessary to derail Lafayetteís fiber-to-the-home initiative. Going into the fiber optic cable business is not for the faint of heart, Huval said.
Salisbury residents have watched the Fibrant story unfold in amazingly parallel fashion. Have finances also followed the Lafayette experience?
To an extent. According to the local newspaper, The Daily Advertiser, last August Huval went back to the Lafayette City Council with a revised budget for the cityís LUS Fiber network, one containing lower revenue projections ó and expenses ó than originally presented. He said the new budget did not reflect any major problems with the system.
The Lafayette system has been in place longer and has more customers than Fibrant; it also rolled out ahead of schedule, while Fibrant ran into a delay. But the need for these municipal fiber-to-the-home projects to rework their business plans is not surprising in and of itself. In the corporate world, companies revise projections and adjust plans as their businesses evolve.
Starting in 2009, Salisbury has been making payments on the $35.86 million bonds issued to finance Fibrant and other city improvements. The payments ó starting at $2 million a year ó come from the capitalized interest fund (also borrowed) set up to cover debt payments during startup. Tax money is not to be used, and the plan is for Fibrant to be self-supporting within a few years. How many? City officials expect it to be ěcash flow positiveî in three to four years.
Again, this is not for the faint of heart ó nor the thin-skinned. The city has taken a bold step by establishing Fibrant, but it is not in uncharted territory. Others have used this route successfully.