"Audit: LUS making progress"

Here's a striking contrast.

Stories on LUS Fiber that start with "Audit:" the Advocate's new story "Audit: LUS making progress" and the Advertiser's "Audit: LUS Fiber lost $45,000 a day."

We're talking the same audit. I've already commented on the Advertiser story—and on an Advocate story that actually focused on the core of the audit and was published on the same day. I felt (and feel) that the story out of the Baton Rouge paper focused on the whole audit and accorded LUS Fiber its appropriate space while the Advertiser went for an inflammatory headline.

Now, several days later the Advocate does a follow-up story that highlights the LUS Fiber portion of the audit story. What's instructive is that Burgess, the reporter for the Advocate, goes back to the auditor for a followup story, the city's chief financial officer and Terry Huval, head of the new utility. A very different story emerges. From the story:

Kolder said in an interview Thursday that despite his note of caution, he did not intend to present a “doom-and-gloom” scenario. 

He said that based on his review of LUS Fiber’s finances, he agrees with City-Parish Chief Financial Officer Lorrie Toups that the service could break even by late 2014 or early 2015. 

“Normally, most start-up businesses lose money the first three to five years,” Kolder said. “... It would be expected.”

And:

Toups noted that the $28.8 million deficit cited in the audit for LUS Fiber at year-end 2011 includes about $21 million in accumulated depreciation since 2009. 

Depreciation is not the loss of actual cash but rather writing off the value of equipment and infrastructure as it ages. 

Huval comments:

Huval said that when the depreciation expense is factored out, LUS Fiber, as of April, was making enough money to cover all operating expenses and to set money aside to help repay the more than $100 million borrowed to start the enterprise.

That's what's commonly known as "cash flow positive." And it is a big deal for any startup. It means that you no longer have to borrow new money—or dip into the money you've banked at startup—to pay for day-to-day expenses or debt service. With a debt as large as LUS Fiber's the latter concern is a large one. It's not the same as profitability, of course—to claim that you also have to be able to pay for expansion, replacement, and upgrades. In LUS' case there is no further expansion beyond the city in the works; there won't be much in the way of replacement beyond new trucks, tools and the like; and upgrades will be common enough—but since LUS Fiber is, by dint of being fiber, well oversupplied with capacity most upgrades in the future will be merely to replace older equipment with newer, more capable, and almost certainly cheaper equipment.

LUS Fiber is over the hump. Every additional subscription from here on out adds to the cushion that will  predictably allow the utility to say that it is profitable. Being cash flow positive means the business plan has proved out and the great mass of costs are being absorbed the current subscribers and the (notably low) prices that LUS Fiber is currently charging. There won't be a need for a radical restructuring of the business plan, merely the usual periodic adjustments to account for increased costs — issues that by and large the utility's competitors will also face.




Lagniappe: Interested readers may wish to travel over to the KPEL site where they can get many of the points made in this story directly from the horses' mouths. The radio station has posted an audio stream of an interview with Durel and Huval that the two gave in response to the initial Advertiser story.

"Durel – Huval Defend LUS Fiber Earnings"

 Yesterday morning, the day after a questionably crafted story:  Audit: LUS Fiber lost $45,000 a day ran in the Advertiser Durel and Huval got up early and went to KPEL's ‘Mornings With Ken & Bernie’ show to dispute the report.

The online recording shows Durel opening the segment by saying that the "headline was so misleading and distorted" that he felt compelled to clarify. The audit took place early in the new ventures life; when LUS Fiber was about 2 years old and long before there plan called for a break-even point. The audit was the 2010-2011 fiscal year starting  on November 1st so the data in was between 18 and 6 months old when it was presented to the council so things have changed. Even working with the old figure Durel and Huval point out that 2/3rds of the scary 45,000 dollars was in "basic depreciation." They explained it by analogy to new car depreciation— the value lost through depreciation is an accounting tool that deals with what you can sell the asset for; it does not mean that the actual assets are worth any less to the user or that that much real money is being poured into the business.

Part of what has changed is that LUS Fiber has continued to grow since the auditor closed his books. The new venture is now raking in 57% more revenue and has 50% more customers on its books than it did last year at this time. Those are the kind of growth figures that any start-up would be thrilled to have in year 3.  And that sort of growth has important consequences: without depreciation LUS Fiber has turned a very real corner and as of the April books is taking in in excess of 2 million dollars a month and can pay both debt service and operating expenses out of current revenues. Pause for a second: this is very big news.  It means that there is no further drain on borrowed money. From here on in they simply have to keep expanding and start saving for the inevitable periodic upgrades. Baring an unlikely contraction in the user-base the community can consider that their new utility has turned the corner. To quote Huval: "We did what we said we were going to do..." and LUS Fiber is "On the path of being a very self-sufficient business."

This whole process is not a new one for Lafayette. Huval, at one point in the interview, read from a 1901 newspaper article—6 years after LUS' electrical utility was launched—that bemoaned the constant drain on the city's coffers but offered encouragement about the services and savings from which the community benefited. Starting up a capital-intensive utility has always been a tough business.

In a short aside Huval also mentioned that of the 25 million dollar loan portion of the total debt that LUS Fiber took from the larger utility business that almost all of it was a cost forced on the utility by state law—it was a transfer of fiber already bought and paid for by LUS to the new division. Only 5.8 million was anything like what we conventionally mean by a loan and even a portion of that covered the same law's "imputed taxes"—a state-imposed injustice of which regular readers will be familiar. The Louisiana legislature's subservience to corporate interests was not a new feature developed during the current legislative session.

Durel wrapped up the discussion with his take on what drove some people to oppose the fiber plan: basically "ideology." He said: "There are people driving this that just want LUS Fiber to fail." But he claimed that not only was the fiber network going to pay for itself but it was going to make money, save customers money, and put money into the general fund. That's certainly been our experience with the electrical and water utilities.



*Do take the time to listen to the interview on KPEL. There's even a great radio pic of Durel and Huval. But be aware that the audio is locked up in a pretty nasty Adobe wrapper that will not let you access it directly or start and stop the feed. Just let it play; I went through several irritating restarts of the lead-in music when I tried to pause the download to take notes. Beware. Be patient.

** I'm going to take a moment to complain: today's good news that the utility is going cash flow positive is really, honestly, GOOD news. LUS Fiber has turned a very important corner and from here on out the chance of failure is vanishingly small. But the public is not getting the message that it should. LUS is simply not handling its PR very well. This should have been announced at press conference where the city and our utility could present it cleanly as the high point that it actually is. Having it come out in an early morning radio session under the shadow of an article like the Advertiser's is poor message management. Frankly I think that is mostly due to an excess of silence; those running the utility are engineers, not marketers (and thank heaven for that) but their instinct that not talking about the utilities successes or failures is always to be preferred simply leads to situations like this one.

***Early on I criticize about the Advertiser article that touched this off. You can find that article on the Advertiser site until it goes behind a paywall and you can find my longer critique on the blog.

Theriot Attacks Fiber Obscuring Council's Role in Larger Fiscal Debacle

The Lafayette City-Parish council heard a disturbing report from its auditor last night, the core of which was that Lafayette City Government had run out of the savings it had been coasting on since 2008 when the budget last actually balanced and was now faced with a fiscal crisis. 

So we get this headline: Audit: LUS Fiber lost $45,000 a day. Say whaaat? 

The Advertiser has returned to the days of coverage that sacrifices informed, informative reporting for sensationalism. 

This sort of story misses the real news to focus on sensational headlines and personality politics. Honestly, the real story is contained in the last paragraphs—that LCG as a whole has been living beyond its means every year since 2008. Not mentioned in this story is that the core critique was that LCG lost 9.7 million dollars in the last fiscal year which finally depleted reserves. The audit notes that LCG should be keeping a minimum of $14.5 million in a reserve, 'rainy day,' savings account but that the City-Parish is down to 3.8 million.

Durel, no doubt knowing this audit was coming, has been upfront about this in last few weeks saying that the crunch was coming because the city-parish council (which has responsibility for the budget) has run out of savings.

That Theriot, who is an officer of the council, should froth and foam about LUS Fiber rather than deal seriously with the actual problem that the council faces is predictable. He'd rather attack the supposed fiscal mismanagement of a public utility than face his own role in the fiscal mismanagement of LCG. He'd rather his ideological allies and followers do the same and skip lightly over his own failure to fix the very sort of problems he was elected to fix.

Focusing on LUS Fiber's "losses" is the most obvious sort of misdirection. Anyone who has followed the story of LUS Fiber knows that it is supposed to be losing money now. It's in the business plan, for gosh sakes. You borrow seed money via the bonds in order to build the physical assets that you expect to pay back the loan. Business 101,  Building a fiber-optic network from scratch requires enormous upfront capital. The plan presented to the public made it crystal clear that the division would lose money on paper for years, that was the whole point of borrowing 125 million dollars to buy construction bonds. The story even mentions this truth—in passing. Even Theriot, blinded as he might be by his own ideology, surely understands this basic bit of business management.

 Theriot, the only person interviewed for this story, gamed it all very nicely. He's getting to be quite the politician. Expect a follow-up make-good story that interviews Mayor-President Durel and utility director Huval tomorrow. That's the one where the community leaders have to explain, again, what bond money is and what it is used for. And that story will put off, for yet another day, the real story that the Advertiser should be writing: Audit Finds LCG has Run Out of Savings.

Update: Right after posting this I settled down to read the rest of my morning papers...and found that the Advocate's Richard Burgess had reported the story and reported it well. The title: "Budget cushion dwindling." The story focuses on the real problems the audit revealed and mentions LUS Fiber in the final paragraphs, clearly providing the context needed to understand its fiscal picture. Theriot is not provided a platform—nor is Durel or Huval.

Update #2, 5/25/12: Durel and Huval have responded to the Advertiser's article during an interview on  on KPEL. I covered that interview in a separate blog post.

"Lean Networking" and the Utility advantage

Martin Geddes, one of the brighter guys in a field full of smart people, writes intelligently and simply about what a modern telco company need to do to succeed. It's not easy to write both intelligently and simply about anything, especially telecommunications business models, but Geddes achieves that in an essay entitled "Lean Networking."

The basic trope he uses is to describe modern telecommunications companies as crucially similar to classic, massive, industrial manufacturing plants—they are centrally concerned with keeping the expensive plant running at full capacity all the time. They want to keep their networks full all the time and central to that is not overbuilding and viewing both network queues and QoS devices as fundamentally a way of keeping the pipes full. Quality, in guise of loss and delay, is is conceived of as something that happens after you've assured basic network efficiency, in the guise of full pipes. (You may now have an inkling of the underlying conundrum that AT&T' has created for itself.)

In contrast modern, "lean," manufactories are focused on what constrains the production of quality goods and in eliminating those constraints. Quality, conceived of as low defect and high user satisfaction, is the first focus of lean manufacturing. Efficiency is something that you work up to once you've got the quality where it needs to be to satisfy your market. So keeping the factory running at capacity at all times is not the first priority and is achieved by ruthlessly eliminating any constraints on supplying quality goods as they are needed even if that means plant downtime as the demand ebbs periodically. Maintaining some excess capacity is part of the price of viewing manufacturing in this way. By analogy, the lean network of the title of the essay is one which views minimizing loss and delay by focusing on those parts of the network that constrain the network—chiefly contention—eliminating those, and dealing with ebbs and flows by network planning allows excess capacity in accordance with anticipated large flows.

Geddes take-home idea is that the only way to have both efficiency and quality is to ensure quality first. Focusing on efficiency first results in the big, bulky, plants that have to run at full capacity all the time. And that sort of full capacity can only be achieved by methods which compromise on quality. But if you go for quality first you can adapt to the ebbs and flows exactly by minimizing queuing and other tactics which actually ensure contention. Only the quality-first route can take you to the very most efficient network.

Ok, you may say, but why talk about something so arcane in a blog focused on a local municipal network. Well...

Lafayette—and other fiber municipal or small networks.  
Geddes is focused on advising enormous,vertically integrated creatures like AT&T. As he notes the chief constraint on quality, contention, is worse at the local edges of the network. The solution is to both being willing to refuse to allow new entrants at peak times and to build more capacity to reduce the frequency of such moments. (Like lean manufactories.) The old telephone network that AT&T and its brethren built worked this way: like most utilities it was luxuriously over built and, in those rare moments of contention, new calls were simply refused; you were told "all circuits are busy" on those rare occasions when capacity was challenged. Interestingly, cable companies had their own version of this: they devoted discrete capacity to each channel, classically, each channels full info flowed past your tv's receiver all the time. It was hugely wasteful in terms of efficiency since you could only watch one channel at a time.

The advent of Internet Protocol (IP) and associated protocols changed all that; the key term is "best effort"—IP networks are not "all or nothing" networks like the old phone service or the classic cable model; instead they can trade quality for capacity. It's more efficient overall. And there is a strong engineering and financial push in the direction of efficiency; the two mindsets are in agreement on this issue.  The cost-savings occurs at the very edges where Geddes notes there is the most contention. This is at least partly because it is the most expensive part of the network in which to upgrade capacity. It's where the compromises are most profitably made. Old technologies that are more expensive in the long run are given spotty and gimmicky upgrades to extend their life and only the relatively inexpensive core lines are given the newer, more capable, and more easily upgraded fiber treatment.

That (finally!) is where entities like LUS Fiber come in. If the big guys can't see their way toward fixing the edges local folks can...and the end result can—if LUS focuses its bandwidth purchases on ensuring contention-free links at the regional level—result in a user network like the one Geddes would recommend: a network which is built to minimize contention first, and build efficiency on top of that.

It's a utility mentality. And with its LUS Fiber utility Lafayette is a "back to future" sort of place where the local supplier of the most constrained part of the network returns to viewing service as a quality issue and is willing to oversupply capacity in order to get quality...which, if Geddes take-home idea is right, is the only way to get to real quality and maximum efficiency.

LUS' biggest advantage in the modern business environment may well be its oldest attribute: a commitment to running the network like a utility.

"Stuller, LGMC, FiberCorps launch telemedicine clinic"

The Advertiser covers a new telemedicine project at Stuller today. The project at Stuller is the first fruits of a more complex project built on LUS Fiber—LUS' internal 100 meg intraconnection makes the two-way HD video that is the central feature of such a system simply not an issue; any off-the-shelf equipment can be used. Any medical practice that wants to make use of the infrastructure and any business that has LUS broadband can come in at a minimal cost. The hope of the program is to develop more and more varied clinics that rely on off-site expertise using the infrastructure that Stuller is piloting. A company the size of Stuller makes a great anchor tenet for such a project. Once it's up and running reliably and well-staffed adding additional virtual sites is easy—smaller companies coming onboard incrementally won't stress a system that starts with 12000 employees. That's an impressive base number especially since this is not meant to replace your general practitioner or specialist physicians. This is all about palliative care of minor illness and preventive medicine. Expanding the numbers in the program is only sensible business practice; the larger the base, the smaller the overhead maintenance will be.

 There's a perhaps not yet realized potential for the school system as well. New superintendent Cooper has made it clear that he wants to expand the already overburdened school nurse system into something much closer to community clinics either onsite or attached to schools. Telemedicine is one way to practically bring specialists and the children's primary care physicians into the loop without breaking the bank. And the school system is on LUS Fiber at 100 megs per node throughout the parish.

Senior care centers would likewise be prime candidates for expansion of the idea. Patients and caregivers could have much easier and more timely access to advanced care.

There is lots of room for good things to emerge from the ease with which advanced services can be offered when the capacity of the basic network and policy of unconstrained internal bandwidth means that ALL the potential users have easy, cheap, direct access to all the capacity they need. If Lafayette emerges as a leader in practical, widespread telemedicine it will be because all the basic infrastructure is lying here ready to use. The big pipe is open. We only have to connect the dots.

Chattanooga’s smart streetlights include a wireless network

Nifty idea from fellow fiber city Chattanooga: install a wireless network with your actively managed LED street light upgrade. Save money on lighting by using cheaper, longer-lasting lighting and by using the dimming function dynamically to save an extra fraction. Plus you can use it to piggy-back a wireless network for more general use if you want. Why not?

Before & After. Nice color temperature too! (via Sensus)

Once you've got the basic infrastructure in and under your control you can do some amazing things on top of it.

"New Video Explains Community Broadband"

The Institute for Local Self-Reliance has posted a new video that succinctly lays out the case for local broadband. It's not just faster. It's not just cheaper. It's also, and perhaps most importantly, about local self-determination.

And, while you're thinking about it, download their latest and greatest case study of three leading municipal networks: Broadband at the Speed of Light. Yes, LUS Fiber is one of the three examined.

"ALEC Wants You To Pay 750 Percent More For High-Speed Internet"

What's Being Said Dept.

The Independent puts us on to an article that uses LUS Fiber to illustrate the the malign nature of ALEC. (The American Legislative Exchange Council is a secretive, corporate-funded organization that exists to create model state-level laws that favor corporate interests.) In  "ALEC Wants You To Pay 750 Percent More For High-Speed Internet" ALEC, which has been in both the national and the state news lately, is taken to task for sponsoring state bills that attempt to outlaw new municipal networks or cripple them once the exist. An ALEC bill was the basis of the infamous (un)fair competition act which would have, in its original form, made Lafayette's home-town network impossible to build. ALEC state president, then the (ig)Nobel Ellington (R, Winnsboro), embarrassed himself during debate by repeatedly having to walk away from the podium to confer with lobbyists in order to explain a bill he supposedly "authored." Only a veto threat from the Lafayette native who was then governor, Blanco, altered the bill enough to allow LUS Fiber to launch.

This article is in the way of piling on—ALEC has been pilloried in the national arena for having sponsored a series of "stand your ground" state gun laws that culminated in the Florida death of Trayvon Martin. The corporate-sponsored group has also come under attack for promoting series of laws restricting access to voting which range from shortening the voting day to restrictive voter ID laws. ALEC has responded by disbanding the committee that pushed laws not directly benefiting their corporate sponsors.

Lagniappe: The headline's sensational "750% more for High-Speed Internet" referenced LUS Fiber's advantage over Cox and substantiated the claim by referring back to an article on this site but I couldn't find anything that was very close to that figure in the post. The nearest I could find was price per Mbps for the two companies lowest tier of internet usage—where Cox's price per meg was 8.7 times LUS Fiber's price, or 870%. I'm not sure why the article was so nice on that one....

"How Chattanooga, Bristol, and Lafayette Built the Best Broadband in America"

Christopher Mitchell has published "How Chattanooga, Bristol, and Lafayette Built the Best Broadband in America," an in-depth case study and analysis of how the three named cities have, well, built the best broadband in America. It is indeed in-depth; weighing in at 65 pages the study digs into the history, the current status—with an emphasis on unique features of the networks—and the benefits that each community-owned network has developed. There's a little something for every interest in the studies. If you want to know how to get a network started there are three successful models to review. The types of opposition and local preparations are discussed at length. Widely different business plans are revealed. Each network's unique services and approaches are highlighted.

This is exactly the sort of study of community-owned broadband success stories that has long been needed. A structured set of case studies both gets at the common features of successful municipal networks share and the very real differences between local circumstances and strategies. Both the Institute for Local Self-Reliance, Mitchell's home base, and the Benton Foundation, who supported the work financially are deserving of thanks.

Lafayette readers of this blog will be most interested in how the study deals with LUS Fiber. Mitchell does a good job—and put in the time necessary to get a good handle on the area's unique features. He visited all the cities covered and hung out in Lafayette, interviewing the principals and rooting around in local privately held "archives." (By which I mean folk's old card board boxes and saved documents.) I reviewed an earlier draft and think he's done an excellent job. You can't do better for a succinct catch-up on the history and development of LUS Fiber.


Recommended without reservation.  

Gigabit News: Roundup—Causes, Cox, AT&T, and Durel

What's Being Said Dept. 

The news that LUS Fiber is offering a gigabit service to businesses has generated news coverage—both locally and nationally. What I find interesting is the contrast between how national and regional stories cover the topic at hand and what they find important to focus on. The Louisiana-based stories are actually a good bit more substantial.

Nationally
The national coverage has shown up at various advocacy and communications-centric specialty sites. Notable ones include Stop The Cap and Broadband Reports.  Stop the Cap's story notes ATT's role in trying to block LUS and it malign influence on lost delta-region fiber broadband grant. Pull quotes:

That puts Lafayette on the map with Chattanooga, Tenn., as the two fastest operating fiber broadband networks in the country selling to both residential and business customers.  Both are publicly-owned networks private companies like AT&T have lobbied hard to banish... 

An $80 million federal grant to fund much-needed improvements to the state’s Internet infrastructure was returned in what one public official called Gov. Bobby Jindal’s special favor to Big Telecom companies like AT&T.

Broadband Reports titles its story: Lafayette Offering 1 Gbps Connections Seven Years After Idea Was Nearly Destroyed And that's pretty much the story. As always at Broadband Reports the really interesting stuff is in the comments. A 150x150 tier coming from LUS?  Interesting.

Local
The local stories are notable for being less cause-oriented and more down into the economic nitty-gritty.

First up though is an audio clip from KPEL's "Lafayette’s Fiber Gets Even Faster"...its nice to see the internet being used so competently by local media. The audio clip at the bottom of the page is the real thing—hear director Huval discuss the new capacity.

The Advertiser story, "LUS to release new high-end Internet" covers the local supporters of LUS' new tier, the competitors reactions, and throws in an interesting bit on the wholesale business. This site has already discussed the supporters' take. But of the two competitors AT&T's response—or rather, non-respsonse—was most interesting. AT&T basically told the reporter that they weren't competing and didn't plan to. Well, not in those words. But pretty nearly. Judge for yourself:

AT&T spokeswoman Sue Sperry said she doesn't anticipate a high demand for that kind of speed from residential customers... adding that AT&T offers 24 megabits per second with its U-Verse service in other markets, but not Lafayette. 

"Our focus right now is expanding capacity to our wireless network and adding more cell sites in the rural areas of Acadiana," she said.

Okaaay...

Cox on the other hand said that they had plenty of good bandwidth

"...in the municipalities of Lafayette, Youngsville, Broussard, Carencro, Scott, Duson, New Iberia, Breaux Bridge, St. Martinville, Crowley, Rayne, Abbeville, Erath, Delcambre, Kaplan, Franklin and surrounding areas."

Fair enough, and they provide dedicated business bandwidth as well; though they didn't discuss how their a la carte product might cost. One interesting tidbit was revealed in the attempt to put Cox's best foot forward: apparently they're doing a fiber build:

Thompson said Cox Business is in the process of installing an all-fiber optic private network for a south Louisiana public school system that services about 90 schools and 50,000 students. 

"This customer is representative of the size and scope of a customer who actually requires gigabit level Internet services," she said."an all-fiber optic private network for a south Louisiana public school system that services about 90 schools and 50,000 students.

No, that's not exactly right. As St. Thomas More's gigabit connection demonstrates, a really well-equipped, forward-looking school requires a Gbps all by itself. I will be fascinated to discover who owns that network when it is done. And how much it costs to install.

The Advertiser has the savvy to ask about LUS' wholesale network and the relationship of the new gig tier to that set of LUS Fiber customers:

"This does provide other options for wholesale customers to serve their customers," Huval said. "In some cases, the wholesalers are going to have new options. It might require a shift in the way it is approached because of what we have out there, but the options are available to all customers." 

Wholesale customers would also have the option of buying LUS Fiber's gigabit service, Huval added.

That's hedging things considerably. Having a gigabit option on the table that is competitive in capacity with what wholesalers buy is definitely going to impact the way they market services. That's another area to watch and I'll be interested to hear what current wholesale providers think. Will it expand the market for the bandwidth intensive services they sell on top of the bandwidth they buy from LUS? Is 999.95 expensive enough to leave some room for their current marketing schemes?

Burgess at the Advocate pens "Utility increases Internet speed" He touches base with two other municipal systems that also provide a gigabit documenting the wide range in prices with one charging $2,500 to $3,500 a month, and another, EPB Fiber Optics in Chattanooga, TN, which offers 1 gigabit service for residential customers and small businesses for $349 a month. The implication, of course, is that LUS's service is not as remarkable as its home-town proponents might claim. That raised the ire of Joey Durel, Lafayette's mayor, who came onto the comments to counter any such impression:

2) Comment by Joey Durel - 04/06/2012
A clarification on Chatanooga. If you compare apples with apples, their guaranteed gig service is $20,000 per month. They have a shared gig service that only costs $395, but they say it commonly only delivers as little as 80mbs. This is much like the "marketed" speeds we often see companies offer. It is legal to market, but is rarely delivered. Lafayette's true gig service is $999.95, unheard of in America. 

I look forward to the battle of speed tests that is sure to ensue. But that might not be so easy to pull off—apparently for all that the gigabit connection has been very loudly and successfully trumpeted as the distinguishing feature of Chattanooga's project there are not many actual users of the feature:

EPB’s 1 gigabit service is offered to both residential and business customers, but she said only about 10 residential customers have signed on.

That's very interesting...

Burgess notes that LUS' gigabit service is only available to businesses (the Advertiser seems to have overlooked this point) but when asked LUS granted that they'd entertain the idea if any residences actually wanted the service, a sentiment that Huval repeated to me when I asked the same question.

Cox responded to the Advocate's apparently pointed questions about their pricing in a revealing way:

Cox spokeswoman Patricia Thompson said the connections are customized for individual businesses and that the company could not give a basic price for 1 gigabit service. 

She said Cox’s prices for the service are competitive with other private companies but might not compare with what’s offered by the publicly owned LUS Fiber, which had the advantage of government bonds to fund the startup costs and occasional intergovernmental loans.

That's more than a little defensive and more than a little misleading. One would think that a new overbuilder, trying to buy down an enormous initial investment while competing against an entrenched incumbent whose network is already paid off could be spotted a couple of points on a their startup loan. The "intergovernmental loan" business is purest hogwash. What "loans" there have been have been the result of LUS having to borrow back its own earnings, at a standard interest, that it was forced to pay over to the larger utility to satisfy the PSC's dubious interpretation of an incumbent-sponsored law that already unfairly forced the utility to hike its prices to satisfy nonexistent costs ranging from taxes it doesn't pay to fees for using poles LUS already owns. Cox wants to double dip on the loans thing, both forcing LUS to pay interest to use its own money and also complaining when it does.

A quick side note: I was impressed by the quality of both the local stories. Both reporters delved into issues that weren't apparent on the surface and actually went out and made calls and interpreted what they saw in a pretty reasonable way. LUS, Cox, and AT&T all had to deal with some insightful and uncomfortable questions. And that's the way it should be. Kudos all around.

Lagniappe: The move to 1 gig is not exactly a total surprise. It's been anticipated and hinted at for a long time. I blogged a quick bit on it back in June last. Back then, though, it was supposed to be for both businesses and residents....

Lafayette goes to a Gigabit!

LUS Fiber is now offering a 1 gigabit internet connection to businesses. That puts Lafayette at an elite level globally and among the very few providers in the US which offer a gig of service available to the whole city and not just a few in the "business core." 

Joey Durel and Huval presented the new service as advancing Lafayette to the forefront of communities that could serve as testbeds for new services and as further fulfilling their promise to the community to maintain LUS Fiber as a world-class asset.

LEDA's Greg Gothreaux, the public school system's Logan McDaniel, and Dr. Menard, principal of St. Thomas More all spoke a few words of support, agreeing that in their experience the system was rock solid. Gothreaux touted that he'd long wanted a gig to market to the new business prospects that LEDA seeks to bring to Lafayette and claimed that he relished being able to get up from the table and make a follow up call to a prospect that had been in town last week and was impressed with the 100 meg intranet. Logan McDaniel, whose LPSS has been on the wholesale network since 2005, reported that they'd already upgraded the central office to two gigs and some of the high schools to a gig. The new plan that superintendent Cooper unveiled last night included an increased use of distance learning. But the most interesting testimonial came from Dr. Menard of St. Thomas More who noted that her school's technology initiative had placed an internet-connected device in the hands of every student complained that they were already hitting the limit of a 100 meg connection and were eager to be the first customers of the new 1 gig service. Schools are a good example, perhaps the best example, of institutions where the basic functions of the institution demand more bandwidth than is commonly available. Educators simply cannot count on having enough capacity available to reliably slot in 15 minutes for a high bandwidth activity like video conferencing to sister school in France. The reliability and headroom that a 1 gig fiber connections provides will make all the difference in such institutional settings.

Elsewhere—and here until this morning—gigabit services only been practically available to large corporations and public institutions like universities at a staggering price. LUS notes that in Lafayette before today it cost $20,000 a month to buy such a connection. Against that background LUS Fiber pricing its offering at $999.95 sounds like a bargain. (Though I suspect that part of the reason for the relatively high price is that LUS maintains a stable of wholesale providers to whom it has been marketing very large connections and who then resell their connections to business users. I expect we'll hear an outcry from such users that this pricing is too low and undercuts their business model...?) 

Part of the traditional high cost of such connections is that the seller assumed that organizations that wanted such speeds would have a damned good reason to buy it and that they needed to have that much service available without fail. Consequently most such services were "dedicated" and "guaranteed." That roughly means that  a purchaser can count on getting the full gig of service—as long as their connection stays on-network. No one can guarantee service speeds on the open internet. 

One of the things that sets LUS Fiber apart, and this may be due to their history of having been a wholesale provider of dedicated bandwidth for years before getting into the retail business, is that all LUS services are treated as if they were dedicated services. In most Internet Service Providers' (ISPs') networks the bottleneck is at or very near the last mile connection and anyone wanting large, guaranteed service requires rewiring or dedicating physical assets in the last mile to that customer alone; something which is very costly—hence the high prices. Oversubscription and "best effort" is the name of the game for almost all ISPs and the bandwidth available to the last mile customer is in practice limited: if all subscribers were to use their full bandwidth at once the available speed would drop to a small fraction of the promised bandwidth. LUS has always played that game a different way, minimizing oversubscription and ensuring that even during busy hours of the day the customer's full bandwidth is available. That's in marked contrast to what I used to experience on Cox when the kids in my neighborhood got off the bus. LUS Fiber's modern network takes fiber optics all the way to the home but over a PON network where the final distribution node is a 32 address split. In talking with Huval after the press conference he noted that LUS will, as a matter of policy, split a node in half to 16 customers anytime any customer on a node buys a gig connection. That effectively doubles the available bandwidth available and ensures a reliable speed that doesn't fluctuate.

LUS is not the first to offer a Gigabit of service...Chattanooga, for one, has offered gigabit services to all its customers for quite some time, and on a very similarly architected system. So the question you have to ask is: what has kept LUS from offering a gig before and what has changed? Mona Simon, in charge of LUS Fiber's daily operations, explained that LUS has as a matter of policy has purchased two main connections to the internet that together is double the capacity it anticipates needing on a regular basis. They want to maintain full fall-over capacity so that if one of their providers fails they'll be able to continue to provide service without interruption or even degradation. What changed, apparently, was that LUS Fiber has reached a point in its customer growth that it has enough people online that the sudden spikes in usage that a gigabit service can provide would no longer be unmanageably large relative to the baseline usage. Companies that are less careful about the effects of oversubscription at all levels (meaning most companies) would tolerate the sudden drops in the network's shared connection to the internet that having a Gbps product would entail. LUS was unwilling, apparently, to offer such a product until it could "drown" the effects in a large user pool that overall justified a larger internet pipe.

LUS Fiber to Get Commercial Income Stream

LUS Fiber recently announced that it was partnering with Viamedia to offer businesses the ability to insert commercials into the cable video stream. Viamedia aggregates ads nationally and provides sales services both locally and nationally. So LUS Fiber will be looking at adding an additional revenue stream from the direct sale of advertising. Since LUS Fiber currently has about 1/3 of Lafayette households both local and national advertisers will gain a way to access the whole Lafayette cable market by purchasing ads on both LUS Fiber and Cox. 


Viamedia fills a hole in the advertising market in places where there is no single cable provider in a DMA— a "Designated Market Area." Most cities these days have only one cable company and that company is large enough that it has its own advertising marketing machine. Viamedia exploits the hole that's left in DMA's where there is no overwhelmingly dominant provider and offers ways to, for instance, market to all of Chicago or all of the Atlanta region. Advertisers who once could get the Lafayette market with a single buy through Cox now need to get onto LUS Fiber.


This isn't particularly exciting stuff, granted. But it's a sign of the growing maturity of the local network and it adds real revenue. 


—Viamedia issued its own press release. 

LUS Fiber Announces Results of State Audit

Huval in a post presentation interview

LUS Fiber held a press conference today at the Pinhook customer service center that reported on the results of the first state audit required by the infamous (un)Fair Competition Act.  The state audit covered the first three years of LUS' operation and is intended to ensure that LUS Fiber is not being subsidized by Lafayette Consolidated Government.

Lafayette is touting the results of the audit as a clean bill of health from the Public Service Commission. The only issues that arose in the audit were ones previously noted in LUS' own yearly audit from 2010 and the PSC staff found no further issues. The two errors from 2010 involved LUS Fiber underpaying rent on the "fiber huts" located at electrical substations and overpaying the larger utility for some of the fiber assets transferred to the new utility. The result of the offsetting errors was that LUS Fiber slightly subsidized the larger utility—something the PSC had no objection to since they are only charged with preventing LUS Fiber from being supported by a "cross-subsidy."  (This is all part of the general thrust of the (un)Fair Act—to raise the price that LUS has to charge and to protect the incumbents from competition.)

Nonetheless the news is not all good. Cox and the cable association are "intervening" as is provided for in the law. Declaring that they want to intervene is not exactly surprising. It's exactly what was anticipated from the time that the PSC held hearings on how it would implement the uncomfortably vague and constitutionally dubious law. What form this "intervention" takes will be up to the PSC; there will likely be hearings but nobody really know as this is the first time the law has ever been applied—after all it's a law that only applies to LUS Fiber. Lafayette says that in view of the fact the PSC finds nothing worth pursuing the intervention is simply to harass, distract, and increase our expense. As Durel says in the press release: 

“We are not sure why Cox and the LCTA have intervened, unless it was to create further mischief, expense and distraction for our local taxpayers” states Joey Durel, City-Parish President. “The LPSC was granted this responsibility in the Local Government Fair Competition Act, which was created at the request of the private telecommunications companies.”

I suspect that they also hope to get deeper into LUS' books in any discovery process. It'd sure be nice if Lafayette had the right to root around in their books...

As to why this annoying but relatively minor event was worth a press conference: LUS' PR person said that since NBC's "Rock Center" newsmagazine was in town doing a story on LUS Fiber this would allow them to get some tape of LUS being harassed. (Didn't say it just like that, but...) Partly, I'm sure it's a well-worn habit: Cox does something obnoxious and Lafayette hits back. 

Lagniappe: Whining, sniveling losers...

An attack on LUS following the state audit has been long anticipated. Almost eagerly anticipated. Back during the PSC hearings over the first iteration of the regulations that govern LUS the incumbents were annoyed that the PSC didn't see things entirely their way and a bit of spite from one of the opposition attorney's generated one of Durel's patented quotable quotes:

 "The biggest disappointment is that BellSouth's attorney said he would see us in court," said City-Parish President Joey Durel, calling the company "a bunch of whining, sniveling losers."

The more things change....

LUS Fiber changes pricing policies (updated)

Without any fanfare LUS Fiber has instituted two, make that three, major changes in its pricing policies—there's no longer a minimum monthly amount to get on the network, they've changed the speed tiers on their internet offerings, and they've dropped the policy of not offering special bundle pricing.

Dropping the monthly minimum to secure a subscription has been in place for some time—I noticed it during my recent post comparing the pricing of LUS and Cox. Previously LUS Fiber had a minimum $44 dollar charge. At the time it was justified as necessary considering that the utility was making an expensive investment in fancy electronics and installation costs when they lit up a new customer and that cost was exacerbated by LUS not requiring a yearly contract or installation fee. But the minimum also had the effect of making it difficult to argue that LUS Fiber was doing all it might to close the digital divide; eliminating that "gotcha" will help make the case that LUS Fiber is simply a cheaper, faster service. When queried Huval confirmed the policy change.

A Facebook status message today announced:

Very exciting news from LUS Fiber today! Save over $300 when you sign up for video, Internet and phone from LUS Fiber. Three different bundles, three LOW prices.

That means the end of the no-bundling-discounts policy that LUS Fiber has followed since it inception. The previous "VIP" bundles had been nothing more than packaging three levels of the basic services together in a convenient package—the user did not get the limited-time "discount" that conventional providers used to steer users higher tiers. These three new bundles do give a discount — a standard $323.64 over the first six months. But along with that discount comes LUS Fiber's first real contract—a user is obligated to continue all those tiers for another six months at a step increase in price or face a 300 dollar termination fee that would wipe out the original savings.

Appearing alongside the new bundles are new internet tiers and new internet pricing. Considering the fact that LUS Fiber raised its prices about 6 weeks ago, making a sweeping set of changes to its internet offering so quickly seems odd. (Other services appear unchanged.)  Previously internet could be purchased at symmetrical speeds of 10, 30, and 50 mbps with an business-priced 100 meg version available to residents that were willing to pay the premium. The new speeds are 10, 15, 40, 75, and 100 mbps. The pricing for the old and the new speeds:

10/10—$28.95 30/30—$44.95 50/50—$57.95 100/100—$199.95

10x10—28.95 15/15—$34.95 40/40—$49.95 75/75—$99.95 100/100—$199.95

The logic behind the changes in both speed and pricing escapes me...perhaps LUS will be forthcoming as to what it hopes to accomplish. Given that this change comes so close on the heels of a price hike I'll expect some larger explanation. It is also unclear what happens to current internet customers and how long it will be before old customers have to shift to the new tiers and pricing plans.

Hmmmn.....

Update 3/8/12: 
This morning the Advertiser runs a story on these pricing changes that adds some of LUS' reasoning for the changes...
On the new discounted bundling policy:

"We want to make it easy for people to switch and try out their own community-owned fiber-optic system," said Amy Broussard, a spokeswoman for LUS Fiber.

On the change in speed tiers:

Broussard said LUS Fiber decided to increase the speeds it offers after realizing customers needed more bandwidth as households add additional devices, like mobile phones, tablets and gaming consoles to home Internet networks.

Correction:
A major difference between my blog post above and the Advertiser story is the inclusion of the old 10 Mbps tier—at the old price—in the new set of tiers being offered ongoing. I'm pretty confident that wasn't on the new LUS internet pricing page initially but I am very happy to see that the lowest tier is being retained at the old price. It means that LUS Fiber will offer a very competitive "low tier" to our citizens wishing a low price product—10 times the download speed for 3 dollars a month more than Cox's lowest tier and a much better price per Mbp—as the Advertiser notes:

Overall, the cost per Mbps is far more expensive for Cox customers. A Cox Internet subscriber with the lowest tier of service will pay $25.99 per Mbps of service, while the lowest tier of LUS Fiber's Internet service offers customers a rate of about $3 per Mbps.

The changes made in red to the original post above reflect the retention of the the 10 meg tier. 

NBC's "Rock Center" to do show on LUS Fiber (Updated)

Though its not been widely announced—Nicholas Persac of the Advertiser mentioned it in a twitter post—apparently NBC weekly newsmagazine "Rock Center with Brian Williams" is in town filming a segment to be shown on next Wednesday night's show. According to Persac who was tweeting from Tuesday's council meeting:

Durel says Brian Williams and NBC's "The Rock" are in Lafayette all week filming for a story to air Wednesday next week a/b LUS Fiber...Durel on NBC story: "The interesting thing is it's not as much about what the fiber is but what a community can do."

That's suggestive but not what I'd call really informative. As far as I know there's been no larger announcement. Unhappily, the UStream video of the council meeting online omits the first part of this meeting where Durel made the announcement...

I do know that the NBC team was out interviewing Kit Becnel of the Carencro Academy of Information Technology this morning.

Anybody know anything more? Let us know in the comments.


Update 3/1/12: The Advertiser's Persac (whose tweet is cited above) runs a story today on the upcoming Rock Center segment. Persac's take emphasizes the recent spate of good publicity for the utility and Lafayette quoting Durel as saying:

"This kind of publicity has brought credibility and respect to Lafayette from all over the country," Durel said. "You can't pay for that kind of publicity. For a town our size in south Louisiana to be talked about for something other than just food, festivals and crawfish - which are all good things - is really great."

The tale behind the camera crew's visit is a study in how this sort of "earned" publicity occurs. The shows producer, Tom Bettag, first heard about Lafayette's project from friends and family members of his wife who is a ULL (nee USL) graduate. But that's not the full story: the show found Lafayette to be a pretty unique community:

"I've always known this to be a very special community," Bettag said. "Every community is trying to save jobs and find employment for their kids, and the country is trying to make these broadband decisions to stay competitive." 

Bettag said another facet of the LUS Fiber saga he finds particularly noteworthy is the community's willingness to tackle such a progressive endeavor despite strong conservative roots.

Of course, I've always said that any community that boasted the number of drive-thru daiquiris shacks that Lafayette does and hosts the free Cajun and Fest Internationale festivals has a different idea about the meaning of the term "conservative" than the rest of our country.

PS:
The show is supposed to run, at the earliest, on March 15th. If you want to record to record the series and you are on LUS Fiber  :-)  you can do so right from this page. There's both a computer and a smartphone oriented interface. Enter your credentials, search Rock Center (selecting "program title," set up the series recording and the new series recording will pop up on your home DVR instantly. (I grabbed the HD version.) Nifty.

"Louisiana city blazes high-speed Web trail"

What's Being Said Dept.

Lafayette garners national coverage for its home-grown fiber optic network in the USAToday story titled: "Louisiana city blazes high-speed Web trail." The lead-in sets the tone:

In this tradition-rich city known for its crawfish etouffee and Zydeco stomps, high-speed Internet rules. Web videos upload in a few quick seconds. Surgeons review online pathology reports from their living rooms. University students share bulky research files with one another electronically at lightning speeds.

There's a brief version of the history from the early fiber ring through the fiber referendum, the legal battles, and Cox's price-slashing Lafayette-only "specials," missing only the yet-to-be completed story of Cox's obstructionism at the NCTC and its debuting its advanced DOCSIS 3 50 meg service in Lafayette in telling the tale of the unrelenting attempt to suppress the powerful local network. It's good to see the nation noticing the advantages of treating last mile networks as community utilities and the role such networks can play nationally:

Once a broadband leader, the USA has slipped to 15th ... according to the percentage of households and businesses using broadband, falling behind Finland, France, Canada and other countries. The USA's "duopoly problem" — 96% of households have access to two or fewer broadband service providers — has contributed to the slide in ranking, according to the Federal Communications Commission. In its National Broadband Plan, the FCC urges Congress to clarify federal rules allowing state and local governments to provide broadband service.

Local tech-enabled businesses are also touted—from Pixel Magic, to Skyscraper Holdings (from whom any LUS subscriber can get fiber-fast free off-site backup), to the Gastroenterology Clinic of Acadiana. For example: 

Scott Eric Olivier moved his tech startup firm, Skyscraper Holding, from Los Angeles to Lafayette when he heard of the speeds and service offered by LUS Fiber. The same connectivity of 100 megabytes per second [sic "bits"Mbps], which allows him to move large files across the Web for clients, would cost him several thousand dollars a month on the West Coast, he says. In Lafayette, he pays $200 a month. Another plus: He's getting what he paid for — exactly 100 megabytes per second [sic] — while his previous provider rarely delivered the promised speeds, Olivier says.

But that's all a nice repackaging of bits and pieces the locals already know. There is a bit of real news for the local reader. Huval reveals that LUS fiber has nearly reached the point where it is serving 1/3 of Lafayette. That great news; in the long run nothing is more important than market penetration and at 1/3 of the market LUS is assured of having the numbers that will allow it to succeed long-term. Any other problem is temporary and relatively easily dealt with; even better, at that level of market share Cox and AT&T have to treat LUS seriously or risk losing the entire market. They have no choice but to compete on price substantially extending the benefit of Lafayette's fiber to the whole community:

LUS Fiber has captured nearly one-third of the city's 45,000 residential and business subscribers, and more are steadily joining each month, Huval says. To compete, Cox has slashed its rates for some residents and business customers, lowering TV and Internet bills across the city, he says.

Go take a peek for yourself. ( Don't wait for tomorrow's paper; there's no guarantee that this national Gannett story will make the local Gannett paper. The last big USAToday article and the dramatic follow up editorial endorsement of Lafayette's network in its battle to win the right to exist only got a single, buried sentence of coverage.)