Sunday, November 14, 2004

LUS fiber plan faces crucial vote Tuesday

The Sunday Advertiser runs "LUS fiber plan faces crucial vote Tuesday" as its Sunday headline. All in all it is pretty thin gruel. The story reviews the history, summarizes the plan, and covers the arguments of the boosters and opponents is the "he said; she said" fashion that has come to pass for objective journalism.

Though it may not matter much to the reading public, the decision to run a local story as the "Sunday Headline" is a significant one for those who work at a daily newspaper. The decision to present the fiber optic story as the story of the week makes sense. On a local level it is arguably the story of the year in its potential to shape the future. It is hard not to wish for a more muscular, in-depth piece that opens the issue up for examination by the public in addition to simply reporting the latest back and forth. If the story is worth the Sunday Head it is worth a little more work effort at this time to fill out the story and help readers understand what has and has not been credible in what has been said by both sides over the course of the story.

Still, taking this for what it is rather than what it could be, it isn't a bad little summary and is worth the read as long as you are careful not to take the he said, she said portions too seriously.

5 comments:

GumboFilé said...

1) Is it right for any entity to enter into competition against other entities over which it has power to tax and regulate?

2) Is it right for said entity to have taxpayers assume all consequent risks?

3) Is it right for said entity to have risk-free entry into competition against entities which do not have risk-free entry into the market?

GumboFilé said...

If the LUS fiber network is such a good idea, and if there is going to be such a demand for this, and if this is going to be such a profitable investment for LUS, then why haven't I heard of any private business
planning to do the same thing? Maybe it's because real businesses make such decisions based on real market economics, which does not allow for a tax-funded safety net.

On the one hand you have the utility customers and taxpayers assuming a liability for something for which the market apparently hasn't indicated a real need. On the other hand you have LUS with the unfair advantage of this tax-funded safety net, guaranteeing that only taxpayers will be exposed to any of the financial risk. Due to the power to transfer all risk to the
taxpayers, LUS will also have an unfair ability to provide a product that is superior to it's competitors, whether it's needed or not.

Not only is this immoral, it is unnecessary. Technology and the free market are already bringing continuous improvements in electronic delivery of
information. Additionally, at the current rate of technological improvements, it's quite possible that this fiber network will be obsolete before it is paid for. Think about the cutting-edge technology of 20 years ago. How much of it is still being used? Now think of what might happen to today's cutting-edge technology in 20 more years.

You might say that the utility customers and taxpayers are co-signing a note on a purchase we hope somebody else will someday want to pay for. All utility customers and taxpayers will be assuming this liability, including those who vote against it and those who will never use the fiber network. This venture is risk free for LUS, but it is not risk free for the taxpayers.

It's not unlike a majority in a neighborhood requiring all in the neighborhood to co-sign loans enabling some in the neighborhood to buy the latest high-performance cars from a single neighborhood dealer, whether or
not the cars are even needed. There are adequate vehicles available from other neighborhood dealers, but no one is cosigning loans for those vehicles. Even if high-performance cars are needed, it's immoral to force
your neighbor to cosign your loan, and it's immoral to give this advantage to only one dealer, especially if the car is going to be obsolete before it's paid for.

I suggest that those who think that this is a good investment should invest in a private venture for this purpose, with private financing, unless you don't really believe your own rhetoric.

Anonymous said...

"If the LUS fiber network is such a good idea, and if there is going to be such a demand for this, and if this is going to be such a profitable investment for LUS, then why haven't I heard of any private business
planning to do the same thing? Maybe it's because real businesses make such decisions based on real market economics, which does not allow for a tax-funded safety net."

Or maybe it's because the bottom line of private business is to make money, and lots of it. The difference between private business and LUS is that LUS's goal is NOT to make alot of money on this venture, but to better the lives of its customers. This will not only make broadband more widely available for a cheaper price, but it will potentially draw many businesses back to Lafayette and help stimulate our local economy.

As far as the question of "Why do this when the technology could be obsolete?" Well, by that logic, why would you do anything in this world? Why build a home when building techniques could change for the better in 20 years? Why buy a new car now when better cars will be available in 20 years? You cannot keep putting things off just because there is potential to be obsolete. If you do put things off like that, then nothing will ever happen, as you will be putting off forever. Sure, everything becomes obsolete at one time or another. However, that shouldn't be a deterrent from doing something now that will benefit the city an immeasurable amount in the future.

John said...

"1) Is it right for any entity to enter into competition against other entities over which it has power to tax and regulate?"

LUS doesn't have the power to tax or regulate anyone. Sorry, but that's true. The state has some regulatory power. The federals more. LUS and the city? None. Taxation? There is no special city tax on telecom. And if there was LUS would have to pay it. It's the Law. LUS will pay the fees that Cox pays. Again, that is the law.

There is some money exchanged contractually between business having to do with one business using the property of another --poles, rights of ways. That's as it should be. And it is neither regulation nor taxation. Does Teche Electric let folks use their property for free? No?! Does Teche Electric by this fact have regulatory or taxing rights? You are bound to know that this stuff is not true. Why repeat it?

You might not like what's coming in Lafayette but you ought to get clear on what is actually going on.

"2) Is it right for said entity to have taxpayers assume all consequent risks?"

Owners get both the risks and the benefits. The owners here will be the taxpayers. It's as simple as that. The benefits of this plan far, far outstrip the risks. Just as they did for power generations ago. New Iberia used to be the queen city of Acadiana. Part of losing that status was missing the boat on public power, getting it late and then paying out all that cash every year to someone living in another state instead of keeping the money home to support local activities and businesses. The city of Lafayette has made gobs of money for its citizen-owners over the years. And that, consequently, lowered taxes. It's rational, good business for the citizens based on a proven model. And Lafayette is one of the cases that has proved that in the past. It's hard to deny history; however hard one may try.

"3) Is it right for said entity to have risk-free entry into competition against entities which do not have risk-free entry into the market?"

Nothing is risk-free. Careful. Sure. Smart. Sure. Good, aggressive business plan? Damn straight.

What are you afraid of? That our local people will succeed and a couple of out-of-state megacorps will have to cut back their profits a little in a single parish?

Doesn't bother John at all. We all have to decide whose side we are on. Whose side are you on?


Ok, that was pretty heated, I'll admit. But the crux of the matter really is this: Out of state corporations whose only motive is profit should not be allowed to control the only fiber-optic system likely to be ever built in Lafayette. (A fiber-optic system is a natural monopoly.) It's crucial infrastructure and should be run at our speed, for our purposes, on our schedule. Nobody in Atlanta should be in a position to tell us what we need and want. They tried to do that. They are about to find out that was a mistake. I think that is a good thing. For us and for other communities they pretend to serve.

John said...

If the LUS fiber network is such a good idea, and if there is going to be such a demand for this, and if this is going to be such a profitable investment for LUS, then why haven't I heard of any private business planning to do the same thing? Maybe it's because real businesses make such decisions based on real market economics, which does not allow for a tax-funded safety net.Actually the reason why BellSouth and Cox haven't pursued this is based on actual "real market economics" and not the faux kind too often bandied about. These publicly traded corporations go for high, short-term profits. They more or less have to in order to satisfy their owner, the shareholders. So there are a lot of profitable businesses they never get into because taking 20 years to pay back the investment is not an option. The long view works for LUS because it can, and will, pay back its owners with lower prices on goods. In this way it is like a coop. Coops don't make big profits either. They return their value to their owners in lower prices, better service, and local control. If you own the service profit isn't the big motivator. It is for these publicly owned megacorps

On the one hand you have the utility customers and taxpayers assuming a liability for something for which the market apparently hasn't indicated a real need. That is what the incumbents say and it isn't true. They don't offer more than 4 megs on a shared line. To get more you have to pay thousands. (Ask them, it is simply true.) But if LUS offers 40 megs for the same amount of money and 10 megs for less more people will buy. Its called supply and demand. You sell more if you sell better stuff for less. I am sure Teche Electric is familiar with this concept and has used it successfully.

On the other hand you have LUS with the unfair advantage of this tax-funded safety net, guaranteeing that only taxpayers will be exposed to any of the financial risk. Due to the power to transfer all risk to the taxpayers, Covered in the previous comment.

LUS will also have an unfair ability to provide a product that is superior to it's competitors, whether it's needed or not.Hunh? I plain don't get this objection and it is new to me. So if LUS ponies up the money for a superior system, and decides to take its payback over a longer period of time in order to win market share this is somehow unfair. Really? I thought that was how free enterprise was supposed to work. Competition comes in and offers more for less. It's not unfair. It's business. If BellSouth or Cox was willing to do the same we wouldn't be having this conversation.

Not only is this immoral, it is unnecessary.

Whoa! Where did immoral come in?! This is the people banding together to do something for themselves that oustiders are refusing to do for them. I call that self-reliance. You call it immoral. I really think you do the people of Lafayette a disservice.

Technology and the free market are already bringing continuous improvements in electronic delivery of information. Additionally, at the current rate of technological improvements, it's quite possible that this fiber network will be obsolete before it is paid for. Think about the cutting-edge technology of 20 years ago. How much of it is still being used? Why stop with 20 years? Why not 100 years? At that time the cutting edge was electricity. Some of that copper is still in use. The tube and bare wires were taken out of my house in this decade. And all we really did was add a little insulation arounnd those wires. The technology, pole switches and all is still in place. Again, I think you are well aware of this, are you not?

Now think of what might happen to today's cutting-edge technology in 20 more years.I have, I do. Electricity over copper is a natural. As long as electricity is important copper will be. Tensil strength and conductivity. Nothing can match it. And more than a hundred years of electicity provision have only served to demonstrate this.Similarly light over optical glass is a natural. Nothing, nothing can match its bandwidth and almost infinite overhead. Each and every alternate technology I have heard of is designed to rely on fiber to move the really massive amounts of data around. Really the proof is in the incumbents plans. The long-term not short-term, long term plans of each of the incumbents is to replace every inch of copper they can afford to with glass. They are doing it now. They show a huge faith in the longevity of glass and are putting all their investor's money at risk in that bet. They think it is a good risk, about as sure a bet as one can get. I agree. This talk about alternate technologies "maybe" coming along is just a distraction; but it isn't distrating real companies.

You might say that the utility customers and taxpayers are co-signing a note on a purchase we hope somebody else will someday want to pay for. All utility customers and taxpayers will be assuming this liability, including those who vote against it and those who will never use the fiber network. This venture is risk free for LUS, but it is not risk free for the taxpayers.If it is risk-free (which is nonsense, of course, it is a low risk, high gain venture, but not risk-free) then how could the taxpayers have a risk?

The logic you use about customers and taxpayers turns the actual situation on its head. In reality what happens is that the subscribers pay the cost of the system. The other taxpayers get a free ride on the tax-abatement benefits, the increased economic activity due to keeping the money circulating in our community, the jobs, etc. etc. Non-subscribing taxpayers are getting a free ride and if they wanted to do the right thing by their neighbors they would pony up. But nobody, nobody, is even suggesting that they be forced to pay for the system.

It's not unlike a majority in a neighborhood requiring all in the neighborhood to co-sign loans enabling some in the neighborhood to buy the latest high-performance cars from a single neighborhood dealer, whether or not the cars are even needed. There are adequate vehicles available from other neighborhood dealers, but no one is cosigning loans for those vehicles. Even if high-performance cars are needed, it's immoral to force your neighbor to cosign your loan, and it's immoral to give this advantage to only one dealer, especially if the car is going to be obsolete before it's paid for.

I suggest that those who think that this is a good investment should invest in a private venture for this purpose, with private financing, unless you don't really believe your own rhetoric.
I do believe my "rhetoric" —and my principles. It is a principled position to say that local monopolies ought to be locally owned and controlled. I don't think there is anything wrong with using the local government I help elect and control to enable this. (I think the same thing about the military, roads, schools, water, police, building inspectors, and power.) This is the American mainstream position. There is nothing at all immoral about doing for yourself and helping your neighbor. Quite the contrary. That is what they taught at my Sunday School and I'm sticking with it. (Smiles)

Respectfully

David Hays
Yours, John St. Julien