The current story looks like it started out as a color piece on a nice place to spend the weekend for the Pittsburg paper. I suspect the writer found a little more than he was bargaining for. It turns into a pretty incisive piece of economic reporting.
On the savings enjoyed by the residents:
Service Electric, began offering high-speed Internet access only after Kutztown unveiled its own network. To Kutztown residents, the high-speed service costs $25 a month. But if your home is just a foot over the Kutztown borough limits, the cost rises to $45 a month.That's what you save by going with the private provider--close to half price. In our case, think Cox. Here's the story on the borough's own offerings:
And so grows Kutztown's customer roster, month by month, student by student, business by business. Nearly 800 subscribers out of 2,200 homes and businesses -- that's a market penetration of 35 percent for the utility. Jaymes Vettraino, borough manager, hopes market share will eventually grow beyond 40 percent, which would allow Hometown Utilicom to begin turning a "profit" by 2009.
Hometown Utilicom's prices -- as low as $15 a month for 2 megabytes per second of transfer speed, $16 a month for cable TV -- have saved Kutztown's customers $400,000 over the last three years. "Private companies may view it as $400,000 left on the table," he said, shrugging.
"Hometown Utilicom" is true to its name. It doesn't need to make a big profit. Only pay for itself and return value to its citizen-owners.
Here's a bit more economics -- this with an historical awareness:
In taking matters into its own hands, Kutztown would appear to be a technology maverick. But it's also a bit of a throwback. Before big electricity companies came along, many small towns ran their own electric generators, providing juice for townspeople.
Three dozen towns still do that in Pennsylvania, and Kutztown is one of them. It's the fee-based model of taxation -- provide a utility that your residents would use anyway, charge for it, and if your business model works, other taxes stay low.
It's worked in Kutztown, at least on the electric side of things, as the local property tax rate hasn't risen in seven decades. Vettraino hopes Kutztown's Internet experiment will pay off the same way, by attracting more businesses like Lapic's, and more student customers like Vaculi and Maga, and by eventually contributing to the town coffers instead of draining them.
Now, as regular readers will note, I think the writer confuses "taxes" with revenues--a confusion shared by some folks around here, but do pay attention to the basic idea: electrical revenues are a proven way to keep taxes low. And telecom can serve the same role. (And yes, this is similar to my claims about LUS' in lieu of taxes; there's nothing new or odd about the logic.)