Wednesday, February 28, 2007

The Independent on the fiber battle

The Independent's news roundup this week headlines Lafayette's victory in the state Supreme Court.

The story highlights the victory, takes a dig at Naquin, repeats the city's contention that the delay has not hurt the project and closes with a citation to Michael Dell's recent affirmation of the importance of fiber to dreams about the digital home.

On the "costs" issue:
...the almost three-year delay will actually save LCG $4 million to $5 million because the price of technology and equipment has come down. “Because of the legal battle we’re going to save money,” City-Parish President Joey Durel says.

“At the same time, the technology has gotten 10 times faster,” notes LUS Director Terry Huval. He says interest rates in that time period have remained south of 5 percent, another factor lending viability to the original business plan.

It's true that we are good to go; and it is true that we'll get a more capable system for the delay. But it is not as simply "all good, no harm" as these quotes might make it seem--and I am sure that Lafayette actually understands that. Lafayette paid a real price, and will pay a continuing price, for the obstructionism of the incumbents and their allies. In insisting on that I'm not advocating a vendetta but a good relationship with the opposition always starts with a realistic assessment of that relationship.

The (Un)Fair Competition Act will, as it was always intended to, cause unnecessary expenses, limit the financial flexibility of the utility we own in ways that the incumbents would never tolerate, introduces a thicket of regulatory rules that are so unusual they can't even all be legally monitored by the PSC, and, most astonishingly, sets a limit on how low a price LUS can give to its citizen-owners. (Wouldn't you like to write a law that limits how low your competitors can go and get the state legislature to pass it?) That law will impose continuing, unfair costs on LUS for as long as it is in place.

Clasues in that law, and unfavorable conditions agreed to by LUS in its authorizing ordinance while the courts battle hung in the balance will surely drive up the interest paid by our community. LUS would normally be able to borrow money at the lowest possible rate, given its stellar history, size and the general reliability of utility loans.

Interest will be, by far, the single largest single expense of the fiber project. While it is true that the delay will not drive interest costs above the 5.5% anticipated by the feasibility study what goes unspoken is that had BellSouth and Cox not stood in our way the bonds would have been sold into a market that was almost unbelievably cheap. The prime rate was 4% for much of 2004 and is now 8.25%. That is 4.5 points of difference. An enormous difference, over the life of the loan. I have no doubt that LUS can get the discount it needs to drive its rates lower than 5.5% but I also have no doubt that in 2004 it could have gotten a similar discount off the prime...wouldn't it be much better if our interest was at, say, 2%? That enormous difference in the cost to us and our children over the 25 years of the bond is directly attributable to incumbent delay. And, we need to clearly understand, driving up Lafayette's cost has been a goal the incumbents have pursued in the legislature and the PSC; its legal strategy contributes to that broad goal.

At this point we've also lost years of receiving a unique service and the price savings that would have accompanied it. In addition we've lost years of a headstart on the rest of the country--and on our corporate antagonists who have used the "time-out" to beef up their own systems.

So we're not getting off "even" in any sense. The costs of obstructionism have been high--and they are not nearly over. If AT&T/BS and Cox wanted to do right by the community at this late date they'd not oppose repeal of the so-called "Local Government Fair Competition Act" an unfair law that imposes continuing costs on Lafayette's now inevitable system and has curtailed the rights of all Louisiana cities. The original purpose of the law, frankly, was to prevent LUS from competing at all. When that failed the incumbents settled for making it as difficult and damaging as possible to operate in order to discourage us. That too failed. The law should go. The incumbents are hoping that we'll not carry a grudge. That's not a reasonable hope as long as the corporations continue to take unfair advantage of our community.

Not to dwell entirely on the negative: it is great that LUS' fiber will be initially speced for 1 gig intead of the 100 megs we talked about during the referendum. (That is the implication of Huval's saying that it would be 100 times as fast.) That, most had assumed, would have to be reserved for the planned upgrades several years down the road. Getting that almost as soon as it becomes commercially available will be a good thing indeed.

1 comment:

Anonymous said...

http://www.thetowntalk.com/apps/pbcs.dll/article?AID=/20070228/BUSINESS/70228012

These numbers will soon change with the FIber we have in Lafayette. Eat your heart out BellSouth and Cox.