Sunday, February 14, 2010

"LUS: Fiber on right track"

If you follow Lafayette's LUS Fiber but don't get the Baton Rouge Advocate you'll want to check out Richard Burgess' latest story, "LUS: Fiber on right track." The heart of the story is found in the first paragraph:
Lafayette’s publicly owned fiber-optic based Internet, television and telephone service appears to be moving toward sound financial footing a year after its launch.
and the kicker:
Huval said this week that LUS Fiber should easily achieve the 23 percent market penetration needed to break even.
That's the story and it should be understood as a huge and exciting one. LUS Fiber is on track to making its financial nut. The bottom line in the story of the new utility division is no more complicated than getting the take rate needed for success.

What's nice about this story is the careful attention to the right detail. The first thing the citizens of Lafayette need to know about their new utility is whether or not it will pay for itself. This story makes it clear that as of right now it is on the expected path towards that goal. (At a moment when the network is not yet completed.) That path includes large upfront investments in expensive infrastructure that we have always understood would be paid out over the 25 year life of the bond issue.

LUS Fiber should not be "making" money in its first years. In fact the presence of a "profit" in the early years would be a terrible sign since it would indicate that LUS is not taking on the very heavy expenses of customer installations that raise its take rate and result in income which leads to the eventual timely retirement of the bond issue. Stories that lead with the "expenses" and "loses" in these first years are being sensational and hoping for no more than an excited readership. But worse than sensationalism they are actively misleading their readers about what is important about this developing public resource. Burgess' story does not to succumb to this temptation and so it is not an "exciting" read — unless you understand the basic dynamics of the situation. I've argued (repeatedly) in these pages that the first duty of a news story is educational. Kudos to the Advocate on this one.

Click through to the report; there's more interesting and encouraging tidbits about things like the higher than expected proportion of those taking all three services. It is a good solid read.

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