Wednesday, August 10, 2011

LUS Fiber Financials Covered in Local Media (and more)

I posted earlier about the LUS Fiber budget hearing yesterday. There I focused on the annoying return of the idea that LUS was (somehow) being subsidized — I suspected that Patin had successfully revived a truly dumb idea. Credit where credit is due: Neither the Advertiser nor the Advocate's reporters chose to take the bait and emphasize that foolishness. Instead they largely reported on the issues raised by the Councillors and Tim Supple. Take a look at both articles, they are worth the read though, frankly, the Advocate is better on the technicals possibly because Burgess was here during the fiber fight and has a deeper background.

Executive Summary: LUS' financials are confusing. Financials just are confusing. Always. But LUS Fiber, being a semi-autonomous arm of the semi-autonomous LUS utilities (which is owned by the city but semi-run by the city-parish) is especially confusing. This is exacerbated by a sick state law designed to raise the prices that customers pay that causes LUS Fiber to give money to LUS utilities so that LUS utilities can loan it back to LUS Fiber—at interest. (Which means there is a subsidy: of LUS utilities; not the other way around.) Got it? Confused yet? Anyway:

The Important Stuff: LUS Fiber is doing ok, not great but ok. The "ok" part can be seen by its more than doubling its installed base in the last year; recent statements by Huval confirm that the utility has made over the bump and has the minimum number of users to break even. The "not great" part is due to the fact that it's not meeting the rosy projections of a 2004 feasibility report that had predicted that LUS would be doing better than just ok, that they would be doing great by this point in the rollout. (The feasibility study was always sketchy and clearly a political document. See my first two blog posts on this issue. #1, #2)

Extras from my Notes: Caution: This is for the dedicated few who'd like a little more on the two and and a half hour session than a dry newspaper article has space for or fits the newspapers' idea of a budget meeting story.

Attendance: Theriot, Patin, Boudreaux (presiding) Shelvin (late), Castille,  Morrison Conspicuous by his absence: Don Bertrand who was a leader in the fight for fiber and certainly has a better understanding of all matters concerning LUS Fiber than any of fellow councilmen.  His participation would have really helped the rest of the council make sense of the arcane parts of the presentation—some of the questions asked showed a real lack of understanding.

Overall: Part of the confusion that reigned during the presentations was due to a new computer financials program and a new, much more extensive report format that was presented to the council. It was apparent that some had only read (at most) the summary sections and it showed in their questions. LUS Fiber is a big, new, different, retail establishment for the C-P to keep track of and understand and Toups seemed to feel that she was only just getting hold of it all.

Conservative Borrowing: A couple of times during the presentations it was apparent that part of the reason that LUS' numbers were tight was because LUS was being...tight. One example came up when Shelvin asked whether it would all look better right now if LUS had taken the whole 125 million authorized by the voters instead of only bonding out 110 million dollars. Huval hemmed, hawed, and said that they just didn't want to borrow more than they really needed. This was in the context of LUS having not yet taken the in-organization loan of 5.5 million that the council authorized. A lot of the noise we are hearing now is a direct consequence of LUS Fiber deciding to make do with the very least borrowing they can get by with.

Competition: LUS estimates that the citizens of the community have saved 5.7 million dollars—in part direct saving from LUS' cheaper phone, video, and internet services and in part as a consequence of Cox lowering its prices and giving out special rates. Those special rates were discussed in the meeting with Huval pointing out that Cox had petitioned for and received permission to treat Lafayette as a "competitive" area. That meant that Cox could offer special deals to Lafayette users and, as we all know, has offered cuts to anyone who tries to leave. Those "deals." as Huval pointed out to Patin don't include the rural areas of the parish where Cox has no competition.

Coalitions: Intriguingly coalitions with other communities that have fiber were mentioned and Terry indicated that this was involved positive attention from the White House. I'm pretty sure that this is the US Ignite project—a project initiated by the administration that will bring together communities that have next-generation fiber projects. Conceivably this could be a "big thing" and bring ideas, financing, and lend emphasis to the movement to develop big bandwidth applications that could be used across these communities. Lafayette's own FiberCorp has been a player in this effort.

"Subsidizing" Makes a Return Engagement—With a Twist

To begin at the end of today's LUS Fiber budget hearing: all the old nonsense about "subsidizing" LUS Fiber returned again today. And, surprising no one, it came riding back in with Tim Supple. Supple's long history of opposition to LUS Fiber has long included this particular falsehood. To give the devil his due Tim was definitely goaded by councilman Keith Patin after Keith and fellow rural member William Theriot failed to come up with a sufficiently news-worthy phrase during the questioning. Tim tried not to answer in the simple affirmative for a couple of rounds while Patin repeatedly pressed him to phrase his characterization of the LUS financials as being a subsidy that had to be being paid for by "somebody." Supple finally caved and said it was, indeed, just like subsidizing Parks and Recreation as Patin suggested.

That, of course, is utter nonsense. Nonsense that Terry Huval immediately spiked. A loan that must be repaid with interest is nothing like using tax monies to support Parks and Recreations. But  Huval really shouldn't have had to lay that out. A subsidy would illegal under state law. If LUS were breaking that law both Cox and ATT would make sure we all knew by suing us again. It's silly to have to treat it as a sensible question.

For those who weren't following this blog way back when the recurring issue of subsidization first arose way back in 2005 the idea was supposed to be that any publicly owned fiber utility would obviously and necessarily be subsidized by the public. The idea of a publicly-owned competitor being subsidized by taxes was promoted by BS (BellSouth, now ATT) and Cox as "unfair" and an affront to their two monopolies of phone and cable service—which they characterized as "free enterprise." That was nonsense from the beginning—plenty of utilities are run without subsidies, including LUS' electrical and water divisions and plenty of private companies are actually subsidized. LUS never, at any point, planned on using Lafayette taxes to subsidize the new utility. But the idea that some municpality might was one of the tools that BS/ATT and Cox used to convince the Louisiana legistlature to pass what would become known as the Local Government Fair Competition Act (or as I prefer: the (Un)Fair act). That state law outlawed any cross-subsidy. But only for LUS--Cox is free to subsidize from its extensive newspaper holdings and ATT from its wireless division.—Hence my preference for (un)Fair. There has been no subsidy, and if there was any half-rational way to characterize anything that has happened as a subsidy Cox and ATT would be happily suing Lafayette—yet again.


Subsidy with a Twist

But as a by-blow to all this an interesting subsidy did emerge. But it runs the other way...LUS Fiber is subsidizing LUS' other divisions and through that, indirectly, Lafayette city-parish government.

Again it all goes back to the (un)Fair Competion Act. One of the things put in that act during negotiations is a concession that LUS Fiber would be able to borrow from LUS' other utilities just like any other corporation could set up internal borrowing arrangements. This is not a subsidy, it's a loan—with real interest. One of the efforts to raise an issue by Messrs Patin and Theriot centered around "imputed" taxes. Those are extra costs that Cox and ATT got the state to require that LUS include in order to force LUS to raise their price to customers (you!) above the actual cost. (Yes, really. See this. And these.) The idea was that LUS should have to pretend to pay taxes that it doesn't actually pay when setting its pricing—and include those fake costs when competing against Cox or ATT. PSC regulations (not the law) requires LUS Fiber to send those monies to the larger LUS. So LUS utilities is holding money LUS Fiber earned. LUS electricty, water, and sewer loans it back to LUS Fiber—at interest. The net effect of this is to subsidize LUS' other utilities on the back of the new utility, LUS Fiber.

That's the only subsidy uncovered today.

You can't make this stuff up. Only in Louisiana.

Friday, August 05, 2011

LUS Promotion Offers Free Speed...A+ speeds

LUS is running one of its typically underpromoted promotions. This one is a lot of fun: free speed. Every internet customer is getting bumped up a full speed tier for August and September. Announced on LUS fiber's facebook page not long ago and on their web site the promotion lets a subscriber experience a 30 meg symmetrical speed if you are paying for 10 and a 50 meg connection if you are subscribed at 30 and — wait for it: a 100 meg connection if you've normally got 50.

I'm paying for a 50 meg connection so I am set up to be getting a 100 meg right now. And I am. I tested it out using both SpeedTest and M-Labs—SpeedTest is the most popular of the online tests and M-Labs is the techno-policy-nerd's favorite toy. M-Labs says I'm doing good: 93 megs down and 80 megs up with just 21 ms of latency. SpeedTest thinks I've got 94.5 down and 53.76 upload speeds also with 21 ms latency. And that's to a server in Houston about 200 miles away as the crow flies. Between overhead and the vagaries of routers in multiple hops along the way those are the sorts of numbers I'd expect , being the practical sort.

Speaking of practical, you might reasonably ask what sorts of numbers you'd see when doing something practical like downloading a real file big enough to demonstrate the value of 100 megs of service. Two nights ago I downloaded Apples newest operating system: OS X 7—Lion. It weighs in at a monstrous
3.76 GB. The average US user, according to Akamai, gets 5.3 mbps of download speed. At that rate, according to Gaijin, downloading the OS would take about an hour and a half. I downloaded it in about 6.5 minutes...which works out to something in the range of 75 mbps.

All in all LUS Fiber
offers astonishing speeds—SpeedTest gives my test of the system an A+ , saying that its better than 99% of Americans get. I also tested my system a couple of months ago before my free upgrade and pulled down a reading of "only" 58 megs of download. That was an A+ rating at better than 99% too.

Lafayette, we've got it good...better than most of us probably realize.


Lagniappe: LUS is again running its "Refer a Friend" program—if you've got a friend who wants some of that insane internet (or any other service) and they give you as a reference you both get 50 bucks off your LUS Fiber bills.



Lagniappe 2: If you're on LUS Fiber contribute your stats to the discussion @ speedTest: http://www.speedtest.net/wave/0f5c1a0f979e0aeahttp://www.speedtest.net/wave/0f5c1a0f979e0aea