Comments on: Tangled up in fiber

For communities planning to build out their own fiber networks, the devil is in the details.

Marietta was not a FTTH build

Jim:

One major point from your article....

"The example of failure cited most commonly is Marietta, Ga. Just like Ashland, Marietta decided in the late 1990s to build fiber lines into people's homes and pipe in broadband access, TV channels and voice calling. But the cost of construction and maintenance, coupled with lower-than-expected subscriber additions, became too expensive for the city to handle.

In July 2004, the city sold Marietta FiberNet for $11 million to American Fiber Systems, a fiber-based Internet service provider. In total, Marietta spent about $35 million to build and maintain the system, AFS said. "



However...



http://www.tricitybroadband.com/failures.htm

Marietta, Georgia
The Charge: On August 31st, 2004, after eight years, the city will sell its FiberNet to American Fiber Systems for less than $11.2 million, a loss of about $24 million. Since 1996, the city has invested about $35 million into building and maintaining the system which services about 180 customers along the 210 miles of deployed fiber.

Mayor Bill Dunway, whose successful campaign platform included selling FiberNet said, "That's why we should not be in this business-you have to keep reinvesting. It's negative cash flow once you consider reinvestment of capital." (Associated Press, Marietta selling city-owned Internet company at $24 million loss, July 29, 2004)

Response from Broadband Reports - http://www.dslreports.com/forum/remark,12751032 - The notion that Marietta FibreNet was a failure apparently stems from an article published in the Atlanta Journal-Constitution on July 29, 2004, suggesting that Marietta "lost" $24 million and then sold out to avoid any more red ink. The author arrived at the $24 million figure by simply subtracting the City's selling price, $11.2 million, from its investment in the system, $35 million. This was obviously wrong and misleading on its face, as the author did not take into account the millions in annual revenues that the system generated over the years.

Furthermore, when judging and comparing private-sector communications providers, industry analysts typically use a standard known as "EBITDA" - Earnings, Before Interest, Taxes, Depreciation and Amortization. See, e.g., »www.investorwords.com/5534/Earnings_Be... Marietta FiberNet had not only been running EBITDA-positive every year since 2001, but it was on track to go fully into the black in the first quarter of 2006. Thus, according to the standards that analysts typically apply to the private sector, Marietta FiberNet was a success, not a failure. American Fiber Systems certainly did not consider it a failure. To the contrary, it hired 100% of the system's management and staff to continue to do exactly what we had been doing before the sale.

What really happened in Marietta? The current mayor ran three years ago primarily on the issue of getting the City out of the telecom business. At the time, the system was still in its adolescence, and it had several years of projected losses to go before getting itself into the promising position that it was in at the time it was sold. The mayor, having won on this platform, made good on his promise to sell the system. Reasonable minds can differ as to whether the City could have obtained more for the system if the mayor were not so determined to sell it. But one thing is certain -- the system would surely have been even more successful and valuable if it had not had to operate under a cloud for the last three years.

I agree with the main point of your article -- that municipalities must be very careful about entering the communications field because failure is a real possibility. In fact, municipalities are extremely cautious, particularly because the open process through which they make such decisions ensures that they act conservatively and take every possible downside into account. I do not believe, however, that Marietta can fairly be cited an example of a municipal venture that failed.

In any event, Marietta FiberNet was a not fiber-to-the-home system of that kind that a number of municipalities are considering today. Marietta FiberNet did not offer the "triple play," nor did it even serve the residential market. Rather, it only offered broadband and telecommunications services to businesses in Cobb County, Georgia, just northwest of Atlanta, and in some areas of Atlanta itself. Several private-sector firms were offering similar services in these markets. Thus, it is questionable whether Marietta's experience provides much useful guidance for other municipalities.

Marietta was not a FTTH build

Jim:

One major point from your article....

"The example of failure cited most commonly is Marietta, Ga. Just like Ashland, Marietta decided in the late 1990s to build fiber lines into people's homes and pipe in broadband access, TV channels and voice calling. But the cost of construction and maintenance, coupled with lower-than-expected subscriber additions, became too expensive for the city to handle.

In July 2004, the city sold Marietta FiberNet for $11 million to American Fiber Systems, a fiber-based Internet service provider. In total, Marietta spent about $35 million to build and maintain the system, AFS said. "



However...



http://www.tricitybroadband.com/failures.htm

Marietta, Georgia
The Charge: On August 31st, 2004, after eight years, the city will sell its FiberNet to American Fiber Systems for less than $11.2 million, a loss of about $24 million. Since 1996, the city has invested about $35 million into building and maintaining the system which services about 180 customers along the 210 miles of deployed fiber.

Mayor Bill Dunway, whose successful campaign platform included selling FiberNet said, "That's why we should not be in this business-you have to keep reinvesting. It's negative cash flow once you consider reinvestment of capital." (Associated Press, Marietta selling city-owned Internet company at $24 million loss, July 29, 2004)

Response from Broadband Reports - http://www.dslreports.com/forum/remark,12751032 - The notion that Marietta FibreNet was a failure apparently stems from an article published in the Atlanta Journal-Constitution on July 29, 2004, suggesting that Marietta "lost" $24 million and then sold out to avoid any more red ink. The author arrived at the $24 million figure by simply subtracting the City's selling price, $11.2 million, from its investment in the system, $35 million. This was obviously wrong and misleading on its face, as the author did not take into account the millions in annual revenues that the system generated over the years.

Furthermore, when judging and comparing private-sector communications providers, industry analysts typically use a standard known as "EBITDA" - Earnings, Before Interest, Taxes, Depreciation and Amortization. See, e.g., »www.investorwords.com/5534/Earnings_Be... Marietta FiberNet had not only been running EBITDA-positive every year since 2001, but it was on track to go fully into the black in the first quarter of 2006. Thus, according to the standards that analysts typically apply to the private sector, Marietta FiberNet was a success, not a failure. American Fiber Systems certainly did not consider it a failure. To the contrary, it hired 100% of the system's management and staff to continue to do exactly what we had been doing before the sale.

What really happened in Marietta? The current mayor ran three years ago primarily on the issue of getting the City out of the telecom business. At the time, the system was still in its adolescence, and it had several years of projected losses to go before getting itself into the promising position that it was in at the time it was sold. The mayor, having won on this platform, made good on his promise to sell the system. Reasonable minds can differ as to whether the City could have obtained more for the system if the mayor were not so determined to sell it. But one thing is certain -- the system would surely have been even more successful and valuable if it had not had to operate under a cloud for the last three years.

I agree with the main point of your article -- that municipalities must be very careful about entering the communications field because failure is a real possibility. In fact, municipalities are extremely cautious, particularly because the open process through which they make such decisions ensures that they act conservatively and take every possible downside into account. I do not believe, however, that Marietta can fairly be cited an example of a municipal venture that failed.

In any event, Marietta FiberNet was a not fiber-to-the-home system of that kind that a number of municipalities are considering today. Marietta FiberNet did not offer the "triple play," nor did it even serve the residential market. Rather, it only offered broadband and telecommunications services to businesses in Cobb County, Georgia, just northwest of Atlanta, and in some areas of Atlanta itself. Several private-sector firms were offering similar services in these markets. Thus, it is questionable whether Marietta's experience provides much useful guidance for other municipalities.

[confucious_says]

186,000 is not much debt

Anyone who has graduated from high school knows that $186,000 is not a lot in this country.

- At the federal level the debt is over
$6,000,000,000,000
- States commonly have multibillion dollar projects, like the
$?,000,000,000 bay bridge retrofit in San Francisco
- $186,000 is just a little more than the salary and benefits for the average firefighter in Oakland

If civic internet access is such a bad thing, why are the only opponents existing ISPs and the odd libertarian (who doesn't believe we should have an FDA either)

[confucious_says]

186,000 is not much debt

Anyone who has graduated from high school knows that $186,000 is not a lot in this country.

- At the federal level the debt is over
$6,000,000,000,000
- States commonly have multibillion dollar projects, like the
$?,000,000,000 bay bridge retrofit in San Francisco
- $186,000 is just a little more than the salary and benefits for the average firefighter in Oakland

If civic internet access is such a bad thing, why are the only opponents existing ISPs and the odd libertarian (who doesn't believe we should have an FDA either)