Fiber network profits could be years away
ASHLAND - Ashland Fiber Network will be profitable, but not as soon as expected, according to a nearly completed business plan being created by an advisory committee appointed to investigate deficits in the program.
First profits should appear in the 2006-07 fiscal year. Debts should be paid by 2016. Projections in April suggested profitability in 2003-04 and debt elimination by 2011.
The city's budget committee urged greater scrutiny of the city-owned network, which provides cable television and high-speed Internet services, in April when it learned $4.5 million would be borrowed from other city departments this year. The City Council formed the committee composed of residents and city staff. The council will get an update on the committee's progress Oct. 16 and a full report at the Nov. 6 meeting.
"We asked a lot of tough questions. We put the staff through the ringers," said committee member Marty Levine. "They came up with a revised plan that we all agree is do-able."
The committee made very conservative assumptions on hookups and revenues, according to Levine. It also budgeted for system updates. Potential revenues from possible services were not included.
Projections now call for 2,404 cable television hookups and 2,883 Internet connections by June 2003. Earlier, city officials had projected 2,860 cable installations and 3,319 Internet users by June 2002 - more ambitious than the new plan's long-range projections. In June this year the system had 1,403 Internet customers and 1,883 cable television hookups.
Long-range projections for June 2008 foresee 2,914 cable hookups and 3,117 Internet users.
Borrowing from other city departments is also expected to continue past the original cutoff date of 2006, according to city administrative services director Dick Wanderscheid.
Revenue increases were scaled back in the face of competition from Charter Communications, which also provides cable television and Internet access to Ashland residents.
"The competition is probably the biggest single change since the initial business plan," said committee community member Emile Amarotico. "It took a group that had an impartial view of the outcome so that we could ask some tough questions early on."
Except for the initial business projections, city officials have developed subsequent business plans. Consultant R.W. Beck developed the first plan.
Lower rate increases and subscriber numbers were the two primary assumptions used to create the newer plan, said Amarotico.
"They didn't anticipate quite the competition we have seen," said Amarotico.
The committee did not consider possible legislation that might limit municipal network operations. The Oregon House of Representatives did not approve a bill to regulate city-owned networks in this year's session. Representative Alan Bates, Ashland, says he expects a similar effort in 2003.
Local telephone service, security services or sale of network bandwidth outside the city might bring in additional revenue, said Wanderscheid. Ashland has already sold bandwidth to the city of Medford.
"The numbers ... assume all the business we do occurs in the city," said Wanderscheid. "Even with these conservative estimates the thing over time makes money."
Levine and Amarotico anticipate the advisory committee will continue to meet.
"(Mayor) Alan DeBoer thought we could take the role of a board of directors in a for-profit corporation," said Amarotico.
Reach Ashland bureau reporter Tony Boom at 482-4651, or e-mail