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AFN eyes selling ISP service

The Ashland Fiber Network Options Committee has asked city staff to prepare a cost analysis for the city to sell AFN&

s services directly to customers rather than only selling wholesale as it does now through Internet service providers.

Selling Internet services directly is one method the city could use to increase revenues.

The options committee, which was appointed by the Ashland City Council and began work this month, is tasked with exploring options for dealing with the financially troubled cable television and high-speed Internet service. Alternatives range from investing in new services to spinning off AFN as a nonprofit to selling off AFN in an effort to recover some portion of its $15.5 million debt.

In a 2004 study for the city that offered numerous recommendations, Navigant Consulting said the city could earn an estimated $303,268 in additional revenues if AFN became an Internet service provider, or ISP. But representatives from the firm, headquartered in Chicago, recommended the city instead require the existing ISPs to improve marketing, customer service and technical standards.

The city currently wholesales AFN Internet services to seven ISPs, including Ashland Home Net, Open Door Networks and Jeffnet. Jeffnet earns revenue for Jefferson Public Radio.

Gary Nelson, owner of Ashland Home Net, said consequences would be dire for local ISPs if AFN began directly retailing its Internet services.

&

It would put us out of business,&

he said.

Nelson said his company charges an additional $10 per month per customer above the AFN wholesale Internet price, but that money is not all profit. Ashland Home Net provides technical support and other services. He said the city likely would have an even smaller profit margin than his company does because it would have to add employees and pay city wages and benefits.

AFN Options Committee member Rick Barth said the committee has not ruled out either AFN becoming one of the ISPs or becoming the sole ISP.

AFN Telecommunications Engineer Richard Holbo said using ISPs has both pros and cons. Residents who contact the city to sign up for AFN are given a list of the seven ISPs and must take the extra step of choosing and contacting a provider. The city also could probably make more money by retailing Internet services directly, he said.

&

I think for itself it would make more money,&

Holbo said. &

My personal opinion is that&

s not in the spirit of the idea or for the benefit of the community. We would definitely make more money.&

According to Holbo, using a range of ISPs gives customers a choice. For example, Macintosh users can choose Open Door Networks, which focuses on Macs. Using ISPs also fosters competition and innovation, and supports the high-tech industry in Ashland, he said.

AFN Options Committee members also are looking into the possibility of spinning off AFN as a nonprofit.

Committee member Paul Mace said the committee could seek information from the people who were involved in setting up the Ashland Community Hospital and Mt. Ashland Ski Snowboard Resort as independent nonprofit groups. Committee members also could talk to representatives from successful local nonprofits like the Oregon Shakespeare Festival.

&

We certainly have a pool of experience. They ought to be able to shed some light on the situation,&

Mace said.

At an options committee meeting last week, City Attorney Mike Franell briefed committee members on some details of spinning off AFN as a separate nonprofit or for-profit entity.

As a separate entity, AFN could respond more quickly to market forces and avoid many of the requirements for public disclosure of business operations that currently impair AFN&

s competitiveness, Franell said in a separate interview.

If AFN operated as a nonprofit, the city could still subsidize the service, he said.

Spinning off AFN as a nonprofit would not absolve the city of responsibility for paying back AFN&

s $15.5 million loan, Franell said.

That loan is currently backed by the city, which will tap Ashland electric customers to make up projected shortfalls in being able to make payments on the loan.

&

There is no way to get out from under the loan unless the financier agreed to let someone else assume the debt,&

Franell said. &

That&

s kind of difficult to imagine.&

If a private company bought AFN, it might be able to assume the loan if it had deep enough pockets, he said.

The options committee is continuing to look at a range of other alternatives. Members have asked city staff to prepare information on offering new services such as video on demand and voice over Internet.

So far, the committee has not asked for a market appraisal of AFN, which according to some industry analysts would be one of the first steps in determining whether to sell the service.

The committee&

s next meeting is at 7:30 a.m. Sept. 8 in the Siskiyou Room of the Ashland Community Development Building on Winburn Way across from Lithia Park.

Staff writer can be reached at 482-3456 x 3018 or valdous@dailytidings.com.