Municipal Report > Funding Model

reply to JTRockville

Re: Funding Model

said by JTRockville:

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said by boogie74:

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So it would seem that the Tri-city proposal is asking voters to decide whether to allow private investors to form a company?

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That's not my impression. I think the private investors will simply back the bonds. The municipality will still own and operate the plant.

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Boogie:

Here's the deal. It's treated just like a mortgage.

Private Investment Company realizes that City X has a "brand" it can sell - MuniTown Cable.

Here's where things diverge. In a simple description:

Private Investment Company A pushes a model in which said company provides funding while specifying content providers to used (DirecTV for television, MSN as ISP, AT&T for phone) and basically runs the whole deal as a government endorsed competitor. Company A makes cash from providers for brokering the deal.

Private Investment Company B pushes a model similar to Company A, but hands over the reins to MuniTown Cable to maintain and bill the customer. Company B makes cash from providers for brokering the deal.

Private Investment Company C uses a model similar to Company B, but requires a partial investment of MuniTown (say a 60/40 split with MuniTown putting up 40%). Company C may or may not have a requirement for provider specs. Both MuniTown and Company C make cash from investment.

Private Investment Company D gets investors that want to strictly invest cash in build, knowing history of profitability of MuniPlants around the Country. Lends cash, like a mortgage, without programming requirements, knowing if MuniTown blows it, Company D still has full control of a tangible asset that can be resold to private sector player like Charter or AT&T. System still provides competition to incumbent.

Several different Investment Companies have pitched several different models to the citizen's group. No decision has been made, except that the citizen's group will only support a non tax-backed financing model.

Specific to the TriCities, the ballot issue comes into play for the following reasons.

1. The cities ARE NOT PLACING THIS ON THE BALLOT. The citizens group, Fiber For Our Future - FFOF - (»www.tricitybroadband.com) will be going out and collecting signatures to place this issue on the ballot in November. If FFOF does not get the signatures, this will not happen at all. Local politicians are gun shy after the amount of garbage Comcast & SBC threw at the voters and themselves last year.

2. A municipally run system still requires that each city to decide if they want to get involved and play. Politically, it's much easier to dump the question into the laps of the voters.

3. Specific to Geneva: Geneva's population is about 20,000 - 5,000 short of being Home Rule. Illinois law requires any non Home Rule city to ask for the authority to provide cable television service. Mind you, not for the funding, but for the authority to offer service. A Home Rule community has no such requirement.

Hope this clarifies.....
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»www.tricitybroadband.com

The issue that's going to make this plan lose is STILL two-fold:

1. It's obvious that the marketing that is pushing the passing of this referrendum is targeted at asking people to say, "SBC and Comcast are monopolies and they MUST be SHUT DOWN!" Most don't feel that way. Most realize the SERIOUS amount of competition in phone and TV services. Hell- SBC and Comcast both advertise as competitors of each other.

2. This is more pressing than the first- most people don't care about broadband internet. They simply aren't interested in it. You might as well start a muni-based Hummer/Rolls Royce/Ferrari dealership and ask for people to vote to add competition to the "High End Vehicle" providers that have too much of a monopoly now. People wouldn't vote for that either. They simply DON'T care! People aren't rushing out to buy broadband internet from SBC or Comcast (where it IS available). People ACTUALLY say that they don't mind paying $28.95 for AOL dial-up and wouldn't spend $26.95 for SBC DSL instead! Is it because they hate SBC? No. It's because they simply DON'T CARE!

I wish you the best of luck. Personally, I believe that public entities should not attempt to compete with private industries. You don't see UPS and FedEx suddenly picking up garbage. You don't see private security firms pulling people over that are speeding. You don't see public schools offering prayer services to compete better with religious private schools. You don't see fire departments selling home owners insurance.

That's MY opinion.

Boogie

Boogie,

You are seriously off-base with #2. People have been clamoring for cheap, stable broadband: they care tremendously. AOL has been hemorrhaging customers for the last 3 years. I can't even reconcile your logic between your #1 & #2: on the one hand you shout that there is a "SERIOUS amount of competition in phone and TV services" and in the next breath claim "[people] simply DON'T care! [about broadband]" - which happens to carry a booming voice service (telco replacement) and a small but growing trades/sales in movies & TV shows.

I think you do not comprehend where services are rapidly migrating to: to residential broadband. That is why Comcast & SBC loath the idea of munis: if the muni trend takes off it'll undermine their market share. It's a rapidly shifting piece of ground. And if you think customers don't hate SBC & Comcast (especially comcast) then you need to hang out in those BBR forums more often. Munis have been mostly very successful at providing very fast, fair, and stabile connectivity.

said by jap:

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Boogie,

You are seriously off-base with #2. People have been clamoring for cheap, stable broadband: they care tremendously. AOL has been hemorrhaging customers for the last 3 years. I can't even reconcile your logic between your #1 & #2: on the one hand you shout that there is a "SERIOUS amount of competition in phone and TV services" and in the next breath claim "[people] simply DON'T care! [about broadband]" - which happens to carry a booming voice service (telco replacement) and a small but growing trades/sales in movies & TV shows.

I think you do not comprehend where services are rapidly migrating to: to residential broadband. That is why Comcast & SBC loath the idea of munis: if the muni trend takes off it'll undermine their market share. It's a rapidly shifting piece of ground. And if you think customers don't hate SBC & Comcast (especially comcast) then you need to hang out in those BBR forums more often. Munis have been mostly very successful at providing very fast, fair, and stabile connectivity.

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said by boogie74:

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You really need to look further than BBR for your source of information.

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reply to boogie74

said by boogie74:

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You don't see UPS and FedEx suddenly picking up garbage.

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reply to boogie74

said by boogie74:

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It's obvious that the marketing that is pushing the passing of this referrendum is targeted at asking people to say, "SBC and Comcast are monopolies and they MUST be SHUT DOWN!" Most don't feel that way. Most realize the SERIOUS amount of competition in phone and TV services. Hell- SBC and Comcast both advertise as competitors of each other.

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There is more service than just SBC and Comcast. Covad has presence in both COs and RTs in IL. DLS.net is a wireless provider that also covers the Tricities with some speeds up to 10mbps symmetrical.

Yes, SBC and Comcast started a smear campaign last year. Yes, they scared residents into thinking taxes would go up and muni-porn and the like, but the fact remains that GO bonds are issued to governments because of their taxing power. Even the proponents will admit (after much prodding) that last years proposal DID have tax implications. As far as the government providing porn, well, internet porn is a billion dollar industry. People are arrested on a daily basis for downloading child pornography all the time. The incumbents were making a point - some just may not like HOW they made it. You can very easily think they are fallacies, but it ultimately rests with your point of view. This is politics. Regardless, many people have the same sentiments toward their local politicians.

The models for muni broadband work well in small farm town types where no service is available. The successful models that people keep point to all have household incomes well below the national average. This model doesn't work for Tricities because there are already 4 facilities providers with presence there and most residents have household incomes that are double the national average. Besides, the model has now changed for it's second go round... now, revenue or profits are there for the investors. Last year, this whole network was a value add not-for-profit to keep prices low. So already the model is messed up and will not offer the same low prices that other models have offered.

Just because there is a angle for revenue or profit going to investors doesn't necessarily mean it won't compete well. It's almost the same as if government tax dollars were funding it because municipal broadband is also proposed as a way to generate extra revenue for the municipality, though not to a great extent. At least that's what I hear.

I know about the other providers out there, but keep in mind many, many locations can only get ILEC DSL services and of course cable broadband normally involves only one provider in the region (with maybe Earthlink piggybacking to keep regulators from thinking Time Warner is backing out on their deal). Also I think in this case Comcast and SBC are the only options.

Regarding the smear campaign in relation to porn I do believe it was uncalled for. They were using guilt by association. I don't think it's fair to put to blame an Internet service provider because content that can be found online is unacceptable or illegal. It's liken to the MPAA suing Roadrunner because users offer movie downloads. SBC and Comcast were doing just that. Politics or not it's a distortion of the truth to make it sound like a municipal broadband service endorses child pornography... especially when the ones doing the accusing harbor the same content.

I agree with some of your points, however Covad does maintain presence in all of SBCs RTs in the Chicago area and DLS wireless does have coverage as well (go to dls.net if you don't believe me). CLEC DSL is no less available that ILEC DSL for these communities. So Comcast and SBC are not the only 2 options.

The funding option and subsequent guarantee fo cheap service was their main selling point, now even some of these towns mayors are saying the cost savings is only probable, not guaranteed with this new model.

I agree with you to an extent about the porn issue. I must point out that I also agree it was uncalled for, but that does not necessarily make it "lie" like the proponents say. Distorting facts to support your cause is commonplace in politics and lobbying. The fiber group is just as guilty for distorting facts in their favor with the past election results and tax burden on the previous referendum. There are, however, things that a government should not get behind. To my knowledge (and correct me if I'm wrong), you cannot obtain a copy of "Juggs" magazine at the Geneva, IL Public Library, nor should you. Why? Because a public operated library system shouldn't be used to provide this content. Quite similarly, I don't think it's ideal for a government to provide internet access to a society that has proven time and time again that it cannot resist pornography. Currently, there appear to be 18 registered sex offenders in Geneva and Batavia combined. St. Charles has no listings.

Still stuck using SBC lines to reach wherever via DSL.....

Rates that are going to go up any day.

"Should tax money be allowed to provide pornographic movies for residents?"

That's the exact reason the tricities want it. It will help to support the fledgling TriCity porn industry too.

"Do you believe local schools will have to cut teaching staff, increase class sizes and eliminate after­ school programs because the Tri‑Cities broadband referendum competes with existing school referendums?"

Can you say SEPARATE TAXING BODY FROM CITY? Thought so...
Wait, I know, the porn industry could employ the out of work teachers....

"Would a government broadband invade privacy and allow the government to listen to your telephone conversations, monitor the Internet sites you visit and know what cable shows you watch?"

Do you mean any more than Comcast? See »www.detnews.com/2002/technology/···3526.htm

Privacy? What about this from you?

"Quite similarly, I don't think it's ideal for a government to provide internet access to a society that has proven time and time again that it cannot resist pornography. Currently, there appear to be 18 registered sex offenders in Geneva and Batavia combined. St. Charles has no listings. "

I'm so happy you know what's best for us. That must be the only reason we want it.....screaming fast porn. The moral compass for TriCity voters? Thanks for checking up? Porn causes all sex offenders? All sex offenders are the result of porn? Give me a break....

Using that logic, guns cause death, not the people pulling the trigger...

Distort nothing......LIES
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»www.tricitybroadband.com

»www.n2h2.com/about/press/usage_stats.php

Go ahead and read it. Not very supportive of your desire to have government internet, huh? Let's focus on a few interesting nuggets from this...

More than 60 percent of companies have disciplined - and more than 30 percent have terminated - employees for inappropriate use of the Internet.

27 per cent of Fortune 500 companies have battled sexual harassment claims stemming from employee misuse and abuse of corporate e-mail and Internet systems.

Keep bitching. Facts are facts. A lot of people use internet for pornography or other inappropriate uses. Is that the reason you guys want to build it? Please, don't embarrass your own lack of comprehension here. I'm not talking about good intentions. I'm talking about practical applications and usage. With this EMPIRICAL DATA, and with the COMMON KNOWLEDGE THAT PORN IS WIDELY AVAILABLE FOR FREE ON THE WEB, should the government provide the link? By you not addressing the Juggs Magazine comparison, I would assume that your local public library won't provide the content. Then why should they provide the link for the digital content? That's the real topic of discussion. Don't insult me by claiming that I "know whats best".

Don't want to use SBC lines, go with DLS or Comcast. You people just won't address some issues pertaining to this argument. You dance around the topic and take the offensive in any way you can, yet you keep ignoring some key critical components of this network. Go ahead, keep ignoring the fact that other options are there and keep spewing out misinformation (ie LIES).

Actually, if you want to get technical...County Govts. or municipalities often hold and sign the franchises for the cable companies. Here it is Comcast (the #1 cable company profiting from porn). By holding the franchises the Govt. is actually already approving and profitting from your porn.
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It's muni-licious! »www.tricitybroadband.com

reply to AuroraJock
"The funding option and subsequent guarantee fo cheap service was their main selling point, now even some of these towns mayors are saying the cost savings is only probable, not guaranteed with this new model."

As the person who has been doing all the research on the potential financing models for the Tri-Cities, for the citizen's group, I think I am uniquely qualified to speak to the different options available. If you have questions about the options you may ask me directly. Cheap service is still a selling point and we still expect to be 10%-15% lower than anything Comcast and SBC will be offering. When Comcast and SBC drop their rates EVERYONE still benefits from competition. However, we will still have the superior backbone and the larger view in mind for our residents, unlike the incumbents who stooped to disgusting behavior during last year's referendum battle.

The Cities are NOT putting this on the ballots this year. The citizen's group is trying to. The facts and truth of this year's referendum battle lie with the citizen's group. www.tricitybroadband.com
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It's muni-licious! »www.tricitybroadband.com

reply to AuroraJock
therapy.......please.

reply to Octopussy2
Okay, answer these questions...

What was the profit margin based on the old model from last year? What is the profit margin for this years model? What sort of contractual arrangment will the villages have with the owners of the network? Who ultimately decides on what to charge? How can you expect a 10-15% lower price when Batageek has pointed out in the past that a not-for-profit coop is in charge of negotiating your wholesale buyrates? How do you intend on providing Comcasts new Sports Network debuting this fall? Many local sports broadcasts are going to be shown on this network and it is replacing Fox Sports Net Chicago. For your backbone, both SBC and Covad have multiple backbones, with BGP failover built in. Both the SONET level and ATM stuff have capacity to last for many years to come. Please identify how your proposed backbone will be superior.

Octo:

don't even bother. this is a troll that has been going for too long.

"What was the profit margin based on the old model from last year?"

The profit margin last year assumed different take rates for each service offered. Based on those take rates, the system would have begun operating in the black in year three.

"What is the profit margin for this years model?"

The profit model for this year has not been established. Since any private sector backer will do their own study, it really doesn't matter what we say. And again, a muni doesn't need a profit margin...it just needs to exist, pay its bills, and break even.

"What sort of contractual arrangment will the villages have with the owners of the network?"

Who knows? All we the citizen group are stipulating is that the financing is not backed by taxes. As long as the private investor makes his return, that's all he should care about too. And again, it's assumed to be city owned and operated, otherwise, as you've pointed out elsewhere, there would be no need for a private sector company to go to referendum.

"Who ultimately decides on what to charge? How can you expect a 10-15% lower price when Batageek has pointed out in the past that a not-for-profit coop is in charge of negotiating your wholesale buyrates?"

Last year's feasibility study ran the financials. Again, read the study. The savings in a muni typically come from the lack of overhead the likes of Comcast & SBC typically carry combined with the longer payback model.

"How do you intend on providing Comcasts new Sports Network debuting this fall? Many local sports broadcasts are going to be shown on this network and it is replacing Fox Sports Net Chicago."

Negotiate. Just as Kutztown, PA has done for the same reason. Everything is available for a price.

"For your backbone, both SBC and Covad have multiple backbones, with BGP failover built in. Both the SONET level and ATM stuff have capacity to last for many years to come. "

The proposed tricity ftth plant would be able to tie directly into several providers, even easily bypassing the Geneva CO if so desired. AT&T, Sprint, McLeod, MCI, & AboveNet all have fiber pulls within the TriCities. Pulls they'd be happy to have miss the Geneva CO.

"Please identify how your proposed backbone will be superior."

Tell me, where's the SBC fiber to the home in the TriCities? That's right....not here. And not here for a long time to come.

Fiber For Our Future wants an all fiber network that's designed to serve the long term goals of a city, not the short term profit of a company.

END OF POST. END OF DISCUSSION. YOU DON'T VOTE HERE ANYWAY.
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»www.tricitybroadband.com

quote:

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Tell me, where's the SBC fiber to the home in the TriCities? That's right....not here. And not here for a long time to come.

Fiber For Our Future wants an all fiber network that's designed to serve the long term goals of a city, not the short term profit of a company.

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reply to batageek
Batageek, as soon as somebody like me brings up valid points, you consistently go on the defensive. You can call me a troll all you want, I bring up valid points for why this network shouldn't exist.

You freely admit you have no profit model done on this new version, and you have no idea about the contractual arrangement between the private entity and the local government. So, in essence, you have no detailed business plan.

I read the feasibility study last year. But once again, this model was based on the towns financing it. With the unknown that is the contractual obligation of the villages to the private investors, I'll ask again... Who ultimately has the final say in pricing??? You want to solicit voters, but you are not answering basic questions and you don't have a detailed business plan.

I also asked how your fiber backbone will be superior, yet you answered this question identifying the last mile. Please, how is the BACKBONE superior?

Okay, for the umpteenth time, Comcast and DLS.net both bypass the local telephone plant. Are you able to comprehend this? Let me know if you don't understand this. Why won't you admit that there are other options available? Do you feel that if you admit that there are 4 facilities based ISPs that you network is harder to sell to the voters?

This all comes back to my original point. Your group consists of a small number of techno-geeks who think a fiber connection would be cool. You come to these public message boards and cry about a lack of options, yet when someone calls you on this, you blatantly ignore the facts. Last years business model called for a 30-something percent penetration rate for the network to be successful. I find that 30% is an unrealistic target. Your own mayors say that cost savings is only "probable". Plus, there are 2 facilities based DSL providers, 1 cable provider, and at least 1 WISP. That means that your fiber network will be the 5th facility based ISP. Then, you've got any number of resellers out there. Now, if you are going to be the 5th broadband company, and you have NO IDEA of a business model, how can you realistically expect this network to be successful?

Please, Batageek or Octopussy, post the following info and end this dicussion once and for all.

1. Post the number of YES votes, the number of NO votes, and the number of absentee ballots submitted, and the number of voters that didn't vote for the 2003 proposal. NO percentages, actual counts only please.
2. Post the number of registered voters per household, and the total number of households.
3. Post the number of households required to make the network successful
4. Didn't the cities do a survey prior to the feasibility study regarding internet and asking if people were satisfied? Post those results.