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Thursday, June 22, 2006American Fork Broadband: Unanswered Questions and Unexplored PossibilitiesWe can only guess how important AFCNet, properly managed and extended, could be to the long-term economic viability of American Fork and to its residents' quality of life. What if, years down the road, it turns out to have been crucial, and we find that a decision to divest was made too early, and that the picture would have looked much different if we had kept it for one more year? Note: This is a revised version of the original post. I don't ordinarily revise after posting, except to correct factual errors or typos. In this instance, however, the offline responses of some readers have convinced me that the original communicates some impressions which I did not intend, and which, in fact, are opposite my intentions. To the extent that my writing does so, I as the author am responsible. I hope that the current version communicates my actual thoughts more faithfully. Here is more discussion of AFCNet, American Fork City's municipal broadband system, as I promised yesterday. What the City Council Did First, let's be clear about what the City Council did on June 13. First, they voted unanimously, after much discussion, to declare the system surplus. That doesn't mean it's not a valuable asset, just that the City in theory could get by without it. It doesn't mean they have to sell. It's a necessary prelude to issuing a Request for Proposals (RFP) -- proposals to buy or lease all or part of the system, that is. The Council's second related vote, also unanimous, was to issue the RFP. We have been assured repeatedly that the City will not be bound to accept any proposals and, again, that it has not actually decided to sell. An RFP is presented as the best way to test the market value of the assets. These three assertions are true, I believe, but don't get the idea that the City isn't seriously considering selling something to someone, given the right proposal. The RFP itself is available at the City's Web site for public inspection. I recommend looking at it, partly because, among all the legally-mandated chaff, it includes the best official information I've seen posted about the system itself and the fiber-optic lines; there are maps of the latter. Some Unanswered Questions and Unresolved Issues Before we get to what may happen next with AFCNet, here are some questions and issues which have not yet been addressed to my satisfaction. I'm not one of the decision makers, so my satisfaction, strictly speaking, doesn't matter at all. But I communicate with several of the decision makers and have attended some related recent meetings. So I wonder if each of my questions really is mine alone. If all of them are only mine, then either I haven't been listening carefully enough, or more public communication by the City is needed. If decision makers have any of the same questions (which I think should have been resolved by now at least for them, if not for me), then that may be further evidence of tardy or inadequate staff work. (The Q's below are questions. The A's are not necessarily answers. They tend to be explanations of the questions.) Q. Have the various plans and estimates of the system's worth been updated to reflect relatively recent revelations about the extent of the City's related assets? A. I think the answer is probably yes, but here's why I ask. In all the public and private discussions I heard of AFCNet over several months, I understood that the City had two major related assets. A few weeks ago I learned of a third. I infer that the third was unknown to at least some elected officials until then, too. Numbers 1 and 2 below are fairly widely known and have been for at least several months to anyone who has paid attention. Number 3 recently came as news to me and, perhaps, to some others. If it was news to City officials, it should have -- and probably has -- affected those plans and estimates significantly by now.
Q. State law prohibits the City from being a retailer of Internet services -- or does it? A. This is the conventional wisdom. But in the discussion June 13, in the Council meeting and before it in the hall, there was some talk by people who should know, thinking retailing may be possible, if the right sort of feasibility study is done. Here, again, I fancy I see inadequate staff work. The apparent prohibition was accepted and presented as fact, which it may be -- but now we are hearing that it may be possible in some circumstances. Q. Is AFCNet an "enterprise fund," which is not legally allowed to run at a loss or be subsidized from the City's general fund, or is it not? A. The first time I heard this mentioned was June 13, when Councilman Gunther said it. Later that evening, there was an informal legal opinion -- in the meeting and on the record, or off the record in the hall, I don't recall -- that this is not, in fact, the case. If I were a decision maker, I would be rather frustrated with situations like this, which make AFCNet appear to be a moving target. Q. Can the City legally lease the assets, especially the fiber, or are the only options keeping them and selling them? A. This subject came up in the City Council meeting. Some doubt was expressed, and research was promised. I would have thought that this piece of staff work would have been timely in January or February. Q. How much potential revenue is there in service to businesses? A. We don't know. We can hardly even guess, because, in a mind-boggling multiyear display of stasis, the City hasn't really tried to reach businesses yet. Q. Is it legally realistic to suppose that the City can sell the system and enforce, through the sale contract, that the service will remain affordable, will be extended citywide in a reasonable time, and that speed and reliability will be preserved? Not everything that can be put in a contract is realistically enforceable. I have my doubts about this one, and so do a couple of attorneys I have asked. If it's not realistic, then it may not be possible to sell the system and insure its continued existence. Welcome to the real world, where most decisions must be made with incomplete information -- but I think more study of this is in order and should precede consideration of proposals received in response to the RFP. Q. The June 13 City Council meeting was the first time I heard in a public setting detailed reports of senior, non-expert staff micromanaging the system and impeding its extension to businesses. In response, I thought I heard a directive which might solve this problem. Will that directive be sufficient to remedy the problem immediately? A. I earnestly hope so. Q. How will federal legislation currently moving through the US Senate and House of Representatives affect the City's participation in municipal broadband? A. We don't know which bills will pass, if any, or in what form. Currently, the most likely bills would override state laws forbidding municipalities from retailing Internet services. Expert opinion offered June 13 dealt with this somewhat satisfactorily, but until a bill is signed into law, relying on it in any way is a gamble. Q. What percentage of city residents (or voters) value AFCNet and its current and potential economic benefits? Is there a way to put keeping the system (with a subsidy and the necessary additional tax increase) before the voters? A. It's entirely possible that more American Fork residents value and use the system than value and use the Recreation Center, which receives a substantial annual subsidy in addition to the millions frequently spent for upgrades. If the Recreation Center, which itself competes with private industry, is a justifiable piece of our infrastructure, it's hard to make the case that AFCNet is not. Q. If the City kept the system, would it be managed competently, as it has not been so far? A. The previous administration was unable or unwilling (it doesn't matter which) to manage AFCNet competently. I think the current administration could do it, with some staff expansion. But what about the next administration, and the one after that? It's a very big, very interesting question, but since we have no crystal ball, the better question is, Do current City officials and residents have faith that the system can be managed competently by successive administrations? And my answer is, I don't know. I'm not completely certain that I myself have enough such faith to justify a costly experiment. Where Does AFCNet Go from Here? The City could sell the network to some company. One year, five years, and ten years down the road, we might be very happy with the results -- or not. The RFP stipulates that a buyer would provide continuous service to existing customers through a transfer of ownership, extend the system, and improve its capacity to offer "triple play," which is voice-over-IP (telephone) and video in addition to conventional broadband Internet access. If a purchase contract also stipulated that the system would revert to City ownership if a buyer ever shut it down, due to bankruptcy or for other reasons, and if it gave the City first right of refusal in case the system or its owner company was put up for sale, it's possible that the City's and the residents' interests could be sufficiently protected, and the results could be quite satisfactory. Or not. Some have suggested that the ISPs should band together to buy AFCNet, but I won't blame them if they don't want to go into business together. State Representative John Dougall (to whom major kudos for caring) has floated the very attractive idea of a coop, which would acquire the network (probably not the fiber) from the City. This is tantalizing, but the RFP deadline is less than a month away, and I doubt that all the preliminary work could be done in time to allow a coop to submit an RFP -- even if its creators could see how it might be profitable and could attract enough initial investors. I'd buy in if the opportunity arose. (For basic information about coops -- that's a two-syllable word -- consult the National Cooperative Business Association and the Cooperative Development Institute.) In the short term, what I would like to see the City do under the circumstances is this, if it proves possible:
Elected officials and others have worked very hard the last few months to understand AFCNet, to project its potential, and to prepare and consider various ways it might be handled. If, by the time they have to make a firm decision, they have firm, true answers to nearly all of the questions which apparently remain, that will be a very good things. But one of my questions will not have been answered by decision time, because it cannot be. What is the potential for revenue from serving businesses? The Mayor's and the Council's best efforts cannot answer this now. Only time -- at least a year, I suspect -- and a serious, effective, immediate effort to extend the system to businesses can answer this. If the system is, shall we say, rationalized in the immediate future, then a year from now the interested public and the Mayor and Council will have a much better picture of the system's potential, especially potential income from commercial customers. Moreover, if the City chooses then to sell the network, it's possible that a coop may have had time to organize itself, if there is sufficient interest. If so, the system could be sold, yet still remain the property of the people of American Fork -- just not the City government itself. We can only guess how important AFCNet, properly managed and extended, could be to the long-term economic viability of American Fork and to its residents' quality of life. What if, years down the road, it turns out to have been crucial, and we find that a decision to divest was made too early, and that the picture would have looked much different if we had kept it for one more year? Daniel Zappala comments (6/29/06): I think it would be really imprudent for American Fork to sell off its broadband network. From reading this site, it sounds as if the network has never been managed or marketed properly. Giving up now, when so much more benefit could be realized, seems short-sighted. If you rely on what private industry can provide, you will get what everyone else has and is unsatisfied with -- Comcast and their artificially high rates (due to a monopoly) and Qwest with their inferior DSL technology. Providing a city-owned network is crucial to fostering competition and getting a high-tech asset. As a bonus, American Fork can help locally-owned businesses to prosper, with the superior customer service that they offer. David Rodeback responds (7/1/06): Thanks for cogent comment. I can't bring myself to disagree with any of your points. David Rodeback comments (7/3/06): Subsequent discussion has suggested that the answer to the retail question above may be something like this: If the proper feasibility study is done, then the issue can be presented to the voters, and then, depending on the vote, retail might be a possibility. Further insight and correction is welcome. Copyright 2006 by David Rodeback. |
