cablewithaview
03-28-2006, 11:47 PM
Against advice from the Ashland Fiber Network Options Committee, which I co-chaired, the city created the position of Information Technology Director and hired Joe Franell, formerly of Knology, to oversee the handful of people who make the city’s computers work, and to rescue AFN. With his arrival, and fresh insight from the council that the Options Committee somehow completely missed, the AFN dilemma, so the story goes, will be solved and everyone will save money.
The source of AFN’s problems is no mystery. First, AFN cost three times as much to build as estimated — nearly 10 times the original proposal, which was to automate meter reading — something we still cannot do. The actual cost to build was $9.5 million, approved at every step by the city council.
AFN brought broadband to this end of the Valley two years ahead of the competition and made cable television rates plunge. But AFN’s broadband services now cost more than the competition and ISPs are quietly abandoning it. AFN’s television services are priced far below what they cost to deliver and that benefit has flowed for years to subscribers, but also to the other half of the community who enjoy Charter’s “Ashland rate.” By borrowing $5.5 million internally to subsidize television rates the council steered AFN deeper into debt.
The total, $15 million, has been accounted down to the last spool of optical fiber and man-hour of digging and cable-pulling. But one more devil hid in a budget detail. At $2.5 million budgeted, AFN was paying a half million dollars a year for the city attorney and other central services. A typical business might spend a hundred thousand dollars, but the city apportioned each department a share of its total administrative expenses according to a formula too complicated, we were told, to understand. This included the cost of city personnel attending mandatory public meetings like the ones we were having.
Over the several months we met, I witnessed people finger-pointing, deflecting responsibility and ball-dropping right before my eyes. Managers and elected officials still could not agree on what to do, who was responsible, how to get to a decision, or whether to even mention their ideas and if so to whom. Geared to planning, sewers, water, power, streets, where decisions took years and endless debate was common, Ashland’s tradition of citizen involvement in public process led to a culture of decision-making gridlock that spelled financial doom for its competitive telecommunications operation.
One clear option did emerge: let AFN pay only for central services it needed and it would be several hundred thousand dollars a year in the black. Apply that retroactively and it would have several million dollars less budgeted debt. Place AFN outside city government, under control of people who knew the media industry and who were willing and legally able to act competitively and it could catapult AFN to honest profitability. We were unanimous that you had to do all three things for AFN to succeed, not pick and choose one or two.
Jefferson Public Radio’s offer to lease and operate AFN matched this option very closely: a successful media-savvy non-profit with sound management, paying back over time the money wasted on subsidies and budget bingo for central services. The Open Carrier Model embraced by the city council was rejected by the options committee as wishful thinking. No one could say honestly how it would make money, other than competing with Charter, Quest and local ISPs for internet connections.
This rejected option is the one being tortured into shape as Joe Franell arrives, and which he is tasked with making work. We are all going to be charged extra on our utility bills. $10 or $21? No one can honestly say. No one can say if this will cause our internet charges to go down, pay off the debt or what Charter will charge with AFN gone. $10 more? $20 more?
And AFN’s rescuer, Joe Franell? We know he has a great sense of humor — he must have. Knology went bankrupt, and stiffed creditors for $400 million. Emerging from Chapter 11 it ran through $64 million raised at IPO and recently borrowed another $305 million. Last year it lost $55 million. The point is not that Joe Franell made that happen, but that given 50 times the risk capital, an unlimited market opportunity and a team of talented marketing, sales, operations and finance experts, Knology was unable over 10 years to find economic viability in the telecom space, with or without Joe Franell.
Relax, Joe. It doesn’t matter. We know JPR will thrive. We know Ashland won’t be going bankrupt. When AFN fails you’ll still be IT director. The council will just hide your salary and pension in central services and add budget overruns to our utility bill. Your new job will cost you no more than $10 a month.
Paul Mace was the co-chair for the city-appointed Ashland Fiber Network Options Committee. Alan Oppenheimer wrote in favor of the open carrier model in an earlier local commentary.
http://www.dailytidings.com/2006/Mar%202006/0328/032806MACE.shtml
The source of AFN’s problems is no mystery. First, AFN cost three times as much to build as estimated — nearly 10 times the original proposal, which was to automate meter reading — something we still cannot do. The actual cost to build was $9.5 million, approved at every step by the city council.
AFN brought broadband to this end of the Valley two years ahead of the competition and made cable television rates plunge. But AFN’s broadband services now cost more than the competition and ISPs are quietly abandoning it. AFN’s television services are priced far below what they cost to deliver and that benefit has flowed for years to subscribers, but also to the other half of the community who enjoy Charter’s “Ashland rate.” By borrowing $5.5 million internally to subsidize television rates the council steered AFN deeper into debt.
The total, $15 million, has been accounted down to the last spool of optical fiber and man-hour of digging and cable-pulling. But one more devil hid in a budget detail. At $2.5 million budgeted, AFN was paying a half million dollars a year for the city attorney and other central services. A typical business might spend a hundred thousand dollars, but the city apportioned each department a share of its total administrative expenses according to a formula too complicated, we were told, to understand. This included the cost of city personnel attending mandatory public meetings like the ones we were having.
Over the several months we met, I witnessed people finger-pointing, deflecting responsibility and ball-dropping right before my eyes. Managers and elected officials still could not agree on what to do, who was responsible, how to get to a decision, or whether to even mention their ideas and if so to whom. Geared to planning, sewers, water, power, streets, where decisions took years and endless debate was common, Ashland’s tradition of citizen involvement in public process led to a culture of decision-making gridlock that spelled financial doom for its competitive telecommunications operation.
One clear option did emerge: let AFN pay only for central services it needed and it would be several hundred thousand dollars a year in the black. Apply that retroactively and it would have several million dollars less budgeted debt. Place AFN outside city government, under control of people who knew the media industry and who were willing and legally able to act competitively and it could catapult AFN to honest profitability. We were unanimous that you had to do all three things for AFN to succeed, not pick and choose one or two.
Jefferson Public Radio’s offer to lease and operate AFN matched this option very closely: a successful media-savvy non-profit with sound management, paying back over time the money wasted on subsidies and budget bingo for central services. The Open Carrier Model embraced by the city council was rejected by the options committee as wishful thinking. No one could say honestly how it would make money, other than competing with Charter, Quest and local ISPs for internet connections.
This rejected option is the one being tortured into shape as Joe Franell arrives, and which he is tasked with making work. We are all going to be charged extra on our utility bills. $10 or $21? No one can honestly say. No one can say if this will cause our internet charges to go down, pay off the debt or what Charter will charge with AFN gone. $10 more? $20 more?
And AFN’s rescuer, Joe Franell? We know he has a great sense of humor — he must have. Knology went bankrupt, and stiffed creditors for $400 million. Emerging from Chapter 11 it ran through $64 million raised at IPO and recently borrowed another $305 million. Last year it lost $55 million. The point is not that Joe Franell made that happen, but that given 50 times the risk capital, an unlimited market opportunity and a team of talented marketing, sales, operations and finance experts, Knology was unable over 10 years to find economic viability in the telecom space, with or without Joe Franell.
Relax, Joe. It doesn’t matter. We know JPR will thrive. We know Ashland won’t be going bankrupt. When AFN fails you’ll still be IT director. The council will just hide your salary and pension in central services and add budget overruns to our utility bill. Your new job will cost you no more than $10 a month.
Paul Mace was the co-chair for the city-appointed Ashland Fiber Network Options Committee. Alan Oppenheimer wrote in favor of the open carrier model in an earlier local commentary.
http://www.dailytidings.com/2006/Mar%202006/0328/032806MACE.shtml