Batavia League of Women Voters Presentation, March 18, 2003
Presenter, Ed Hodges, Chairman of Fiber For Our Future

(Comments were shortened to fit into the 7-minute time allowed, but this is the full text.)

Thank you for the opportunity to speak here tonight to present the position of the Fiber For Our Future, pro broadband citizens group.

Even though I spent six years working for one of the largest telephone companies in the country, I can’t begin to tell you what the representatives from SBC and Comcast are thinking at this hour. But, I can remind you of how they have been acting in recent weeks.

They behave as if we are ignorant or irresponsible depending on who they are talking to at the moment. In the recent telephone push surveys conducted by SBC, Comcast and OTHERS, the callers were insulting at best and at worst they fraudulently represented themselves as working for city government. Our opponents behave as if our local elected officials are incompetent. They behave as if we are taking bread out of their mouths and that their businesses are going to fail while at the same time proclaiming that they welcome competition. If they truly do welcome competition, why are they working so hard to shut this project down before it even begins?

They tell us that we do not know how to run a telecommunications business. Well, I can tell you that even though I run an Information Technology Company in the Tri-cities area I won’t say that I’m qualified to run a telecommunications company either. But I can tell you some of the things that the Municipalities will NOT have to do in order to succeed:

• This utility will not have to achieve a net income of $7.47 BILLION last quarter as SBC reported in their quarterly statement.
• Nor will we need to maintain $117 Million in assets like Comcast reports in their annual report.
• Nor will we need to lose over $3 Billion in investments as reported by Comcast in that same report.
• According to the Illinois Coalition for Competitive Telecommunications, SBC – Ameritech paid over $1 Billion in fines and penalties over a six year period nationwide beginning in 1996. We will not have to do this.
• We will not have to close our system and prevent our competitors from gaining access to our customers in order to protect a nearly 17% profit margin.
• We will not have to limit our service offerings because of lack of capacity.
• We will not have to maintain a base of over 120,000 employees.
• We will not have to worry about being able to provide customer service for a poorly conducted installation in say, Denver, Colorado.
• We will not have to maintain six different legal staffs to keep up with franchise agreements in 11,000 plus communities.

So, who stands to benefit from this utility in Batavia?

All of the opponent advertising about this referendum focuses on the residential services. One of the reasons for that is because the opponents do not focus on providing broadband solutions to businesses. Our utility will include ALL businesses. According to Dunn & Bradstreet and Harte Hanks there are over 4700 small and medium businesses located in the Tri-cities area. Over 400 of those businesses are members of the Batavia Chamber of Commerce. Our local Chamber has endorsed the Tri-Cities Broadband Utility because they believe as I do that this project represents the best chance for supporting and encouraging our local business owners. Now, a conservative think-tank organization based out of Chicago says that the promise of business incentives rarely works to bring in new business. So, let’s agree to not talk about bringing in NEW business and instead talk about those 4700 businesses that are already in the area.

Each of these businesses has an average of 8 employees. Roughly half of those employees are married. That means that approximately 56,000 people could potentially be affected in a positive way if these local businesses were able to take advantage of business class internet and telephone service provided at a much lower cost. Businesses pay exorbitant rates for these services because those prices are what the market will bear. A municipal broadband alternative will provide some viable, local competition. That means the local businesses that are already here benefit, their employees benefit, their spouses and children benefit and ultimately, our community benefits. And despite what the conservative think-tank says, I’m convinced that more new businesses will choose to locate in Batavia. Their choice will be indirectly or in some cases directly affected by the services this utility will provide.

Finally, I would like to address some of the recent arguments against this city utility raised by our opponents:

• They say that a property tax increase is guaranteed, and will be over $2,400 per household per year. But according to this City’s administrative office, the worst case actual number if this utility is a complete failure would be closer to $145 per year for a home with an assessed value of $200,000.
• They say that we must obtain 34% of the market share of cable business, when in fact that number represents what the independent research says we will probably gain. What they neglect to tell you is that for residential service, we only need to gain about 6% of the Telephone, about 25% of the Television and about 4% of the Internet services market to break even. For business customers, we only need to gain less than 1% of Television, 8% of Telephone, and less than 4% of Internet business. Those lower percentages would allow us to be operating in the black by year 7 with a net profit. That's a worst case scenario.
• They neglect to tell you that the citizen surveys conducted last year for the feasibility study revealed that 71% of the citizens of Batavia responded favorably to the question “If it was available, would you be interested in a broadband/combined service?” Meaning telephone, TV, and Internet together.
• They say that government should stay out of private business. I agree. I don’t want Washington or Springfield to meddle in my business and I don’t want them to compete with me. Their resources would make it a very unfair competition! But I believe that local government is a different situation completely. In this case, it is the local government that is David and the monopolistic companies who control the market that are Goliath. My local elected officials and city staff are my neighbors. They truly represent me. If I have a problem with any aspect of this city utility, it will be much easier to get someone’s ear here locally and get my problem resolved. Plus, the city has been successfully operating an electric/water utility for over 100 years. And you know what has happened with that example of local government competing with large, privately owned utility companies? We have lower electric rates and better service than any of our neighbors who have to use ComEd. That is exactly how the broadband utility will be structured. The city utility doesn’t need to make profits – they just have to break even. They will provide superior services at lower prices. And the money STAYS IN THE COMMUNITY.
• They also say that by the end of this year 100% of the residents of the Tri Cities will have broadband access available to them from Comcast, so we don’t need the city utility. What they fail to explain is the numerous and vast differences in the type of “broadband” Comcast is installing as compared to a fiber-to-the-home network. Much higher bandwidth for Internet, download and upload speeds for Internet, bandwidth for television, security, and reliability are just some of the advantages of a fiber-to-the-home network. Plus, with the city utility, the money you pay for services STAYS IN THE COMMUNITY.
• They say we don’t have any idea how to run a telecommunications company. They imply that we are not smart enough, sophisticated enough, or informed enough to know what we are doing. This is an insult to every one of the dedicated professionals in our three cities who have spent the last two years researching and performing due diligence. There is a huge pool of highly qualified, talented professionals in our community who are eminently capable of completing the planning, implementation and operation of this utility. I don’t think they are planning on having the meter readers run this utility or having the water department staff handling technical support.

They also cite a number of communities who have implemented some form of a municipal broadband utility that have supposedly failed:

• Tacoma, Washington is one that has been mentioned and this is news to the folks in Tacoma, whose municipal broadband utility is operating in the black and has not resulted in a tax hike. What has happened in Tacoma is that they are not reaching their projected market share as quickly as they want to. But the utility is alive and well and making money.
• Coldwater, Michigan, again, being cited as an example of a failing municipal utility is news to the folks in Coldwater! Their broadband utility is a screaming success. The Coldwater Communications Manager for the Board of Public Utilities wrote to us and said, “I just want to set the record straight. We are not losing money. We are actually operating in the black. We currently have 65% of the homes in Coldwater that have cable television service. We also have 50% of those customers receiving High Speed Internet service.”
• Hillsdale, Michigan, From the city of Hillsdale: “Hillsdale’s broadband utility did not fail as it was never constructed.” They had voter approval, but were never able to get affordable financing. When they went to their voters to ask for permission to issue general obligation bonds, they were defeated by the incumbent cable company!
• Glasgow, Kentucky – The superintendent of Glasgow's Electric Plant Board said “The truth is our project is an overwhelming economic success. For nearly fifteen years now our project has delivered the lowest cable rates in North America.” In fact, Glasgow issued bonds in April 2001 to buy out Comcast’s system. “They packed up and left town.”
• Paragould, Arkansas – The Chief Financial Officer of City Light Water & Cable in Paragould said their municipal cable utility operates separately from their city and “it has been operating in the black since 1998 when we bought the competing cable company, Cablevision, Inc. Taxpayers like having their own system. The rates charged are much lower than private companies – we only need profit enough to pay debt, and maintain and upgrade the system.”
• And there are several more along the same lines. The point is, there are many successful municipal utilities across the country that are providing cable TV, telephone, Internet and some combinations of the three services. None of the municipal utilities has failed and none have resulted in higher taxes. And the demographics for these communities range from rural communities like Spencer, Iowa, a city of over 11,000 to Tacoma, Washington a city of 194,900.

If our opposition is incorrect and misleading on all of these points, is there anything that they are saying that we should believe? I am gambling. Gambling on the integrity, honesty, accountability and due diligence of our city officials and city staff. Looks like a sure bet to me!