Have Patience, Ashland
Russell Sadler
The two thigh-thick bundles of bright orange fiber optic cable unspooled themselves down the Siskiyou Pass in the mid-1990s and passed through Ashland alongside the railroad tracks, bringing the bright promise of a 21st century artery of commerce just as railroads had done for the 19th century and highways for the 20th. That cable virtually connected rest of Oregon to the world.
“Why not dig up that cable as it passes through town,” asked a couple of Ashland visionaries, “and distribute it to the business district and eventually throughout the community just like the city’s municipal electric service?”
In an age of declining property tax revenues, it seemed like a sound entrepreneurial way to improve a small town’s economy in the Information Age. That idea was the genesis of the Ashland Fiber Network, a municipal service some people in Ashland now want to eliminate with an initiative petition.
AFN makes Ashland one of the best interconnected communities in the Northwest. In the late 1990s, Ashland’s fiber optic connectivity made it a magnet for high tech workers who wanted a high quality of life in as small town, good schools and still work for major companies like Intel and Microsoft. It was called telecommuting.
“It worked,” said Jim Teece, the head of Project A Software in Ashland’s newly built-up Railroad District, “It did what it was supposed to do. The Fiber Network produced family wage jobs as we were losing logging and manufacturing jobs. But then the bubble burst and everything slowed down.” Teece should know. His building in the Railroad District, that once served as incubator space for software start-ups, survived the dot com bust by renting space for yoga classes.
While AFN covers its operating costs -- it takes in $2.5 million in revenues -- it is not earning enough to make payments on the $15.5 million in bonds sold to build it. The City of Ashland recently imposed a $7.50 a month surcharge on its electric utility customers to raise the money to make bond payments. That has created a backlash, including people who want to draft a city charter initiative prohibiting the city from owning a cable system.
“It’s out of sheer frustration and anger,” said Ann Marie Hutson, who chairs the opposition group. “Our goal is dissolving AFN and eliminating its debts, which we know is going to be impossible because no buyer will take them on,” she told the Medford Mail Tribune. But she’s going to try anyway, regardless of the consequences.
Hutson knows that an initiative forcing the city to sell AFN reduces the market value of the state-of-the-art fiber network. Why would any private company negotiate a voluntary sale when it can wait for voters to approve a forced sale at fire sale prices? The best estimate of the forced sale value of AFN is $5-9 million. It cost $15.5 to build. Hutson’s initiative could force the sale AFN for as little as $5 million leaving Ashland taxpayers morally obligated to pay off the remaining $10.5 million in bonds. That’s an expensive gesture to placate Hutson and her friends’ “sheer frustration and anger.” It will be interesting to see whether Ashland voters actually allow this costly, indulgent tantrum to get on the ballot.
There are some steps a city-appointed Options Committee may recommend to make network more profitable. AFN’s cable and Internet services are priced about 15-20 percent below the national average. Prices could be raised to 10 percent below the national average with the loss of few customers. The City of Ashland charges AFN $467,000 a year for Central Services -- the cost every city agency pays for the city manager’s staff, lawyers and accountants who supposedly serve all city departments. This is a euphemism for shifting money from revenue-producing departments to finance bureaucratic positions that used to be financed with property tax dollars. No business can afford that kind of overhead. But it’s AFN’s debt service that remains a problem, just as it does for the entire telecommunications industry.
The telecommunications industry overestimated the demand for broadband internet. They spent billions to build it. The customers did not come.
In recent years the growth of digital cameras, games, music and internet telephone service, especially among the kids, has made a residential broadband connection as essential as any high-tech business connection. It’s the kids who will drive the residential broadband market just as they drive the cell phone market
As this demand materializes, it will solve a lot of debt service problems for the telecommunications industry including AFN and its stockholders, the taxpayers of Ashland. They will just have to be patient and wait for the broadband internet market to grow, just as institutional investors who hold telecommunications stocks must do.
The alternative is to buy into an initiative that forces the sale of AFN at bargain basement prices and get left holding the bag paying off as much as $10 million in bonds and no assets to show for it.
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connect with blueoregon
Oct 16, '05
Russell Sadler: AFN’s cable and Internet services are priced about 15-20 percent below the national average. Prices could be raised to 10 percent below the national average with the loss of few customers. JK: Why are they pricing below market? Why not price at the national average? Political favors to some one?
This strikes me as yet another example of bad decisions made by politicians who are taking unnecessary risks with taxpayer’s money. If the service was needed at its true cost, then why did the city have to get involved? Reminds me of PGE park.
Russell Sadler: The telecommunications industry overestimated the demand for broadband internet. They spent billions to build it. The customers did not come. JK: And willing participants paid the price. Unlike when government plays business person using taxpayer money. Then the participants include many people who cannot afford to take a chance. How many people now have to have less food on the table because of that added utility fee? Shameful. How can these politicians claim to care about people when their schemes frequently have this result?
Russell Sadler: In recent years the growth of digital cameras, games, music and internet telephone service, especially among the kids, has made a residential broadband connection as essential as any high-tech business connection. It’s the kids who will drive the residential broadband market just as they drive the cell phone market
As this demand materializes, it will solve a lot of debt service problems for the telecommunications industry including AFN and its stockholders, the taxpayers of Ashland. They will just have to be patient and wait for the broadband internet market to grow, just as institutional investors who hold telecommunications stocks must do. JK: 1. I thought broadband already had about 50% of the potential market. How long should they wait? 2. More speculation on the future. Do you have a special crystal ball? Speculation is for speculators, not taxpayers. 3. How many more of these deals have to blow up before you realize that government should not be dabbling outside of their field and into business? In Portland alone there is a steady stream of money losers including PGE Park, Expo center and the Convention center, soon to be joined by a new hotel.
Russell Sadler: The alternative is to buy into an initiative that forces the sale of AFN at bargain basement prices and get left holding the bag paying off as much as $10 million in bonds and no assets to show for it. JK: Any chance of defaulting on these bonds as a lesson to the banking elite that pushes this crap on the taxpayers? Wpps did it, maybe Ashland can do it too. AND a recall election for the brilliant politicians?
Thanks JK
8:24 a.m.
Oct 16, '05
Hey JK
You don't get to hijack this threated in the first comment. Sit down and listen to the adults talk for awhile.
Recalls are pointless because the government employees who suggested this no longer work for the city and the city council members who appoved it are no longer in office.
Defaulting on bonds is out of the question -- to protect both Ashland and Oregon's credit rating.
You seem to forget that we live in a reprsentative democracy and we all live with the decisions that are masde in our names. The lesson here is that voters need to pay closer attention to the people they elect from President on down. It's pretty clear we have not made very wise choices lately.
The only issue in Ashland is how to pick up the pieces in a responsible way that preserves AFN's value as an asset -- to sell or to spin off as the city's present councilors may decide.
Your desire for revenge and retribution reflects a social inmaturity that is the the bane of your generation -- it infects the Legislature and so many of our generation that get elected to what passes for public office these days.
Oct 16, '05
The system has already been purchased and the point now is to make it work financially. It sounds like there are some options that can do that. Even the $7.50 surcharge doesn't sound bad to me. Just tell the right-wingers that the $7.50 is really for a no-bid contract with Halliburton, and everything will be Ok.
I think the issue here is whether Ashland wants to be in the 21st century or not. Having broadband access is an attractant to businesses and professional people. A lot of modern education takes place over the internet now, and many universities require students to have computers and internet connections. Almost anything you want to do requires an internet connection, even applying for unemployment.
But for some reason some of the right-wingers just can't stand the idea that government would do something like arranging for a broadband network, and they would rather destroy the system than make it work.
Some years ago I attended a number of board meetings at Mt. Hood Community College, just for the fun of it. Well, it turned out that the swimming pool needed some work. But one of the board memebers, a monumentally stupid Gingrich wanna-be, didn't want to spend money to fix the pool. Why did the college need a pool anyway? No, his idea was to shut the pool down and fill in the hole with dirt. I kid you not. Fortunately, the adults on the board decided to fix the pool.
But this is now these nut cases think. Anything that doesn't fit into their ideology has to go, and damn the consequences. After the broadband is gone, maybe they can shut down the water system, dig up all the pipe, and sell it for scrap metal.
6:57 p.m.
Oct 16, '05
i never watch 60 Minutes or Andy Rooney, but the other day, channel surfing, i saw Andy talking about all the telephone & power lines that mar the views in town. it's a gripe i share deeply; this visual polution spoils so many of the great views around Corvallis. and yet we have the technology to do away with these ugly, and inefficient, old-world technologies. i hope Ashland has the wisdom and guts to stay this particular course; i hope they have the smarts to figure out how to minimize the current problems.
and i hope they can keep the selfish reactionaries from doing something stupid and self-destructive. it would make a nice change.
Oct 17, '05
Something else which impacts the situation in Ashland is the pricewar with Charter Communications for both cable (which Ashland also provides as a municipal, money-losing service) and broadband. I posted some background on the situation several months back here.
7:39 a.m.
Oct 17, '05
This reminds me of an event early in Abraham Lincoln's political career when he was first elected to the Illinois legislature as a champion of the Illinois-Michigan canal. Favored by Whigs as an economic development project, it immediately ran into problems when the country fell into a depression in 1837, just after the state committed itself to the project.
Lincoln argued they should stay the course, that the long-term advantages of that particular infrastructure investment were worth enduring the short-term pain. The voters turned against him, though, and while narrowly reelected he soon left the legislature with a cloud over his political reputation that lasted for years.
Now I'm not comparing Russell to Lincoln, but I do think sometimes it is important not to let the short-term financial impacts of these decisions cloud the long-term vision of what makes sense for our cities, counties and states. A knee-jerk reaction against what Ashland did would be mistake, in my opinion.
8:46 a.m.
Oct 17, '05
short-term vs. long-term perspective is an issue we really ought to be looking at. the greedheads almost never have any kind of long-term view; they want their profit now, and to tell with any other considerations. that's why people follow the stock market every day, why jobs in one state -- or country -- are jettisoned and moved thousands of miles away. that's why a forest that takes hundreds of years to grow is chopped down in mere decades, why we are racing as fast as possible to extract every usable mineral, with no consideration for either the environment of the consequences of what happens when it's all gone.
a long-term perspective is hard to justify on grounds of immediate profitability. we know that investing in a child's education for 20 years pays huge dividends, but since it costs us money today, we have no interest in that project. developing an economy that will last for centuries means not digging out every last penny of profit that we can today, so it's simply unpatriotic, communistic, and stupid (read: i want mine now).
while i don't agree with Wendell Berry fully in hiss condemnation of technology and modernity, i do believe we need to take a step back. we need to develop smaller communities, even within huge cities, and we need to think about the possibility of our species lasting more than the next five or six years. the right technologies can be part of this humanizing; the city of Ashland's fiber-optic network, if they'll just put up with some short-term expense, can help that town become a primo place to live. and help set an example for larger cities further north.
Oct 17, '05
While AFN covers its operating costs -- it takes in $2.5 million in revenues -- it is not earning enough to make payments on the $15.5 million in bonds sold to build it. The City of Ashland recently imposed a $7.50 a month surcharge on its electric utility customers to raise the money to make bond payments. That has created a backlash, including people who want to draft a city charter initiative prohibiting the city from owning a cable system.
So they have a surcharge on the electic bill to pay for the cable system's losses?? Does that seem stupid (and possibly criminal) to anyone else? Or am I reading this wrong?? Why wouldnt they up the price of cable and/or internet? Maybe because people would rebel and disconnect those services? After all, it hard to turn off your own electricity to fight city hall.
Oct 17, '05
Jon,
AFN is considered part of Ashland's public utilities. Ashland has a municipal electric utility that buys most of its power from the Bonneville Power Administration.
The City of Ashland, not just AFN subscribers, is pledged to pay those bonds.
In lieu of property taxes that are only paid by property owners, the council chose to impose a $7.50 a month surcharge on all electric customers -- which means just about everyone in town and not just property owners -- to get the needed revenue from as many people as possible at the lowest cost per person to pay the debt.
It's hardly criminal. If it were a larger sum, we might argue it is regressive. But in the end, it's not really a bad tax policy choice. Ask the most to pay as little as possible to finance a debt that must be paid.
That is just the opposite of the tax policy Oregon has been following for the last 15 years. Between the tax limitation measures and Republicans in the Legislaturepaying off their campaign contributors Oregon's present tax system ask fewer and fewer people to pay more and more tofinance the legitimate costs of government.
There are a lot of discount passengers now sailing on Oregon's ship of state. It's getting hard on the remaining full fare passengers
See Chuck Sheketoff's frequent comments on this blog to see how serious that situation has become.
The lesson in Ashland, I think, is that the residents there need to pay more attention to the people they elect to the council. The campaigns there have become so ideologically shrill that no one can talk about the real issues of municipal governance and the turnover on the council combined with a relatively new city manager and considerable employee turnover has deprived the council of its institutional memory. It is not unlike what term limits did to the Oregon Legislature and gave lobbyists a field day.
Oct 18, '05
TA Barnhart chides:
ATTENTION TA BARNHART ...THIS IS THE NEW JOURNALISM POLICE!!! ...STEP AWAY FROM THE KEYBOARD WITH YOUR HANDS UP!!!!!!
WE ARE ISSUEING YOU WITH FORMAL CHARGES!!! ...YOU ARE NOT, REPEAR NOT, ALLOWED TO USE THE TERM "GREEDHEAD" OR ANY OTHER PHRASES CREATED AND POPULARIZED BY THE LATE AUTHOR HUNTER STOCKTON THOMPSON UNTIL YOU HAVE READ AT LEAST ONE OF HIS BOOKS...AND DOONESBURY DOESN'T COUNT!!!
SO, YOU DUNG-HEADED CRETIN, GO CHECK OUT AN HST BOOK FROM THE LOCAL LIBRARY AND EDUCATE YOURSELF YOU NUMBSKULLED UNWASHED HEATHEN!!!!