Economic Development

Bandwidth on the Bayou

Slick Sam Slade showed up in Lafayette, Louisiana, in 2005, fast-talking his way through a mock TV commercial comparing an exotic sports car to a bicycle....
by | July 31, 2009

Slick Sam Slade showed up in Lafayette, Louisiana, in 2005, fast-talking his way through a mock TV commercial comparing an exotic sports car to a bicycle. The bicycle, representing traditional cable and DSL broadband offerings, was, oddly, priced higher than the car, a stand-in for the ultra-fast fiber-optic network Lafayette wanted to build. Sam declared the bicycle the better deal, because it employed conservative, tried-and-true technology. At the end of Sam's pitch, a voiceover intoned, "Sorry, Sam, Lafayette's not interested."

The video was launched by a citizens' group as Lafayette prepared to vote on the local electric utility's plan to get into the consumer telephone, TV and high-speed Internet business. It was just one weapon in the battle to create a municipally owned fiber-optic broadband network, one that would extend all the way into local homes and businesses. City leaders hoped it would give Lafayette a leg up in its quest for businesses that need advanced telecommunications services.

In the end, Lafayette got its fiber network. Local businesses and residents are signing up. The private-sector providers have become more competitive, offering improved services. At least one company's decision to locate in Lafayette was a direct result of the availability of the fiber network. But like dozens of cities that have tried to get into the broadband business, Lafayette faced many hurdles, foremost among them pushback from the private-sector providers who turned to the legal system.

As efforts proceed to improve the nation's patchwork broadband infrastructure, most attention is focused on the $7.2 billion allocated in the federal stimulus law to bring broadband to rural and other underserved areas that still live in the dial-up world. Some of those places, unable to attract commercial providers, may find themselves with no other realistic option than to build their own networks, and they are likely to encounter many of the same hurdles that Lafayette and other communities have faced.

As of March 2008, there were 44 public providers of fiber to homes, representing 66 cities, including some that had banded together to provide service. Most are run by municipal utilities in places ranging in size from Kutztown, Pennsylvania (population 5,000), to Grant County, Washington (population 85,000).

Have they gotten the subscribers they hoped for? When gauging the success of municipal fiber, municipalities look at the "take" rate--the percentage of subscribers in an area where the service is available. According to RVA, a market research and consulting group, the take rate for municipal systems after one to four years is 54 percent. Typical business plans for these kinds of systems calculate a 30 to 40 percent take rate, according to the Fiber to the Home Council, a nonprofit with municipal and utility members.

Lafayette always saw a fiber network as a tool to bring in jobs. "Our greatest export is our kids," Joey Durel, president of Lafayette's combined city-parish government, told Congress, testifying on behalf of the American Public Power Association about the need for rural areas to get fiber. (Twelve percent of Lafayette's population of nearly 207,000 lives in rural parts of the parish.) "We educate them and send them to your states," Durel said.

Lafayette's fiber plan began as an electric-utility improvement project in the late 1990s. To connect its 14 substations, the Lafayette Utilities System was using a microwave system built in the 1970s that was no longer being supported. LUS decided that fiber-optic connectivity was the best way to go, but learned that cable and telephone companies were not providing fiber to any utility in North America.

For $3 million, the city found, it could get 12 fiber strands, enough to serve the utility's immediate needs. But by paying 20 percent more, it could get 96 strands, eight times the capacity. In 2002, LUS began using some of that surplus fiber to provide wholesale service to hospitals, universities and the public school system. At the same time, residents were complaining about rate increases and the lack of competition for cable TV. When Durel, a small-business owner, was elected city/parish president in 2003, he and LUS Director Terry Huval began discussing the benefits a municipal fiber network might offer.

Within a few months, the city made public its intention and put together a market survey. Seventy percent of residents and 80 percent of businesses said that if fiber services were competitively priced, they'd be interested. The reaction from the city's telephone and cable providers, BellSouth and Cox Communications, was swift: The giant firms pushed for state legislation to make it impossible for governments to provide such services. Then-Governor Kathleen Blanco brought both sides together to work out the language in the proposed Local Government Fair Competition Act that would make it possible for governments to get into the fiber business without unfair advantage over companies.

Soon after the bill became law, though, Lafayette was sued by the state cable association and BellSouth, which wanted to force the city to hold a public referendum on the network plan. After Lafayette lost in district court and on appeal, the utility moved to hold a referendum. But LUS was worried. How could it fight the likely media onslaught by the big companies? The city was prohibited by law from running its own promotional campaign.

A citizens' group called Lafayette Coming Together faced no such constraints. The grassroots activist group set out to explain why fiber to the home was better than what the commercial providers were offering: fiber to the curb, where it had to connect with lower-bandwidth copper wire into the home. The group launched a "Fiber Film Festival," calling for pro-fiber entries. In the winning video, Slick Sam talks up the virtues of bygone technology, in this case cable and DSL: "You can't really put a price tag on something that's obsolete," he exclaims.

In 2005, Lafayette voters approved the utility's plan by a 2-to-1 margin. But to build the fiber system, Lafayette needed to borrow money through tax-exempt bonds, which brought on another lawsuit by the cable association and BellSouth on the grounds that the bond ordinance didn't comply with the new state law. After an appeals court ruled against the city, Lafayette amended the bond ordinance to comply with the court ruling. The legal challenges still weren't over. In 2006, two citizens sued, alleging that LUS was overcharging customers. Ultimately, the state Supreme Court ruled in the city's favor.

Finally, in 2007, Lafayette could move on to issuing bonds for the $98 million system and building it. Construction began in 2008, and the first customers signed on this February. But Lafayette residents and businesses already had benefited. As the city's network was being built out, Cox chose Lafayette as the first community to launch its super-fast Internet service, providing speeds of 50 megabits per second. (The city's fiber network offers 10 to 100 megabits.)

Huval, the Lafayette utility's director, advises municipalities interested in similar projects to be sure to do their research and hire experts. "Municipalities are going to face pushback, and it's going to take different forms," he says. They need a good plan to share with elected officials and the public and to use in reaching out to business, the education community and residents. "Make sure that what you're trying to do is what they want," Huval says. "No matter how good the idea, it's climbing a steep hill."

But for Lafayette, at least, the climb seems to have been worth it. Recently, a Canadian company moved a call center to Lafayette, creating hundreds of jobs. Company representatives told city leaders that Lafayette had proved itself to be forward-thinking with its plan for high-speed fiber. Durel, when testifying before Congress, had facetiously told lawmakers that other companies would do well to come to Lafayette and plug in to its prized fiber. "Please send your technology companies to Lafayette, Louisiana," he said. "We will welcome them with open arms and a gumbo."

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