The strength of a case can sometimes be measured by the degree to which the advocates are willing to deal honestly with the jury. This can be particularly true in cases which involve highly technical matters. In such cases, where the technical specifics may escape the jury, the outcome may hinge on whether those deciding the case feel that the opposing advocates have dealt with them honestly.

The public policy debate now joined in Lafayette over the possibility of LUS deploying a fiber to the premises project resembles such a case. The details of fiber to the home networks and the potential such a network would offer Lafayette may well be lost on most residents. As a result, the public's perception of the issue is likely to depend on how it perceives it is being dealt with by LUS proponents and opponents.

The deeper one looks into the information being presented to the public by Cox Communications and BellSouth on this matter, the more clear it becomes that they are skewering facts in what appears (according to their own polling data) to be a failing attempt to generate public opposition to the LUS plan.

Part of their problem, it seems to me, is that the public is not buying the message because Cox and BellSouth have little credibility in the community. The facts regarding the Bristol, Virginia, municipally-owned fiber network indicate that Cox and BellSouth are only adding to their credibility problems by distorting the reality there in the hope of helping their case here.

An examination of the claims made regarding Bristol's OptiNet project in documents handed out at the broadband forum earlier this month reveal that Cox, and BellSouth are playing a little loose with the facts in this case or, at the very least, shading the truth. And, for the sake of accuracy, let's drop the pretence of labeling that event 'academic.'

What Was Claimed

In a document distributed to attendees of the forum, a document alleging to provide facts on failed municipal fiber and telecom efforts said this about the Bristol project:

"In 1999, the city decided to build a state-of-the-art fiber-optic network in order to boost economic development and attract hi-tech companies that would provide high-paying jobs in Bristol and the surrounding areas. The resulting telecom provider, called OptiNet, is owned and operated by Bristol Virginia Utilities (BVU), the local electric, water and waste water treatment utility. BVU began building its network in 1999, initially offering voice, video and high-speed data services to local schools and government. By 2001, BVU decided to provide these services to residents and businesses as well. After overcoming a series of legal hurdles, OptiNet began offering voice and data services in December 2002 and added video in July 2003. BVU accumulated more than $31 million in bond debt, and operating expenses were substantially in excess of operating revenues for fiscal year 2003. The study concludes that the average loss per customer in fiscal year 2003 was more than $2,100. BVU has received five grants, which do not have to be paid back, for infrastructure buildout. Furthermore, OptiNet is still being cross-subsidized by BVU — by the citizens through their electric, water and wastewater bills."

It doesn't paint a very rosy and – surprise! – it wasn't intended to do so. If these were, as Joe Friday used to say, "just the facts," then the Bristol experience could raise some questions about a similar project here.

But, the facts appear to be significantly different in Bristol than the incumbents would have us believe and a July 25, 2004, article in the Bristol Herald Courier presents a much different picture than that painted by the documents produced by Progress & Freedom Foundation for use at the Cox/BellSouth forum.

Note that the article was published a full week in advance of the broadband forum. Parties genuinely interested in public being able to make an informed decision on this issue would have included this information in handouts at a public event they were sponsoring.

Headlined "Opti-Mistic," the article by Joe Geraghty begins with this sentence:

"A year after it became one of the few public utilities in the country offering full telecommunications services, Bristol Virginia Utilities is beating its business plan and reaching its goals more quickly than expected."

As the article points out, OptiNet is achieving this success despite the best efforts of telephone and cable incumbents there to prevent OptiNet from offering its services to the general public. Since the Progress & Freedom Foundation (a think tank heavily funded by incumbent phone and cable companies) has taken a keen interest in the Bristol story (even if it refuses to report it accurately), looking at what has transpired in there could be instructive as to the kind of obstacles that may well be thrown in LUS's path when it decides to move forward with its fiber to the premises plan.

In fact, it is the legal and regulatory obstacles thrown up by the incumbents that drove up the losses the OptiNet initially incurred. For BellSouth and Cox to cite those losses as a reason for LUS not to undertake its project, one could logically infer that our local incumbents plan a similar strategy of lawsuits and regular challenges to whatever LUS initiative gets rolled out.

Bristol's Losses: 'It's the obstructionism, stupid!'

The PFF claims that OptiNet's operating losses in fiscal year 2003 were "substantially in excess of operating revenues."

That is correct, but neglects to mention why.

Here's what the Bristol Herald Courier reports:

Vice President of Finance Stacey Bright attributed the discrepancy to unexpectedly high legal and regulatory costs as well as unanticipated delays in offering full service. The legal bills came when private competitors like Sprint and Charter Communications challenged the legality of OptiNet’s plan to provide telecommunications services.

"The competition was creating barriers to entry – or trying to," Bright said.

While OptiNet's losses were higher than projected in their first year, it had nothing to do with the competency of the operation or its management. Instead, the losses were directly tied to the obstructionist efforts of Sprint and Charter.

Those fights were fought in the courts, in the Virginia legislature, and the state's Corporation Commission (which is pretty much the equivalent of the Louisiana Public Service Commission).

So, in the first year of operation, when BVU and OptiNet had hoped to be offering services to customers, they were hip-deep in lawyers as a result of the various challenges from Sprint and Charter. As a result of the delays and legal costs, operating losses, which the paper reports had been projected at $2.1 million were, actually double that figure. According to Bristol CFO Bright, BVU spent about $625,000 on legal fees fighting Sprint and Charter.

Cable Rate Increase of 15 Percent

Much was made of the fact that OptiNet had to raise cable rates by 15 percent. One document distributed at the forum framed that decision in these terms:

"According to local media, City Councilwoman Vicie Dotson literally cringed when she voted on May 11, 2004, in favor of a Bristol Virginia Utilities cable rate increase. But Dotson and the rest of the council unanimously approved the hike of 12-15 percent, saying it was necessary to keep the municipal cable operations self-supporting, as required by state law. The increase will take effect July 1."

And Cox increased rates in Lafayette how many times last year?

The Bristol paper reports that the May cable rate increase was to cover increases in programming costs. Charter, the paper notes, ate those increases in an effort to undercut OptiNet cable prices. Is Charter subsidizing its cable rates in Bristol in an attempt to undercut OptiNet? I don't know, but it has that freedom; a freedom denied Bristol through limitations placed on its operation in legislation that made its way through the Virginia legislature.

Like the recent legislation that was approved in Louisiana, these laws are designed to protect the businesses of monopoly cable corporations at the expense of the tax and ratepayers of the state. That is, the practical impact of requiring OptiNet or LUS to make their cable operations self-sustaining is to drive up the costs to consumers, thus making those offerings less attractive (in pure dollar terms) than those of incumbent carriers.

Taken together, the lawsuits, regulatory challenges, and attempts to force municipal cable ventures to have higher rates tend to undermine the concerns companies like Cox Communications express for the fate of ratepayers and taxpayers in Lafayette.

If the record of their peers in Bristol is any indication of what is to come (and it's a safe bet that it is) look for Cox and BellSouth to engage in whatever form of obstruction possible to delay the delivery of services by LUS and to drive up the cost of entering the business. Do those sound like the actions of companies that have ratepayer interests at heart?

Cross-Subsidizing

The incumbents state as fact the notion that BVU is engaged in cross-subsidization its digital services with revenues from other aspects of its utility operations.

Actually, a complaint has been filed before the Virginia State Corporations Commission alleging that BVU does cross-subsidize (the paper does not report who filed the complaint). It's a charge that is vigorously denied by the CEO of BVU, Wes Rosenbalm. Here's what the paper reports:

Rosenbalm vigorously denied suggestions that BVU is engaged in cross-subsidization. He said the law prohibits it and that BVU operates within the law.

Thanks to the new state law here affecting the ability of municipalities to get into the network infrastructure business (which I believe LUS made a strategic mistake in supporting), the LUS project will be subject to the scrutiny of the Louisiana Public Service Commission. This is troubling because the PSC has developed into a playground for BellSouth over the years and giving the commission and its staff the ability to muck around in the business operations of LUS cannot help but produce a less positive outcome than if LUS had been able to steer clear of them. In the judgment of LUS's leadership, they could not avoid that and we'll all pay higher rates for cable and bandwidth than we would otherwise when LUS finally rolls out its system.

OptiNet is a Success!

Despite the attempts of the Progress & Freedom Foundation, Cox and BellSouth to claim otherwise, OptiNet is an emerging success story. Having cleared itself of its legal hurdles and most of its regulatory thickets, OptiNet is now beating its financial projections. Read what the local paper says:

This year, after a full year of offering cable, Internet and phone service, BVU did much better, beating both the proposed budget and a business plan created by CCG Consultants in 2002. Actual losses were $2.6 million, beating projections by $1 million.

OptiNet services are available to about 10,000 homes in Bristol and apparently a significant number have made the switch. About half of those homes are taking one or more services that OptiNet offers. The paper also reports that customers are happy with the quality of service and that the May cable rate increase did not drive off customers. Charter told the paper it had lost 2,000 cable customers since OptiNet began offering services.

Old Acquaintances

The quoting of Progress & Freedom Foundation's Thomas Lenard in the Bristol Herald Courier article drives home the point that the fight that is underway in Lafayette is taking place within a national context. The paper duly notes that PFF is sponsored by a number of incumbent telecommunications companies like BellSouth. PFF has shown up either in person or in print in other communities where incumbents are fighting these municipal fiber networks.

Lenard and other private sector competitors of OptiNet resort to fear, uncertainty and doubt (FUD) to call into question the future viability of OptiNet and other municipally-owned fiber networks.

OptiNet's CEO Rosenbalm counters that municipally-owned utilities like BVU and LUS are actually better prepared to adjust to changes in the market place than are the corporate behemoths they compete against. I would add that that having the local market as their only focus surely makes them better able to respond to the needs and concerns of their respective markets.

Summary

Cox and BellSouth will one day meet their enemy in Lafayette and discover it is themselves.

In what promises to be a protracted and bitter debate over LUS's fiber to the premises initiative, Cox and BellSouth have displayed a basic level of disrespect for citizens here through deceptive polling, advertising and other attempts to frame the issues for the public. To their credit, the citizens of Lafayette have not been fooled by this approach. The fact that so many of us have had business relationships with Cox, BellSouth and LUS is contributing to the difficulties that Cox and BellSouth are having in getting people to buy their arguments against the very idea of LUS deploying a fiber to the premises network.

Can there be any doubt that there is a fundamental link here between the business reputations of the three principals, the tactics used by the incumbents thus far and the public's perceptions of this issue? That suggests to me that if Cox and BellSouth want to see better results, they need to deal more forthrightly on this issue. They have not proven capable of it thus far.