March 18, 2006
Winners and losers
$10 fee would provide for universal basic cable TV, 256K Internet access
By Vickie Aldous
Ashland Daily Tidings
Residents who want only basic television and Internet services would get a good deal under an Ashland City Council plan to provide those services to everyone for $10 to $21 a month.
But people who want a full range of cable television channels likely would face higher monthly bills.
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Dena Adame, a telecommunications technician for AFN, installs a new filter for cable service in March 2005. Daily Tidings file photo |
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Ashland Fiber Network high-speed Internet users would probably see little impact.
Earlier this month, the city council directed city staff to explore implementing an “open carrier” model for AFN.
AFN’s fiber line infrastructure would be opened up to businesses that wished to pay the city to offer telecommunications services, such as telephone via Internet, to customers.
Another element of the plan calls for AFN to get out of the turbulent cable television business.
The city would instead provide good reception on television network channels, CSPAN and other free or low-cost channels. Households and businesses also would get a basic Internet service with speeds of about 256 kilobits, which is several times faster than dial-up service but slower than AFN’s 5 megabit high-speed Internet service.
Councilors who helped develop the concept said they hope to charge households and businesses about $10, with $21 being the top amount.
Winners
The $10 to $21 figure compares favorably to market rates for basic television and Internet service.
Charter Communications offers basic television in Ashland for $13.07 and its slowest speed Internet service for $29.99, for a total of $43.06 a month, according to a Charter customer service representative.
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AFN’s value drops without TV subscriber base AFN’s market value will drop if the City of Ashland stops offering full cable television service, according to Charter Communications Southern Oregon General Manager Mike O’Herron. Much of AFN’s value to any prospective buyer resides in its cable television subscribers, he said. “They’re devaluing the enterprise if they take the cable television subscribers out,” O’Herron said. At this time, the Ashland City Council is not considering selling AFN, but instead plans to give stripped down television and Internet service to all residents and businesses for $10 to $21 a month while continuing to provide high-speed Internet to those who choose to buy that service. Lowering AFN’s market value could have negative financial consequences if the new plan doesn’t work and the council has to resort to selling AFN. An independent broker estimated AFN’s current market value at $7 million to $10 million, including the cable television subscriber base. That amount is still not enough to cover AFN’s $15.5 million debt. O’Herron said Charter’s corporate mergers and acquisitions team has not had time to assess whether it would make business sense to try and buy AFN. He said AFN’s fiber line infrastructure — and Charter’s as well — already has a lowered market value because Ashland has duplicate fiber infrastructure. Companies or cities that own the only fiber network in a city have a more valuable network, he said. Telecommunications company Qwest earlier decided not to pursue buying AFN because it also has fiber lines here. O’Herron said he doesn’t know if Charter will raise its cable television prices if AFN no longer offers complete television service. “I’d never say we wouldn’t raise them. I’m not going to say we would,” he said. Charter charges $32.40 per month for its popular Expanded Basic television package in Ashland. Charter’s Expanded Basic television customers in Medford and Grants Pass pay $47.99 a month. Ashland City Councilor Russ Silbiger said he suspects Charter will raise its rates without AFN as a competitor. AFN and Charter have long offered below-market cable television rates in Ashland. |
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In Ashland, Charter also throws in the Discovery channel, The Learning Channel, MTV and several other channels to its basic television package, the representative said.
AFN currently offers a bottom tier for cable television that includes a handful of channels for $9.95 a month. AFN’s next level, which is similar to Charter’s basic television package, costs $17.96 a month, according to AFN customer service specialist Vince Zauskey.
Those AFN television prices include a few dollars in franchise fees and PEG fees that are added to monthly bills, according to Zauskey.
Charter does not include the fees when making quotes.
Internet Service Providers retail AFN’s wholesale residential Internet service for about $35 to $40, Zauskey said.
That residential-level Internet service is faster than the service councilors envision providing to all Ashland households and businesses.
Councilor David Chapman, who helped develop the open carrier model with Councilors Russ Silbiger and Cate Hartzell with local ISP owner Alan Oppenheimer, said most residents would probably still need to buy AFN’s Internet service through an ISP to get e-mail, technical support, virus protection and other services
The $10 monthly city fee could be included in the amount Internet users pay ISPs, so that AFN Internet users wouldn’t end up paying more, according to Silbiger.
Losers
It’s the person who wants full cable television service who would have a higher monthly bill.
Most Charter and AFN television customers buy the Expanded Basic level of service or higher, which costs $32.40 per month from Charter and nearly $39 per month from AFN.
With AFN eliminating its cable television offerings except for free or low-cost channels, cable customers would need to shop elsewhere for a full cable package.
Current Charter Expanded Basic customers and AFN customers who want more channels therefore would be paying about $10 a month to the city, plus they would have to pay their separate cable or satellite television bills.
“That’s a double hit. That’s paying twice,” said Mike O’Herron, Southern Oregon general manager for Charter.
O’Herron said he doesn’t know whether people will accept the city fee, especially in light of the outcry that followed the city council’s adoption in 2005 of a $7.50 monthly fee to help cover AFN’s debt. The council rescinded the fee before it took effect, after hearing concerns about its impact on low-income residents.
“I was surprised at the whole (open carrier) scenario,” O’Herron said. “I thought they took a pretty good beating over the $7.50 charge.”
Under the open carrier model, about 1,000 low income households would be exempt from paying the $10 to $21 fee. Another 1,000 households cannot be reached with AFN lines and would not have to pay, but the city could eventually connect those homes using wireless technology, according to Chapman.
Debt unavoidable
O’Herron said even if the city sold AFN, residents would end up paying to help cover AFN’s $15.5 million debt because the sales price would not be enough to cover the debt.
An independent broker consulted by city staff estimated AFN’s sales value at $7 million to $10 million.
Chapman said if the city sold AFN, households would face about a $10 monthly fee to cover the remaining debt.
If the city let the Jefferson Public Radio Foundation or another nonprofit group take over AFN and assume a portion of the debt, households would pay more than $10 a month, he said.
By keeping AFN and offering basic services to everyone who can be reached, people are getting something for their $10, Chapman, Silbiger and Hartzell said.
“We are in a position where we have to pay the debt,” Hartzell said. “Our town, our community has a debt. ... The question is, ‘How can we increase the benefit to people who are paying off the debt?’ The debt and fee are here to stay.”
Councilors will still be looking at additional ways to help pay the debt.
Charging households and businesses $10 a month would cover a portion of the debt payments and remaining operating expenses; charging $21 a month would cover the full debt payments and remaining operating expenses, Silbiger said.
Ashland Finance Director Lee Tuneberg developed a long list of methods for the council to consider to help pay the debt, ranging from selling city property to capping city spending and using additional incoming revenue for debt payments.
Staff writer Vickie Aldous can be reached at 479-8199 or vlaldous@yahoo.com.