Ashland Fiber Network staff plan to seek $250,000 in federal stimulus money to blanket Ashland and surrounding rural areas with Wi Max wireless Internet service.

Ashland Fiber Network staff plan to seek $250,000 in federal stimulus money to blanket Ashland and surrounding rural areas with WiMAX wireless Internet service.

AFN staff would install solar-powered WiMAX equipment on a tower at the south end of town and on another tower that is across Interstate 5 from Ashland.

The cost to cover Ashland with WiMAX service would be about $150,000. But AFN staff hope to reach outside the city's urban growth boundary.

Information Technology Interim Director Michael Ainsworth, a long-time AFN staff member, said the city is well-positioned to win economic stimulus money.

"This stimulus was almost custom-designed with Ashland in mind," he told Ashland City Councilors at a meeting earlier this month.

Ainsworth said federal money is aimed at helping bring Internet service to rural communities. Projects that can be completed within a year have top priority.

Ainsworth said AFN staff can build the WiMAX network themselves in 90 days after receiving money.

The earliest Ashland would know whether it will receive any money would be this fall, he said in an interview with the Tidings.

The federal money will be dispersed by September 2010, he said.

AFN already offers wireless Internet service under the name AFN Anywhere.

Ainsworth said WiMAX is faster and waves from the system can bend around obstructions like buildings and trees. AFN Anywhere service is sometimes disrupted by weather conditions like heavy rain. That existing service also has limited range and customers must have a direct line of sight to "AFN anywhere" towers.

AFN is already providing AFN Anywhere wireless service to about 50 customers outside the city's limits, Ainsworth said.

Retail vs. wholesale

AFN's main product continues to be its wired high-speed Internet service. AFN sells that service wholesale to companies like Ashland Home Net and Infostructure, which then retail it to customers.

The city wholesales Internet service through companies in order to help support the local high-tech industry. But there has long been debate about whether the city should retail service directly in order to make more money.

Internet retailers previously were told they had to jointly increase their customer numbers by 3 percent or AFN would begin retailing Internet service directly.

"They hit 2.8 percent, which is pretty remarkable in this economic climate," Ainsworth said.

AFN did institute a new floor of $1,500 in minimum monthly sales for a company to remain an Internet retailer. One new retailer had to accelerate its customer growth in order to hit that target, Ainsworth said.

He said he wants Internet retailers to work on adding more customers, especially since AFN's main competitor, Charter Communications, recently filed for Chapter 11 bankruptcy.

"We should take advantage of customer confidence erosion in our competitor," Ainsworth said.

Unlike its wired Internet wholesale business model. AFN would directly sell WiMAX wireless service to customers.

AFN business plan

In a five-year business plan that was accepted by the City Council earlier this month, Ainsworth predicted that both wired Internet sold by retailers and WiMAX sold directly by the city can grow.

The business plan projects wired Internet revenues growing from $1,355,500 this fiscal year to $1,643,883 in the 2011-2012 fiscal year. WiMAX revenues would grow from nothing this fiscal year, which ends on June 30, to $344,000 in the 2011-2012 fiscal year.

Ainsworth said younger and more mobile customers might buy only the WiMAX wireless service. But he predicts that most people will keep their wired service that is provided by a retailer, and then spend about $5 more to add on wireless WiMAX service directly from AFN.

Under that scenario, AFN would not be taking customers from its retail partners, he said.

City Councilor Russ Silbiger, the only councilor to vote against accepting the business plan, said he does think that WiMAX should be part of what the city offers. But he would like to see more data to back up the business plan projections.

"I would like to see it fleshed out a little bit more, especially with WiMAX. We need better data on where we expect to get the business from. We got projections for increasing business and nothing to show how we're going to get there," Silbiger said.

He said revenues may turn out to be more or less than the projections made in the business plan.

Although a City Council majority voted to accept the business plan, members also designated a council subcommittee to review the plan and return in four months with a report and recommendations for possible changes.

Eating into reserves

Meanwhile, the plan calls for AFN to continue paying $356,000 each year toward debt payments. The total debt payment for this fiscal year is $1,298,000, with other city departments having to shoulder the rest of the debt burden.

However, in the past AFN was unable to pay anything on the debt and was losing money.

AFN's debt grew to $15.5 million because of fierce competition from Charter Communications and higher-than-expected build-out costs. AFN was launched in the late 1990s to provide both Internet service and cable television.

The city privatized the money-losing television business in 2007 and finances improved under the new leadership of Information Technology Director Joe Franell. Franell accepted another job and left Ashland in October 2008.

Despite its improved finances, AFN's expenses — including its annual $356,000 contribution toward the debt — exceed its revenues.

AFN has stayed in the black only by drawing down its capital carryover funds.

AFN had $963,000 left in its capital carryover fund last fiscal year, but has $870,000 left in that fund this year, Ainsworth said.

Other city departments are also eating into their reserve funds as the city's overall revenues fail to keep pace with growing costs.

Last year, Franell decided not to spend an estimated $125,000 to $175,000 to bring WiMAX service to Ashland. The savings helped AFN contribute toward its debt and pay the $410,000 it gives to help fund the city's administration, finance and legal departments.

City government finances aside, Ainsworth said AFN generated $1.8 million dollars in revenues in the last fiscal year, while the companies that retail AFN Internet service generated another $500,000.

Ainsworth said that $2.3 million stayed in the community and helped support the local economy.

Meanwhile, city officials have not decided whether to launch a search to replace Franell.

City Administrator Martha Bennett said she has not had time yet to talk to Mayor John Stromberg, who took office in January, and the City Council about the position that is now being filled on an interim basis by Ainsworth.

Ainsworth said AFN staff members are able to handle all their work even though the department is down one person.

Staff writer Vickie Aldous can be reached at 479-8199 or vlaldous@yahoo.com.