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Setting The Record Straight - Response to Yellowhammer article
2/16/2017  

SETTING THE RECORD STRAIGHT

From Gary Fuller,Mayor of the City of Opelika 

This letter is in response to the recent article by Joseph LaPorta in Yellowhammer News entitled: “Taxpayer Protection Alliance Foundation: Opelika's government-owned network among the nation’s worst broadband failures”.In his article, Mr. LaPorta recycled old claims using inaccurate information. His article contains numerous mistakes, omissions, misrepresentations, distortions and insupportable claims. We are happy to take this opportunity to set the record straight because the facts speak for themselves. 

Introduction. 

Opelika, estimated population of 29,500, is the County seat of Lee County. Opelika Power Services (“OPS”), a department of the City of Opelika, has been Opelika's community–owned power company since 1911. OPS is also a world-class broadband provider utilizing a 100%fiber-to-the-home optic (FTTH) network offering TV, telephone and Internet throughout Opelika. Opelika is proudly recognized as Alabama's first GIG city. The broadband division of OPS is known as OPS ONE. 

OPS was a reluctant entrant into the broadband marketplace. Before 2010, broadband service in Opelika was supplied by one major cable provider. This monopoly provider made sizable profits without investing much money into its network. There was no competitive pressure to improve. The business plan of the incumbent provider was to maximize revenue from its infrastructure rather than upgrading it. Meanwhile,residents and businesses complained of high prices, inferior quality, slow speeds, poor customer service and lack of competition.

Because the City did not want to enter the broadband market, it first went to other large private cable and telephone companies and asked if they would be willing to deploy a broadband network within Opelika.  All of them refused, stating that Opelika was too small a market to make such a large investment.  The City decided to build the next generation network itself. 

In Opelika, community leaders recognized the economic benefits of faster, cheaper and more reliable Internet services. Frustrated by a lack of competition, Opelika residents voted overwhelmingly in favor of the City building a FTTH network. OPS deployed its FTTH network in all unserved and underserved areas of the City. In Opelika, all residents and businesses now have access to high-speed Internet, cable TV and telecommunication services. 

By building its own network, OPS pushed the private incumbent provider to upgrade its network and challenged its pricing strategies. The prospect of competition spurred new capital investments by the incumbent. It is without dispute that Opelika's entry into the market has increased competition and lead to faster speeds and cheaper prices. 

Misstatements of Facts

1.         OpelikaONE is not taxpayer-funded.

Mr. LaPorta boldly claims that Opelika’s broadband network is taxpayer funded. Actually, OPS ONE does not rely on any tax subsidies. OPS ONE pays all its own expenses. Moreover, no state or federal grants or subsidies have been used to build or operate Opelika's network.

2.         Expenditures grossly overstated.

Mr. LaPorta claims that Opelika initially spent $43 million to build a network capable of 1 gigabyte-per-second speeds. Actually, Opelika spent $20 million to build the FTTH network. OPS spent an additional $23 million to modernize its electric grid and to build anew OPS facility. The state-of-the-art Smart Grid will allow OPS to provide better reliability and greater efficiency to its electric customers.

3.         Number of GIG subscribers.

Mr. LaPorta claims that OPS has only one subscriber for its Lite Speed Gig service. Actually, OPS currently has five (5) residential GIG subscribers.  On February 7, 2017, the Opelika City Council approved a new price of $94.99 for gigabyte service with certain packages. With the new affordable price, OPS projects that demand for gigabyte service will increase substantially.

Erroneous Conclusions.

1.         OPSONE is a success story.

Mr. LaPorta and the Taxpayer Protection Alliance Foundation contend that publicly funded Internet projects are a universal failure and, in particular, Opelika’s network is among the nation’s worst broadband failures. The bottom line is that OPS ONE is doing just fine and is getting stronger each year. Opelika fiber is making progress as a start -up company as planned. OPS signed up its first broadband customer in October 2013.  After only 3 years in operation, OPS ONE has over 3,200 subscribers and is generating annual gross revenues of approximately $5,500,000.  It is obvious that OPS ONE is receiving grassroots support in the community. 

Mr. LaPorta does correctly quote meas stating Opelika’s network “has not broken even”.  It is not unusual for capital intensive fiber projects to show a loss in the early years of operation. Rapid growth in capital expenditures is a natural part of any start-up enterprise.  Mr. LaPorta knows perfectly well that it is inappropriate to draw negative conclusions from early-year losses in such projects.  Our business plan projected losses during the first 5 years of the project. OPS is meeting all projections in the business plan.

High-speed access to Internet services is a key requirement for citizen participation in the 21st century.Municipal telecommunications and broadband networks are not new.  Over 143 municipalities provide broadband services. Many municipal utilities have successfully offered broadband to their customers as an adjunct to their electric or other utility services. Local governments provide needed broadband services to address community needs. Municipalities throughout the country, such as Chattanooga, Tennessee; Chanute, Kansas; Santa Monica, California; Lafayette, Louisiana; Burlington, Vermont; Tullahoma,Tennessee; Bristol, Tennessee; Cedar Falls, Iowa; Russellville, Kansas and Wilson, North Carolina have successfully created and operated “gigabit broadband enterprises”. These municipal networks provide excellent service at competitive prices and serve previously unserved areas of the community.

2.         OPSONE contributes to the well-being of the local economy. 

Mr. LaPorta argues that public Internet projects are “a waste of money that will threaten the financial well-being of state and local governments."  LaPorta provides no evidence for these dramatic claims. In fact, municipal networks increase both public and private investment by building broadband infrastructure and creating new business opportunities. Municipal networks add to rather than eliminate competition. It is without dispute, that the fiber-to-the-home broadband network in Opelika has spurred job growth. The Auburn-Opelika area has seen the largest total employment growth in Alabama. In fact, in December 2015, Milken Institute named the Auburn – Opelika MSA as the 10th best performing small city in the United States. The Auburn – Opelika area is among the leaders in Alabama in job creation, wage gains and technology trends.

According to Moody's Investors Service,Opelika’s bond rating is Aa2, which is among the highest ratings in the state of Alabama. This bond rating reflects a solid financial position marked by healthy reserves and a stable tax base. Based upon the incorrectness of Mr. LaPorta’s statements, a casual reader might wonder if Opelika is experiencing financial problems. 

Nothing could be further from the truth.  The local economy is expanding and City government is in excellent financial condition.  The deployment of the FTTH network has not adversely affected the financial condition of the City.

Conclusions. 

Mr. LaPorta attempts to use the Opelika FTTH network as a platform to discourage other municipalities from pursuing broadband projects. Opelika is very proud of the success that OPS ONE has achieved for the City of Opelika. OPS ONE has created a competitive broadband environment in Opelika. OPS ONE is offering superior infrastructure to its subscribers at competitive prices.

For almost two decades, AT&T,Comcast, Time Warner Cable and Charter Communications have spent millions of dollars to lobby state legislatures, influence elections and buy research to stop the spread of public Internet services that often offer faster speeds and cheaper rates. These companies have succeeded in getting laws passed in 20 states that ban or restrict municipalities from offering Internet to residents. Cable and broad band companies have tried to undermine municipal networks by paying for research from front groups such as Taxpayer Protection Alliance. Instead of improving broadband and infrastructure, these companies have spent millions to resist competition by the municipal networks. In our view, competition is preferable to regulation in a competitive market. It is important that legislators and policymakers recognize the vital role competition plays in achieving better Internet services.

In summary, we are extremely proud of OPS ONE and are confident that it is well positioned for the future.  The system is offering the fastest Internet service in the country at competitive prices.

 

 

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