Posted by: Ann Treacy | May 21, 2012

Monticello successful? Depends how you measure it.

Last week the Freedom Foundation of Minnesota ran an article on FiberNet in Monticello. They painted a picture of a project that wasn’t successful…

The City of Monticello has put bondholders on notice that the municipal broadband network once hailed as a national model is unable to meet its financial obligations with revenue generated from FiberNet Monticello customers. Instead, city leaders now will discuss how to restructure payment of $26 million in revenue bonds to save the faltering broadband network.

A financial report prepared for the Monticello City Council meeting on May 14th acknowledges that FiberNet “continues to operate at a loss. For the quarter, FiberNet lost around $100,000, not including its 2012 debt payments.”

A blunt letter sent to Wells Fargo Bank in March indicates the City does not have an obligation to continue making up the losses incurred by FiberNet.

I contacted Jeff O’Neill, the city administrator at Monticello for his take on an update. He touches upon some of the issues we’ve heard in the past: the budget has taken a hit starting with obstacles caused by the lawsuit brought against the project at the onset of the initiative. Also they have seen some fierce competition from other providers. But I think it’s interesting to take a look how a community network can and should measure success. Obviously finances is part of the equation – but providing the community with the infrastructure it needs to succeed is another part.

Here’s what Jeff had to say…

When evaluated as a whole, FNM has been wonderful for the community.  As requested by its citizens, FNM has delivered.   The system is performing well with FNM staff and HBC getting great reviews from customers.  The community is benefitting from telecommunication service at a level and cost that is the envy of the nation.  With telecommunication costs  dropping 35-60% since the inception of FNM, the savings to the community are enormous.  This savings and improved performance is certainly a huge plus for the local economy and supports the goal of  job creation.

When measured from a purely profit and loss basis,  original business plan has been impacted significantly by the one year delay created by the TDS lawsuit along with a variety of impacts resulting from the great recession.   Also, the presence of an army of Charter door to door salespeople selling 30 meg internet, all video channels and four movie channels for $59.90 has blunted the growth of FNM subscription rates.    Please note however that FNM subscription rates are actually quite good (Appros 39% of Single/two family) and we have a strong and steady base of customers that continue as FNM customers due to fair prices and great service. These customers have turned away Charter salespeople on multiple occasions.   Some have mentioned that they will not take the Charter deal as doing so would be self-defeating and like cheating against themselves and their neighbors who voted for building the system.

Over one quarter of businesses in the community are using services (120+) and the number continues to grow.  Overall, business and residential citizens in the community are saving millions due to the reasonable prices by FiberNet combined with the drastically low prices by Charter.   The original David and Goliath story ended with the sling of a single rock… this modern day version is ongoing… Monticello is fighting the good fight and doing what it can to enhance financial viability through cost cutting and development of new revenue sources.  We are confident that these business development efforts will ultimately off-set the economic damage resulting from the lawsuit and unbelievable competitive pricing.

 


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