City Adds Telecom to Basic Service Menu

A booming number of Americans regards telecommunications as more of a necessity than a luxury, but is your Internet connection truly as essential as clean water? Is cable TV as valued as sewer services?

The Coldwater, Mich., Board of Public Utilities (www.cbpu.com) thinks the answer is "yes" for many of its residents, if not today, then in the near future. Along with the vital 20th-century city services-water, electricity and sewage-is a new one for the 21st century: telecommunications.

The idea hasn't met with unanimous approval. Some say the competition with private business is unfair, and others wonder if a public utility has the fortitude to keep up in a rapidly changing technology field. But many citizens and businesses have registered their approval by voting in a $4.5 million revenue bond to fund new infrastructure and by signing up for CBPU's dial-up Internet service, which is already in operation.

As the $6 million, two-year project to wire the city and environs with a hybrid coaxial/fiber-optic cable ring nears completion, CBPU will expand that telecommunications menu this summer to include cable TV, broadband Internet and fiber-optic networking. "We're not marketing the services yet, but we've already been getting unsolicited phone calls. There are a number of industrial and commercial customers calling for information about high-speed connectivity," said Linden Cox, CBPU's manager of communications systems operations.On the telephony end of the market, the board in April completed a deal to resell long-distance telephone service for 9.75 cents a minute. And sometime in the future, the utility plans to offer videoconferencing and possibly even local dial-tone service.

Why would a company that holds a monopoly on the water, sewer and electric services in town want to tackle a new, highly competitive and infinitely complex market such as telecommunications? The answer, Cox said, is that CBPU itself needs high-speed communications to remain competitive if and when energy deregulation comes to Michigan. To underwrite the costs associated with laying new cable and diversifying its business, the CBPU decided to create a separate telecommunications utility.

Given the level of demand for internet access and other high-speed communications, it's no surprise that local utilities are getting in on the act, said Kate Delhagen, a market analyst with Forrester Research Inc., Cambridge, Mass. Furthermore, "utilities are known for reliable service, and they already have a monthly billing relationship with customers," she added.

In Coldwater, the public utility seems to have garnered the goodwill of the citizenry thus far. "I'd give them a 10 out of 10 for public service," said Dick Patterson, the owner of Michigan Nickel, which specializes in coin amusements and represents local entertainers. "Our electric service has been so good in spite of ice storms, wind storms-all kinds of weather. The longest we've ever been out of electricity is 20 minutes."

Choice is perhaps the biggest reason voters approved CBPU's plans. There is only one cable TV provider in town and no other way at all to sign up for a high-speed Internet connection. And until recently, the only Internet service provider in town was the local library, which was overwhelmed trying to support some 1,500 dial-up accounts. It asked CBPU to take over when the board announced it was forming a telecom utility. The board agreed and is maintaining those customers at the grandfathered rate of $10 a month for unlimited service, Cox said.

The lack of competition in the cable TV market was a sore spot for some Coldwater residents, who said the current provider was slow to upgrade its technology and respond to customer requests.

The civic-minded among Coldwater's private citizens and business community might choose CBPU's telecom services because it is a way to keep money in the community, Cox said. "The money doesn't go to some stockholders back in New York," he said. "The money they spend turns over a number of times before it leaves the community, and that helps to hold down property taxes."

Both Patterson and Cox said charges that the competition is stacked in CBPU's favor are simply wrong. Voters, Cox said, initially rejected a general-obligation bond, which offers better rates, only later approve a revenue bond, which specifically limits the nature of competition and funding. The board was required to form a wholly separate telecommunications utility, and it is prohibited from engaging in any cross-subsidization among the separate utilities or raising taxes to cover costs.

For example, if CBPU wants to include a flier in every electric customer's bill touting its telecom services, it must pay for the mailing just as if it were a completely separate business.

In theory, CBPU, which is a not-for-profit organization, will be able to beat private companies' pricing because it is not required to turn a profit. In reality, skeptics worry that repaying the $4.5 million bond, paying interest on it, covering maintenance costs on the new network and actually trying to recover the cost of the new cabling might result in higher prices rather than lower.

In addition, residents of Coldwater and its environs will have to decide if they believe a utility that made its name in electricity and water can compete in a highly technical, hard-to-predict market.

For its part, CBPU is confident its pricing can remain competitive and its technology and service superior, Cox said.

"There are never 100 percent guarantees in this business, but we've been very careful in our selection of equipment providers. We've put out several [requests for proposals], and we've stayed on the very edge of technology," Cox said. "This business will continue to grow on people as they realize how much a part of their life broadband communications will become."

Tracy Mayor is a Beverly Mass.-based free-lance writer specializing in information technology. She can be reached at tmayor@shore.net.

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