In 1995, Marc Bergman looked to the future and didn't like what he saw. Bergman, administrator for the city of Fort Wright, Ky., was concerned about the city's telecommunications system and where it was headed. With the federal government planning to deregulate the phone and cable industry, he worried that telecom providers might base their service decisions solely on cost.
Universal access could be weakened as new providers came in and "cherry-picked" the best customers, providing them with advanced technology while leaving the rest of the community with limited services. Most importantly, the city's rights-of-way could be exploited as competing telecom vendors cut and recut the city's streets for their projects.
It was during this time that Bergman heard of International Communications Services Inc. (ICS), a Colorado-based firm that specializes in developing municipal utilities. Recently, ICS had begun promoting the concept of municipal ownership of telecommunications infrastructure. By building a publicly owned fiber-optic telecommunications network and then leasing it to a range of telecom providers, said ICS, a city could ensure its residents and businesses have universal access to a leading-edge network, provide its community with quality phone, cable TV and Internet services at low cost, control its public rights-of-way and generate non-tax revenue.
For Bergman, the ICS idea sounded extremely interesting. "We had just been in a bruising battle with our cable provider for the past year over our franchise," he recalled, "and the whole episode brought to a head the issue of dealing with a single service provider, cherry-picking, density requirements and community access."
ICS told Bergman they would prepare, at no cost to the city, a business plan that would examine the feasibility of owning and operating a publicly owned telecommunications utility. The plan would include market research on the potential customers for such a utility and an analysis of what capital was needed to put the utility in the ground.
Fort Wright isn't the only city in Northern Kentucky intrigued by the possibility of owning its telecommunications infrastructure. Ten other nearby cities and towns have joined Fort Wright and will receive business plans from ICS. Hopefully, most of the jurisdictions will partner with Fort Wright and ICS, which will help lower construction costs through economies of scale.
If the plans look good -- Bergman said he will run it by an independent expert to look for any "fatal flaws" before accepting any of its recommendations -- the local governments will form a nonprofit corporation that will hire a major accounting firm to conduct a full-blown feasibility study for financing purposes. According to ICS and Bergman, the nonprofit corporation will be able to sell investment bonds and revenue from the utility's operations will be used to pay off investors. "There's no tax money at risk in this project," said Bergman.
If the bonds sell and the financing is raised, then ICS receives its reward for footing the bill on the original study and becomes the construction supervisor for the project, according to Bergman.
The benefits of publicly building a community's telecommunications infrastructure appear to be many, according to Bergman and others. First, there's the benefit of offering customers low prices. As a public utility, the proposed corporation Fort Wright and other jurisdictions create would be exempt from Public Service Commission guidelines. "We will be able to set pricing standards any way we want," said Bergman. This kind of pricing control could be used as an economic tool. Cities could offer residents lower-cost cable TV and phone services and promote discounted telecommunications services to attract new businesses.
Because the infrastructure will be fiber right to the door, the utility will open the door to a multitude of different services. Besides cable TV and phone services, the telecom utility could offer residents and businesses high-speed access to the Internet,