Background

In the city of Ashland, Oregon, tourism constitutes a critical part of the local economy. As home of the world-renowned Oregon Shakespeare Festival, the city attracts nearly 125,000 visitors each year. Still, while tourism does provide the city with regular revenues, it does not provide many new opportunities for employment.

For this reason, Ashland decided to create an advanced telecommunications network. By doing so, the city hoped to attract new high-tech businesses not otherwise likely to relocate to Ashland. Similarly, it also hoped to provide local businesses with the competitive edge they needed to compete in today’s market.

“Without an advanced telecommunications infrastructure, our growing high-tech community would be unable to remain competitive with urban areas like Portland, Seattle, and San Francisco,” said Mike Freeman, Ashland’s City Administrator.

Process

Similar to other communities, Ashland’s network began in 1996 as a way to prepare the city’s utility company, Ashland Utilities, for the possible effects of deregulation. The city adopted the goal of building out a fiber optic ring in 1997 to improve utility efficiency through automatic meter reading and load control.

Ashland began the process of building out its network by conducting extensive analysis of other “wired” cities, including Glasgow, KY and Cedar Falls, IA. In 1998, the city council approved a business plan for the project and proceeded to invest approximately $5 million into the initial buildout of an existing 12-mile fiber optic ring. The city financed this buildout through a bank loan (quicker and easier to obtain than a municipal bond while available at similar interest rates) as well as through revenues generated from the municipal electric utility.

Throughout the process, Ashland generated community support for the network by inviting residents to attend various public meetings and encouraging them to share their input. In addition, the city also sponsored two open houses—attended by more than 600 people—at which it demonstrated to residents the services that it proposed to provide over the network.

Challenges

At present, Ashland’s network passes 90% of all households in the community, and officials expect to complete the final 10% of the buildout by the end of 2002. Getting to this point has required the city to overcome significant challenges.

At the end of 2001, Ashland was forced to revise its business plan due to several issues: revenues were not meeting projections, capital expenditures were exceeding the amount originally financed, the buildout was taking longer than anticipated, and some managerial problems were identified. An advisory committee was appointed to (1) revise the business plan, (2) develop a communication system with the council, and (3) evaluate ways to enhance the network’s performance.

Ashland’s revised business plan called for :

• Achieving a positive net income by the end of the system’s 9th year of operation
• Reducing net gain from $3.8 million (10 years) to $1.13 million (15 years)
• Generating $735,000 in advertising revenue (15 years)
• No telephone revenue (loss of $508,000)
• Internal borrowing capped at $8.9 million the ninth year

The report also proposed various improvements in the area of marketing. Specifically, the report called for implementing a direct sales team, revising the pricing structure, developing targeted marketing campaigns, promoting bundled cable TV and Internet packages, and marketing the advantages of a publicly owned advanced telecommunications network.

Services

High-Speed Data

Ashland provides advanced high-speed data service at either 10 or 100 Mbps to local businesses through direct fiber links (Fiber To The Business).

High-Speed Internet

For private residents, Ashland offers high-speed (3-5 Mbps) Internet access through cable modems. Internet service on the network operates via an open-access (wholesale) business model. Currently, nine competing Internet Service Providers offer services over Ashland’s HFC network, enabling residents to choose from a variety of services. Benefits of a wholesale model include fewer staffing requirements and fewer legal hassles. In addition, a wholesale model prevents monopolies and provides local businesses with the opportunity to compete against the incumbent. Penetration rates for Internet access vary by neighborhood and average around 40-45% of potential customers.

Cable Television

Ashland offers retail cable television service to the community and now serves over 30% of the market. Community involvement throughout the MetroNet’s various stages of development has resulted in a cable television channel lineup that is “as unique as Ashland,” said Michael Ainsworth, CATV Specialist for the Ashland Fiber Network. “That’s one of the greatest features of the service. It was created by Ashland residents for Ashland residents.”

Results

Notwithstanding its various challenges, Ashland’s network has still managed to have a positive impact on the community. It provides local schools and businesses with vital services they could not otherwise access or afford. In addition, competition from the network has forced the local incumbent, Charter Communications, to cut cable TV rates in Ashland by 25%. While residents in neighboring cities continue to pay full price, Ashland residents save a total of $500,000 on services each year.

Furthermore, while Charter’s relationship with the @Home network (which declared corporate bankruptcy in early 2002) has raised serious concerns regarding its credibility, AFN customers remain confident that the city’s open system won’t fall victim to the financial problems that currently plague the telecommunications industry.