story by Pamela Hill, special to The City Wire
Editor’s note: This is the first in a three-part series about the May 22 vote in Siloam Springs in which voters will decide on the construction of a municipal cable/Internet system.
Siloam Springs may add cable and Internet to the services offered through its city-owned electric utility, but it won’t come without opposition.
Some citizens and former city officials question the financial soundness of the proposal to add broadband services, while others decry the move as government overstepping its bounds and trying to compete against private industry. And the private companies that currently provide Internet, cable and phone services to the city have vowed to be aggressive competitors should the city move forward.
David Cameron, city administrator, said the proposal is not so much about dissatisfaction with current providers as it is about finding new revenue for the city. Cameron said revenue from electric services has been a key source of funding for various projects and necessities for the city. That “enterprise” fund is getting smaller, Cameron said, and an alternative funding source is needed.
“We have done a good job managing accounts, building a reserve,” Cameron said. “We want to keep building on the programs we have. It takes money and funds to do that.”
City officials discussed the issue for the last 18 months and decided to put it to a referendum. Voters will decide the issue May 22.
In the meantime, city officials will try to make their case at a series of town hall-style meetings on March 29, April 5, and May 3. Conversely, it was announced last week out of Little Rock that a coalition, whose members include Cox Communications, has formed to protest the city’s efforts. The coalition, Arkansans for Limited Government, plans a campaign to “educate” citizens about the debt taxpayers would inherit should the proposed system fail.
Currently, the city is served by Cox Communications and CenturyLink for cable, telephone and Internet access. Siloam Springs would follow Arkansas cities Conway and Paragould into the broadband business, as well as nearby Sallisaw, Okla.
About 150 municipalities nationwide offer broadband services. The success of some systems has been a source of great debate.
If approved by voters, the city plans to spend $8.3 million to install 100 miles of fiber optic cable directly to homes and businesses. The city should be able to repay the debt in 12 years, if things go according to a feasibility study presented to the city’s board of directors in January. Cameron said projections show the system could begin making a profit after three years.
Critics contend the proposal is too risky and would cost more than projected.
“This is not like a private business where if I start a cupcake company and it fails, I’m out the money,” said Mike Kenney. He argues citizens would be left holding the bag if city-owned broadband service fails.
Kenney served on the city board from 1992-2000 and was a state representative from 2002-2008. He said the city discussed joining the cable business when he was on the board.
“The up-front money was significant, the return was questionable, and some board members had a real concern about competing with private business,” Kenney said. “For me, that was a big part of voting against it.”
Mike Flynn was on the city board then, too. At that time, he said, a company did a study and said it would be profitable. But city officials decided against it.
“I called and talked to several cities (that had done that). Several of those said, ‘We aren’t making any money on it.’ I just think the pie in Siloam Springs is very small,” said Flynn, a former television news anchor and retired John Brown University professor. He served 12 years on the city board, beginning in 1994.
City electric director Art Farine, a 32-year city employee, said now is the right time to add broadband services.
“I think the community may be more progressive (than in the 1990s),” Farine said. “But the big difference is we’re looking at fiber-to-the-home versus a cable system. We’re offering something completely different than our competitors.”
Sandy Luetjen, Siloam’s director of marketing and community services, said fiber-to-the-home, also called fiber-to-the-premises, is superior to cable or DSL (digital subscriber line).
“We’re looking for the best deal and the fastest speed,” Luetjen said. “That’s what fiber is.”
“Fiber is the most efficient way to move data,” said David St. John, a spokesman for the Fiber-to-the-Home Council. “You can move enormous amounts of information through glass fiber without diminution of the signal.”
St. John said it’s common to use copper lines for the last mile to the home – a method that produces a great signal. But the closer fiber is to the customer, the more bandwidth you can offer, he said.
Fiber-to-the-Home Council is a 10-year-old industry association. Its members were companies that manufactured fiber-access technology, but now they also include providers, like small telephone companies and small city utilities. The association has 270 members nationwide.
“More than 700 small providers have upgraded to fiber-to-the-home,” St. John said. Most are telephone companies; others are municipal utilities.
“I think the reason is if you don’t have high bandwidth in your community, you might as well close your doors. You will isolate yourself,” St. John said. “You just need fiber to meet the bandwidth demands of today.”
Users demand increasing amounts of bandwidth as more and more devices stream video and data, a stark contrast to usage just a decade ago.
“Only 10 years ago, everyone dialed in for Internet. YouTube was just founded in 2005,” St. John said.