story by Pamela Hill, special to The City Wire
Editor’s note: This is a three-part series about the May 22 vote in Siloam Springs asking voters to decide on the construction of a municipal cable/Internet system. This is the third story in the series. Link here for the first story, and link here for the second version.
Art Farine, a 32-year city employee and director for Siloam Springs, said a fiber-to-the-premises network will help the city stay current.
Fiber can carry so much bandwidth that systems aren’t limited by the lines, Farine said, only by the equipment on either end. An upgrade to that equipment is easier and less expensive, he said.
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.
The Siloam Springs’ mayor’s office has received letters of opposition from Lt. Gov. Mark Darr and from Randy Zook, president/CEO of the Arkansas State Chamber of Commerce.
Zook, noted last fall, the city proposal runs counter to free-enterprise principles.
“Make no mistake, when government competes with private business it always has an unfair advantage, and it will stifle economic growth and competition in the Siloam Springs market,” Zook wrote.
He encouraged the city to weigh the impact the proposal would have on the existing telecommunications firms and employees in Siloam Springs.
“Our concern focuses on whether there are private market services available,” Zook said last week. “We think it’s a dangerous precedent and unhealthy and think there’s potential for it to be a burden to the taxpayers in that municipality.”
Zook said there are many instances across the country where cities have tried this and failed.
Siloam Springs City Administrator David Cameron said he’s seen the letters from Darr and Zook.
“I can understand someone’s concern about government getting bigger. But we’ve proven through the electric company it can be done – and done reasonably. And those funds can be used to the benefit of the community,” Cameron said.
Cameron said he’d like for Darr, Zook or other critics to come to Siloam Springs and look at what the city has done over the last decade.
“If we’d been negligent with it, I could understand. But our deficits aren’t growing. We still have a balanced budget, a robust reserve, and controlled spending,” Cameron said. “But somewhere you have to rebuild infrastructure. If we don’t create a new revenue stream, and have to increase water and electric rates, well, that affects your industries, as well.”
“We think it’s unnecessary and unwise on the part of government to usurp opportunities from private companies,” Zook said. “It sends a message: Be careful how much you invest in this area because the government could come in and take your market share.”
Christopher Mitchell, director of the Telecommunications as Commons Initiative for the Institute for Local Self-Reliance, said the Minneapolis-based institute sees no evidence that government presence in the broadband marketplace prevents private industries from locating in a region.
“More companies are interested in whether the costs for telecom services will be lower and if they have faster speeds,” he said.
Mitchell said a claim that government has an unfair advantage in the marketplace is “crazy talk. The reality is it’s too easy for an established company to drop prices and run a new company out of business,” Mitchell said. “This is the scenario: Two very large companies with a large rate base nationally. They charge inflated rates because they can. When there are only two providers, they tend not to be competitive, they just split the difference.”
Mitchell said large corporations usually respond to municipal businesses by lowering rates to below the city’s offering. Since they have a national base, they can afford to run a thin margin or even at a loss for a while if they choose to, he said. Citizens then have to decide if they want to save $10 by staying with the corporation, even with the chance that rates likely will go back up if the city service fails.
People are tempted by the most savings they can get, he said.
“Cox and CenturyLink have the power to lower rates,” Mitchell said. “They probably paid off their systems long ago. So that’s where municipalities hope citizens and businesses will subscribe to the community network, knowing that if the city doesn’t get enough customers, they will fail. Then rates go back up and there are no savings.”
Farine said he hopes industrial customers and city residents will come on board.
“If this all passes, we have no pretense that it won’t be a long, hard, arduous process to get it set up, but it will be a facility the citizens own,” Farine said.
Mike Kenney 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.
Kenney said he’s sent letters to all the directors and the city’s newspaper opposing the proposal. And while he hasn’t filed for office, he hasn’t ruled out challenging some of the city’s incumbents.
“I may be considering something, but I’ve not made a decision,” Kenney said.
In addition to the perceived risk, Kenney said city officials created a conflict of interest by hiring the same company to do a citywide interest survey that will design the project.
But Farine said that’s not true. Pioneer Marketing Research of Georgia did the telephone survey, he said. Uptown Services Inc. did the feasibility study and will likely design the project if the proposal is approved by voters.
Cameron said he’s also heard the argument that it’s a conflict for Uptown to do the design since it also did the feasibility study.
“If you’re building a new highway, you hire an engineer to do the preliminary engineering report. Typically, the firm that does that is the one that does it (the job),” Cameron said. “So I hear that comment, but it’s routinely done.”
Clint Reed, a spokesman for Arkansans for Limited Government, a group opposing the Siloam Springs cable plan, said he looks forward to the public meetings.
“We’ll be there, we’ll be a part,” Reed said. The coalition plans other means of contact, as well. “We plan on educating voters on the pitfalls of this, whether by mail, telephone, or advertising. Do the voters understand what they’re getting into?”
Flynn said he, too, will be at the town hall meetings.
“The city may be able to give us some answers,” Flynn said. “So far no one has.”
City officials also will be available for questions before Board of Directors’ meetings on April 3 and 17, and May 1.