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Council views mixed on network expansion

Tuesday, December 4, 2012

By MICKEY POWELL - Bulletin Staff Writer

A consultant’s determination that an expansion of Martinsville’s fiber-optic telecommunications system is feasible and eventually could be profitable is drawing mixed reactions from city council members.

The feasibility study prepared by CCG Consulting LLC shows that expanding the system to cover all of the city would cost about $20.5 million and could start being profitable in five years. Expanding it citywide and into Collinsville would cost about $37.2 million and could start being profitable in six years.

At the least, the city would break even if it signs up 42 percent of all city and Collinsville households, the study shows. CCG thinks that percentage is easily attainable based on the interest of residents it surveyed.

The firm suggests that the city use bonds to finance expanding the system, an idea aimed at generating more revenue for the city and keeping prices for telecommunications services such as phone and Internet affordable locally.

Martinsville City Council ultimately will decide whether to expand it.

Interim City Manager Leon Towarnicki emailed the roughly 100-page study report to the council late last week. As of Monday, council members either had not begun reading it or were just getting started.

Mayor Kim Adkins and Councilman Gene Teague declined to comment on the study until after they are able to read a substantial amount. Teague noted he had been out of town until Monday.

Based on what he so far has read, Councilman Danny Turner still does not think the city should expand the system.

Private companies would be better able than the city to keep up to date with constantly changing telecommunications technology, Turner said.

That could be a concern of financial lenders, he indicated.

He added, though, that the city might “find somebody who’s fool enough” to finance the project.

Turner also said he thinks questions that CCG asked area residents in surveys were “asked in such a manner ... you’re going to get obvious answers” making an expansion of the system look worthwhile.

An example of such a question, he said, would be if someone would sign up for the city’s service — instead of a private service — if it costs less.

“I think they kind of stacked the deck,” so to speak, in terms of questions that were asked, Councilwoman-elect Sharon Brooks Hodge said of CCG.

Martinsville installed its fiber-optic system in the late 1990s to supply high-speed voice and data-sharing to city government buildings and infrastructure such as electrical substations and traffic signals.

Over the years, as costs for communications services increased, businesses asked to use the system, and the city agreed. The system now has about 30 private customers among businesses, according to Towarnicki.

Because a limited system already is in place, “I certainly think it (expanding the system) is a revenue option that the city of Martinsville should explore,” said Councilman Mark Stroud.

He said he thinks expanding it would generate new customers because of interest already shown and “technology is moving forward more and more” and people “want more bandwidth” from their providers.

Turner wonders if the latter is highly relevant.

For instance, “Is it that important for you to download a movie in two minutes instead of three,” he asked.

Stroud said he thinks that because of the lower projected cost, the council should consider expanding the system citywide before considering expanding it to Collinsville.

“Make sure it is profitable, or at least break even,” before expanding it outside the city, he said.

Vice Mayor Kimble Reynolds Jr., who will leave the council in January after not seeking re-election, said expanding the system “probably is something worth considering.”

Reynolds said, though, he would need to study the city’s finances and talk to finance department employees before he renders an opinion on whether the city could afford the project.

Hodge, who will be sworn into office next month, said she thinks the city should look at expanding its fiber-optic system because the technology is what people and businesses want.

However, Hodge does not favor the city actually providing such services. She said the city should not compete with the private sector.

“You have to lay your infrastructure before you have growth” in terms of population and the local economy, Hodge said.

But because the community is small, she thinks private firms would not invest much money in improving telecommunications services locally, she added.

If the system is expanded, it should be so that private telecommunications providers can lease it to upgrade services to their customers, she said.

CCG’s study found that expanding the system to all of Henry County would be too risky for Martinsville, at least initially, because parts of the county do not have enough population to make extending lines there worth the cost.

Extending lines to those places would increase the number of years it would take the city to make money on an expanded system, the study shows.

Henry County Administrator Tim Hall said he has not seen CCG’s study or talked with Towarnicki about the city’s interest in expanding the system.

“We’ll wait until the city reaches out to us” before commenting, Hall said.

The city plans to post the full feasibility study on its website at www.martinsville-va.gov this week.

 

 
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