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No plans for city to expand fiber-optic system

Thursday, January 31, 2013

By MICKEY POWELL - Bulletin Staff Writer

Martinsville will not expand its fiber-optic telecommunications system outside the city — at least not anytime soon.

Instead, Martinsville City Council on Wednesday directed city employees to determine how feasible it is to recruit more city businesses to be customers of the system.

Mayor Kim Adkins said she wants the feasibility study to be presented to the council no later than March. That would give the city time to put costs associated with serving more customers into the budget for the fiscal year that will start July 1.

Such costs, Adkins said, include how many new employees would be needed for the Martinsville Information Network (MINet) to take on more customers, potential marketing costs and how much customers should be charged.

Although the city aims to charge less for phone and Internet services than private providers, officials and a consultant agreed that market rates should be used to set city rates instead of those charges being set arbitrarily.

If enough revenue cannot be received from a system with more customers to pay associated expenses, such as salaries for extra workers who would be needed to run the system, then the city should not recruit those customers, said Doug Dawson of CCG Consulting LLC.

Private phone and Internet service companies “could put their rates down too low for us to make a profit,” said Councilman Danny Turner.

The city established MINet in the late 1990s to provide high-speed voice and data-sharing services to city government buildings and infrastructure such as electrical substations and traffic signals.

As costs for communications services climbed over the years, businesses and organizations outside city government asked to use MINet and the city let them. The system now has 38 customers, including businesses, higher education institutions and nonprofit organizations.

None of those customers were recruited, said city Telecommunications Manager Mike Scaffidi.

“We’ve never marketed the system,” Interim City Manager Leon Towarnicki emphasized.

He added that the city earns about $200,000 in revenue from MINet a year before expenses are subtracted. He did not immediately know the net profit.

Each customer is charged a different amount, Towarnicki said, based on the services they want, the city’s cost to extend services to them and how cost-effective it is for the city to provide the services.

Seventeen potential customers are on a waiting list to be connected to the system as employees have the time to do so, said Towarnicki.

A four-person crew — the same one that keeps traffic signals working — works around the clock to oversee MINet, Towarnicki said.

CCG had determined that if MINet was to be expanded in Martinsville to homes as well as businesses, it would cost about $20.5 million and the system could start turning a profit in five years.

Expanding the system citywide and into Collinsville would cost about $37.2 million and could start being profitable in six years, CCG had determined.

The firm had suggested that the city finance any expansion of the system through a bond issue.

Turner and Vice Mayor Gene Teague indicated that because of city financial constraints, now is not the right time to borrow many millions of dollars for something that is not absolutely essential.

Dawson said he thinks the city would not have to market MINet to recruit a lot of new customers. Fiber-optic lines already run by many businesses that are not customers, he said, so all employees should have to do is “knock on the door” and ask them to sign up.

He said, though, he does not think it would be possible to recruit all of the city’s roughly 1,100 businesses.

Adkins asked why a business would want to sign up for MINet instead of services offered by private companies.

Scaffidi said MINet provides Internet service at speeds many times faster than some private providers.

Also, he said, “we give the personal touch,” such as by having a person answer the phone when people occasionally call to report outages or other problems with their service.

Problems generally are few, Towarnicki said, because the way lines are built, customers usually have a backup for service if a connection fails.

Dawson mentioned that while MINet is business-oriented, lines run by homes. Therefore, he encouraged the city to consider extending the service to homes if they request it.

“You might end up with a handful” of residential customers, Dawson said, adding he thinks they mainly would be people who sometimes work at home and need very high-speed Internet, such as lawyers and webpage creators.

 

 
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