Heartland Institute PolicyBot: Municipal Broadband

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BellSouth offer

May 16, 2005

Honorable Joey Durel
City Parish President
705 West University
Lafayette, LA 70506

Re: Public/Private Partnership Alternative to LUS Plan

Dear President Durel:

BellSouth understands that Lafayette seeks to enhance economic development and the competitiveness of Lafayette as a business location by providing higher speed Internet services to its citizens. Lafayette proposes both to build and to operate the infrastructure to support this service and use the revenue from the ‘triple play’ to support this investment. The following statements appear in the Fiber for the Future Newsletter on the LUS website:

"...more and more people come to understand the pivotal role telecommunications will play in our efforts to build a better Lafayette by creating better jobs, improving our education system and providing world class healthcare to our citizens."

"There is no doubt that a comprehensive, broadband fiber optics system is a vital communications tool for education, entertainment and interaction on a global scale."

"Maintaining and servicing our fiber optic communications system will require a tremendous network of administrative and support personnel, overseen by individuals with a vested interest in the future of our community."

As the Southeast’s leading telecommunications company, BellSouth certainly shares this vision of the pivotal role of telecommunications and the benefits which a comprehensive broadband fiber optics system can bring to the communities we serve. In fact, BellSouth has been serving Lafayette with fiber for over 20 years. In addition to this experience, we have a tremendous network of administrative and support personnel, and, as a company which has some 1,500 employees and 300 retirees who live in this community, and has already deployed 15,000 miles of fiber in Lafayette, BellSouth certainly has a vested interest in the future of this community.

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This is why, in vibrant competition with cable TV companies, wireless providers and other communication services companies, BellSouth is proceeding with its extensive network expansion and upgrade plans to help bring these benefits to the residents of Lafayette. We believe that this type of free-market competition is the engine driving the communications technology explosion which has made these kinds of benefits even conceivable now, and which will make them attainable in the near future.

BellSouth realizes that the City desires to achieve availability and speeds of Internet access greater than that which might become available from commercial efforts alone. BellSouth proposes a public-private partnership to deliver higher speed Internet services, state of the art telephony services and video services to the citizens of Lafayette. BellSouth is proposing a nearly ubiquitous deployment and availability of these services in partnership with the City, significantly beyond that which would be available without such a partnership. This approach would be at a fraction of the cost and present no operational, market or financial risk to the City and would achieve the desired results more quickly. BellSouth differs with the LUS plan not in terms of the benefits that we and they both want to see brought to the residents of Lafayette, but rather in the approach by which we would achieve those benefits.

As we have discussed previously with City leaders, BellSouth’s current plans already anticipate a massive expansion of its fiber optics broadband network capabilities in Lafayette, one that is expected to reach approximately 80% of the households in Lafayette with high speed Internet, video and related broadband communications services at speeds of up to 24 Mbps within the next four years.

In return for financial support (whether cash, tax credits or incentives or other possible forms of payments or concessions) from the City to BellSouth amounting to just a small fraction of the cost of proceeding with the proposed LUS plan, perhaps only about one-half of what just the annual interest payments would be on the proposed bonds for the next four years, we believe it should be possible to create some form of public/private teaming arrangement with the City whereby BellSouth’s current network deployment plans could be accelerated so as to reach close to 100% of the Lafayette households with such broadband services at competitive market prices within that same time period. It is anticipated that the deployment schedule for such an accelerated network enhancement project could proceed along the lines laid out in the schedule attached to this letter.

Second, in order to solidly close the digital divide, we suggest that a wireless technology should be deployed for ubiquitous coverage to include the city and perhaps the entire parish. There are two different wireless technologies that could provide either primary or portable/low-speed mobile coverage for Lafayette. Either technology would work, but each has different costs and presents a different type of opportunity requiring further discussion.

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-One wireless technology is WiMAX, a solution that promises to offer low cost ubiquitous wireless access with a cellular-like network of wireless base stations. These stations could be placed within the Lafayette area to provide both public access and public safety access within the city itself and in adjoining areas of the parish where Lafayette provides services. We currently estimate that 3-6 WiMAX base stations would be needed to cover the city and the adjoining areas if parish coverage is selected.

-A second alternative is the use of a mesh network where small transceivers are attached to street lights. The network is self-organizing and operates using a WiFi technology base. This solution would also allow public and private access and could provide high-speed internet services either for primary service or for portable/low-speed mobile use. We currently estimate that several hundred of these mesh access points would be needed to cover Lafayette and the adjoining unincorporated areas.

Either approach could provide a high-speed cost-efficient solution to Lafayette’s needs. The selection of one technology over the other is primarily a function of intended uses, the need for reliability and costs. Either solution could meet Lafayette’s needs. BellSouth is eager to work with Lafayette to clearly define the specific needs, to develop cost models and to develop a schedule that will produce an optimum solution.

Third, in addition to the benefits received by deployment of the above enhancements, there are 50 buildings within the LUS serving area in which BellSouth currently has a fiber presence. Our existing broadband deployment plans provision additional fiber facilities to both residential and business locations. This deployment initiative will configure the main feeder routes with sufficient spare fiber to allow for shortened installation intervals to buildings where service is requested. As BellSouth experiences increased demand for fiber based services such as SMARTRing® and Metro Ethernet, our triggers to place fiber over a larger geographical area increase. There are 25 buildings in Lafayette which have 5 or more existing DS1 circuits. Utilizing our construction proposal, BellSouth will place fiber to each of these buildings to the extent the building owner(s) agree to the new fiber addition.

Lastly, regarding connectivity for digital services leaving Lafayette, BellSouth currently has five leased OC3 internet backbone connections (150Mbps each, 750Mbps total) between Lafayette and New Orleans. In 1Q06 we complete a BellSouth fiber build from Lafayette to New Orleans and expand the capacity to 2 OC12s (total 1200Mbps) capacity. In addition, this can be expanded to 5000Mbps for a trivial cost.

We strongly believe that such a public/private teaming relationship, which preserves the existing free market competition between non-governmental communications companies yet holds the promise of accelerating the arrival of these

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broadband telecommunications benefits for the residents and businesses of Lafayette, would be a far more efficient, cost effective and safer alternative than the proposed LUS plan of putting that utility’s ratepayers into the speculative fiber optic network building business. BellSouth would welcome the opportunity to explore in further discussions with the City the opportunities that such a public/private partnership could present for improving the lives, businesses and prospects of this community.

We believe that the public-private partnership which BellSouth is proposing for consideration and further discussion with the City would involve the City teaming with BellSouth to enable the citizens of Lafayette to reap virtually all of the benefits of the proposed LUS plan without having to incur the major investments and substantial risks inherent in that plan. In addition, we propose that these discussions include details of 1.) Our network based VOIP (Voice over Internet Protocol) solution for business customers and VOIP service for consumers; 2.) Our developing wireless/wireline capabilities where a user can transparently switch between the cellular network outside the home or business to a broadband DSL connection using WiFi inside the home or business; 3.) Evaluation of speed to the home in a fiber-to-the-curb (FTTC) environment and 4.) Lafayette’s status as a top 25 market for BellSouth and how that relates to our IPTV efforts.

We anxiously look forward to discussing this proposed approach.

Sincerely,