In preparation for the events of September, I have asked several Princeton residents to provide their perspective on the upcoming vote. Here’s the second in this series by Harry Strock.
“Doing nothing to address Princeton’s broadband needs is not an option. We must act. We should do the best we can with the information we have and what we know. High participation rates mean a high probability of success. Maximum benefit to Princeton will be achieved by maximum subscriber participation. Our town’s future will be improved by residents pulling together.”
The recent “Princeton FTTH Broadband Risk and Vulnerability Analysis” addressed to the Princeton Broadband (PBMLP) and Residents of Princeton, dated June 28, 2016, “has been prepared for both decision makers and residents.” All residents are asked to decide, at the September 13 Special Town Meeting, the future of the Princeton Broadband – Fiber to the Home (PB-FTTH) project.
Business decisions, and I am a business person as well as a scientist, generally consider the balance between Risk and Reward. The above-noted risk analysis report, however, only addressed half of the risk versus reward comparison. In short, it was necessary but it is not sufficient for rational decision making. Risk is a term often used to imply bad risk, meaning the uncertainty of a financial gain and the potential for financial loss. On the other hand, rewards can be tangible—something I can put in my pocket—or intangible—something I feel. In finance, risk is associated with reward; low risk investments equate with low reward and high risk investments require higher rewards to be “rational”. Rewards from a successful PBMLP broadband network and operating business range from tangible financial returns to intangible personal satisfactions and the benefits of socioeconomic improvements to the entire Town. I have concluded that the benefits / rewards to Princeton of a successful PBMLP project significantly outweigh the risks. I will vote in support of the proposed borrowing on September 13.
The balance of this letter of support makes a general case for Princeton’s September 13 approval of the funds needed for the PBMLP fiber optic network buildout. This letter looks at the Town’s investment and future downside risk of financial loss while accepting as reality the expected overwhelming longterm benefits of a town owned and operated broadband network. I truly believe town-wide broadband is critical to Princeton’s future. I ask that residents consider broadband benefits relative to Princeton’s future, which should transcend our personal needs. The future of our Town depends on all residents pulling together. Please support broadband.
Whether we buy a new home, invest in a retirement account or build a town-wide broadband network, we attempt to maximize the benefits of the “product” we choose to purchase relative to those which we passed over. An active ethernet fiber optic network offers the best set of benefits for Princeton for a host of complex technical reasons. Technical experts have advised the Town that an active ethernet point-to-point fiber optic network—as approved by the PBMLP—is the best value of the candidate systems considered. It is the most “future-proof” and offers the lowest downside risk due to its superior robustness and adaptability to changes in the future.
Cost is what we invest, usually dollars, in order to obtain the value or benefits we desire from the product acquired. We should not confuse purchase price with the total cost. Our cost is the sum of all the little bits and pieces plus increases over time. There is no such thing as a “no cost” fiber network for Princeton. I believe the probability that AT&T, Verizon, or Google will compete in the Princeton market is laughably low. An active ethernet fiber optic network owned and operated by Princeton represents a phenomenally attractive opportunity. It supports Princeton’s future. It can be self-financing and it will likely offer lower cost to subscribers than can profit-making telecoms. The probability of success depends on and is proportional to resident support. Voters / future subscribers will determine the rate of success. That is within our control.
The balance of Benefits vs Cost, Value vs Price, Return on Investment vs Risk of Financial Loss, whatever you choose to label your decision making process, is typically used by all of us to weigh the pros and cons of a purchase decision. The bigger the investment the more intensive the analysis. We each do it our own way! Maximum benefit to Princeton from our fiber optic network will be achieved by maximum resident participation. The future of our Town will be determined by all residents pulling together, not by profit-making telecoms offering us a good deal. That too is within our control.
It Need Not Be Paralysis by Analysis
The risk of future financial loss by PBMLP, for whatever reason, is of primary concern. A town issued bond makes the town liable for repayment, i.e., all tax payers must pay. The PBMLP business plan is based on subscriber revenues. Subscribers alone pay for the network as long as there are enough of us to keep the project viable. While the project is viable, non-subscriber taxpayers will gain some benefit from Princeton’s broadband infrastructure, at no cost / risk, while subscribers shoulder all risk and pay for the network and its services.
Now let’s assume, at some year in the future, the project no longer has sufficient subscribers to keep it viable. I would assume, as that is happening, the PBMLP will be making business decisions and taking actions to improve competitiveness and / or revenues. It is possible that the non-subscriber taxpayer may be asked to support the PBMLP at this juncture with some amount in subsidy payments. Subscribers will still bear the bulk of risk at this point. What if eventually the PBMLP even failed, let’s say year 10 (or will it be year 15, or 8)? On failure, the balance owed would all be on the town, but how much might that be? After 15 years it certainly won’t be $4.8 million—it would more than likely be closer to $1 million. Our ultimate risk, at any time, is no more than the amount required to retire outstanding project bond(s) issued by the town, and approved by voters to finance the project. Of course the amount due will include any unpaid interest that has accrued. This outstanding amount should be very quantifiable and decline to zero or close to it in 20 years. Further, projected state mandated cash reserves for fiber replacement is expected to be in excess of remaining bond debt by year 12. Such cash reserves should significantly reduce financial risk between year 12 and 20!
Here is What I Think
- Princeton needs broadband infrastructure NOW!
- The network build should be a FTTH fiber optic network.
- Princeton Broadband MLP should purchase the best value system at the best price.
- It should be as “future-proof” as affordable in order to minimize future downside financial risk.
- An Active Ethernet system has been recommended; I accept that recommendation.
- Technical short cuts / patches will not be worth the costs and risks.
- FTTH should be accessible to all residents (as limited in the STM question of 9/13).
- Project success is directly proportional to subscription rate. High town participation will assure success.
If the town pulls together, we can assure a better future for Princeton.
Doing nothing to address Princeton’s broadband needs is not an option. We must act. We should do the best we can with the information we have and what we know. High participation rates mean a high probability of success. Maximum benefit to Princeton will be achieved by maximum subscriber participation. Our town’s future will be improved by residents pulling together.
Note: The fact that Sterling, Rutland and Holden cable customers have 85% internet participation rates suggests that Princeton too could expect participation above the projected 60% breakeven point. Higher participation would likely enable faster debt pay down rate or lower subscriber fees.