In preparation for the events of September, I have asked several Princeton residents to provide their perspective on the upcoming vote. Here’s the first in this series by Ned Utzig.
Hello fellow Princetonites,
As a former member of the Broadband Committee, I can say with certainty that I share everyone’s frustration regarding how long it is taking to bring Broadband service to the town. Since the Committee finished its intended work and was disbanded, I have watched with dismay as “Analysis Paralysis” within the town has caused a series of delays and distractions from the primary goal of providing service as soon as possible.
At the heart of this all appears to be the fear of undue risk, should the town decide to go ahead with the current plan to create a municipally-owned network, paid for by the subscribers. We have seen renewed talk for instance about contracting with private companies, such as Comcast, Matrix, or Ayacht, in order to shift this risk away from the town and onto an outside entity.
I believe that we are confusing two very different types of risk in this ongoing debate. The first type of risk is that the network will be built, and there will not be a sufficient number of subscribers to make it viable. For a town-built network in this event, we would likely be required to make up subscriber shortfall through town funds. This scenario preoccupies many of the plan’s detractors due to possible tax consequences, but is it really very likely? The mere fact that outside companies have expressed continued interest in providing at least some level of service to the town should be pretty strong evidence that they at least do not see this as a likely risk. Our initial town survey showed a 90+ percent interest in high speed internet service, and with no viable competition for it available, the chance that there will be a low number of subscribers for such a service seems very unlikely. The private companies know this, we should too.
So why then do we not have a long line of commercial providers at our door, ready to hook us up? That brings us to the second type of risk, which is profitability for the investors. Any private company that expends capital at a risk is going to expect profit in return, and in as short a time period as possible. In today’s business world, the horizon is very short, so any private investment in town would have to pay for itself in a much shorter time period than 20 years, and with a much higher profit margin than zero. There are many greener profit pastures these companies can graze in, so there would have to be concessions to make their numbers work for Princeton.
In order to make a ‘suitable’ profit in a very small market like us, these companies will have to cut costs, and charge higher prices. Maybe we get a hybrid cable/fiber network that is not so future-proof. Maybe they choose to wire only 80% of the town. Maybe the fees are substantially higher than neighboring towns. Maybe they will cut corners on equipment or service. All to maximize the investment return.
It is this second risk, the risk of the short-term profit on investment being too low or taking too long, that keeps companies from being overly eager to build a complete, state-of-the-art network here. This type of risk is not one that the town-built approach would face. As a town, we would build a network not to profit outside investors, but to profit ourselves. If we provide fairly-priced,reliable, fast internet service for 20 years and do not make a dime in the process, that is great success for us as a town. For Comcast, that would be a dismal failure. As a town we would have the benefit of borrowing any money long-term, and would be able to roll any eventual profits back into reducing our rates, and improving our network. Something a private company will never do. Any and all profits from a privately run network would leave the town, never to be seen again.
We are asking the town to invest in itself, in a way which will benefit subscribers and non-subscribers alike. Don’t confuse the risks involved. We can invest in ourselves at a much lower risk than anyone from the outside, because our measure of success has nothing to do with making money for disinterested third parties. Please support the Broadband vote at the upcoming special town meeting and ballot vote this September.