Main Street goes high tech

Ashland is a quaint college town with 19,000 residents, where neighbors greet each other as they stroll along Main Street. The town's claim to fame is its award-winning 63-year-old Oregon Shakespeare Festival, which attracts roughly 125,000 visitors each year.

This small town, however, is looking to put another feather in its cap. It has grand plans to build out a high-speed network to link its schools, businesses, and citizens.

The proposed Ashland Fiber Network is a roughly $5 million project that would take an existing 12-mile fiber optic ring and build it out to offer high-speed Internet and data services, cable TV, and eventually telephone service to the community.

Ashland's planned network would be an ambitious undertaking for any community, let alone such a small town. Some question whether a small-town government should bet large sums on little or untested high-tech ventures. In addition, some local businesses have bristled at the idea of public institutions becoming competitors in what--until now--has been the exclusive war zone of private firms.

Other cities and towns are involved in projects similar to Ashland's, with varying degrees of both involvement and success. In Kentucky, for example, the Glasgow Electric Plant Board provides electric power and operates a "high-speed, city-wide communications network" that provides cable television and audio service, computer networking, and data services for the electric system, according to Glasgow's Web site.

In Silicon Valley, the affluent city of Palo Alto recently suffered a setback in its attempts to connect residents to its fiber optic ring. The City Council is considering a staff report that recommends shelving the project, over costs and other concerns.

Born of necessity
Pete Lovrovich, director of Ashland's electric utilities, said that the idea for the Ashland Fiber Network was born out of a need for Ashland's municipally owned and operated electric utility to prepare for deregulation, which is expected to hit Oregon following a state legislature vote next year.

Lovrovich said the company was concerned about "keeping ourselves viable as an electric utility. And so one way was to make sure we were as efficient as possible. So I looked at putting in a fiber optic infrastructure that would help us monitor our system" as well as automate certain functions and allow for greater reliability and competitive pricing.

Lovrovich and city administrator Mike Freeman said that once the idea was in place for the fiber optic ring, the vision for its potential began to grow.

"The little city of Ashland, Oregon, is not going to see a metropolitan area network built by any traditional public entity just for the sake of providing those services to the community, because the revenues were not there for those large organizations. They're going to build them in Seattle and Denver and San Francisco and all the other large cities across the country," Lovrovich said.

The town is no stranger to the world of high tech. Ashland houses companies such as Open Door Networks, a firm offering products designed to maintain a company's network services and security as it moves from AppleTalk to IP; Starseed, a Net community firm that operates WebRing and was recently bought by GeoCities; and Project A, a custom software developer.

In fact, a study conducted this month for the city by Scudder and Associates found that of those residents surveyed, 65 percent own a PC. Of that 65 percent, 78 percent have a Net connection. This compares to data from research firm Jupiter Communications that shows in the United States, 50 percent of people own PCs and 70.1 percent of those owning a PC are connected to the Internet.

Too good to be true?
There are concerns surrounding the network, however, focused especially on the city's plan to offer cable TV. Although both Freeman and Lovrovich point to the plan as a way to break up what they say is a monopoly held by Falcon, the city's incumbent cable provider, the plan could in essence replace one monopoly with another.

Falcon, for its part, does not plan to go down easy.

"We're going to be very competitive," said Ron Hren, divisional vice president for Falcon in the Northern California, Southern Oregon region. "Our cable system is in the upper percentile for state-of-the-art cable systems in America."

Hren also criticized the city undertaking such a project. "The bottom line is that the city is going to put at risk $5 million to put in a duplicate system to compete with ours, which is already in place," he said.

"It's a huge amount of money to put at risk for a tiny town like Ashland," he added.

Sharon Stern, the festival's information services manager and a member of one of the two committees the city charged with helping put together the project, said the cable aspect of the plan would be positive for the city. "The cable issue has been tremendous. Cable would pay for the rest of the project--but also, bringing in a competitor in the cable business is good for the citizenry."

Freeman pointed to potential advantages for consumers as another reason the city-run cable TV service is a good idea.

"Here's the advantage for the consumer--it's a lot like the advantage for the data: We have a product that's 25 percent less [expensive], it's fully digital, and it's going to have a much broader channel selection," he said.

"And it provides consumers with another choice," added Lovrovich. "Isn't that what it's all about? Additional choice. Monopolies are a thing of the past."

Hren of Falcon countered that the company would not allow itself to be undercut. "It will never be an apples-to-apples situation," he said. "We won't let that happen."

A deal breaker?
Regardless of whether city-owned and operated cable TV service as part of the overall plan is seen as good or bad, it may be the potential deal-breaker for the entire project.

"Cable revenue is key to this project," Freeman said. "The data is the cool stuff and that's what we think the real advantage is, but the cable TV revenue is absolutely critical to pay this thing off."

"This thing" is the approximately $5 million debt the city will take to build out the network, according to its business plan. The city intends to float a revenue bond to cover the cost.

In the first year, it expects to have a net loss of roughly $870,000. By year five, however, the city expects to be firmly in the black, with net income of more than $770,000. That number jumps to more than $1 million by year ten, according to the city's business plan.

Freeman noted that the city's plan is based on assumptions about demand, growth, and the overall market that he characterized as "very conservative."

News.com's Ben Heskett contributed to this report.