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Fiber network is boon to businesses

ASHLAND, Ore. (AP) — A woman runs the Web site of a Midwest medical school from her home. An advertising company on Main Street prepares national television commercials that executives around the nation preview the same day. A real estate agent on the plaza shows a home to a client in Hong Kong in an instant.

These digital entrepreneurs say such transactions are possible because of the Ashland Fiber Network, the first city-owned telecommunications network in Oregon. AFN provides high-speed, direct-fiber connections for large businesses and organizations as well as cable television and Internet services to small businesses and residents.

It also is boosting business for local Internet service providers who use the network to serve their clients.

"We've definitely expanded our business," says Jim Teece, president of Project A, an Internet service provider. "It's enhanced all those (other Ashland ISP) folks' business, too."

High-speed data transmission is becoming increasingly important as the technology industry continues to grow in the Rogue Valley.

High-tech employees constituted 2.4 percent of Jackson County's total work force in 1999, compared to 1.5 percent in 1995, according to state Employment Division statistics. There were 934 employees in high-tech in 1995 and 1,694 in 1999. Annual wages for those employees in Jackson County rose from $28,335 in 1995 to $39,083 in 1999. (Not counted are independent contractors working in high-tech or workers who perform high-tech roles in other industries.)

AFN plans to expand its high-speed capabilities to Talent, Phoenix and Medford by installing an overhead fiber-optic line to Medford to take the place of a line AFN currently leases from Qwest. AFN will wholesale the capabilities to ISPs, which will then connect businesses and organizations. AFN is a division of the city-owned Department of Electric Utilities that began a little over a year ago.

The city borrowed $5.8 million to start the operation and expects to see a profit in five years. There are currently 39 Ashland businesses and organizations that have AFN direct-fiber links, including the Ashland School District and Southern Oregon University.

AFN also provides about 1,200 cable Internet hookups and 1,160 cable television connections. AFN has captured about 25 percent of the existing cable user market, said Pete Lovrovich, director of power and communication.

Detractors have expressed concerns about the viability of the city-owned telecommunications operation. They fear that a money-losing operation might place taxpayers at risk.

In the city-commissioned Community Attitude and Opinion Survey, taken in November 2000, 21 percent of respondents said some city services could be eliminated. Of that group, 40 percent identified AFN for elimination.

Network charges for services fell $164,000 short of the $511,000 the city projected for the fiscal year ending June 30, 2000. Officials say a 10-month delay in establishing hookups caused the revenue deficit. The system only had about 400 cable hookups at that time.

However, the loss was offset by interest earnings of $172,000 on the money borrowed for system construction, according to city finance director Lee Tuneberg.

Halfway through the current fiscal year, the city has received about $370,000 from charges for services. Officials projected $1.6 million in income by June 30.

"The network will grow between now and then," Tuneberg said. "We're behind about a year on construction. . . . We looked at having 1,800 cable TV users on June 30. We will probably be at about 75 percent (of that figure)."

As long as the customer base continues to grow at its current rate, AFN should be able to pay off its debt and begin to return money to the city in the five-year time frame projected, says Lovrovich. AFN is also undertaking additional revenue-generating options that would shorten the debt payback time.

AFN has been approached about leasing its lines for phone use to another entity. The new overhead line to Medford also should produce additional revenue.

AFN's plans for expansion and revenue generation may be threatened by a bill in the Legislature that could drive up subscriber fees and would make it harder for other cities to establish similar operations. The bill is designed to create a level playing field between government and private business.

House Bill 2680 would require local government providers to include both direct and indirect costs to local government for services in their rates. These could include taxes and franchise fees. AFN already pays franchise fees to the city.

AFN's capabilities and rates are rare among U.S. cities, said Seth Fearey, a Menlo Park, Calif. consultant. "Ashland is a notch above in its combination of the speed and the price," said Fearey.

Fearey says he pays $40 to $50 per month for his 500k to 1-megabit connection. In Ashland, up to 10 times that speed is available for half the price.

Ashland Fiber Network isn't the only option available to those seeking high-speed Internet connections in the valley. Qwest and Charter Communication compete with Ashland's operation.

"We can deliver those services, but it's hard to meet (AFN's) price," said Qwest area manager Gary Miller. His firm currently provides direct-fiber links to businesses such as Bear Creek Corp.

Charter Communication offers high-speed computer connections to the Internet through its cable television lines to most areas it serves in the Rogue Valley. Portions of Medford and Rogue River will have the service available soon, says Bob Towe, Charter's area manager.

"It's not accidental that Southern Oregon has a lot of competition with broad-band providers," said Kevin Talbert, president of the Southern Oregon Telecommunications and Technology Council. "When the city of Ashland decided to provide (fiber connection), it was a spur to Charter to make it accessible and it also brought in other providers."