CLEVELAND, Tenn. — Cleveland Utilities officials want to know what it will take to provide fiber-based Internet and phone services to its customers through a phased approach.
In a recent meeting, the utility board voted 5-0 to approve a $12,500 consulting contact, excluding travel expenses, with Uptown Services LLC to discover those answers.
In May, Uptown Services concluded a comprehensive study that weighed options for systemwide fiber service strategies that Cleveland Utilities President/CEO Ken Webb has described as “not overly optimistic.”
A core objective of an incremental build-out of fiber services is to decrease upfront costs and working capital, said Walt Vineyard, vice president of Cleveland Utilities’ information technology division.
An important step is to reduce required working capital to $1 million, as opposed to the $3 million to $4 million recommended for adopting a systemwide strategy, he said.
The new study calls for limiting the total number of premises in the initial launch area to no more than 3,000 households, David Stockton of Uptown Services stated in the proposal letter to Cleveland Utilities. The initial launch areas also should be representative of the full Cleveland Utilities service area, he said.
Cleveland Utilities officials credit the utility-based fiber services initiative in Erwin, Tenn., as an inspiration for their desire to consider their own phased model.
Although Cleveland is larger than Erwin, the idea is to transpose its model, which set scaled subscriber benchmarks and build outs, Webb said.
“It’s a little larger than the approach they’ve taken in Erwin, but it’s very similar to the approach Erwin took,” he said. “We were impressed with the way that seemed to be working with them.”
In July, the utility board voted 5-0 in favor of determining whether Cleveland Utilities should give further consideration to the feasibility of offering fiber-related Internet and phone services through a limited platform.
Although a phased strategy would entail what could be described as a pilot project, a big commitment will still be required to purchase equipment and secure vendors, even if the cost is less than tackling a systemwide buildout, Vineyard said.
The initial fiber study projected that it would take Cleveland Utilities up to 15 years to break even if it included video as part of its fiber services. Fiber-based video is not part of the current study.
Vineyard said the potential of losing video subscribers to competitors and the changing nature of video consumption, which has seen Internet-based inroads, present significant financial risks.
Long-term debt associated with fiber-based video services ranged between $35.4 million and $44.6 million, depending on whether Cleveland Utilities is a video wholesaler or sells directly to its customers, according to the study.
Paul Leach is based in Cleveland. Email him at paul.leach.press@gmail.com.