CLEVELAND, Tenn. -- Cleveland Utilities plans to explore possible fiber-related service options after digesting a comprehensive telecommunications study that was launched a year ago.
The study, conducted by Uptown Services, indicated that providing assorted combinations of Internet, phone and video services would require high investment and capital reserve costs. Cleveland Utilities is projected to break even in 13 to 15 years in most scenarios with or without video.
In a recent meeting, the utility board voted 5-0 in favor of ultimately considering whether to launch fiber-related services in a limited platform after utility officials expressed interest in possibly pursuing a pilot project that would encompass Internet and phone services for industrial, commercial and residential customers.
"We would like your permission to go forward with this study with the consultant to see what would be involved in working with us to develop a business plan and study the feasibility of that, which could lead to a pilot project," said Ken Webb, president and CEO of Cleveland Utilities.
Walt Vineyard, vice president of Cleveland Utilities' information technology division, presented study findings to board members.
"It's a pretty big commitment to go with what is called a pilot project, just not as huge a commitment as a full-on system," said Vineyard, who cautioned board members that equipment purchases and vendor agreements will be necessary to provide fiber-related services to customers.
Taking on Internet, phone and video services presented many challenges and risks, especially concerning video, said Vineyard.
The financial impact of losing video subscribers to competitors and the evolving nature of video consumption itself were key concerns, said Vineyard, citing Internet-based video alternatives offered by Netflix and Amazon.
"A full video, Internet and phone business venture is not viable in today's market," said Vineyard.
The study concluded that long-term debt associated with video services ranged from $35.4 million to $44.6 million, depending if Cleveland Utilities serves as a video wholesaler or provides video directly to its customers.
Utility officials positively remarked on the subscriber growth associated with a utility-based fiber Internet pilot program in Erwin, Tenn.
The rollout of that program was projected to break even at 180 customers and has already brought 150 subscribers on board in a short time, said Webb.
By establishing the residential connectivity project in a phased manner, Erwin Utilities has benefited from learning experiences and they now estimate they can reduce a total projected $16 million in build-up costs down to $9 million, said Marshall Stinnett, CFO for Cleveland Utilities.
"We owe it to the community to determine whether or not this is a viable project or not," said Webb.
Paul Leach is based in Cleveland. Email him at firstname.lastname@example.org.