Reprinted with permission from the Charlotte Observer. Copyright owned by
the Charlotte Observer

THE CHARLOTTE OBSERVER

VA. CABLE SYSTEM TOUTS ITS SERVICES
OFFICIALS GET CLOSE LOOK AT HOW CITY-RUN CABLE WORKS

Inside the data center at Bristol Virginia Utilities, fiber-optic wires send words, voices and video up and down the western Virginia mountains.

About three hours northwest of Lake Norman, the city-owned utility is doing what area governments are considering.

If the Lake Norman governments - Mecklenburg County and the towns of Huntersville, Cornelius, Davidson, Mooresville and Troutman - vote to buy the former Adelphia cable system, BVU is the top candidate to manage it.

The governments have a right to buy the cable system in Lake Norman from Adelphia before Time Warner, which is running it on an interim basis. They're waiting for the bankruptcy court to decide the system's cost - likely to be between $50 million and $68 million.

The ruling, which officials had expected in December, will set off a flurry of activity. The six governments will have a 30-day window for a decision.

The idea of government-owned cable has sparked fierce debate in the Lake Norman region in recent months.

Proponents say that private companies have provided substandard service, resulting in only 45 percent of residents subscribing, below the industry average.

They say the government would provide more local control, better customer service and improved services and would be able to use fiber optic cable to help recruit businesses. Eventually, local officials say, the cable system would make money to help pay for the area's growth.

But opponents say the government has no place running cable television or competing against private industry. They question how so many governments could work together and warn that telecommunications is a volatile industry.

Time Warner officials say they welcome a chance to own the former Adelphia system.

They would upgrade the system and offer cable and Internet services that customers in Charlotte are used to getting. Because it's a large company with research staff, it can adapt to the changing marketplace, company officials say.

*

`Future-proof'

A drive up Interstate 77 and across I-81 provides a glimpse of what government-owned cable is like.

Bristol Virginia Utilities was formed in 1945 as a municipal utility, similar to the town-owned electric companies in Huntersville and Cornelius.

President and CEO Wes Rosenbalm runs it like a business, with a board of directors, that happens to be owned by the city of Bristol, Va.

In 1999, it started to build a fiber network for its electric substations. Rosenbalm said Bristol's business community was interested in using the fiber network.

While critics say government shouldn't provide cable, Rosenbalm compared a fiber-optic network to other services governments provide.

"It's almost parallel to the highways and railroads," he said.

BVU started offering residential customers services through its OptiNet division in January 2003. The company builds fiber-optic cable to the home, which provides faster service than standard cable.

The utility went with fiber to "future-proof" its investment because new services are likely to require more and more speed, said Mark Lane, network architect.

BVU OptiNet is not a monopoly. It laid cable in direct competition with established cable companies and started out with zero market share.

It spent its first few years in regulatory battles with the state and its competitors.

First, it sued the state to be able to provide telecommunications services, and it survived regulatory challenges from its cable and telephone competitors. The local telephone company, now called Embarq, accused the utility of offering below-cost telephone service by subsidizing it with revenue from other services. The rate hearing ended in BVU's favor.

Today, it offers television, telephone and Internet service. It has a 64 percent penetration in its main service area. Utility officials say OptiNet makes enough money to pay for itself and pay for upgrades.

They say they don't offer below-cost rates subsidized by other revenues. Instead, they tout customer service and their fiber technology to win customers.

Calls to the customer service center had an average wait time of 1.41 minutes in 2006 through December, and that includes power outages, according to the utility. For service calls, they aim to arrive within 15 minutes of an appointment.

*

Example for other towns

As the first government to offer fiber-optic cable to the home, BVU started to draw attention, Rosenbalm said. The company's efforts became a case study on both sides of the national debate on whether government broadband is a good idea.

Other governments started touring and asking for advice, so much that BVU started offering consulting services. It also formed a partnership with a nearby Virginia planning district to build a fiber backbone through several western Virginia mountain counties.

If the Lake Norman governments decide to buy the Adelphia system and hire BVU, it would be the utility's first management job. Utility officials like the business prospects of Lake Norman government-owned cable.

The current system performs below industry standards in speed, services available and its market penetration, but still made a 35 to 40 percent profit under Adelphia, according to government officials. System upgrades and more services should win new customers, said Stacey Bright, executive vice president and chief financial officer for BVU.

Elected leaders and staff from Lake Norman have taken day-trips to Bristol in recent months.

After their visits, Mooresville's Chris Carney and Huntersville's Sarah McAulay both reported being impressed. McAulay noted how the staff seemed prepared to quickly begin serving the Lake Norman area if necessary.

Carney described how he called the customer-service number on his mobile phone. He got an immediate answer.

*

Erica Beshears: 704-987-3670. ext. 11