Salisbury's 10 Gigabit Internet Service Losing Millions
About two years ago, Salisbury improved the download speed of its city-owned internet service to 10 gigabits per second, making it one of the fastest systems in the country. By comparison, Google Fiber is one gigabit. Salisbury officials predicted that Fibrant would create jobs and attract new businesses. But Fibrant is losing millions of dollars annually and city officials are considering a way out.
When Salisbury officials issued more than $30 million in bonds to launch the Fibrant high-speed network, most saw it as a great investment. The area had lost thousands of jobs in the late 1990s when several textile mills closed. Officials predicted Fibrant would fill that void and attract businesses that needed high-speed internet. But Salisbury Councilman David Post says the General Assembly put up a road block.
"The legislature passed the level the playing field law,” Post said. “It tied our hands saying we couldn’t go outside the city limit and the intention when we built it was for it to go well outside the city limit. We have nowhere to grow.”
That is unless Fibrant gets an invitation for services from a municipality or company. So far, that hasn’t happened. But still, the word around the city was that Fibrant was profitable. That is until two years ago when Lane Bailey was hired as the city manager.
“Then-Mayor Paul Woodson told me that Fibrant was now making money and was in the black,” Bailey said. “I started to delve into it more and I went to the mayor and individual council members and said we’re not making money. We’re doing a direct subsidy to Fibrant from the general fund.”
Bailey found that over the past four years, Fibrant lost more than $3 million a year. Plus, when Fibrant was initially launched in 2010 at speeds of one gigabit, Councilman Post said, “The first couple of years when Fibrant lost money we borrowed money from the water fund, $8 million. And we went through a period of years where we took a lot of the Fibrant expenses and put them in the general budget so you couldn’t see it so it looked like Fibrant was making money until this year.”
According to Post, currently, Fibrant is close to breaking even but the city still has to pay off the money it borrowed to build the network, more than $3 million a year.
Residential customers pay between $44 a month for basic service to $100 for the 10-gigabit speed. Fibrant needs about 4,500 customers to turn a profit, but it only has about 3,200 subscribers.
“We had a really bad start, severe outages and businesses couldn’t afford that and residents are quick to change television or Internet if they don’t work. It’s been an uphill battle ever since,” Post said.
Service reliability is now at 99.9 percent but marketing has been poor. That was the conclusion of a consultant and Mayor Karen Alexander agrees.
“We realize that marketing is probably the largest hole we have in the operation,” Alexander said. “We are working hard to come up with a marketing plan that will allow us to compete.”
Fibrant’s marketing budget is $100,000, officials say, and it has one sales rep for commercial customers and one for residential. Not much for a company that competes with the likes of Google, AT&T and Spectrum.
City officials have refinanced the bond debt at a savings of $438,000 a year. But it will take the city 12 years to pay the debt off with Fibrant still forecast to lose money in the meantime. Selling Fibrant would not bring in near enough to pay off the debt. In January, city officials solicited bids from private companies to help them run Fibrant and are considering two proposals. One involves a lease agreement, the other a management agreement. Mayor Alexander wants to take thing slowly but Councilman Post says a solution is needed quickly.
“I think Fibrant is the most critical issue facing the city because it takes resources away from so many other needs. I mean $3 million for a town that has a $35 million budget, that’s a lot of money. It is stealing from us big time,” Post said.
Mayor Alexander chooses to see having the fastest, citywide Internet service in the country as a long-term investment.