Private Company Taking Over Salisbury's Money-Losing Internet Network
The city of Salisbury is getting ready to hand over operation of its money-losing video and internet service to a private company. The eight-year-old system, now called Fibrant, will become Fision after the handoff this summer.
In a May 8 referendum, 81 percent of voters supported a plan to lease Salisbury's fiber optic, or broadband network, to Florida-based communications company Hotwire.
The network is one of the fastest in the country - capable of 10 gigabit per second internet speeds, which is 10 times what you can get from Google. When the city built it in 2010, it was supposed to help lure jobs. But city manager Lane Bailey said it has struggled to attract customers.
"The challenge that we have is not the quality of our broadband, but the financial challenges that we face," Bailey said. "We're just not used to running this type of utility and we felt like they were the best partner for us."
Those financial challenges include losses of about $3 million a year, and debts of nearly $32 million - money spent to build the network. About two years ago, city officials began looking for a way out. They talked to 12 companies about buying, leasing or managing the system. Bailey said the 20-year lease to Hotwire was the best financial deal.
Hotwire executive Jonathan Bullock said the arrangement meshes with its strategy of selling fiber-optic-based services to homes and businesses in the eastern U.S.
"We provide residential services - voice, video, Internet, home automation, security," Bullock said. "We've got commercial services to small and medium businesses. We have enterprise services. Having this fiber footprint here in Salisbury was a nice fit into the rest of our business."
Bullock said Hotwire wasn't interested in buying Fibrant outright, mainly because of the big debt. By leasing, his company still can use its size, buying power and expertise to cut costs, invest in new technology and improve marketing. The city will get a share of the profits, which will help pay off the debt.
Bailey, the town manager, said there's one more legal wrinkle. By leasing to a private company, the network loses its tax-exempt status. So it will have to refinance the debt. The Local Government Commission, which oversees local government borrowing, is expected to approve the refinancing in July. That means Hotwire could take over in August.
Customers will see a few changes - including the name change to Fision and lower prices - at least initially, Bullock said.
"Across the board, the packaging will become more simple and will become cheaper," Bullock said.
Hotwire will also offer a cheap high speed internet for low-income residents - $15 a month. The company also expects to modernize the system's video offerings by September 1.
It's the first time Hotwire has taken over an existing network owned by a local government. Bullock said he hopes it can become a model for similar deals. He said they're already talking with other municipal broadband owners, in and outside North Carolina.
See documents about Fibrant and details about the possible lease on the city of Salisbury referendum website, http://salisburync.gov/Government/Administration/Fibrant-Vote