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Opportunities and Challenges as Lafayette Considers Muni Fiber Expansion - Community Broadband Bits Episode 144
After we heard that Lafayette's LUS Fiber was considering expanding to some nearby communities, we knew we had to set up an interview with Terry Huval, Director of the Lafayette Utilities System in Louisiana. In our interview this week, Terry and I discuss Lafayette's success, the legacy of the law creating special barriers that only apply to cities building fiber networks, and the challenges of expanding LUS Fiber beyond the boundaries of the city.
We also discuss some plans they are developing to celebrate the 10th anniversary of the referendum on July 16, 2005, in which a strong majority of voters authorized the building of what was then the largest municipal FTTH network in the nation. Despite its success, Lafayette has been targeted by cable and telephone shills that are willing to say just about anything to defend the big corporate monopolies. We addressed these attacks in this Correcting Community Fiber Fallacies report.
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Thanks to Persson for the music, licensed using Creative Commons. The song is "Blues walk."
Terry Huval: So, this idea of us being able to offer our fiber services, where it makes sense, outside the city dovetails quite well with the regional approach that our business leaders are looking at in this community.
Lisa Gonzalez: Hello. This is the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance. I'm Lisa Gonzalez.
Terry Huval, Director of Lafayette Utilities, joins Chris this week to discuss his community's experience in deploying its LUS fiber network. Lafayette's fiber network has attracted new businesses and new good-paying jobs, helping to reboot a once-struggling economy. There's also more people online, schools have top-notch access, and the community is saving money, while controlling its own digital destiny.
As communities around the city of Lafayette also seek better connectivity, LUS Fiber is exploring ways to expand beyond city limits, so other parish towns can benefit from gigabit technology. Chris and Terry talk about why LUS Fiber wants to expand, the challenges they have faced and continue to face today, and whether or not Lafayette plans to follow Chattanooga and Wilson's lead and ask the FCC for relief from state barriers. As states across the U.S. consider ways to improve connectivity, lessons learned from places like Lafayette can help shape successful policies.
Here are Chris and Terry Huval, from LUS Fiber.
Chris Mitchell: Welcome to another edition of the Community Broadband Bits Podcast. I'm Chris Mitchell. Today, I'm speaking with Terry Huval, Director of Lafayette Utilities System in Louisiana, which operates LUS Fiber. Welcome to the show, Terry.
Terry Huval: Glad to be here.
Chris: I'm really glad to have you on. We've loved what you've done in Lafayette. And I wanted to just start by asking, how are things going down there?
Terry: Things are going really well. We're very pleased with how the system has performed. Our customers are pleased. We're growing every day. Of course, the headlines, and the kind of attention that is drawn to our community, have been something that would cost millions of dollars for a city to bring to their own community. It's -- our economy is going well, even with the fact that the -- that we're still a heavily oil-industry-based community. We're still growing, even though there have been some -- the oil prices have dropped, and those kinds of things. So, you know, we're still growing. We're at new residences, new businesses. The fiber system is being vaunted very often as a reason why businesses are choosing to locate here, businesses are looking to stay here, businesses looking to expand here. The residential customers are elated about us having a gigabit per second services to their home. We have set a standard that our competitors can't meet, which is really important when you're in a competitive business like this. And it's a lot of excitement about the fiber system. There's discussions about it regularly on the streets. Whenever I see people in the grocery store, or at church, or at the ball game, there's always someone talking to me about the system, and usually telling me how excited they are about how great it is for their home or their business, and their community.
Chris: I actually have had the chance to use it a few times. Once from the home of Geoff Daily, when I was visiting. And it really is a wonderful system. I mean, I think that may be the fastest connection I've experienced, actually, that wasn't on some sort of college campus.
So, let me ask more deeply about the impacts of the network, which I'm curious about. You know, you mentioned that some of the jobs are locating there. What are some of the examples of firms that have come into town? And then, also, a few examples of firms that have -- already were in town that have expanded?
Terry: Yeah. Well, as far as the ones coming into town, in the last year, maybe year and a half, we've had -- CGI has opened up an on-shore delivery center here. They created 400 new direct jobs, and an additional 405 new indirect jobs, with an average salary of $55,000 a year. And Enquero is putting in an agile delivery center here, for 315 direct jobs and about 350 additional indirect jobs, average salary of $64,000 a year. And Perficient is putting in a domestic delivery center here for 245 new direct jobs and 248 new indirect jobs, and average salaries of about $60,000. So, in total, we're talking about, you know, about a thousand jobs created directly, and another thousand jobs being created indirectly, just because of their presence and the support entities that will be in place to support their companies.
You know, those are big headline grabbers. Those are the kinds of things that -- you know, all three of those companies have cited LUS Fiber as a reason why they came here. The state of Louisiana has some, you know, very attractive economic inducements -- economic development inducements -- to try to bring companies here. But those inducements are the same whether it's New Orleans or Baton Rouge or Shreveport or any other part of the state. But these companies are choosing Lafayette to come to, to get that inducement, because of the fiber system being here. They've commented to us that this gives them some flexibility on how they handle their work staff. A lot -- some people, perhaps, you know, work from home and still have network-quality connectivity with their offices. And they just see it as being a community that's taken this kind of leap forward, as being the type of community they want to be located in.
Chris: And, you know, one of the things that I sometimes hear from people who are intent on dragging you down is that, well, a lot of the Gulf economies are doing well because of the extractive industries. But what I'm hearing from you, and what City Parish President Durel has told me, as well, is that, you know, you're laying the future. So, if, at some point, the oil industry, you know, has a setback and declines, you have now a second industry that you're starting to build up, you can rely on for your local economy.
Terry: Oh, there's no doubt that a tech -- bringing tech industries into our community does provide some good diversification for our economy here. And, you know, no doubt, also, that oil and gas is still very, very important here. But, you know, we realized in the '80s, whenever there was the oil bust, and oil prices came down to, you know, $12 a barrel, that -- you know, that we had to find some way to diversify. And the city has. There's a number of tech companies here, some of them supporting the oil industry, but many of them supporting other industries, too. And we've kind of become more of a regional hub in retail and in medical care. And so, the fiber system really fits very well in supporting those types of industries. And there's lots of excitement.
I mean, all the major companies in town are buying our services, and companies have told me that they have made the decision to stay in Lafayette because -- a number of factors, but the fiber system being one of them. Because they're -- you know, they don't have to move to a big metropolis, like Houston or Dallas or Atlanta to get the kind of speeds and flexibility and pricing that they're getting here in Lafayette, for the big pipe perspective. Plus, you know, they're -- the employees themselves, it gives them a better quality of life in their homes to have that type of capacity available. There have been studies taking place nationally that indicate that homes that have fiber connectivity typically sell more in the market than those that don't.
One of the biggest complaints I have is in the areas we have not yet served. And there's some developments that have taken place, and that are saying, you know, we want to have LUS Fiber here. We want to try to make this happen. We have one developer that actually paid to get the LUS fiber infrastructure built into his subdivision when he was building it, so that his -- so he could sell his homes more quickly. So there's no question that that infrastructure -- just like electricity was, and water was, and sewer was. 'Cause all those are essential components of quality of life for people -- that that has -- the fiber -- is in that list.
Chris: Now, the LUS Fiber, you connect everyone in the city of Lafayette, but not in the entire parish -- is that right?
Terry: Well, what happened is, when we built the system, we issued $125 million of bonds. And that was based on what the city looked like in 2004. Of course, as you may recall, in 2005, we had to have a citywide election -- which, we're getting ready to celebrate our 10th year of that, and we'll talk more about that later -- 10th year since that date. But in 2005 we had an election. But then we got caught up with another couple of years of lawsuits that slowed down our getting into the market. And then we began serving customers. And, you know, the customers that we had planned for are those that were in the city in 2004. Well, the city has expanded since that time. New developments have taken place, etc. So we don't have fiber in all those new developments and all those new expansions. We're about ready to make a move to do that, 'cause, financially, we're getting stronger each year.
Chris: So, about how much of the city do you pass currently?
Terry: We are along every public street in the city that existed in 2004. Probably -- as things stand today, we're probably on 98 percent of the streets now, because there's probably an extra 2 percent that has been built since that time -- that we're not yet along those streets yet.
Chris: As you've been in the papers lately, it looks like you've been considering expanding, as well, outside of the city, into the parish. With some of the other local governments or areas that are not a part of the city, formally, right now. Is that -- am I understanding that correctly?
Terry: Yes. Whenever the proposition was proposed in the city, and the vote was taken, it was only in the city of Lafayette, and even though we have a consolidated government between the city and the rural areas -- the Parish of Lafayette and -- well, the parish as a whole, the city utility system is only owned by the city, and the city fiber system is only owned by the city. So, expanding outside the city is something that we had not planned at the beginning. Also, we had -- we had plenty enough to say grace over, to build a deal with those areas inside our community. But now we're getting strong enough to where we can start looking at that. But there's several criteria associated with it.
If we're going to go outside the city, then the entities outside the city that want our services are going to have to come up with some kind of funding source, or they'll have to be adequate business to justify our extension of our lines outside the city to get there. So, let's say it's a large industry, which is really what the biggest push was, is that, you know, the large companies outside the city that would like to see LUS Fiber. Well, the types of services they might buy might justify us expanding our lines to serve them. And if not, perhaps the cities that they're in -- the towns that they're in -- outside of Lafayette might be willing to pitch in, to be able to make that happen, to build support of a large industry in their community.
The second thing, that Mayor Durel wanted to make sure we included was, is that we had to have some type of annexation policies, so that the city could continue to grow, as well as those towns continue to grow, without having, you know, conflicts. They're starting -- this is a popular part of the state for people to move into, and each city is trying to grow their borders, so that we can continue to grow our respective economies within our communities, and our tax bases within our communities.
And, a third thing, we had to have a good relationship with those cities that might be looking to do that.
So, those are the three criteria that's in place, you know. Financial, of course, is an important part of it all. And there have been discussions about extending outside the city. But we haven't -- you know, we haven't gotten our arms completely around those issues, so that we can make final decisions on it. But from a legal perspective, we have -- there's nothing prohibiting us to serve outside of our city -- or outside of our parish, for that matter. And so, it's just a matter of the economics working out, and making sure it makes for good public policy overall.
Chris: I can imagine where a local government that has the kind of network that LUS does, to say, we don't want to expand our network. We want businesses to have to move into our borders, and pay taxes to use, and have their workforces live within our borders. I'm always curious -- and I salute your willingness to expand beyond your borders to serve your neighbors, because I think it makes for strong regions. But, I'm curious, you know, how do you see it, in terms of what are the opportunities for LUS Fiber expanding beyond the city?
Terry: I think they're strong. The -- in fact, just recently, our local Chamber of Commerce -- the Greater Chamber of Commerce of Lafayette -- has now morphed into a regional entity called One Acadiana. This part of Louisiana, we call it "Acadiana" because it ties into Acadie, which is where the original French settlers settled in, around where Nova Scotia is today. And then, when they were evicted by the English in 1755, they settled in Louisiana, and called that area Acadiana. And it's kind of the French -- more the French heritage part of our state. And it's usually about a six- to eight-parish area around Lafayette -- Lafayette being right in the middle, and the areas outside of that. Our Chamber of Commerce has decided that, you know, to be able to get the kinds of projects that we need, that affect -- that impact us all more on a regional basis, that they need to have a more regional footprint. And so, this idea of us being able to offer our fiber services where it makes sense, outside the city, dovetails quite well with the regional approach that our business leaders are looking at in this community.
Chris: What are some of the challenges that come with expanding? You know, I have to assume that, for someone who's been working on this and, you know, dealing with paying off all the bills that you incurred from the capital costs, and just knowing how bitterly the rivals, like your cable and telephone company opponents, will fight you on these sort of things -- you know, what are some of the challenges you anticipate as you look at expanding?
Terry: I think the biggest challenge is the financial challenge. You know, it is the cost of expanding. It's -- you know, if one takes a circle and draws it on a page -- and it's a one-inch, you know, diameter circle -- and then you expand that by four times, then the area expands -- the square of that, you know. And so, as you -- as we continue to expand from in the city to outside the city, if we're going to try and serve larger areas, and there's a lot more capital costs associated with that. That's one particular thing we always have to keep in mind. And we can't overrun our headlights.
The second thing, I think, that's more concrete, is if we can serve businesses. 'Cause if a business is located in a town not far from us, chances are, a number of people that work for that business shop in Lafayette, live in Lafayette, send their children to school in Lafayette. You know, so, when we try to support especially the business environment outside of our community, that's where the biggest return on that investment takes place. And, again, we're just at the infancy of looking at these expansions. But it is the sort of thing that, I think, makes for -- DOES make for a much stronger, broader community as a whole.
Chris: And so, as you're looking at expanding, I've -- there was a quote in a paper, and there have been a number of people that have been asking me, because of your status as one of the premier fiber-to-the-home networks in the United States. And people have been asking if you would petition the FCC to remove some of the obligations that the state of Louisiana has created uniquely for public entities such as yourself. You and I have talked about this in the past, and you've clearly learned to live with the disadvantages that the state uniquely confers on you. And you guys are doing well despite them. But I'm curious if you can tell us any plans to challenge the state's restrictions in order to expand?
Terry: First, quick response to that -- that is NO, I don't have any plans to do that. And -- not that we would not like to be out from under some of these restrictions. But, really, as you indicated, we've learned to live within them. And, actually, it's kind of a source of pride for us to have built a system that was not able to rely on any other part -- any other asset -- of our organization, or taxes, to be able to pay for it. We were able to build our system completely from the money that we could borrow to build a system, and the resources that we had allocated to that system. The Louisiana Local Government Fair Competition Act is the law that was passed at the behest of BellSouth, at the time, and Cox Communications, to make life difficult, if not impossible, for us to get into this business. We have fought hard to live within and to respect that law. And we have now, you know, finished our fifth year of Louisiana Public Service Commission audit, where we have had an absolutely clean audit, to the point that they have no requirement to continue to audit us in that particular way. We're going to still be audited locally. In fact, we're probably the most audited entity in the state. We're having three -- virtually three audits a year that we had to go through. Very expensive. Very cumbersome. But now we've made it. You know, we're at the end of the tunnel. And we think that the way we've built our system is one that's easily defensible to anyone. Because now we can say very proudly that no tax dollars went into building this system. And no utility dollars went into building this system. It was built all on its own, by virtue of us borrowing it and -- borrowing the money and building it like we should. So, as we see it now, this law is not adversely impacting us. It did in the old days. It makes it, certainly, difficult for any new entity in Louisiana to want to do it -- do this. In fact, we're still the only city in the state that has even breathed publicly about the idea of building such a system. No one else really wants to talk about, because it's so much -- so difficult -- and they know the trials we had to go through. But from our perspective, we don't see any reason to start kicking this around, right now. As long as things stay as they are, and we can continue to run our business like we -- like the citizens expect us to. We're fine with things as they are. So, we're not looking to make any appeals to the FCC or to any other entity to remove ourselves from -- or, remove that law in the state. Now, if it happens through some other way, if there's some federal action or whatever, you know, certainly we'd welcome that, because, I mean, the more regulation you have, the more cost, and the more issues you have to deal with in an organization. But I think, as of now, we have survived it. By the damnedest, we have survived it. And we're moving forward. And excited to be in this position.
Chris: I can respect that. And I do think you deserve the pride of having, you know, succeeded under such adverse conditions. But before, I think, anyone wants to take your words to suggest that the law didn't hurt you, it's worth noting that it certainly slowed you down. I mean, you guys could have had this done years ago and had much less problem. And I just -- I think it's worth emphasizing that, because you noted it. But the law clearly represents a barrier. And anyone who'd want to misrepresent your words to suggest it wasn't would be clearly misrepresenting your words.
Terry: Oh, no doubt. And, just to make it real clear, not having the -- having the law in place probably cost us millions and millions of dollars. And it did because of multiple reasons. One is that having it in place created a toehold for our competitors to find reasons to take actions to make it difficult for us to move forward the project, whether it was through the Public Service Commission process, whether it was through filing lawsuits, of which we had many of them -- $4.5 million worth of fighting we had to go through before we could even build the system. So, that by itself has been -- was a huge burden for us to carry. But, even worse than that was that it affected our speed to market. And so, what happened is, our -- especially our cable company, Cox Communications, made an overbuild of their system, to upgrade it to DOCSIS 3.0. And what I understand is, Lafayette was the first community in Cox's entire national footprint to receive this upgrade ...
Chris: That's right. We wrote about that.
Terry: ... because they were -- they wanted -- they did this because they could now offer more services to compete with our fiber system. And they were able to sign contracts with businesses in town to take them off the market before we were ready to serve businesses. So it cost us dearly, for that delay of speed to market. And any businessman will tell you that if he has a good idea and a good concept, he wants to build a business, that the key to making it happen is to be the first one to be able to offer it, or get to the market as quick as he can, after he's assessed what his competition is doing. In our case, we were delayed because of those court cases, and it hurt us a lot. I mean, you know, we had issues with getting into the NCTC, the National Cable Television Co-op. Finally got that all resolved. But for the first, you know, several years, we had to fight that battle ourselves, of trying to get the TV -- the programming on our video system, to be able to even offer something that was competitive. So, we went through a number of rings of fire to get to where we are here. So, to say that the law was inconsequential certainly is absolutely false. But the fact is that we have fought through those things. We have made it through each one, to finally get to a point now that, as the law stands today, if nothing is changed in it, we can survive, going forward. But it -- but clearly, the law has had an absolute chilling, freezing effect on the rest of our state. Because no other community even wants to take a shot at taking a look at doing this. So, it's not the healthiest thing for the state. But from Lafayette's perspective, we've made it through, and our eyes are focused on continuing to grow this business.
Chris: Let's end on a happier note. Which is, we're three months away from the 10th anniversary of what might be the most impressive grassroots mobilization on this issue that we've seen in the country. You said it was July 16th, 2005 when you had the referendum. What are you going to do to celebrate that anniversary?
Terry: Well, we're going to do, you know, the typical things of getting, you know, a proclamation from our Council to let people recognize this is taking place. We've got some little surprises -- so I don't want to put those out there too soon, but some of the things we're going to do is recognize the people who stood up and said, we want to see this happen. And it was so impressive. Of course, in 2005, the -- I guess -- the level of confrontation we have between the extreme right and extreme left was not what it is today. But we had the Republicans, we had the Democrats all coming together, saying this is a good thing for our community. Had the Chamber of Commerce come on board -- even though our competitors were members of the Chamber of Commerce, the Chamber of Commerce come on board in support of Lafayette -- city of Lafayette building this system. That's huge. We had -- of all the living former chairmen of the Chamber, I think every one of them but one signed on, saying to support this project, and the one that didn't was an attorney for one of our competitors. On the day of the election, in 2005, I -- I'm sure somebody took a picture of it; I didn't; you know, we didn't have phones that took pictures in those days ...
Terry: ... so you could do it as seamlessly as we do it today. But I remember sitting in an office building that someone had lent us to use to try to help get out the vote -- 'cause I was alone with my staff and other people to commit to making phone calls to remind people to go vote that day -- that I saw the Chairman of the of the Parish Republican Party and the Chairman of the Parish Democratic Party literally sitting side by side in two cubicles, making phone calls to get the vote out. And everybody being together that night to celebrate the returns coming in and celebrate the election that was won. It was such a unifying effort in the community. And all the noise our competitors made. I mean, they made such a big deal of trying to make us fail that they actually ignited the community in a much stronger way than we could have ever done ourselves.
So, what we want to do is recognize that people -- you know, the minorities, the majorities, the Democrats, the Republicans, everybody that were involved in it, you know -- to kind of commemorate and be able to reflect on, you know, what was their vision, what did they want in 2004 and 2005 when we were having these debates. And how has that been realized ten years later -- even though our system has only just finished its sixth year of serving customers, 'cause of all the lawsuit noise that took place after the election. But, you know, in the ten years since the dream of getting the election and getting everybody mobilized to get that to happen, how has that been realized, how have they benefitted from that, and how -- what do we look forward to the future?
So, it's a nice stepping point to kind of reflect back on what we've all together accomplished. And then, how do we see Lafayette moving forward as a result of this, in the future, for our families and our children.
Chris: Excellent! Well, I really hope it's a terrific celebration. Y'all really deserve it. Thank you for coming on the show.
Terry: OK. Well, thanks a lot. I appreciate the invitation.
Lisa: We have a number of stories on how LUS Fiber has impacted Lafayette. Chris also wrote a report in 2012 focusing on Chattanooga; Bristol, Virginia; and Lafayette. Check it out.
Send us your ideas for the show. E-mail us at email@example.com . Remember to like us on Facebook and follow us on Twitter. We are @communitynets . Thank you to Persson for the song, "Blues walk," licensed through Creative Commons. And thank you for listening. Have a great day.