Results blended with municipal cable systems

Conway in central Arkansas and Paragould in the northeast corner have had city-owned cable services since 1980 and 1990, respectively. They’ve continued to upgrade and add services as times and technologies changed. Officials for both systems say they operate at a profit.

But critics of Siloam Springs’ proposal to add broadband service to its city utilities contend the northwest Arkansas town wouldn’t have the same success as its two counterparts.

“It seems almost backward for a municipality to try to offer those services now,” said Arkansas Lt. Gov. Mark Darr. Darr sent a letter last fall to Siloam Springs Mayor David Allen saying the city would jeopardize existing private sector jobs and could discourage new companies from locating in Siloam Springs because of fears of government competition.

CONWAY, PARAGOULD EXPERIENCE
Conway and Paragould are the only Arkansas towns which have city-owned broadband systems. However, nationwide about 150 municipalities offer broadband services, including nearby Sallisaw, Okla. Siloam Springs officials visited all three while researching the feasibility of broadband for their town of 15,000.

Siloam Springs voters will decide May 22 whether to invest $8.3 million to run fiber optic cable directly to people’s homes, creating the ability to have more bandwidth and faster service. Both Cox Communications and CenturyLink – the current cable, phone and Internet providers for the city – oppose the idea.

“Siloam Springs would be the first city in over 20 years to attempt this in Arkansas. Two other cities got into the video business before there was a competitor in the market, and before residential Internet or digital phone was available,” said Len Pitcock, director of government affairs for Cox. “Both of these communities are considerably larger than Siloam Springs.”

Paragould’s population now is 26,113. Conway currently has 58,900 residents. Both cities were considerably smaller two decades ago.

Rhonda Davis, chief financial officer for Paragould Light, Water and Cable, said there actually was another cable provider there when the city began offering services. She recounts a tumultuous beginning to what she claims is now a successful program. It was a journey that became the subject of a Harvard Business School case study and subject matter for various publications.

Paragould Light and Water’s efforts to add “Cable” to its name landed it in court as the defendant in an antitrust lawsuit filed by Cablevision Inc. The Woodbury, N.Y., company was then the city’s cable provider.

The city eventually won.

The public wasn’t happy with Cablevision’s service or rates,” Davis said. “We took it to a public vote and did it.”

Davis said the case drew interest from all over the United States.

Paragould’s electric company started in 1938. The city merged its electric and water utilities in 1984. In 1990, it hooked up its first cable customer. Internet service began in 1999. The city bought Cablevision’s remaining Paragould service in 1998. Paragould, they said, was a remote location and not in a cluster of other towns which the company served.

“Our system is now 20 years old. We’ve been replacing and upgrading ever since,” Davis said.

Paragould’s fiber lines don’t run all the way to people’s homes, but close enough to provide excellent quality, Davis said. Fiber nodes are placed throughout the city, she said. Coaxial cable hooks on there and delivers signal and data the rest of the way. Cox and CenturyLink use similar delivery systems in Siloam Springs.

Paragould Light, Water and Cable serves 13,000 homes and businesses with its electric service, and supplies cable to 11,080 subscribers and Internet to 6,550 premises.
Davis said the city does still run a debt for the cable and internet systems. The $3.2 million bond issue for cable in 1989 has been refinanced and increased over the years. It should be paid off in 2014, she said. But the system has been paying for itself since the sixth year of service, according to Davis.

During the first five years, the city increased property taxes by $100,000 a year to help make payments. The extra taxes amounted to $1 to $2 a month for most households and still allowed customers to get cable “way cheaper” than what they paid the private company, Davis said.

Richard Arnold, Conway Corp. CEO, said Conway has no debt on its system. The original cable launch in 1980 was funded by a loan from the city’s electric department. Cash flow from the cable system’s profits funded a complete rebuild in 1996, as well as subsequent upgrades.

Conway’s original electric utility launched in 1895. When Conway Corp. launched its services in 1980, there was no cable service in the Faulkner County college town.
“It was not a competitive thing,” Arnold said. “Residents were just not being served.”
Now some Conway residents use satellite providers. AT&T also now offers its U-verse service.

“They didn’t come in here to fail,” Arnold said. “You have to have a competitive product.”

Conway Corp. is experimenting with fiber-to-the-home. Arnold said one new subdivision receives its service that way. But the utility supplies most homes with fiber to nodes or remote locations throughout the city, then via copper or hybrid fiber coax on to the houses.