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- Subscribe - Contact Us - Rate Card - Place an Ad Archives Revels Classifieds Real Estate Menu Guide Wedding Weather Subscribe Contact Us May 28, 2005 Looking For Direction Rate hikes would not fix AFN Report shows continuing deficits under proposal By Vickie Aldous Ashland Daily Tidings The Ashland Fiber Network would not cover its deficit even if city officials agreed to raise cable television rates to top market prices and no customers were driven away by the price hikes. Since its inception, the city’s cable television and high-speed Internet service has charged below-market rates for cable television. City staff members and Ashland city councilors have said the city should raise cable television prices to make them more in line with market rates and to help close AFN’s ongoing annual deficits. In a memo to the council earlier this month, Councilor Russ Silbiger proposed a number of price changes for AFN cable rates to bring them in line with prices Charter Communications and satellite companies charge Rogue Valley customers who live outside Ashland. The price increases would bring in an additional $241,722.72 per year if no customers canceled, less than half of the annual deficits the Ashland Finance Department has projected for AFN. “That certainly would help,” Silbiger said. “But at this point, the debt payments are far greater than that.” The continuing shortfalls even with price hikes raise the strong possibility that AFN television customers will be paying top market rates even as Ashland electric customers face bigger electric bills to cover AFN’s deficits. The council voted earlier this month to subsidize AFN using electric department revenues. AFN faces a total $3.8 million shortfall through 2011 in being able to make payments on a 20-year, $15.5 million loan the city took out in 2004 to cover and consolidate AFN’s debts. That $3.8 million shortfall is based on the assumption that AFN’s revenues will increase 10 percent each and every year, according to Finance Department Director Lee Tuneberg. AFN’s Internet rates are at roughly market rates already, he said. City staff members currently are preparing advertisements for professional journals to recruit a new AFN leader for a position recently created by a city council decision, according to City Administrator Gino Grimaldi. That person will face a number of challenges. Despite the shortfalls, there is little room to cut expenses. AFN staff ratios already are low compared to the number of customers, according to a 2004 report by Navigant Consulting. Programming costs — the fees the city pays for the television channels it sells — are rising and the city is unable to win the volume discounts that national companies can secure, Tuneberg said. The city already has implemented most of Navigant Consulting’s recommendations that the firm said would boost revenues and customer numbers, but “results have fallen short of the response predicted by Navigant,” the most recent AFN Quarterly Report said. For example, the city mailed out approximately 2,700 coupons offering free Pay-Per-View movies in an effort to gain regular Pay-Per-View customers. Navigant predicted 170 customers would respond, but only 37 had responded, according to spring update. The impact of technological change in the telecommunications industry remains a big unknown for AFN. The city service could be faced with increasing competition and high costs to upgrade its technology, while it also could offer new revenue-generating products or expand its customer base, according to local members of the telecommunications industry. Meanwhile, the city council has indicated support for Silbiger’s idea to form an AFN Options Task Force that would examine the financial implications of keeping AFN, selling it to a third party, spinning it off as a nonprofit or cooperative, or some other option. Silbiger said he envisions people on the task force who will bring knowledge of financial analysis, mergers and acquisitions, telecommunications technology and business management. Discussion of the task force is scheduled for the next council meeting, which begins at 7 p.m. June 7 in the Ashland Civic Center Council Chambers, 1175 E. Main St. Staff writer Vickie Aldous can be reached at 482-3456 x 3018 or [email protected]. 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