Three months ago the Lafayette Advertiser revealed that LUS Fiber, Lafayette, Louisiana’s government-owned fiber optic network, was overspending by $45,000 per day. Just last week, LUS Fiber managers claimed that the network is in a “strong financial position” and is on track to be self-sustaining within two years.
The turnaround seems miraculous and it’s so amazing that’s it almost unbelievable. Before taxpayers break open the champagne bottles there are a number of reasons to be skeptical.
When the news hit that LUS Fiber was in the hole by $45,000 per day, Lafayette leaders began logically contemplating whether the network should continue. According to the May Advertiser story, District 9 and Lafayette Council vice president William Theriot said, “We’re putting money in a sinking ship … We need to have a valid discussion now about LUS Fiber, and we need to make a decision as to whether this is something we need to continue funding.”
With their livelihoods apparently threatened, it appears that LUS Fiber managers scrambled and came up with a glowing report for the Parish Council’s August meeting. According to the Baton Rouge Advocate, “[LUS Fiber Director Terry] Huval said Tuesday that LUS Fiber is making enough money this year to cover expenses and to begin repaying start-up debts but not enough to cover depreciation — writing off the value of infrastructure and equipment as it ages.” In addition, “[City-Parish Chief Financial Officer Lorrie] Toups said LUS Fiber could begin paying a tax-like payment into the city’s general fund after the service is making enough money to cover all costs — operations, depreciation and annual debt repayments.”
LUS Fiber estimates that revenues will increase from $28 million in 2011-2012 to $37.7 million by the 2014-2015 fiscal year, a 35 percent jump. That report is certainly positive. But, Huval would not reveal key data used as the foundation for the glowing assessment. And, Huval revealed no plan for achieving those astounding revenue gains. In fact, Huval even refused to reveal the current number of subscribers on the network.
Any Economics 101 student will tell you that revenues from subscribers are key to putting any network on a sustainable path. At least two other government-owned networks (the UTOPIA network in Utah and Monticello, Minn.’s fiber network) are facing desperate financing issues because their overly-optimistic subscribership estimates have failed to come true.
With the experience of Utah and Minnesota fresh on taxpayers’ minds, Lafayette Parish leaders should trust, but verify the rosy scenario numbers for LUS Fiber. They should also demand LUS Fiber managers, at least, release their baseline subscribership numbers, if not a full business plan. Any private broadband network answering to shareholders would have to do so, and it is time for LUS Fiber to be held to the same standard.