The source you linked doesn't show a transfer from EBP fiber to EBP. Moreover, it's not the debt outstanding that matters, but the original capital investment. A real company would be expected to generate a return on the original $390 million that exceeded the weighted average cost of capital. Having a big chunk of that money fronted internally without imputing an interest rate to it is a subsidy.
From the article:
> One unique and important advantage for EPB of such a close relationship between the electric division and its fiber-optic division is that investment in fiber by the utility for the ostensible purpose of bolstering its smart grid can be socialized amongst its captive electric ratepayers (i.e., every resident and business in its service territory). In practice, this means that at least some percentage of the GON is being subsidized by the parent utility.42 The benefits flow the other way as well. For example, EPB readily admits that “
“cover increases in operating costs.”44 Whether and how these increased rates might be used for the benefit of the utility’s broadband network remains to be seen.
revenues from [its] Fiber Optics division have allowed the utility to defer rate
increases that would have totaled 5 [percent] over the last four years.”43 Nevertheless, EPB recently
raised its rates by 3.5 percent for customers to
> The source you linked doesn't show a transfer from EBP fiber to EBP.
You are correct that no such transfer is explicitly shown. I don't know if it's done or not behind the curtain, but you may recall that I explicitly accounted for this scenario in my fifth paragraph of my previous post.
So summarize, EPB fiber's profit in itself is enough to pay for debt service regardless of if an internal transfer is made or not. Furthermore the money doesn't simply disappear, just because it isn't transferred. The profit is still there, regardless of how it is accounted for and where it is kept.
EPB fiber is making money, EPG's debt is being paid off (in advance I might add), EPG fiber is not being subsidized (the power side is) and cash is being accumulated.
No matter how you look at it, EPB fiber is both profitable and sustainable.
> Moreover, it's not the debt outstanding that matters, but the original capital investment.
Oh, so we are moving the goal posts now, eh?
Not being able to claim that EPB fiber is unprofitable, you are now instead taking issue with it not being profitable enough.
But, to address your original point directly, no, the original capital investment does not matter. Only and only the debt outstanding matters if part of the original investment was funded by other means.
It's preposterous to claim that an expansion of a project would have to produce returns twice; once on the original project and again in full when the project is built upon via an expansion.
> A real company would be expected to generate a return on the original $390 million that exceeded the weighted average cost of capital.
This is provably false.
If a company built a national network to serve it's own internal communications needs, it would then not be expected to show (additional) returns on that national network, if it later decided to build out a local network in one of the markets in order to expand it's business.
The company would only be required to show returns on the additional investment it made in the local market. Doubly so, if the company received a federal grant to build out the original national network.
> Having a big chunk of that money fronted internally without imputing an interest rate to it is a subsidy.
No money was fronted internally without any interest. EPB made out a $50M loan to EPB fiber which EPB fiber later repaid in full with interest.
EPB did receive a $111M federal grant to build a smart grid, which it did. The grant was not used to build EPB fiber's network. That capital was raised separately through a bond.
EBP's profitability is only relevant to a discussion of fiber generally to the extent it is a concrete example of a municipality (or anyone) building fiber profitably. The question is--could Baltimore go out and do this? Or, what's stopping a private company from doing this in Baltimore? And what's relevant to that is the real capital expenditure to build the fiber network--not just extending a fiber network you had lying around.
I'm happy to concede that if you don't have to actually pay for much of your fiber network, you can indeed show a "profit."
> EBP's profitability is only relevant to a discussion of fiber generally to the extent it is a concrete example of a municipality (or anyone) building fiber profitably.
Very well then, but why did you start of this thread with provably false claims? EPB fiber is not subsidized by the electric side (refer to your own research paper if you don't believe me) and Chattanooga is most definitely servicing their debt in full (again check your paper).
> The question is--could Baltimore go out and do this?
Perhaps, I haven't looked into it, so I don't know. But, why Baltimore? Different state, different laws on municipal broadband, much larger metro area and a very different socioeconomic mix.
> Or, what's stopping a private company from doing this in Baltimore?
Nothing much if they have the money and inclination to do so, assuming they can get the appropriate permits and franchises. Apparently Verizon did consider doing it.
> And what's relevant to that is the real capital expenditure to build the fiber network--not just extending a fiber network you had lying around.
So if Verizon decides to build out FiOS in Baltimore, which part of their existing (national and local) fiber network should they according to you include in their network build budget and show an additional return on?
> I'm happy to concede that if you don't have to actually pay for much of your fiber network, you can indeed show a "profit."
Which parts of the EBP fiber network do you feel have not been paid for? And what do you mean by "profit"? Are you claiming that EPB is cooking the books and not really making a profit?
You keep insisting that no matter what evidence is presented, that the fiber infrastructure will not be able to pay for itself, even in other cities. I can't understand your resistance. Can you explain your position? Are you connected via lobbying, pr, or working for an organization that is opposed to municipal fiber?
Muni fiber could certainly be unprofitable or unworkable, there's no magic reason why it has to work in practice.
From the article:
> One unique and important advantage for EPB of such a close relationship between the electric division and its fiber-optic division is that investment in fiber by the utility for the ostensible purpose of bolstering its smart grid can be socialized amongst its captive electric ratepayers (i.e., every resident and business in its service territory). In practice, this means that at least some percentage of the GON is being subsidized by the parent utility.42 The benefits flow the other way as well. For example, EPB readily admits that “ “cover increases in operating costs.”44 Whether and how these increased rates might be used for the benefit of the utility’s broadband network remains to be seen. revenues from [its] Fiber Optics division have allowed the utility to defer rate increases that would have totaled 5 [percent] over the last four years.”43 Nevertheless, EPB recently raised its rates by 3.5 percent for customers to