Diving into the Issues: Velocity facts
Last week, I watched a video posted by my opponent regarding Velocity Broadband (VBB). The video contained several inaccuracies. Since the lack of internet options has long been an issue for residents and businesses alike, it’s important to get it right – especially in our current environment of virtual learning/meetings that is compounding the issue and making everyone’s internet sluggish.
Mrs. Norman’s video includes inaccuracies regarding both the technology and the financials behind VBB. I would like to offer clarity on these important topics.
First, Mrs. Norman says: “Our government has set itself up in a business that is in direct competition with two other internet providers. Those companies now are launching 4G which goes across quite a large part of Hudson.”
Clarification: 4G has been around in Hudson for years and it is not even provided by the incumbent internet providers she is referring to in this statement (Spectrum and Windstream). 4G is a wireless terminology. The service VBB provides is fiber based high-speed broadband internet. These are two different things.
If what Mrs. Norman was actually referring to was High Speed 5G or mmWave 5G (we will just refer to it as 5G for now) and not 4G like she stated, then it is worthwhile to note that a fiber network is necessary to having 5G as they are complimentary products. If companies wanted to provide 5G to Hudson, they would need to use a fiber network (like VBB) to transmit between hundreds of antennas which would transmit the signal throughout Hudson. So, VBB would not compete with 5G, but could support it in the future should we get it in Hudson– and they would only be able to offer it because of the city’s investment in the fiber infrastructure. 4G is not typically used as replacements to wireline services such as fiber/coax/DSL.
Another point she makes in this video is that Ward 4 will never see “…even one bit of that network.”
Clarification: VBB currently DOES have fiber in Ward 4 today. That fiber follows the turnpike in order to service a customer in the southeast corner of Ward 4. Although it is not a lot, with proper funding, service could be expanded farther into Ward 4 should Council decide expanding to residential is part of it’s long-term plan for Velocity.
VBB was started, and is currently operating as, an economic development tool to retain and attract businesses to Hudson. Many businesses who were located in Hudson already as well as those considering Hudson all complained about the internet connection. Since most of the city’s general fund revenue comes from income taxes, attracting and retaining businesses is critical to our tax base. Without VBB, many businesses would have left Hudson or simply never come here in the first place, which would have had a very adverse impact on our revenue. One only has to look at Hudson Crossing – which has attracted 10 new and significant businesses in the past four years to see VBB in action.
Moreover, VBB is now cash flow positive (profitable), meaning that their revenue is higher than their expenses, which includes paying the interest on the debt. There is also unspent capital from the original $3.8m investment. VBB is proposing to establish a debt repayment plan and use excess cash and unspent capital to expand into residential clusters. This will begin a slow residential expansion without any additional debt. Areas of Hudson that are unable to receive adequate internet service from an existing provider may be able to be serviced by VBB using a wireless extension to the fiber network.
Towards the end of the video, Mrs. Norman says, “I think that it’s a better opportunity for us to divest ourselves of that entity - of Velocity - and allow those tax dollars to be released for really everyday needs that the citizens in Hudson have.”
Clarification: VBB is considered by most customers as the most reliable and customer-focused broadband provider in Hudson. Critics of VBB pick on it because it was funded using money from Hudon’s treasury. Since tthen, Council has moved VBB into an Enterprise fund and it is operating successfully as a business. If you refer to City Council’s recent legislative agenda, you will see that Council has the opportunity to approve the sale of this bond allowing for permanent financing of VBB. This transfer of the debt to long-term bonds will return the city cash investment to the Treasury and the debt will be paid by VBB over 20 years. In fact, if the service were divested, taxpayers would become completely responsible for any and all debt that remains. In the current direction, tax payers are only responsible for debt not covered by VBB profit.
My thoughts on Velocity, in general:
Sarah’s suggestion of divesting ourselves of VBB could jeopardize our income stream and would not bring any additional cash to the general fund. It is important to reiterate that employee income taxes represent 76% of the city’s revenue and our resident property tax only 12.5%. If residents wanted to expand VBB throughout the city for residential use it would most likely require a property tax levy or revenue bond to raise the needed funds.
VBB being moved into an enterprise fund limits what Hudson can spend VBB’s profits on. Once the bond is paid off, any profit can only be used for Velocity, and cannot be used for other City improvements such as roads, because the funds are separate from the General Fund.
Regardless of your view on VBB, it is clear that the City’s implementation of Velocity has forced the two incumbent providers to begin to re-invest in Hudson, update their infrastructures, begin to lay their own fiber lines, and become more price competitive. This significantly benefits residents. Before Velocity, both of these providers had zero interest in making these improvements.
If more people had reliable internet, we would likely see more people working from home. We could then begin collecting income taxes from more Hudson residents who work from home.
The question many in Hudson have, including some on Council, is what is the future of VBB? Do we grow the business by expanding to residential? If so, how is it funded? By putting it to a vote of the people as a revenue bond or a levy? By selling VBB? Would a buyer even exist? Could we ensure that a buyer would maintain the high level of service?
There are varying opinions on what the role of a municipality should be in providing internet to residents. Some (like the cities of Medina, Fairlawn and cities across the nation), consider internet a utility; others view it as competition with the private sector. Regardless of where you stand on VBB and what our Council and the city should do with it, your next City Council member will make decisions that impact this business. Therefore, it is essential that we elect someone with a thorough and complete understanding of the technology and the business so that the foundation of all decisions made is a solid one.
Have questions? Want to share with me your thoughts on Velocity? As always, I would love to have a conversation! Email me directly at nicole@kowalski4hudson.com.
