Sell Wyandotte Cable? Hmm...

If you have not seen the ads on Cable, there's a petition drive going on!  The petition would place a question on the November ballot to add language to the City Charter that would require a referendum should the City attempt to divest the cable/internet operations of Municipal Service (electric and water are already in the charter).

Why would this Charter Amendment be needed?  Though nothing specific has been proffered, there has been discussion among City Officials regarding the sale of the cable system and the resulting one-time revenue the City might receive. 

Should you sign the petition?  Absolutely. 

But should we sell the cable system?  Perhaps...read more inside!

First, how much would we receive from a sale of the system?  A common way to value a cable system is on a "price per subscriber" basis.  In this case, the buyer offers to purchase the system for a specific amount per subscriber.  If you look across the Internet at various investment and telecommunications business sites, you will find "per subscriber purchase values" ranging anywhere from $150 to $4500 per subscriber.  That is a purchase price range from $1.65M to $49.5M.  (recognize that the top number was a special exception from the ATT / Comcast transaction)  A more likely scenario would be $10-$20M.  Is a $20 million deal worth it? 

Maybe...or maybe not. 

A few items that would have to be considered:

1)  The cable system generates over $6m per year in revenue.  Some of this supports fixed costs at Municipal Service, like the billing system, administration, etc. which would now be more expensive per subscriber with the loss of the cable system.  This makes it more difficult to manage the finances at the other utilities since we lose the scale of the cable utility. 

2)  The cable system employs a number of Wyandotte residents who likely would not be employed by the purchaser.

3)  Service quality and response time would probably decline.  Our system would be serviced "remotely" by the new operator from other locations, like by Comcast from their Taylor and other locations.  And we all know how good their service is!

4)  The City, Municipal Service and the Wyandotte Schools benefit from the fiber optic infrastructure by getting better service and lower costs for local file services, public internet and phone access.  The system is also used to support electric distribution and system monitoring.  Replacing those services would cost real money.  And we would not get the future benefit of the planned VOIP offering.  (that's internet telephone to you non-tech types)

5)  Our rates would go up.  Comparing Wyandotte's rates to Comcast's Riverview rates, for a basic cable and Internet subscriber, the price increase would be $28.45 per month.  Therefore, the "purchaser" of the cable system could receive an ADDITIONAL $2.65M per year from Wyandotte residents.  See this file for a comparison of cable rates:  Download cable_rates.JPG

In the end, the City would get a one-time cash infusion at the expense of several million dollars per year going out of the city.  Let's postulate that the city does need another $20M to support pensions.  Why not get a bond approved and have the residents pay that down over time?  It would have less impact on the City to do that instead of selling the cable system.  This approach would also have the benefit of the Citizens knowing exactly what and why the money was needed. 

And frankly, I wonder how the "City" would benefit since the Cable System and its assets are a part of Municipal Service. 

This is all speculation.  We will have to wait and see what scenario might be forthcoming, how much might be realized from the sale, and what the use of the funds might be.

If we do get a deal that may be worth it, how do we proceed?  I would definitely want the referendum to state how the funds should be spent (i.e. create a formal pension fund (not a sinking fund) with the money...and switch pensions for new employees to defined contribution instead of defined benefit.)  This way the one time windfall can be used to solve the problem...not perpetuate it.  And we should not rush into the sale without understanding the situation...we need to understand the full detail of the "problem" that is prompting the sale so we can determine if this is the proper alternative. 

And regardless of the proposal, it needs to go to the voters for approval. 

So, don't forget to sign the petition!

Comments

[Larry]

Very good post Doug.

I had a chance to speak to Council Kolakowski during the Art Fair and he stated that WOW was a service that the city may look at to sell the cable. He stated 'Why not sell the cable - we need to get every bang for the buck we can get'. He feels that the cable is city owned and the citizens should not get in the way of the councils actions to get RID OF IT!

Johnny stated that if the city sells the cable they, the council, does not want a six month delay in that process while the "CITIZENS" vote yes or no.

Just a few items to chew on.

[Trepitien]

Emm.. Do you understand my bright textile Sorry, for off top, i wanna tell one joke) What do you call a veterinarian with laryngitis? A hoarse doctor.

[Tania]

Greatings,
Great job. But not enought info. Where can i read more?

Thanks
Tania