|Tiffany Schleuter is one of two door-to-door sales reps working for LUS Fiber.|
|Photo by Robin May|
|LUS Director Terry Huval|
|Photo by Robin May|
In order to step up marketing efforts and pitch a fiber network touted as state-of-the-art “future proof” technology, LUS recently began enlisting yesteryear’s most tried and true marketing agent: the door to door salesman or, in the case of Tiffany Schleuter, the Avon lady.
LUS Fiber’s Schleuter is one of two full-time door-to-door sales people walking the streets for the past month now. A year ago Schleuter would never have thought she’d be knocking on doors making sales calls. “It’s been cool,” says the 26 year-old, who moved to Lafayette from Monroe 12 years ago. “We’ve gotten a pretty awesome response from it, partly I think because people probably aren’t expecting it.”
At her initial sales call, Schleuter sometimes sets up follow-up appointments and says she has spent up to two hours discussing the service with potential customers. “It’s the personal touch,” she says. “It goes back to that LUS-Lafayette customer service. Terry Huval, everybody, has been very involved and hands on, and I think that the people of Lafayette find that very important.”
Huval says that the idea for door-to-door sales came from discussions LUS had with other municipalities that launched municipal telecom businesses. “Their most effective marketing was the door to door,” he says. “When someone knocks on the door and says, ‘Hey, I can answer any question you have and we can talk about it,’ that goes over very well. That’s what those other towns have done, and we’re finding equally good success on our end, too.”
LUS will soon be adding two more full-time door-to-door salespeople to hit the streets. LUS Fiber is also welcoming longtime local radio exec Mary Galyean as the one of the newest members of its sales team. Galyean, who most recently served as General Manager of Citadel Broadcasting, is sales and marketing analyst for LUS Fiber.
“She’s going to be an important part of the sales side of this,” Huval says. “She’s going to be helping us direct our sales strategies and be involved with our field people that are selling and people taking calls as well.”
The feasibility study’s target of signing up 500 new customers a month is still the goal, one which Huval says he now expects the business to hit by the October 31 end of the fiscal year. LUS Fiber has only recently been begun building up its sales staff to full strength. While the business started with just four customer sales reps, it now has nine listed in its 2010 budget.
Spring 2010 is also the new projected opening date of LUS’ planned retail showroom. The grand opening for the retail space, located in the Acadian Village Shopping Center on West Pinhook Road, was originally slated to happen this year, but was pushed back when LUS re-evaluated plans for the space amid high renovation cost projections. The Independent reported earlier this year that LUS will have already spent more than $225,000 in rent on the space before it opens (“Occupational Hazard, 4/28/09). Huval contends the waiting has been beneficial because construction costs have dropped significantly.
Any lag in the rollout becomes critical with looming deadlines for bond repayments. LUS borrowed approximately $20 million more than it needed for the fiber project, which provided some cushion to paying off debt in the first two years as the business got ramped up. Debt payments are also scheduled to increase. Due Nov. 1, 2011, is a principle and interest payment of $8.6 million, up from the $5.5 million owed this year. LUS Fiber will also have to cover that 2011 payment solely from its operating revenue.
The advent of these hefty loan repayments, combined with the slower than expected rollout, has led to some alarming new projections in Lafayette Consolidated Government’s proposed 2010 budget. The budget — prepared by LCG’s finance department based on the most current financial reports from LUS Fiber — forecasts LUS Fiber will have a $1.3 million operating shortfall going into 2011. This is a stark contrast from last year’s projection; LCG’s ’09 budget predicted LUS Fiber’s 2011 retained earnings would be $8.6 million.
Huval stresses these new projections should be viewed as worst-case. “We have budgeted on the high end,” he says. “We want to give ourselves enough cushion so that if we do move at an aggressive pace, we get more customers signing on, that we’re not in a position where we have to stop. So the numbers I think are somewhat fluid. They’re fluid, but they fit within the business plan that we began with.”
LCG’s 2010 budget also projects that LUS Fiber will take out $11.4 million in new loans over the next three years. Huval points out that the source for this loan money is actually revenue from LUS Fiber. As part of the complicated financial terms mandated in the state’s Fair Competition Act, which regulated LUS’ entry into the telecommunications market, LUS Fiber is required to pay imputed taxes equal to that of private telecom companies. Huval says LUS Fiber is paying that money to the utilities system, which in turn will be loaning the money back to LUS Fiber as that money is needed. These loans are all regulated and approved by the state Public Service Commission, and LUS Fiber must pay the utility system back for the loans with a fair market interest rate.
In an ironic twist, Huval notes that rules put in place to prevent LUS from subsidizing LUS Fiber have actually resulted in LUS Fiber subsidizing LUS.
The 2010 budget also shows LUS Fiber cutting back on some expenses. The business is now cutting $464,177 previously budgeted to expand its wireless network. “Our priority is the fiber,” Huval says. “Once we get to some point where we’re not tying up all our technical expertise on that, then we’ll start to work on wireless.”
While some of these numbers may paint a somewhat daunting picture, Huval says they don’t tell the whole story. He points out that LUS Fiber has kept expenses in check and spent less than projected from its capital budget. It also recently re-affirmed its early projection of only needing to sign up 23 percent of the market to break even with the business. This amounts to a little more than 14,000 out of approximately 62,000 total potential customers in the city of Lafayette (approximately 51,000 of which are residential).
“This business is very different from a financial perspective than our utilities,” Huval says. “This business depends on a whole lot of variables. How fast we market it, how fast customers take it, certain things that come up on costs, equipment that we might need earlier in the year rather than later in the year. It’s very, very dynamic.”
“Everything’s staying within the limits of what the bond issue is,” he adds, “but the timing of what actually moves first can change numbers in an instant.”
In addition, Huval says that while staffing and technical delays have slowed expansion of LUS Fiber’s service area, the actual build-out and installation of the fiber network is running ahead of schedule. “We’re going to be ready to serve a lot of customers sooner than we said we were going to be able to serve them,” he says.
Concurring with Huval, City-Parish President Joey Durel emphasizes that people will start seeing more from LUS Fiber in the coming months. He adds the public should keep in mind all the factors involved in launching a new business, especially one of this scale.
“I think anybody,” he says, “who’s ever started a new business, you always open up anywhere from one to three months before the grand opening because you have training and you know you want to get the bugs out. So this is not any different other than it being a much more complex business. Obviously it’s not perfect, but to me there have been no great surprises and not anything that was completely unexpected.”
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