Written by Nathan Stubbs
Wednesday, 10 March 2010
After its first year of operation, Lafayette Utilities System’s fiber-to-the-premise telecommunications business is above its financial break-even target and ahead of its projected rollout schedule, according to Director Terry Huval. LUS Fiber’s initial feasibility study indicated that the business would need a so-called “take rate” of 23 percent in order for the business to break-even financially — meaning that 23 percent of customers offered the service would sign up for it. 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 whom are residential), once the fiber rollout is complete.
“In the areas where we have done the most of our limited marketing, we are already well above that target,” Huval writes in an e-mail to The Ind. “We are opening up new areas for service every week, so naturally those early take rate levels are lower in those areas. But, we are pleased with the response we are getting. All indications are that we will easily meet all our financial obligations moving forward.” He adds that the business has also exceeded its projection of customers who buy all three services — phone, TV and Internet. LUS Fiber first began serving customers in February of last year.
With the project’s $125 million bond issue, 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. 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.
Citing exceptions to public records law for competitively sensitive marketing information, LUS Fiber does not release specifics on its take rate or its number of customers. According to its three most recently completed monthly financial reports, for October, November and December 2009, the LUS Fiber business’ revenues exceeded its monthly operating expenses in two of those months (October and November). For October, monthly revenues totaled $1.64 million while operating expenses totaled $874,991. In December, total revenue was down due to a dip in wholesale receipts. Huval says this fluctuation reflects some of the cyclical revenue collecting and accounting inherent in the wholesale business.
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| The fiber rollout is months ahead of schedule. |
The recent success is welcome news for LUS Fiber, which, despite its overall popularity, faced some strident critics and sputtered coming out of the gate. Financial reports showed that after its first four months of operation, LUS Fiber was taking in less than $50,000 in retail revenue (that number has risen to approximately $159,000 for December 2009). As for the feasibility goal of signing up 500 new customers each month, Huval says LUS Fiber first hit that goal in November 2009 and has maintained the pace through February of this year. “We are hitting that target consistently and are currently surpassing that target,” he says.
For Huval, Friday has become known as “fiber day.” It’s the day of the week that he huddles with the fiber business’ administrative staff for the latest progress reports. As of last week, Huval says most of the major conduit lines are completed throughout the city. LUS Fiber also has already begun serving small pockets of customers within the Phase 3 and Phase 4 areas of its rollout schedule — areas that weren’t originally scheduled to come online until 2011. The business is now confident it will be ready to serve the entire city by the end of July, nine months ahead of the original schedule. Until that time, LUS Fiber will be steadily building its service area. Huval indicated that the last areas likely to see service will be the northern edge of the city along Pont des Mouton Road, the neighborhoods behind the Heart Hospital on Kaliste Saloom Road, The Settlement and other neighborhoods along the southern end of Kaliste Saloom going toward Milton, and some areas along Pinhook Road near Broussard. Potential customers can find out if service is available for their home by checking the online “service finder” at LUS Fiber’s Web site at fiberforthefuture.com.
In nearing the finish line of the rollout, LUS Fiber is gearing up for a surge in its customer base. Customer sales reps are now working Saturdays, and Huval says while its full-time sales staff is in place, the business may reach out for more part-time help to meet the anticipated increase in calls. Among that staff are four door-to-door sales reps who came on board beginning in August of last year and have helped the business to step up sales. “That’s a very effective medium,” Huval says. “The dialogue between us and the customers has been very beneficial. We’re very pleased with that process.”
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