From: stephen@sprunk.org   
      
   On 01-Jul-14 13:29, Robert Heller wrote:   
   > At Tue, 1 Jul 2014 17:49:37 +0000 (UTC) "Adam H. Kerman"   
   >  wrote:   
   >> Sorry you think the truth is nasty, but the ratepayers belonging to   
   >> that rural cooperative are NOT the ones paying for your   
   >> infrastructure. That would be paid for by a surcharge on fees on   
   >> everyone else's phone bills elsewhere in the country.   
   >>   
   >> Do you really believe there's a business case for building a fiber   
   >> plant in a rural area?   
   >   
   > Actually there is.  Just not a business case that the likes of   
   > Verizon would buy into.  The deal is that since *municiple   
   > cooperatives* don't have to make a ROI or profit in a year (or less),   
   > they can afford to get 20 year bonds and spend 20 years paying down   
   > the capital costs of the infrastructure. That is, the business model   
   > that works involves a 20 year investment time frame.  The private   
   > telecom sector can/will only operate on a 1-2 year investment time   
   > frame.   
      
   Interest on municipal bonds is tax-exempt, which means much lower   
   interest rates than private borrowers have to pay, and that lower cost   
   of capital plus the lack of a profit motive means many borderline   
   projects become feasible for them.   
      
   Private telcos can and do borrow money for capital projects, but they   
   need much higher return on capital to make up for their much higher cost   
   of capital.  And their investors also expect to make a profit on top of   
   that.   
      
   > This is no different that rural electrification (or rural   
   > phone service).  If it was not for *municiple cooperatives*, rural   
   > America would *still* be without electricity or phone service.  As it   
   > is, rural America generally has crappy phone service and America's   
   > electrical grid is aging (badly).   
      
   OTOH, rural telcos also get substantial subsidies via the Universal   
   Service Fund, and the rural electric companies still get substantial   
   subsidies from the REA.   
      
   S   
      
   --   
   Stephen Sprunk         "God does not play dice."  --Albert Einstein   
   CCIE #3723         "God is an inveterate gambler, and He throws the   
   K5SSS        dice at every possible opportunity." --Stephen Hawking   
      
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