Friday, September 25, 2015

Opportunity costs and fiber optic communications: A closer look at Jeff Gahan's luxurious incomprehension.

Opportunity cost is defined as “the loss of potential gain from other alternatives when one alternative is chosen.”

During last night’s League of Women Voters “debate” at Estadio Azteca, I proposed that questioning the price of Jeff Gahan’s nice shiny capital project objects, while necessary and to be encouraged, doesn’t go far enough.

To be succinct, $20 million in TIF bonding for parks improvements not only makes hash of any sensible definition of economic development, but it also represents the absence of potential gain from other projects.

Down the road, as we continue to pay debt service (including interest) on Gahan’s bonded spending spree, and as yearly maintenance costs for these baubles escalate over time, what will we have lost by not pursuing infrastructure needs, as opposed to bread-and-circuses wants?

My example of urgent need? Fiber optic communication. Here's an overview.

A November 2010 report by the U.S. Small Business Administration (SBA) found that the Internet plays an integral role in helping small businesses achieve their strategic goals, improve competitiveness and efficiency, and interact with customers and vendors.

Respondents to SBA’s survey generally agreed that high-speed Internet access is “as essential to my business as other services such as water, sewer, or electricity.”

A more recent report from Connected Nation also shows that broadband connectivity is an increasingly essential component for business growth in the United States.

It states that over four million U.S. firms have web sites, including more than two million businesses with fewer than five employees, and that broadband-connected businesses report annual median sales revenues approximately $300,000 higher than revenues for businesses without broadband.

With Louisville partnering to explore Google Fiber, and as a fiber optic trunk line is being installed through Jeffersonville (estimated completion is 2016), it's easy to see how quickly New Albany could fall completely off the map of modernity.

I propose we call this preferred premature obsolescence "The Indatus Effect."

At a time when cities like Chattanooga are deploying fiber optic to shed their smokestack images, New Albany's mayor insists that a water park, not high tech jobs, constitute economic development.

But it gets far worse. In his rebuttal to these comments, Mayor Gahan expressed indignation at the suggestion that New Albany is behind the fiber optic times.

To paraphrase:

We're making sure the heavily subsidized luxury apartments for millennials has high speed internet. 

And the remainder of the city? I suppose it can do with dial-up, given that so much of the people live in poverty, anyway -- but don't mention that to a Democrat. They're not dealing with cognitive dissonance very well at the present time.

Let's turn to an actual millennial for a rebuttal of our own.


My name is Matthew McDonald. I’ve been a resident of New Albany Indiana all 31 years of my life. It is a place I proudly call my home, and am proud to have grown up in. This year I became a first time home owner and bought a beautiful Sears home, one of only a few in New Albany.

I’ve been proud of some of the progress we’ve made in revitalizing our downtown and in making it a better place.

However, even with said progress, we are always seemingly a step behind our neighbors in Jeffersonville. We have yet to fully embrace Speck’s downtown two-way street proposals, which would make our downtown more livable, and slow down traffic incurred by the tolled bridges.

But besides this major issue, I see another issue which will put us at a major disadvantage with our neighbors in Jeffersonville and Louisville.

As we all know, Louisville has made a major announcement that the city is working with Google to bring Fiber to Louisville, offering speeds 100 times faster than the national broadband average.

There was much excitement among many for the benefits it will bring. It will make Louisville more attractive to high tech businesses and offer residents a better choice than Time Warner and AT&T Uverse. It will also force these companies to lower their prices and increase speeds to compete. Many of my friends were excited, but the resounding question was “Will New Albany get Google Fiber?”

While we are considered part of the Louisville Metropolitan Area and receive the same broadband providers, I find this possibility to be remote, meaning we will receive none of the benefits enjoyed by our neighbors.

Once again we’ll be behind, but it doesn’t have to be this way. I want to know from whomever is running for Mayor and those who are running for city council seats: Will you do what it takes to bring Fiber to this city?

We cannot allow ourselves to lose the next Indatus. This means we need a city government to work with the Mayor of Louisville and Google to find a path to making this happen, even if that includes paying for some the construction fees to make it possible. Nothing should be off the table.

As I write today I want a declaration of position from all candidates running for Mayor or city government seats. This city is important to me and I want to see it invest in our future because I’m invested in it.

I can tell you some are willing to leave this city because of these disadvantages, many of whom live here and work and Louisville. In fact, the previous owner of my home sold the house for that very reason. He didn’t want to deal with the traffic from the tolled bridges.

I also work in Louisville, but stand firm in living here, though not the same can be said of everyone else.

We can and should mitigate these disadvantages. Don’t leave this city behind while our neighbors move forward.


This posting serves as my declaration. I asked a friend with experience in high tech to provide a summary.

Jeff, are you still reading?


New Albany was the richest city in Indiana and Kentucky in the 1870s because of innovation - and our current sad condition is due to a failure to keep up. Other cities have time and again jumped us, using the same march of innovation as the driver of change.

New Albany saw the invention of plate glass (Star Glass Co) and business boomed. When natural gas was found in great quantity near Chicago, our plate glass business withered and fortunes fell.

New Albany had the largest woolen mill in America (If not the world) and again, the owners didn't keep up with greater mechanization, and innovation decimated that business as well.

Recently, a lack of reinvestment in the veneer business (more efficient plants, robotics) has seen New Albany's 100+ year veneer business start to die. The irony is China imports the raw veneer logs from Indiana and the midwest, ships it overseas, converts it to finish veneer and faced sheet plywood and ships it back! Even with the great expense of shipping two ways, the Chinese investment in modern infrastructure is killing New Albany's veneer business. Again, New Albany's leaders just sit on their hands and watch another industry fail.

And so it is with the stunning lack of foresight, planning and lack of effort to bring fiber optic trunk lines to New Albany and Floyd County.

It's the current equivalent of not stringing electrical lines and doubling down on whale oil since "that's the way everyone's always done it."

Kansas City, Chattanooga, Huntsville - these cities are booming, attracting high paying jobs that don't pollute, growing their tax base and they will thrive while New Albany seems to be doomed to watch the future pass the city by. 

Who's trying to tie New Albany in with Louisville's current effort to have Google Fiber installed? When Clarksville and Jeff hook into the Louisville loop, New Albany will literally be completely shut out.

Edwin Hubble taught at New Albany High School - we have a storied history of technology we could build upon, but most here seem content to milk the market instead of grow the market.

The positive impact of broadband technologies on economic growth and small business creation is clear.


Cheer up, folks. After all, the water park opens again next June.


Krafty said...

Let us always remember where these magical TIF dollars ultimately come from. 50% of our property tax dollars go to our school system. Using these funds for something that will also help that system, like fiber optic communications and safer, walkable streets, is a great way to keep the investment in our future. Thank you for what you are doing for New Albany Roger.

w&la said...

Again, the Gahan administration doesn't get it - you can string all of the "high speed internet" cable you want in an apartment building and it still isn't hooked up to a fiber optic trunk line. There isn't any fiber optic internet available anywhere in Floyd County. Period.

As I've said before, just because your little Chevy Cobalt's speedometer has a mark for 120 mph, it's not able to go that fast.

Hey - do you think Pillsbury will hook the factory into the fiber optic internet in their shiny, new plant in Chattanooga?

New Albany lost THIRTY MILLION DOLLARS A YEAR in payroll when Pillsbury decided to move from here. Some New Albany Pillsbury workers earned $ 100,000 per year (with overtime)...

ecology warrior said...

Gahan thinks economic development revolves around a swimming pool and new parks, you know his campaign buzz words "Quality of Life." Without jobs and investment in technology there will be no quality of life doughboy!

SocioSam said...

As I recall, when the deal to deregulate was that the companies would put that money into fiber optics. Instead, they put it in their pockets and now we have slower and more expensive Internet that 19 other nations.

w&la said...

But that's not why New Albany doesn't have fiber optic - our leaders simply haven't understood the importance and haven't tried to have fiber optic internet service brought to New Albany. It's not even close to Floyd County.

Clark County and Jeffersonville can offer state-of-the art fiber optic internet service to attract high paying, tax paying businesses to move there. Those businesses are moving there.

New Albany? Nope - not at all.