None of my business

   I normally don’t get involved in other people’s business if I can help it. Sometimes I find it necessary and this is one of those times. I readily admit others may feel otherwise.
   In the instant case, I have followed the issues (controversies) in neighboring Lafayette in connection with the City/Parish Government’s proposal to build a fiber optics business in competition with Bell South, Cox Communications and others who are already offering the same or similar services.
Some folks in Lafayette may say that I should not get involved in their city business and that what they do is none of my business.
   They could be right but on the other side of the horn, what they are attempting to do may set a precedent for other cities in the state and then it becomes everyone’s business. For those who might be offended by my butting into their business, I apologize in advance because it is not my intent to offend anyone.
   First, without going into the merits or demerits of the issues, let me say on the front end that I am generally, as a matter of principle, not in favor of governments going into businesses that compete with private businesses.
   There are of course some advantages governments have over private enterprise and in some instances they can offer certain services at a lower price initially.
One reason for this is the fact that governments pay no income taxes, federal or state; they pay no advalorem taxes (property taxes) sales taxes and other taxes and fees that private businesses pay. This alone gives governments a 50 percent cost advantage over businesses.
   To put this in perspective, the City/Parish conceivably could charge half the price that a private business charges for the same or similar service. An example: if a private business charges $60 for a service, the government could theoretically charge $30 for the same service. This doesn’t happen often because governments are often inefficient cost wise when compared to competitive businesses. Still, governments could conceivably charge $45 for the same service which would be 25 percent less than private businesses. Given the multitude of risks involved, I don’t think this will happen. And even if it does, is it the right thing to do for such meager savings?
    Another reason governments can sometimes do more than private businesses is the simple fact that a business, when deciding what and where to invest must be able to get a return on that investment if it wants to stay in business. Moreover, business executives are not spending their own money. They are spending other peoples’ money: people who are shareholders or investors and thus they are accountable because their jobs are on the line.
   Not so in government where little or no discipline on costs or expenses is required in order to stay in business. The taxpayers often end up carrying the burden.
   Elected officials purport that the fiber optics cost will not risk taxpayer’s money. If so, who will pay for the bonds totaling a $125 million if the project fails? My guess is that the utility users will pay via increased rates necessary to retire the bonds over the years. I don’t think the bonds can be sold without the full faith and credit of the City or the endorsement of the utility company owned by the City. There is no free lunch!
    Fiber Optics involves ever changing technology and those companies who have been in the business for years not only know the business but are capable of competing in any dog eat dog fight. Who could blame them for lowering their charges as they do in any competitive situation to meet the competition from the City? And then where would the City be if they can’t remain competitive despite their cost advantages mentioned above?
   All things being equal in a free enterprise system, quality, service and price are the determining factors for success: all companies strive to become the low cost producer if all three caveats are present. Bell South, Cox and others are already competing price and service wise with each other for the services the City proposes and prices are coming down monthly.
    Then there is the question of fairness. The Chamber of Commerce and other organizations spend thousands of dollars and a lot of time trying to get businesses to come to Lafayette. Bell South, Cox and others were welcomed to Lafayette with open arms. They provide several thousand jobs to local families. They also pay millions of dollars in taxes to help government provide other services to area residents. Is it fair now to compete with them?
    One Baton Rouge newspaper misquoted a ranking official with Bell South when they reported that he threatened to move part of Bell South’s operations out of Lafayette together with the 1,300 jobs they provide. He made no such threat but there is no magic being located in Lafayette and if the City wants to compete unfairly with my company, I would move in a New York minute.
   A couple of other things puzzle me. Even if the Lafayette Utility Company can master the technology difficulties, provide debatable reduced costs, and compete in the long term with private companies, why has one of the local newspapers come out in support of the City officials’ plan to invade the private sector? Would they feel the same if the City decided to start a new newspaper given the government’s advantages?
    Another question is where does the Lafayette Chamber of Commerce stand? Is it possible they favor government competing with private companies? Do they represent businesses or government; commerce or governmental activities? Their silence is puzzling but whatever their position it seems to me they should come down on the side of private enterprise; else what are they there for or why are do businesses need them?
    There are no easy answers. Proponents believe the benefits out weigh the negatives and that the end results for the good of Lafayette justify the means.
Although I believe they are entitled to their opinions and I believe they are truly interested in what’s good for Lafayette, I disagree with their modus operandi.
   I think private companies can provide the same services and that competition in a free market will, over time, achieve the same objectives sought by the proponents including services to all at reduced costs.
    That’s the American way and the way the free enterprise system has beaten all forms of communism and socialism the world over.
    The government should not compete with private businesses.
   
    That’s my story and I am sticking to it.

Milo A. Nickel is the former President and COO of Louisiana State Newspapers.

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