Tuesday, March 25, 2008

Alameda May Finally Sell Telecom Arm

By Chris Thompson
Tue, Mar 25, 2008 at 8:37 AM

After a decade of catastrophe and $85 million in losses, the city of Alameda has finally recognized that it never should've gotten into the telecommunications business after all. According to the Chron's Chip Johnson, the city has hired a consultant to find buyers interested in acquiring the publicly-owned Internet and cable service provider. Alameda's municipal power company has served the city very well, sparing it from the terrible years of the energy crisis and guaranteeing cheap electricity for its residents. But when it tried to diversify into telecommunications (and compete with better choices like Comcast), it fell into a world of debt, from which the city won't extricate itself for years. Now, behold the irony: it was electricity deregulation, which provoked the energy crisis Alameda avoided, that scared the city into gambling on telecom in the first place. City leaders worried that deregulation would allow competitors to eat into their power monopoly, and they decided to get into telecommunications in order to compensate for lost power revenue. Now the power side is doing just fine, and it's telecom that will bleed the city long into the future.

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