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Jeff Roiland, project manager for Lake Connections, stands in front of fiber cables. The county received grants and loans to build a telecommunications network throughout the area. The project has faced many obstacles, but is expected to be completed next year. Submitted photo.

First customers connected to broadband

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Putting legal battles and naysayers behind them, Lake Connections, the county-owned telecommunications company has finally begun connecting customers to its internet, phone and TV services in Silver Bay and Two Harbors.

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“We’re getting a great response and people are pleased with the service and the staff,” said Jeff Roiland, project manager for Lake Connections.

There has been no shortage of opposition to the ambitious project, however, and legal battles, delays caused by competitors and contractual issues have plagued the initiative since its 2010 inception.

Through all of the setbacks, the county has persevered, stringing fiber cable and touting the benefits of bringing broadband to homes and businesses throughout the area.

“Right now, we’re just focusing on finishing our build and turning up services,” said county administrator Matt Huddleston.

Roiland said about 100 customers in Silver Bay, a town of 1,800, have been connected to services and a few beta testers are trying it out in Two Harbors, including Granite Gear, an outdoor equipment company headquartered in the town. Dave Johnson, the strategic accounts manager for the 28-year-old company, said fast internet has become essential to Granite Gear in recent years.

“It’s not just nice having faster internet, but it has become an absolute necessity,” he said.

Before connecting to the Lake Connections network, Granite Gear’s entire office shared one DSL connection. Johnson said their art director used to work at night because he needed the bandwidth to update the website.

“Business is not just pushing emails back and forth. We maintain a website,” he said. “Doing business has become real bandwidth intensive.” A new technological era has dawned and companies are evolving to keep pace with their competitors.

Granite Gear is the perfect example of the benefits county commissioner Rich Sve hopes broadband internet will bring to the community. He was a brand new commissioner six years ago when the county started pursuing grants and loans from the Department of Agriculture’s Rural Utilities Services to build the network. He said it will be vital for business in years to come.

“The old bricks and mortar will be coming down in some fashion,” he said “The demand (for broadband) is not going away.”

Sve cited health care and education as other fields that will rely on internet more often in coming years. Having a secure, fast network in place will allow people to stay in their homes longer thanks to innovations like telemedicine, and access to cutting-edge technology will also draw and keep young people in the area, he said.

There is a risk with a publicly-funded network, though. The Rural Utilities Service awarded Lake County a $10 million grant and $56 million loan for the project. The county made an initial investment of $3.5 million in the network, not counting legal fees or other costs, and has already started making loan payments, Roiland said. In order to be able to repay their debt and ensure that the business will be self-sustaining in the future, he said, Lake Connections will have to enroll at least 65 percent of eligible residents as broadband customers.

Sve said he understands his constituents’ concerns that the network may not be viable.

“I share that concern as a taxpayer. I think it’s legitimate,” he said.

But, he added, private companies have not stepped forward to provide the service, despite encouragement by federal and state government to do so. The county, therefore, opted to undertake the task.

While the 65 percent projection is a very rough estimate, Roiland said the response they’ve had in Silver Bay is promising.

“So far, we’re pleased with what we’re getting in Silver Bay and hopeful that it continues,” he said.

There is no easy answer for what will happen if the necessary number of subscribers don’t sign on for the service, Huddleston said.

“If things don’t work out, we’ll have to come back to the board,” Huddleston said. “There are so many variables. It’s hard to forecast.”

Christopher Mitchell is the director of the Community Broadband Networks Initiative with the Institute for Local Self-Reliance, a national research and policy organization with locations in Washington, D.C., and St. Paul. Much of his research focuses on community broadband.

He said that the Lake County network is unique in its level of investment. Four hundred communities nationwide have made some sort of investment in a telecommunications network, but most are cities or towns making partial investments.

“This is quite unique, both in Minnesota and across the country,” he noted.

As something of a pioneer, he said, Lake County is paving the way for other counties that are considering similar

investments.

“Lake County was smart to be proactive but they’ve also taken a step that’s been a bit early,” he said. “They’ve made some mistakes that others will learn from.”

Mitchell performed a case study of a municipal project in Monticello, Minn.,that was not as successful as city officials had hoped. According to a Minnesota Public Radio report, that city defaulted on debt payments in 2012 after building its network. Despite a less-than-stellar result, Mitchell said, some benefits were realized.

Competition from the city’ service pushed private companies to offer lower rates. According to Mitchell, residents are paying $60 for packages that cost $150 per month in Rochester and Duluth – an annual savings of about $1 million for Monticello’s subscribers.

“Monticello’s business didn’t hit its targets,” he said, “but it’s not a disaster.”

He said that if Lake Connections has similar difficulties, private competition will likely be the reason. The project has already been threatened and slowed by private companies.

Mediacom, a private telecommunications company providing services in the area, filed a federal complaint in 2011 regarding the project. Frontier Communications, another competitor, has raised concerns in the last two years about how, and on which poles, Lake County is stringing its fiber. Lake Connections officials say that these issues have caused project delays.

In addition to these problems, the project faced a major hurdle in 2011, just a year into the undertaking, when there was a mid-stream change of leadership as contentious negotiations with the original project leader, National Public Broadband, caused the county and NPB to go their separate ways.

Then, a campaign was launched against the network by the Minnesota Cable Communications Association. Postcards were sent, a website was launched and residents were encouraged to sign a petition to put the matter of a county-built telecommunications effort to a vote. The county also spent hundreds of thousands of dollars defending itself in a lawsuit filed by Orix, an investment firm that sued the county for backing out of a 2012 bond purchase agreement.

Through it all, contractors have been plugging along, laying out the network. Now, officials are encouraging people to sign up for service. Folks in Silver Bay can get on the installation schedule and those in Two Harbors and Phase Two, which includes Duluth Township, Knife River, Silver Creek and Beaver Bay, may be eligible for pre-sales. Phase Three construction, connecting the more rural parts of the county, just began in May. The project is expected to be completed by July 2014.

“The biggest thing to do is contact our staff,” Roiland said. “They can call in (or) walk in and the gals at the office can explain to them what to do.”

The price for the a bundle in Two Harbors, including 130 TV channels, internet with 30 megabits per second download speed and 10 Mbps upload speed and phone service including long distance calling, is $139.97 with a two-year contract. That compares to Frontier, which is advertising a bundle costing around $80 dollars per month with a two-year contract, including 100 channels and six Mbps download speed but no long distance calling. According to Mediacom’s website, a bundle for all three services, including 30 Mbps download speeds, 5 Mbps upload speeds and a variable number of channels, costs $99.95 a month for a year, then goes up to $169.85 per month.

For more about the county’s broadband project, visit www.lakeconnections.com

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