Sides fight over fiberThe first public shots have been fired by a potential competitor with Lake County’s fiber-to-home phone, television, and Internet service project.
The first public shots have been fired by a potential competitor with Lake County’s fiber-to-home phone, television, and Internet service project. Mediacom, a cable and internet provider in Two Harbors and Silver Bay, sent letters to the mayors of both cities late last month asking them to reconsider the joint powers agreement the city councils approved as part of Lake County’s application for funds for the countywide project.
But the company may have misfired. In the letter, it cited a portion of the agreement that doesn’t exist; county officials say they believe Mediacom was basing its argument on an early draft of the final document.
A Lake County response, drafted Tuesday by former County Attorney Russ Conrow, disputes other claims by Mediacom and called its letter to the cities “heavy-handed tactics.”
The banter between the county and private telecoms reflects a national debate between established companies and upstarts like Lake County and its fiber project. The federal government is lending its support to more than 200 public and private projects across the country.
Thomas Larsen, a Mediacom group vice president of legal and public affairs, warned in a Dec. 21 letter to the mayors of Silver Bay and Two Harbors that language in the agreement was misleading and accused the cities of helping to falsely represent Mediacom and the service it offers in the cities. He wrote that the county was falsely depicting its fiber project as one-of-a-kind.
Larsen said Wednesday, after looking at a copy of what the county is calling the final draft of the agreement, that he based his remarks on the document approved and signed in Silver Bay. “The ‘county’ version of the JPA is not the same version that was adopted by Silver Bay,” Larsen said. He wondered why there are “multiple versions of this floating around” and maintained that the Silver Bay version still “contains some very troubling findings.”
Larsen said he also learned that the Two Harbors agreement isn’t the same as the one signed in Silver Bay.
Lake County Administrator Matt Huddleston said there is some confusion about changes in the Two Harbors document but said all other signed copies of the joint powers agreement match up. He said Mediacom and others may be finding differences in the resolutions drafted and passed by the separate public bodies to enter into the agreement. The actual agreement is the same for each entity, Huddleston said.
Mediacom demanded that the agreement be corrected and that the cities notify those invested in the project – through the federal loan and grant and bonds issued for the $70 million project – of the misstatements in the agreement.
Larsen acknowledged this week that Mediacom’s complaint might be only technical in nature. The paragraph in question, which is no longer in the agreement, stated that the county project would offer a service that is currently unavailable to county residents through the private market. Larsen, in the letter, called that claim “patently false” because Mediacom provides Internet and other services to all residents in the cities. He wrote that the cities may be liable financially and criminally because the statements allowed the county to secure funding for the project.
The county response reminded Larsen that getting federal funding for the project had little to do with the joint powers agreement. The agreement, signed by 19 municipalities and townships in Lake and portions of St. Louis County and dated Nov. 23, was required to secure the required matching county funds for the project, about $4 million in bonds. A federal loan for $56 million and a grant for $10 million were approved in September.
A paragraph on the second page of the current six-page joint powers agreement document seems to distinguish the service but leaves out any mention of exclusivity.
Par for the course?
Some say the Mediacom letter is typical of campaigns by private companies to root out a potential high-tech competitor and scare residents away from its service.
Stopping short of threatening legal action, Larsen said this week that his company will take its complaint to the Office of Inspector General of the U.S. Department of Agriculture. Federal funding for the fiber project comes through the USDA’s Rural Utility Service branch.
“We’ll file a complaint and ask them to take a look at the facts,” Larsen said.
Conrow wrote that any such actions by Mediacom would be lamentable, writing: “As you know, Mediacom is a valued service provider in the cities of Silver Bay and Two Harbors. Lake County’s network will be an open-access system, allowing Mediacom to reach additional consumers outside of the cities of Silver Bay and Two Harbors without the risk and expense of expanding its cable system. It is a pity that you feel you have to resort to such heavy-handed tactics rather than choosing to continue to work in partnership with the cities and join with Lake County to provide services on this new infrastructure.”
The county contends that it is offering a unique service, one that is technically superior to current offerings in the area, especially concerning the speed and volume capabilities of fiber lines it would install along the electrical power grid. The county would also be required to serve all residents in Lake County and the northeast portion of St. Louis County, not just those in cities.
Larsen said the county can’t speculate on what its service “can or can not do” and that his company is making improvements on the speed of its service.
Attorneys representing Two Harbors and Silver Bay did not return requests for comment on the Mediacom letter. County officials provided the copy of its response and the current joint powers agreement.
The county’s representative at the USDA, Dominic Henderson, said he was prohibited from commenting on any aspect of the county’s fiber project.
One council member, Mary Rosati of Two Harbors, said she would ask that the city withdraw from the agreement unless the language was clearer and wanted assurances from the city attorney that there is no liability.
Larsen said Mediacom’s end goal is to make sure residents “take a harder look” at the county project and whether it is a “good use of taxpayer money.” He said legal action could come after going through the internal complaint process with USDA.
National Public Broadband, the group working with the county on the project, is no stranger to challenges from private telecoms. Its CEO, Tim Nulty, who is being scrutinized about his management of a city-run broadband project in Vermont, said “a lot of powerful interests in this country … do not want municipal or community telecom to succeed. They want that very badly.”
Nulty has blamed some of the funding problems at Burlington Telecom on a long battle with cable company Adelphia, now part of Comcast, that cost BT $4 million and handcuffed its funding sources. The battle against private companies is not just a local problem, Nulty said. “What is going on in Lake County is part of a nationwide battle.”
Lake County Commissioner Paul Bergman, who has taken the lead on the fiber project, said, “I think they’re wrong” and accused Mediacom of using a “ploy to scare people.”
Mediacom and other local companies have expressed doubt about the viability of a rural project like the one in Lake County. Larsen said it will never get the customers it needs to make a profit and called it an “overbuild” on the systems already in place.
Bergman had a question for the competitors: “Why didn’t they respond to our RFP (request for proposals)?” he said, referring to the county’s original call for someone to help it build out a network. Bart Kendrick, a spokesman in Washington for the Rural Development sector of the USDA, said he couldn’t comment on the Mediacom letter since there had been no action taken by either party considering the application for funds for the county project. He echoed Bergman’s sentiments, saying “everyone had the opportunity to apply for funds. It was an open, level playing field.”
Getting to rural areas
Kendrick said history is on the side of the more than 220 projects the USDA is funding through public and private enterprises. “It’s what the Department of Agriculture does,” he said after reciting its efforts to bring electricity to rural regions in 1934, telephones in 1949, and now Internet access since 1996. “It’s bringing service to people who need it.”
Kirk Lehman, a regional manager for Frontier Communications, which provides phone, Internet, and satellite television service in the region, said his company has a “desirable product” and has already invested heavily in improving and widening its service in northern Minnesota. He said Frontier didn’t need a government loan to make its service attractive. “It’s not free money,” he said of the RUS loan.
Lehman echoed Mediacom’s stance, saying the county is using “false and misleading information” about the market to gain a foothold. He said the expectation that 70 percent of households will take the county service is an overestimation. “I wish them all the best, but sometimes passions skew the realities of what they’re doing.”
Lehman said he understands the need for more-rural areas to get quality service and cited a recent Frontier buildout outside of International Falls to serve 100 customers. But he said it’s too broad a statement to say “all people need access to broadband Internet.” He said the company will continue to expand services but won’t use county fiber lines to do so.
Apples and oranges?
Chris Mitchell said the private company complaints are typical in communities building public networks. He is the director of the Telecommunications as Commons Initiative for the Institute for Local Self-Reliance, a group based in St. Paul that is focused on cutting through what it calls “disinformation” from private telecoms when it comes to setting up networks using public money.
“It’s disingenuous for them to say they already offer those services,” Mitchell said. “It’s like someone making ultralite planes saying there is no need for a Boeing 747 plant.”
The service Lake County would offer “doesn’t compare,” Mitchell said, and the cable infrastructure in Two Harbors and Silver Bay is likely from two or three generations ago. He said it is typical for telecom companies to make threats about incoming competition and promises about its own service to get cities to back out of agreements allowing new fiber projects.
“They’ll say they’re about to upgrade and hit residents with all kinds of marketing,” Mitchell said. When they succeed in abating the competition, those promises for better service go unfulfilled, he said.
Mediacom’s Larsen also said his company has invested heavily in the region and that he is frustrated that government money is being used to undermine those efforts.
Mitchell said the private companies are simply taking advantage of the country’s political climate and a populace wary of how government spends. It’s not necessarily an affront on public projects but more of a simple tactic against any perceived competition, he said. “Companies have always fought,” he said, including 10 or 15 years ago when Internet cables were being furiously put down by dozens of companies racing for an edge.
Mitchell said cable companies especially relied heavily on government policy in setting up virtual “monopolies” in small cities across the country and that any argument about government creating unfair competition is specious at best.
Bergman said the competition debate is like two lawyers in court who both know what the truth, or the law, is. “It’s a matter of who’s interpreting it.”
The Lake County Board of Commissioners is expected to have a conversation Monday about the partner in its fiber broadband project, National Public Broadband. Members are meeting at 6:30 p.m. at Grand Superior Lodge just north of Two Harbors for their annual organizational meeting.
The board has been uneasy about the tie between NPB CEO Tim Nulty and a troubled telecom in Vermont. Nulty spoke to board members last week to make the case that he left Burlington telecom before its financial problems began.
The board could make a decision on whether or not to team with National Public Broadband permanently at its regular meeting at 10 a.m. Tuesday at the courthouse.
It’s unclear if voting NPB out of the picture would end the project or even set it back. Officials at the U.S. Department of agriculture, which provided $66 million in a loan and grant for the $70 million project, said only a “significant change” would bring it to look at the application for those funds. It did not define what it would consider a significant to pull the funding and had no comment on Nulty heading up NPB.