Residents eager for fiber service
“Do you have a list where we can sign up today?” That was the sentiment of one of 18 people at a public forum on the Lake County fiber-to-home project last Thursday. And it pretty much sums up the one-hour meeting that began with county officials explaining the project and then taking questions.
- Russ Conrow
“Do you have a list where we can sign up today?”
That was the sentiment of one of 18 people at a public forum on the Lake County fiber-to-home project last Thursday. And it pretty much sums up the one-hour meeting that began with county officials explaining the project and then taking questions.
It was the first of three public meetings on the project scheduled. On Tuesday, the county board will meet at 6:30 p.m. at city hall in Silver Bay for a similar discussion and it has penciled in a meeting in the Ely area for next month.
Former Lake County Attorney Russ Conrow, now a consultant on the project, opened the meeting at the Lake County Courthouse with an overview of the project from its seeds in 2009 to the status today. New project managers Jeff Roiland and Gene South are still studying the project and still expect work to begin this spring with the first customers on line by early next year.
The project was stalled early this year when the county couldn’t come to terms on a long-term contract with National Public Broadband, which had put together Lake County’s application for federal funds and was working on the engineering for the system.
Roiland and South are now reviewing the two years of work to establish a launching point in going forward with the project. Roiland said Thursday they had only “scratched the surface” on that review.
South said there wouldn’t be any dramatic changes in the plan to bring high-speed internet, video, and telephone service to every home and business in Lake County and parts of St. Louis County. The managers want to “make sure we don’t re-invent the wheel,” South said.
Audience members first asked what the price would be for what is commonly referred to as “triple play” service – phone, internet, and cable in one package. Roiland said the goal is to be in the $100 to $125 range, lower than what some audience members are paying now, some with satellite and others with cable companies in the region.
The county fiber system, which will be open for private companies to lease lines for their services, would offer speed in increments. Roiland said faster speeds would cost more and reminded the audience that the system would have lines dedicated to the service area only to avoid data clogs.
The all-new system would be mostly above ground on poles, in deference to the geography of the area. It will use “mid-mile” lines, highways of fiber between major population centers, being put in by the Northeast Service Cooperative in its efforts to link institutions like schools and medical centers to high-speed service.
There would be hubs placed in strategic places and lines to homes would come from there once a resident signs up for service. The managers stressed that no one is required to pick up the service unless they want it.
Roiland said his past experience, mostly in establishing a fiber system in Willmar, had free hookups to homes.
A similar project is going through in Cook County and other parts of the state and Lake County’s projection of a 60-percent take rate is in line with the customer projections of other projects, Conrow said.
Complaints pending
County board members were a bit surprised but happy about the enthusiasm for a project that has had its ups and downs.
The project continues to fight objections from incumbent service carriers like Mediacom, which last month filed a federal complaint about the project unfairly cutting into its cable customer base with a business plan it says won’t work, putting taxpayer money at risk.
The Minnesota Cable Communications Association joined the fray at the end of February, sending a massive data request to Lake County and all the governments within the project area. County Attorney Laura Auron said she “objected to the characterization” the cable industry advocate group made about the project. The MCCA wrote that is was “deeply concerned about the shroud of secrecy” about the project, calling efforts to get the project in line with state and federal rules “opaque.”
The association demanded to see the county’s business plan and contracts for the project. It also asked all the cities and townships in the joint powers association, a requirement under the Rural Utilities Service rules for grants and loans, to provide all information regarding the fiber project discussed at council and board meetings.
Two Harbors City Attorney Steve Overom wrote to Auron after receiving the data request, saying the “proper place to raise questions about this process is with the county.”
Auron said she spoke with the association’s attorney and is complying with the request for the information, which is public and has been readily available since the start of the project. Cities and townships are not partners in the project, as the MCCA letter implies, and would likely only need to provide a copy of the joint powers agreement to satisfy the information request. The JPA allows Lake County to use infrastructure in the townships and cities to string the fiber. The document stresses that there is no financial liability for the government bodies.
“There’s procedures you have to follow,” said MCCA Executive Director Mike Martin. He stood firmly by the tone of the letter, implying that county residents have been left in the dark about the project and urging a “public discussion.” He said his group had requested information on the fiber project in the past but didn’t receive any.
Martin echoed Mediacom’s concern that the county can’t offer cable service without a franchise, which would require a referendum by voters. County officials said the original plan called for consultant National Public Broadband to have the franchises to run the network. That plan has been scuttled since NPB was dropped by the county.
Russ Conrow, an attorney working with the county on the project, said franchise plans are still in flux as the new project managers go over the plan and revise it.
Martin said the county is dealing with “a lot of money” and “they can’t just do this on the back of an envelope.”
The county is under strict project guidelines from the federal government. The $56 million loan and $10 million grant comes from the Rural Utilities Service, a branch of the Department of Agriculture, which is using federal stimulus money to bring broadband access to rural areas of the country. On Thursday, Conrow said RUS has the final say on every aspect of the project because it won’t release funds unless benchmarks are satisfied. “They say yes, they say no,” he said.
Bond issue
Lake County is facing another battle concerning the recent changes in its plan. In December it agreed to a bond purchase agreement to secure $3.5 million to satisfy requirements to get the federal funding.
The county later found out that RUS would not accept the bond arrangement and the county pulled out of the deal in February. The county board decided to dedicate its own money for the project after a year of telling residents that taxpayer money would not be used. Aside from the RUS edict, the county stood to save more than $2 million in interest by using its own cash on hand.
Orix Public Finance says the county is in breach of contract and, in preliminary court documents, is demanding damages of $3.3 million and a termination fee of $560,000.
The county uses an outside law firm for its bond arrangements – Fryberger, Buchanan, Smith, and Frederick in Duluth. Attorney Mary Frances Scala wrote her opinion on the Orix deal Feb. 23, saying the deal was void because conditions on its validity could be met. She said the most obvious condition was that the contract would only go into effect if RUS released funds to the county. Because RUS said the county bond deal wouldn’t work, the deal could be voided.
Scala said there would be no project to bond for if the county held on to the bond deal. “Without a project, there is no purpose to the funding,” she wrote. She is using what is called a “frustration of purpose” to clear the county of any wrongdoing, saying both parties acted in good faith and are “not at fault for the RUS rejection.”
Attorneys for Orix did not return calls asking for comment. They faxed copies of a complaint to the News-Chronicle but offered no explanation of it. Skala’s Feb. 23 letter is included in the complaint, meaning Orix is aware of the county’s position.
The complaint has no date and there is no information on whether it was actually filed in a court. The document asks the district court in Dallas, where the company is based, for a review of information within 50 days. Aside from the contract money, it is also asking for attorney fees and a jury trial.
Scala said Orix can’t file for a termination fee unless the lender terminates the bond contract. She said the RUS requirements scuttled the deal, not the county. Another cause for termination fees is if the county would have dropped Orix and gone with another issuer. It instead is using its own money.
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