Eau Claire and Chippewa Falls worked together to build a high-capacity broadband network connecting community anchor institutions, including schools, clinics, traffic lights, and more. Called the CINC for Chippewa Valley Inter-Networking Consortium, they now have higher capacity connections, more control over their future telecom needs and budgets, and can run applications that make their operations more efficient (lessening the pressure on the tax base).

The Building Community Capacity through Broadband, a stimulus funded project, has put together a video describing what they did and how they did it. Learn more about these BCCB projects here.

As you watch the video, remember that AT&T and its industry allies want to make projects like this illegal. They want to force the schools, libraries, etc. to pay much more for slower, less reliable networks. While the WiscNet attack in June failed, telcos are still trying to create a monopoly for themselves providing these services.

The lawsuit against the project has a hearing on November 11th where the Judge may decide to dismiss the case. If the case proceeds, the bench trial will be in early January. We frequently see lawsuits like these from big carriers that do not expect to win the case but rather are just harassing any potential competition to raise the cost of challenging the incumbent. So even though BCCB will almost certainly win the case, the telco goal is mostly to threaten any community that follows the good example of these communities.

Video: 

After more than a year of expecting Citibank to file suit against Burlington, they finally did. Burlington Telecom, a muni FTTH network, now illustrates the worst case scenario for muni broadband. After the founder of the network left following disagreements with the Mayor, the Mayor's Administration ran the network into the ground (leading us to recently publish the report "Learning from Burlington Telecom: Some Lessons for Community Networks."

Burlington had financed its network with a municipal capital lease, rather than the more commonly used revenue bonds, meaning that the actual network secures the loan. In this arrangement, the network is technically owned by the lender (Citi) and Burlington leased it. So when Burlington decided to stop paying the lease for the network, it became Citi's problem.

And Citi had a lot of problems due to the games massive banks were playing having killed the economy. BT became just one more non-performing asset. They did nothing while the City continued to run the network without making lease payments. Now Citi is suing for the world (this is how these things work) but it isn't clear that Citi can actually get what it demands (the State has a say in whether the network simply gets shut down, which Citi is presently asking for). And if the network did get shut down, Citi would be in a worse position to recover any of its losses because the value of the network is far greater than the sum of its parts.

State law says that losses from a public telecom venture cannot be carried by taxpayers, which is where we return to an interesting document prepared by the Mayor's Administration. As reported by Blurt:

In its lawsuit, Citibank notes that a letter written by attorney Joe McNeil on behalf of Burlington "expressly warranted to Citibank that at least 40 percent of Burlington's revenues were derived from sources other than taxpayers' funds and would be available to fund payments to Citibank, and further, that Burlington had the financial resources and ability to make all payments to Citibank for the full term of the agreement."

I read that document last year and remember being fairly surprised as it appeared to be incorrect from my non-lawyer reading of the law. This is just another case in which the Mayor's Administration played too fast and loose with essential infrastructure.

We have watched in dismay as Burlington Telecom transitioned over the past four years from a model community network to the worst case scenario. This situation proves only that community networks can suffer from bad management in some of the many ways private telecom companies can suffer from bad management (resulting in anything from bankruptcy to prison).

Communities can learn lessons from Burlington's situation -- chief among them that transparency is important. As with other public enterprise funds, the operation should be regularly audited and oversight must be in place to catch errors early, when corrections are easier and less costly.

Unfortunately, Burlington Telecom is in a very bad position presently. The actions of the Mayor's Administration made that position worse than it could have been. Time will tell if it can be saved. Given its important positive contributions to the city (millions of dollars in community savings, increased economic development), the City would benefit from its continued operation.

Five years ago, Michigan decided to deregulate cable companies, preempting local authority to negotiate with cable companies in favor of a more relaxed statewide franchise. Many states have gone down this path in hopes of spurring competition and lowering the prices for service. All have seen very minimal gains (mostly from AT&T U-Verse and Verizon FiOS, deployments that have gone forward as well in states that did not preempt local authority). None have seen real decreases in prices.

Michigan also created greater hurdles for the public sector (click on Michigan on our Community Broadband Preemption Map for an explanation of the legislation). In short, Michigan made a big bet that the private sector would build the networks they need to remain competitive. The results are in.

"No matter how you look at it, 70 percent of Michigan's communities still have only one cable provider four years after deregulation," said Deborah Guthrie, President of MI-NATOA, in a statement. "Even in the places where two providers offer service, if serious competition existed, prices wouldn't run up several times faster than inflation and customer service wouldn't be so poor."

Michigan's National Association of Telecommunications Officers and Administrators joined with the Michigan Alliance for Community Media (neither of which seems to have much a web presence) to note that Comcast's prices for lifeline basic have gone up 18% with other services increasing 3x the rate of inflation. Most communities remain stuck with Comcast or Charter solely, two of the most hated corporations in America.

As we educate legislators around the country, we need to keep the lessons from Michigan in mind. Legislators often know very little about telecom issues and are bombarded by lobbyist talking points - but examples like Michigan clearly show what happen when the telco and cableco lobbyists make policy.

And so long as we are discussing Michigan, it is worth noting that the City of Detroit is pushing to have Michigan's statewide franchise law invalidated. Below you'll see the pdf of Detroit's recent motion for summary judgment, offering background for those who are interested.

In a situation similar to the Frontier letters to Sibley we published last week, the cable company Mediacom has sent letters to Silver Bay and Two Harbors in Lake County to scare them into abandoning the rural county-wide FTTH network that they are building with federal broadband stimulus aid.

Interestingly, rather than sticking to the normal fear, uncertainty, and doubt (FUD) campaign, Mediacom apparently based its threats on a draft previous version of the joint powers ordinance rather than the language actually passed by the resolutionsincluded in the current JPA. Whoops.  [See Update below]

Mediacom, perhaps you should focus on improving your networks rather than stifling potential competition.  Please send us copies of letters your community network has received from incumbent providers.

Without further ado, here is the letter [download pdf] sent to Silver Bay and Two Harbors on December 21, 2010 by Tom Larsen, VP of Legal and Public Affairs for Mediacom:

Re: Joint Powers Agreement with Lake

County Dear Mayor Johnson:

Mediacom prides itself in being one of America's leading providers of telecommunications services to small and medium sized communities. As you may be aware, Mediacom offers a highly competitive suite of high-speed Internet, cable television and phone services to homes and businesses throughout Silver Bay (the "City").

It has come to our attention that the City passed a resolution on November 15, 2010 approving a Joint Powers Agreement with Lake County (the "JPA"). Given the significant private capital that Mediacom has invested in order to make advanced telecommunications services available throughout the City, we were extremely surprised to learn that your resolution approving the the JPA includes the following finding in Section 4(e):

The Municipality hereby finds that the facilities composing the Project are necessary to make Internet and other communication services that are not and will not be available through other providers or the private market accessible and available on an equal basis to the residents of the municipality.

As Mediacom makes Internet and other communication services available on an equal basis to residents of the City, the finding contained in Section 4(e) is patently false. It appears that the JPA is an essential element in Lake County's ability to close on a $56 million loan and $10 million grant from the Rural Utility Service of the United States Department of Agriculture. Given that this outright false statement is being made by the City with the knowledge that it is both false and may be relied upon by the federal government when issuing $66 million to Lake County, the City may want to investigate whether it has incurred financial liability or criminal exposure by entering into the JPA. Mediacom plans to call this matter to the attention of the Office of Inspector General of the United States Department of Agriculture.

The JPA also appears to be an essential element in Lake County's ability to issue revenue bonds pursuant to Minnesota Statutes, Chapter 475. The JPA makes clear that it is your City's "need" for facilities that it supposedly does not "have" that is the justification for the revenue bonds. In fact, Section 6(a) of the JPA requires the City to make false representations that it will only be able to receive Internet and communications services if the revenue bonds are sold:

[A]dopt a resolution (i) evidencing its [the City's] intent to authorize the Issuer to undertake and operate the portion of the Project located within its jurisdictional boundaries, including a recital of the benefits to such Party [the City] from issuance of the Obligations to finance and operate the portion of the project located within its jurisdictional boundaries, (ii) making specific findings regarding the benefits of the Project, including the findings in Section 2 of this Agreement . . .

These false representations by the City may have also exposed it to significant legal liability from the purchasers of the County's revenue bonds on a theory of fraudulent inducement.

It is imperative that these material misstatements of fact be corrected. Accordingly, Mediacom requests that the City immediately take action to correct these false findings by rescinding or amending the JPA. We also request that the City immediately notify any and all affected municipalities (including Lake County), bond issuers, government agencies (including the Rural Utilities Service) or other persons or parties that the JPA contained material misstatements of fact and should not be relied upon.

Further, we request copies of all correspondence and/or information relating to the JPA possessed by the City, including a list of all municipalities, bond issuers, government agencies, or other persons or parties who may have been provided a copy of the JPA. Additionally, we request all materials, statements and/or other information which was provided to or considered by the City in connection with the JPA including the identity of any individuals making oral or written statements or representations to the City regarding the availability of Mediacom's Internet or other services offered in the City.

I appreciate your prompt attention to this matter. Please do not hesitate to contact me should you have any questions.

Sincerely,
Tom Larsen

Lake County responded thusly [download pdf]:

Dear Mr. Larsen:

We have been provided with copies of the letters dated December 21, 2010, which you sent to the Cities of Silver Bay and Two Harbors in Lake County, Minnesota. We are sending this letter as a response.

First, let me point out that the Joint Powers Agreement (JPA) was not a condition precedent to the loan and grant of funds by the United States of America acting through the Rural Utilities Service. The Rural Utilities Service made the decision to award the loan and grant to Lake County well before the Cities of Silver Bay and Two Harbors decided to participate in the network through the JPA.

Second, it is regrettable that you did not have a current copy of the JPA to review. The current version of the JPA provides as follows:

The findings in section 2 are:

1. It is in the best interests of the Municipalities to consent to the issuance of the Obligations by the Lake County HRA and the operation of the Project by Lake County.
2. Each of the Municipalities will receive substantial benefit from the Project which will provide advanced voice, video and data services, accessible and available on an equal basis to residents of each of the Municipalities.

Section (6)(a) of the current version of the JPA states:

Each of the Municipalities will consider, if necessary and requested by Lake County, adopting an ordinance, or modify an existing ordinance to allow such Municipalities to issue an extension permit to Lake County pursuant to Chapter 238 of the Minnesota Statutes and all other applicable laws, rules, regulations and ordinances now or hereafter in effect. Each of the Municipalities further agrees to consider issuing an extension permit to Lake County if necessary and requested by Lake County in accordance with all applicable laws, rules, regulations and ordinances now or hereafter in effect.

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.

If you have any further questions, please feel free to contact me.

Sincerely,
[no-glossary]Russ Conrow[/no-glossary]
Special Assistant Lake County Attorney

Update: After I published this story, VP Tom Larsen contacted me to correct my claim that Mediacom based its objection on a draft:

Given that these are real documents (not “draft” as you described) that were signed by Silver Bay’s City Administrator and Mayor and approved by the City Council, I hardly think my letter can be characterized as false accusations.

Mr. Larsen is correct, the language was not a draft.  However, it was updated in a later version of the Joint Powers Agreement.  I have attached both version of the Joint Powers Agreement here for readers to view (Nov 15 and Nov 25).  Apologies for mischaracterizing Mediacom's actions.  However, we will continue to maintain that a cable network is no more a substitute for a FTTH network than an ultra-light airplane is a substitute for a Boeing 777.