Lake County's County-wide FTTH network has encountered more than its fair share of troubles but residents are excited at the prospect of having broadband access to the Internet. While some of its troubles came from their own confusion and misunderstanding that led to the falling out with their consultants, National Public Broadband, they are now in the cross hairs of a powerful cable industry group - the Minnesota Cable Communications Association.

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.

MCCA exists to protect the interests of its members -- fair enough. Too bad for the folks in Lake County that have no access to the Internet. Because a portion of the project will give the resident of Silver Bay and Two Harbors an actual choice (disrupting the monopoly of Mediacom), MCCA is using a common tactic to delay and disrupt the project: massive public records requests. All the while, MCCA pretends its core mission is advocating on behalf of the beleaguered citizens of Lake County.

We commonly hear from publicly owned networks that they have to deal with constant data requests from competitors. This goes far beyond any reasonable amount as incumbent companies use the requests themselves as a time suck attack against publicly owned networks as well as mischaracterizing any detail they can in an attempt to smear the network.

Communities should be ready for this onslaught. From what we can tell, it never really stops. This is another reason community projects should live in public to the greatest extent possible. Secrecy is not really an option and can consume more energy than community networks can spare.

MCCA is correct that Lake County should act transparently, but its interest lies only in casting doubt and disrupting this potential network because it threatens the monopoly of an MCCA member.

For two years, National Public Broadband (led by Gary Fields and Tim Nulty) has worked with Lake County, Minnesota, to build a universal rural FTTH broadband network to everyone in the County and some nearby towns in Saint Louis County. Toward the end of 2010, the relationship became somewhat tense as some county commissioners questioned what NPB had told them about Burlington Telecom, and a number of media outlets raised questions about Nulty's relationship to BT's problems without actually investigating the story.

Now the Lake County News-Chronicle (which, over the course of this story, has taken the time to report facts rather than following the lazy lead of the Star Tribune and Duluth News Tribune), reports that Lake County and National Public Broadband are kaput. Lake County is seeking a new partner to build the project.

Lake County could not reach agreement on a permanent contract with National Public Broadband, its consultant firm for nearly two years. The two sides battled for nearly two months and couldn’t solve issues based on bonus payments and the ability for the county to fire NPB without cause and without penalty. The negotiations had bogged down work on the actual project, Commissioner Paul Bergman said, and the board wanted a fresh start.

Additionally, due to the state of financial markets, the County is planning to self-fund the $3.5 million local obligation required to access to the broadband stimulus award. Lake County hoped to bond for the matching funds but the current interest rates make that an fiscally unwise approach.

While this does not change the project, it will change the perception of the project and open it to increased attacks from those who don't want the County to build a network (despite the fact that private providers have no interest in providing anything other than slow DSL and cable networks).

The County had long maintained that no public money would be used. However, most people will likely not care as long as the project keeps its promise to deliver fast, reliable, and affordable broadband to the community. This is the need -- and people need to stay focused on achieving this goal.

At a commissioner meeting in late December, Gary Fields commented to the Board that they had to have trust in NPB if the project was going to work. It is hard to know without being at most of the previous meetings, but I suspect the problem came as a result of NPB being nuanced about Burlington Telecom (until late 2009, no one knew how badly the post-Nulty management had hurt BT). Some of the Commissioners apparently interpreted BT as an unqualified success and felt misled when they learned of BT's present problems.

Regardless of who was at fault (and to what degree), Fields was correct. These projects are necessary but still damn hard to build. There will be a lot of stress and it is better for NPB and Lake County to split now if they cannot heal the past. Otherwise, the inevitable bumps in the road of the project (that will occur no matter who builds the networks), would likely just open old wounds and hurt the project. The project needs to have the strong support (and unwavering oversight) of the community, particularly as incumbent providers (ahem, Mediacom) look for any weakness to derail the potential for residents to have actual choices in telecommunications services.

National Public Broadband should be credited with bringing the stimulus award to Lake County -- now it is on Lake County to follow through and make the project work. No one builds these networks because it is easy -- they build them because the future of the region requires fast, affordable, and reliable broadband.

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.  

I just spoke with Danna MacKenzie of Cook County and Gary Fields of National Public Broadband (working with Lake County) to find out just how excited they are about yesterday's announcement of broadband stimulus awards. Both Lake and County (separate projects) have been funded to build fiber-to-the-home networks to everyone on the power grid in the region.

They are pretty excited.

In a few years, these North Shore Communities will likely have better broadband options than the metro region of Minneapolis and Saint Paul -- a far cry from the beginning of this year when a single fiber cut stranded the whole north shore.

Bob Kelleher at Minnesota Public Radio covered the awards:

Combined, they will connect 37,000 residents, 1,000 businesses and 98 institutions such as hospitals and schools.

Cook County actually has a double whammy - they already stood to benefit from the North East Service Cooperative, which is building high capacity fiber-optic lines through the North Shore to offer middle-mile backhaul and connect local government facilities and schools.

As of yesterday, they will also get a fiber-to-the-home network from the Arrowhead Electric Cooperative. Cook, currently served in part by Qwest, has little access to true broadband -- some 37% have access to anemic DSL connections and the rest are stuck with dial-up.

Details of the award from Kelleher at MPR:

Joe Buttweiler, who directs membership services with the Lutsen-based Arrowhead Electric Cooperative, said 70 percent of the federal award is a grant and the remainder a loan. He said the cooperative will add another $600,000 for capital.

Back in April, Blandin's Broadband blog published the short summary of the Arrowhead project:

Arrowhead Electric Cooperative proposes to build and operate a fiber optic network to the residential and commercial members of the cooperative as well to underserved safety and anchor agencies in our service area. This project is designed as an open network allowing multiple qualified vendors to offer services on the system.

I will be fascinated to see how the open network fares -- who will choose to provide services on it, and how will the network fare? This open access arrangement is our single best hope as a nation to escape from the extremely limited broadband competition we see presently.

Over in Lake County, the new network will reach into parts of St Louis County, including the communities of Ely, Babbit, Hoyt Lakes and Fairbanks. Some of the these folks have been working for many years to build a community fiber network, which undoubtedly facilitated their joining the Lake County project. See project map [pdf].

From the RUS Press Release for Lake County [pdf]:

This approximately $66.3 million award, matched by $3.5 million in private contribution, will allow Lake County to offer FTTP advanced voice, video and data services to every home and business in Lake and eastern Saint Louis Counties. Approximately 37,000 people stand to benefit, as do roughly 1,000 businesses and 98 community institutions. In addition to the 510 jobs Lake County estimates this project will create upfront, it will provide a foundation for economic growth and job creation for decades to come.

A press release from the project notes [pdf]:

Construction of the network is expected to begin in Spring, 2011. The first customers are expected to be connected within one year. The entire network will be completed within 3 years. Lake County Commissioner Paul Bergman stated, “This network will be designed with redundant connectivity, so that service interruptions that we have experienced this last year won’t be possible.

A story from the Duluth News Tribune offers more background about the project:

The $66.3 million award from the Department of Agriculture comes through its Broadband Initiatives Program. After other matching funds, the total will be about $70 million, Bergman said. The award breaks down as a $56.4 million loan and a $10 million grant. There will be about $3.5 million on municipal bonds issued, which would be paid back with operational revenues.

When we at ILSR learned of the broadband stimulus program last year, these are the exact sorts of programs we hoped would be funded. So as we hit the end of the broadband stimulus grants, it is nice to go out on a high note.

Update: Beyond the stimulus, Duluth must be considering what it will do -- it will soon have a wealth of middle-mile but it has been left out of last-mile investment whereas neighbor Two Harbors will get FTTH.

Update 2: It seems that some who are not on the grid want to connect to the Net. Fascinating!