When last we looked in on the Lake County FTTH project connecting rural areas north of Lake Superior, the County had just ditched its original management team and Mediacom started trying to derail the project.

The County went on to hire "Lake Communications," a two man firm created for this project, while Mediacom presumably returned to quietly scheming against the introduction of any competition on their turf. Lake Communications has received authority by the Minnesota Public Utilities Commission to provide broadband in their target territory.

Kevin O’Grady, a staffer for the Public Utilities Commission, called Thursday’s 5-0 vote “uneventful.” He said that aside from a protest from the Minnesota Cable Communications Association that was withdrawn just before the vote, the application was “nothing out of the ordinary.”

The cable association, which faces competition from the fiber project, had complained that the county, without a public vote, couldn’t be the legal authority to provide telecommunications services under Minnesota law. The commission, responding to the complaint, said the authority would be granted to Lake Communications, which it deemed had a proper relationship with the county in providing the service.

…

The county plans to build the network and lease the lines to Lake Communications for revenue. In its original response to the cable association’s complaint, the state commission said Lake Communications’ application “complies with the requirements typically applied by the commission to applications” across the state. It also stated that Lake Communications’ financial statements were “sufficient and consistent with the financial information filed by other applicants for authority.”

Remember that Minnesota law requires a supermajority vote of 65% before cities and counties provide telephone service. In this case, Lake Communications will be offering the services on infrastructure owned by the County. If there is any sliver of a doubt about the legality of this arrangement, we can expect Mediacom or the Minnesota Cable Communications Association to file suit.

But now is probably not a good time for them to sue. Most of the time, the point of lawsuits against community networks is not about winning the suit, but rather delaying and disrupting the project. So one would expect a lawsuit to occur much closer to the ground-breaking. Why risk suing now, when the lawsuit could be resolved over the winter, when little work is being done? Better to wait and hope the suit takes much of the construction season away from the potential competitors.

We hope this is too cynical a reaction, but watching some of these lawsuits play out leads one to such suspicions.

This is yet another reason the Minnesota Legislature should make it very clear that local governments have full authority to bond for, finance, build, operate, and own these networks -- preferably with no more barriers than are common for other significant public expenditures.

Without this project, much of Lake County and the nearby areas also served by this project will simply not have fast, affordable, or reliable access to the Internet. Let's hope the anti-competitive desires of a few companies in portions of the county do not derail it for everyone.

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.

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.  

Last night, I drove down to Winthrop (Sibley County) and then Fairfax (Renville County) to get a better sense of their discussions around next-generation broadband networks (originally covered here).

Throughout this week, they are having public meetings to discuss the potential project though the feasibility study is not yet completed. Doug Dawson of CCG Consulting, author of the feasibility study, is in town talking with folks about potential approaches. However, he made it clear that there is no guarantee they will find a business plan that can work to cover all of Sibley County and the area around Fairfax. Stay current on their project from the Sibley & Renville County Fiber site.

Winthrop's City Administrator, Mark Erickson, is committed to serving the farms though. There is little doubt that the project could succeed financially by serving only the towns, which harbor some 80% of the population. But Erickson recognizes that the towns depend on the farmers and that everyone will benefit more from the network if it is universally available.

Many of the people in towns already have access to some basic broadband - either a slow DSL (in some cases so slow even the old super slow FCC broadband definition does not cover it) or a last-generation cable network from Mediacom. The cable television comes out of Dubuque though, so it isn't exactly local.

The project was originally conceived to cover Sibley County. However, a high school in nearby Fairfax has decided to use iPads [pdf] to revamp its curriculum and it would be a travesty to have such great broadband available across the county border when so many students at GFW have iPads but little access to true broadband.

Most of the area schools have continued to do what they can with basic T.1 lines - too little broadband (at too high a cost!) to really use any modern educational applications. And the mandated state-wide testing is a nightmare across these connections. The new network will bring proper broadband connections at affordable rates.

At the meeting in Fairfax, there was definitely concern that it would simply be uneconomical to include all the farms. Though the costs are high, sometimes I think everyone has bought too deep into the idea that we cannot run fiber to everyone in this country. We have forgotten the successes of rural electrification, that we can solve these infrastructure problems to the benefit of everyone.

A common theme across all these networks is that the cities really do not want to get involved but are compelled to take responsibility because they have no future without broadband. Economic development and quality of life are very much linked to broadband access.

Ironically, Mark Erickson moved to Winthrop to get away from the hassles of telecom -- he used to work for Hiawatha Broadband (HBC), one of the few private companies that partners with cities to operate on city-owned infrastructure (as they do in Monticello). He had washed his hands of telecom and broadband until his City Council told him they needed to do something to improve broadband access for the citizens.

In six weeks they should get some numbers from the feasibility study to get a sense of how a project could work. In the meantime, the results of the telephone survey found a lot of support for local government getting involved in building a network (though the final network may be a coop model rather than being municipally-owned).

In the meantime, we'll see if Mediacom and phone companies start trying to erode that base of support with the standard campaign of Fear, Uncertainty, and Doubt (FUD) that they are famous for.