Was it a violation of broadband stimulus requirements? Or is it merely a frivolous attempt by an incumbent cable service provider to thwart new competition?
That’s what the inspector general of the U.S. Department of Agriculture will have to decide, now that Mediacom Communications has filed a complaint with the USDA against Lake County, Minnesota, which won a total of $66.5 million in broadband stimulus funding for a fiber-to-the-home project. Mediacom is the nation’s 12th largest cable operator, and among other places, it provides service in areas where Lake County plans to deploy FTTH.
In the complaint, Mediacom makes several allegations, including arguing that 30% of homes in the project’s service area are unoccupied—at the moment, anyway. In a report posted on the StimulatingBroadband website, Mediacom’s vice president of public and legal affairs is quoted as saying that many homes included in the project “appear to be cabins in the Superior National Forest” that are only used seasonally. Because these cabins are particularly costly to deploy, the Mediacom filing argues that they boost the average cost per home of the project to a level that will not support a viable long-term business model.
Mediacom also argues that “a significant number of housing units” in parts of the project serving area already have Internet access at speeds of 20-50 Mb/s. In addition, the cable operator accuses Lake County of entering into a prohibited “fee for success” contract with National Public Broadband, the consulting firm that helped the county with its stimulus application.
The Mediacom complaint is the latest development in what has been a turbulent history for the Lake County Fiber Network project. As Telecompetitor has previously reported, Lake County Board of Commissioners earlier this year voted to use public funds for the $3.5 million in matching funds that were committed for the project rather than bonding for the money as originally planned. The county reportedly made that decision because the cost of the bond was too high. But according to a report published by the Lake County News Chronicle, there was another more compelling reason for that decision. The Rural Utilities Service, which made the broadband stimulus award, would not accept the bond arrangement.
The Chronicle also reported that Orix Public Finance, which planned to work with Lake County on the bond agreement, has charged the county with breach of contract—although the reporter was not able to confirm whether a formal complaint had been filed. The reporter also quoted an attorney for Lake County, who argued that Orix Public Finance has no case against the county because the RUS refusal to accept the bond financing voided the county’s agreement with Orix.
At around the same time that the Lake County Board of Commissioners made the decision to change their funding mechanism, they also made another controversial decision. They opted not to use National Public Broadband as the consultant for the project. That decision, the board said, was made because the parties could not agree on contract terms. But there was also speculation that the decision was made because of concerns about National Public Broadband’s chief executive Tim Nulty.
Nulty previously headed up Burlington Telecom, operator of a municipal fiber network in Vermont that recently was unable to make its loan payments. Nulty left the company in 2007 and has argued that the financial problems occurred after he left the company.
The new complaint filed by Mediacom raises new questions about Nulty, however. And Mediacom is not the only entity that is challenging the Lake County fiber project. The Minnesota Cable Communications Association also has raised concerns.
In the Chronicle article, the MCCA executive director argues that the county can’t offer cable service without a franchise, which would require a referendum by voters. According to the article, county officials said the original plan called for National Public Broadband to have the franchises to run the network.
The MCCA also has requested “massive” amounts of information about the project from Lake County and “all the governments within the project area,” the Chronicle reported.
Lake County reportedly has hired a new management team for the fiber project. But the project could be on hold until the Mediacom allegations are resolved. According to the Chronicle report, the RUS has not yet released funds for the project.