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Alaska’s Telecom Companies Will Waste $365 Million in Taxpayer Funds Building Duplicate 4G Networks

A new fiber provider is expected to vastly expand Alaska's internet backbone, but there are not enough middle mile networks to allow all Alaskans to benefit.

Quintillion, a new underseas fiber provider, is expected to vastly expand Alaska’s internet backbone, but there are not enough terrestrial middle mile networks to allow all Alaskans to benefit.

A federal taxpayer-funded effort to improve broadband access in rural Alaska will instead improve the bottom lines of Alaska’s telecommunications companies who helped collectively “consult” on a plan that will pay $365 million in taxpayer subsidies to companies building profitable and often redundant 4G wireless networks.

The Alaska Plan, which took effect Nov. 7, is a decade-long effort to subsidize telecom companies up to $55 million annually to encourage them to expand broadband service to 134,000 Alaskan households that get either no or very little internet service today. The Alaska Telephone Association (ATA) — an industry trade association and lobbying group, claims if the plan is successful, only 758 Alaskans will still be waiting for broadband by the year 2026.

But critics of the plan claim taxpayers will give millions to help subsidize private telecom companies that have plans to spend much of the money on redundant, highly profitable 4G wireless data networks that will cost most Alaskans large sums of money to access.

One company — AT&T, which refused to participate in the plan, is still taken care of by the plan, receiving $15.8 million dollars from taxpayers for doing absolutely nothing to improve broadband service in Alaska. The plan directs the money to AT&T to provide phase-down, high-cost support, which drew a sharp rebuke from Republican FCC commissioner Ajit Pai, who questioned why taxpayers had to subsidize AT&T for anything.

“The order claims this a ‘reasonable’ accommodation but cannot explain why the nation’s second largest wireless carrier needs ‘additional transition time to reduce any disruptions,’” Pai wrote.

quintillionThe biggest weakness of the plan, according to its critics, is its lack of support for middle-mile networks — wired infrastructure that connects providers to a statewide broadband backbone that can manage traffic needs without having to turn to slow-speed satellite connectivity. One of Alaska’s biggest challenges is finding low-cost connectivity with Canada and the lower-48 states. Much of the state relies heavily on GCI’s still-expanding TERRA network, which provides fiber as well as microwave connectivity to 72 towns and villages in rural Alaska. Quintillion, a new player, is working on stretching fiber connectivity through the Northwest Passage. Its forthcoming 30 terabit capacity fiber network offers the possibility of dramatically lower broadband rates and no more data caps, assuming providers have the network capacity to connect their service areas and the nearest fiber access point.

Instead of subsidizing the development of middle mile networks for this purpose, the authors of The Alaska Plan have instead favored wireless connectivity, including the very lucrative 4G wireless networks cellular providers want to expand. By definition, the broadband plan accommodates the limitations of wireless by easing broadband speed requirements for providers. To earn a subsidy, providers need not offer the FCC’s minimum speed to qualify as broadband — 25Mbps.

gciInstead, the ATA managed to convince regulators that 10/1Mbps service was good enough — speed that can be achieved by the DSL service phone companies favor. This is well below Alaska’s Broadband Task Force goal of 100Mbps for every state resident by 2020. Another free pass built into the plan is allowing providers to collect subsidies even when they do not offer 10Mbps because of network limitations, including lack of suitable middle mile networks. In those cases, the only speed requirement is 1Mbps download speeds and 256kbps uploads, the same as satellite broadband providers.

Commissioner Pai complained those are broadband speeds reminiscent of the internet a decade ago and hardly represents a vision for a faster future.

In a rare moment of bipartisanship at a divided FCC, Commissioner Mignon Clyburn joined Commissioner Pai dissenting from Alaska’s plan.

“It is clear that Alaska’s ‘majestic geography’ makes deployment difficult, but without affordable middle-mile connectivity, high-cost program support spent on the last mile does little to improve communications service to Alaskans,” Clyburn wrote. “Commissioner Pai and I supported an approach that would have taken the $35 million a year in duplicative universal service money and use[d] it to support a middle-mile mechanism that would enable many Alaskans in the Bush to receive broadband for the very first time. The status quo is simply not good enough, and the cost of doing nothing is far too high.”

Pai

Pai

Both Clyburn and Pai also complained federal tax dollars will be used to build duplicative 4G wireless networks that will primarily benefit providers. From Commissioner Clyburn’s statement:

We do not subsidize competition. We do not provide duplicative high-cost support to carriers in the same area and we do not subsidize carriers where other unsubsidized carriers are providing service. That underlying principle should be applied here as well. With Alaska’s “sublime scale,” we should instead be directing support to areas that are unserved, not subsidizing competition in areas that already receive mobile service. And just what is the cost to the American consumer of continuing to support overlap in these areas? About $35 million a year!

The companies benefiting from federal tax subsidies include: ASTAC, Copper Valley Wireless, Cordova Wireless, GCI, OTZ Wireless, which covers Northwest Alaska, TelAlaska Cellular, covering Interior and Northwest Alaska, and Windy City Cellular, covering Adak.

Clyburn

Clyburn

Pai called many of the spending priorities a waste of money that will still leave 21,000 Alaskans without 4G LTE broadband and another 46,000 without 25Mbps fixed broadband:

All together these wasted payments total $365 million, or about one quarter of the total Alaska Plan pot. That’s $365 million that could be used to link off-road communities to urban Alaska as requested by the Alaska Federation of Natives, the Bering Straits Native Corporation, the Chugachmiut rural healthcare organization, and many others. That $365 million is more than eight times the $44 million grant from the Broadband Initiatives Program that launched the TERRA Southwest middle-mile network that connected 65 off-road communities in 2011.

With the federal government now pouring federal tax dollars into Alaskan broadband, the state government has been using that as an opportunity to slash state investments in internet access.

A bill from Rep. Neal Foster (D-Nome) to upgrade all rural school districts to 10Mbps broadband for $6.2 million died in committee without any hearings, according to the Alaska Commons. State Rep. Lynn Gattis (R-Wasilla) proposed killing a $5 million broadband grant to schools, and the House Education subcommittee also recommended eliminating the Online with Libraries (OWL) program. Both programs ultimately survived, but not before the state legislature significantly cut the budgets of both programs.

Guttenberg

Guttenberg

State Rep. David Guttenberg (D-Fairbanks) hopes the results from last week’s election in Alaska will allow him to position stronger broadband-related legislation in the state legislature.

Guttenberg wants to reinstate a long-cut Broadband Task Force and Working Group while also creating a public Broadband Development Corporation that would build and own middle mile broadband infrastructure and sell it to telecommunications companies that have refused to build those types of networks on their own.

A lot of members of the ATA are lining up in opposition, the newspaper notes, because they won’t directly own the infrastructure. Guttenberg’s view is that the needs of the many outweigh the needs of deep-pocketed telecom companies.

“If you want to build a strong state, if you want to build a strong community, we need to start putting those pieces together,” Guttenberg said of broadband infrastructure last year. “If you give a kid a laptop or a pad in a school district, it’s pointless if he can’t get online.”

Google Fiber’s CEO Out of a Job; Fiber Expansion on Hold Indefinitely in Many Cities

Down the rabbit hole

Down the rabbit hole

Google has quietly announced an indefinite suspension of further fiber expansion as it prepares to downsize fiber division employees and re-evaluate its fiber business model.

In a blog post tonight from Craig Barratt, senior vice president of Alphabet and CEO of Google’s Access division, it becomes clear Google is rethinking its entire fiber strategy and is likely moving towards fixed wireless technology going forward:

Now, just as any competitive business must, we have to continue not only to grow, but also stay ahead of the curve — pushing the boundaries of technology, business, and policy — to remain a leader in delivering superfast Internet. We have refined our plan going forward to achieve these objectives. It entails us making changes to focus our business and product strategy. Importantly, the plan enhances our focus on new technology and deployment methods to make superfast Internet more abundant than it is today.

Barratt outlines the immediate implications of Google’s dramatic shift:

  • In the cities where we’ve launched or are under construction, our work will continue;
  • For most of our “potential Fiber cities” — those where we’ve been in exploratory discussions — we’re going to pause our operations and offices while we refine our approaches. In this handful of cities that are still in an exploratory stage, and in certain related areas of our supporting operations, we’ll be reducing our employee base.
Barratt

Barratt

Barratt himself is jumping ship (or was pushed). He announced in his blog entry he is “stepping away” from his CEO role, but will remain as an “adviser.”

Observing Google’s recent fiber efforts and acquisitions, it seems clear Google no longer thinks fiber-to-the-home service is an economically viable solution in light of competitors like AT&T rolling out increasing amounts of fiber and the cable industry is on the cusp of launching DOCSIS 3.1, which will dramatically boost internet speeds without a substantial capital investment.

Google’s investors have been lukewarm about the company’s economic commitments relating to its fiber broadband networks. Often built from the ground up, Google’s fiber construction complexities also include trying to navigate costly roadblocks established by their competitors (notably Comcast and AT&T), dealing with bureaucracies and red tape even in states where near-total-deregulation was supposed to make competition easy. Google Fiber has also not proved to be a runaway economic success, and now faces more challenges in light of upgrades from their competitors. Cable companies have slashed prices for customers threatening to cancel and have added free services or upgrades to persuade customers to stay, and Google’s proposition of selling consumers $70 gigabit access has proved tougher than expected.

It is highly likely the future of Google’s Access business will be deploying wireless broadband solutions powered by Webpass, a company Google acquired earlier this year. Webpass uses a high-speed point to point wireless transmission system the company claims can deliver gigabit broadband access to customers in multi-dwelling buildings and other urban areas. Webpass sells access for $60 a month (discounted to $550/yr if paid in advance) for 100Mbps-1,000Mbps speed depending on network density and capacity in the customer’s building. So far, Webpass has not been able to guarantee speed levels, and some customers report significant variability depending on their location and network demand.

Webpass’ wireless infrastructure costs a fraction of what Google has coped with building fiber to the home networks, and the installation of point-to-point wireless antennas on participating buildings has been less of a regulatory nightmare than digging up streets and yards to lay optical fiber.

webpassBut despite Webpass’ claim its performance is comparable to fiber, its inability to guarantee customers a certain speed level and its tremendous performance variability from 100 to 1,000Mbps exposes one of the weaknesses of fixed wireless networks. At a time when capacity is king, only fiber optic networks have shown a consistent ability to deliver synchronous broadband speeds that do not suffer the variability of shared networks, poor antenna placement/signal levels, or harmful interference.

There is room for wireless technology to grow and develop, as evidenced by the wireless industry’s excitement surrounding future 5G networks and their ability to offer a home broadband replacement. The emergence of 5G competition is almost certainly also a factor in Google’s decision. But even AT&T and Verizon acknowledge a robust 5G network will require a robust fiber backhaul network to support both speed and user demand. The more users sharing a network, the slower the speed for all users. No doubt Webpass has made the same assumption that cable operators did in the early days of DOCSIS 1 — current internet applications won’t tax a network enough to create a traffic logjam that would be noticed by most customers. The phone companies also learned a similar lesson trying to serve too many DSL customers from inadequate middle mile networks or traffic concentration points. (Some phone companies are still learning.)

Whether it was yesterday’s peer-to-peer file sharing or today’s online video, capacity matters. That is why fiber broadband remains the gold standard of broadband technology. Fiber is infinitely upgradable, reliable, and robust. Wireless is not, at least not yet. But technology arguments rarely matter at publicly-traded corporations that answer to Wall Street and investors, and it appears Google’s backers have had enough of Google Fiber.

Stop the Cap!’s View

tollAt Stop the Cap!, we believe these developments further the argument broadband is an essential utility best administered for the public good and not solely as a profit-motivated venture. The path to fiber to the home service in rural, suburban, and urban communities has and will continue to come from a mix of private and public utilities, just as local public and private gas and electric companies have served this country for the last century. Where there is a business model for fiber to the home service that investors support, there is a for-profit fiber provider. Where there isn’t, now there is often no service at all. So far, the FCC in conjunction with Congress has seen fit to solve broadband availability problems by bribing private providers into offering service (usually low-speed DSL that does not even meet the FCC’s definition of broadband) with cash subsidies, tax write-offs, or occasional tax abatement schemes. Imagine if we followed that model with the nation’s public roads and highways. We would today be paying tolls or a subscription to travel down roads built and owned by a private company often financed by tax dollars.

Not every product or service needs to earn Wall Street-sized profits. Nobody needs to get rich selling water, gas, and electricity… or broadband. Public broadband networks can and should be established wherever they are needed, and they should be priced to recover their costs as well as expenses that come from support, billing, and ongoing upgrades. Naysayers like to claim municipal broadband is socialism run wild or an instant economic failure, yet the same model has provided Americans with reliable and affordable gas, electricity, and clean water for over 100 years.

Maine was made for municipal broadband.

Maine was made for municipal broadband.

In New York, publicly owned/municipal utilities often charge a fraction of the price charged by investor-owned utilities. In Rochester, where Stop the Cap! is headquartered, one need only ask a utility customer if they would prefer to pay the prices charged by for-profit Rochester Gas & Electric or live in a suburb where a municipal provider like Fairport Electric or Spencerport Electric offers service. RG&E has charged customers well over 10¢ a kilowatt-hour when demand peaks (along with a minimum connection charge of over $21/mo and a “bill issuance charge” of 72¢/mo). Spencerport Electric charges 2.9¢ a kilowatt-hour and a connection charge of $2.66 a month, and they issue their bills for free. There is a reason real estate listings entice potential buyers by promoting the availability of municipal utility service. The same has proven true with fiber-to-the-home broadband service.

The economic arguments predicting doom and gloom are far more wrong than right. Municipal utilities are often best positioned to offer broadband because they already have experience providing reliable service and billing and answer to the needs of their local communities. Incompetence is not an option when providing reliable clean water or electricity to millions of homes and customers have rated their public utilities far superior to private phone or cable companies.

Google’s wireless future may prove a success, but probably only in densely populated urban areas where a point-to-point wireless network can run efficiently and profitably. It offers no solution to suburban, exurban, or rural Americans still waiting for passable internet access. Clearly, Google is not the “free market” solution to America’s pervasive rural broadband problem. It’s time to redouble our efforts for public broadband solutions that don’t need a seal of approval from J.P. Morgan or Goldman Sachs.

CenturyLink Broadband in Former Qwest Country is a Mess: Slow Speeds, Customers Leaving

molassesOnly half of CenturyLink’s customers in well-populated areas formerly served by Qwest can buy broadband service at 40Mbps or higher, while rural customers fare considerably worse with less than 25% able to get High Speed Internet at those speeds.

Customers have noticed and at least 65,000 canceled their broadband service with the phone company in the second quarter of this year, most presumably switching to their area’s cable operator.

“CenturyLink is by far the most abysmal telephone company I’ve ever had to deal with and I’m 63 years old,” shares Glen Canby in Arizona. Canby is a retired telephone company engineer that spent 40 years with a larger phone company serving the midwestern U.S.  “Their reviews online echo my own experiences, which have ranged from being quoted one price while being billed another, being locked into a term contract you didn’t ask for, and getting only a fraction of the speed they claim to sell.”

Canby is counted as one of CenturyLink’s 40Mbps-qualified customers, yet he actually receives less than 6Mbps service.

But that isn’t what CenturyLink tells the Federal Communications Commission. In a semi-annual broadband deployment report, the company claimed 51 percent of their customers in urban and suburban former Qwest service areas can subscribe to 40Mbps DSL or higher. But whether a customer is “qualified” to buy 40Mbps service is not the same as actually getting the speeds the company markets.

CenturyLinkCenturyLink attempts to cover their claims with fine print attached to their FCC submission: “The numbers shown in this chart reflect the percentages of households served by DSLAMs that are capable of providing the specified broadband speeds.” (A DSLAM is a network device typically used to extend faster DSL speeds to customers by reducing the amount of copper wiring between the telephone company’s central office and the customer’s home. Customers in a neighborhood typically share space on a DSLAM, in effect sharing a single connection back to the phone company.)

“That’s clever of them, because of course the DSLAM is just one link in the chain that ends with the ‘last mile’ between that equipment and my home, and that is where CenturyLink’s phone plant is at its weakest,” Canby writes. “I spent 20 years at a phone company dealing with last-mile DSL speed issues, so they cannot fool me.”

Canby blames the condition of CenturyLink’s infrastructure between the DSLAM serving him and his home for the problems, as well as overselling DSL service by packing too many customers onto a single DSLAM.

“It might be 40Mbps service at the remote end, but it drops to around 6Mbps on a good day by the time it reaches my house,” Canby complains. “Once the sun goes down, the speed drops to 3Mbps, which is a classic case of overselling to me because too many people are trying to share one connection at the same time. It has been this way since 2008 according to my neighbors.”

Back then, phone service was provided by Qwest, the former Baby Bell providing service in 14 sparsely populated western U.S. states — Arizona, Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming. Qwest was acquired by CenturyLink in 2011.

centurylink report

CenturyLink has promised to improve broadband speeds for former Qwest customers, but much of what counts as progress has been in more urban areas, while rural customers continue to languish. The company admits just 21.9 percent of rural households can get 40Mbps service. Only 47.6% can buy 12Mbps, 61.3% can get 5Mbps, and 83% can subscribe to 1.5Mbps. That leaves 17% of former Qwest customers with no broadband options at all. CenturyLink did not break out the percentage of customers that meet the FCC’s 25Mbps minimum speed definition of broadband.

“This is why CenturyLink loses customers to cable operators who have no problems trying to deliver internet access over their network, because it was built to support more bandwidth,” Canby shares. “They can usually deliver the same internet speed to customers no matter how far out they live while phone companies deal with a network built for making phone calls, not data.”

Company officials recognize they could do better and have promised investors another 2.5 million customers will be able to reach 40Mbps by the end of 2017. By the end of the year after that, CenturyLink hopes to reach 85% of customers with VDSL2, bonding, and vectoring technology to achieve 40Mbps service for most customers in their top 25 markets. But rural customers are likely to left waiting longer because of the costs to upgrade Qwest’s copper-based network, especially in smaller states like Idaho, the Dakotas and Wyoming.

“The only answer is cable or fiber broadband, and if you live in a small community it could be years before CenturyLink gets around to you,” Canby writes. “If it’s the same story all over town, I’d start advocating for a community-owned fiber network and not sit around and wait for CenturyLink to act, especially if there is no cable company in town.”

Google Fiber Puts Expansion on Hold as It Contemplates Wireless Instead

google fiberFurther expansion of Google Fiber appears to be on hold as the company contemplates moving away from fiber to the home service towards a wireless platform that could provide internet access in urban areas for less money.

The Wall Street Journal today reports Google parent Alphabet, Inc., is looking to cities to share more of the costs of building faster broadband networks or using cheaper wireless technology to reach customers instead.

Six years after Google first announced it would finance the construction of fiber to the home networks, the company has made progress in wiring just six communities, many incompletely. Progress has been hampered by infrastructure complications including pole access, permitting and zoning issues, unanticipated construction costs, and according to one Wall Street analyst, the possibility of lack of enthusiasm from potential subscribers.

Google’s recent acquisition of Webpass, a company specializing in beaming internet access over fiber-connected wireless antennas between large multi-dwelling units like apartments and condos appears to be a game-changer for Google. Webpass was designed mostly to service urban and population dense areas, not suburbs or neighborhoods of single-family dwellings. Webpass’ reliance on wireless signals that travel between buildings removes the cost and complexity of installing fiber optics, something that appears to be of great interest to Google.

Google Fiber is planning a system that would use fiber for its core network but rely on wireless antennas to connect each home to the network, according to a person familiar with the plans. Alphabet chairman Eric Schmidt said at the company’s shareholder meeting in June that wireless connections can be “cheaper than digging up your garden” to lay fiber. The only question is what kind of performance can users expect on a shared wireless network. Google’s plans reportedly do not involve 5G but something closer to fixed wireless or souped-up high-speed Wi-Fi. A web video on Webpass’ website seems to concede “you get best speeds with a wired connection.”

Even Google's wireless technology solutions provider Webpass concedes that wired broadband is faster.

Even Google’s wireless technology solutions provider Webpass concedes that wired broadband is faster.

Former Webpass CEO Charles Barr, now an Alphabet employee, argues wireless solves a lot of problems that fiber can bring to the table.

“Everyone who has done fiber to the home has given up because it costs way too much money and takes way too much time,” Barr said.

Barr’s statements are factually inaccurate, however. Fiber to the home projects continue in many cities, but if they are run by private companies, chances are those rollouts are limited to areas where a proven rate of return is likely. Large incumbent phone and cable companies are also contemplating some fiber rollouts, at least to those who can afford it. Many of the best prospects for fiber to the home service are customers in under-competitive markets where the phone company offers slow speed DSL and cable broadband speeds are inadequate. Rural communities served by co-ops are also prospects for fiber upgrades because those operations answer to their members, not investors. Community broadband projects run by local government or public utilities have also proven successful in many areas.

subBut like all publicly traded companies, Google must answer to Wall Street and their investors and some are not happy with what they see from Google Fiber. Craig Moffett from Wall Street research firm MoffettNathanson has rarely been a fan of any broadband provider other than cable operators and Google Fiber is no different.

“One can’t help but feel that all of this has the flavor of a junior science fair,” Moffett said of Google Fiber, pointing out the service has managed to attract only 53,000 cable TV customers nationwide as of December. Moffett concedes there are significantly more broadband-only customers signed up for Google, but that didn’t stop him from suggesting Google Fiber has had very little impact on increasing broadband competition across the country.

Analysts suggest Google Fiber is spending about $500 per home passed by its new fiber network. But that is a fraction of the $3,000+ per customer often spent by cable operators buying one another.

Google’s wireless deployment will likely take place in Los Angeles, Dallas, and Chicago according to people familiar with the company’s plans. Less dense cities slated for Google Fiber including San Jose and Portland, Ore., may never get any service from Google at all, but they are likely to hear something after a six month wait.

Google is also reportedly asking cities if the company can lease access on existing fiber networks. Another tactic is requesting power companies or communities build fiber networks first and then turn them over to Google to administer. The latter seems less likely, considering there are successful public broadband networks operating on their own without Google’s help.

Middle Mile Madness: Rural Florida Blows $24 Million on Wireless Network Serving Nobody

12126179-florida-rural-broadband-alliance-logoA word to the wise: using public money to build a middle mile broadband network without any customers lined up to sign up is a disaster waiting to happen.

In April, the disaster arrived in the form of a Chapter 7 bankruptcy filing on behalf of the Florida Rural Broadband Alliance (FRBA), which threw away $24 million in federal grants on a network that was so unviable, the contractor that was supposed to run it apparently ran away instead, resulting in confusion and an eventual declaration it was “doomed to fail” anyway.

The sordid story started almost seven years ago when Florida’s Heartland Regional Economic Development Initiative (FHREDI) and Opportunity Florida (OF) — two non-profit organizations dedicated to spurring economic development across rural Florida, discovered federal grant money was available for rural Internet expansion as part of the Obama Administration’s 2009 American Recovery and Reinvestment Act. The two groups fashioned a broadband proposal they were confident would win approval. At the time, rural broadband across northwest and south-central Florida was dismal at best, with only 39% of homes covered. Largely unserved by cable and barely served with DSL from AT&T and other telephone companies, the two groups believed a wireless network would be the best solution for Hardee, DeSoto, Highlands, Okeechobee, Glades, Hendry, Holmes, Washington, Jackson, Gadsden, Calhoun, Liberty, Gulf and Franklin counties.

empty-office

$24 million spent and nothing to show for it.

Although $24 million is not an insubstantial sum, it was clearly never adequate to build a comprehensive rural broadband network reaching homes and businesses. Instead, the two groups envisioned a “middle mile” network funded by the government, with central offices in Orlando and Tallahassee equipped with microwave dishes and computer servers. Unlike most middle mile networks, the one proposed by the FRBA would rely on a network of microwave towers instead of fiber optics, and would ultimately serve all of its customers over a wireless network.

When complete, the wireless network was supposed to deliver up to 1Gbps capacity throughout the region, relying on leased space on existing cell towers to support microwave links that would bounce signals from one area to the next. Initially promising to serve more than 174,000 homes and 16,400 businesses, the one immediate flaw noticed by those skeptical of the proposal was the lack of a definitive plan to sell Internet service to paying residential and business customers. The brochures suggested existing commercial Internet Service Providers would magically step into that role. Early critics called that “wishful thinking.”

Despite what some felt was an untenable business plan and an incomplete application, the group won its federal “BTOP” grant of $24 million in 2010 and began a very lengthy planning process using well-paid consultants to get the network fully scoped out and built. Within a year, controversy quickly threatened to swamp the project, and a congressional oversight investigation quickly found evidence of wasteful spending and put its funding on hold. That would hardly be the first allegation raised against the FRBA and those overseeing it. By 2013, the Columbia County Observer had run more than a dozen stories reporting irregularities and other problems with the project. Few were noticed more than the report Rapid Systems, Inc., one of the contractors on the project, had filed a $25 million lawsuit replete with soap operatic allegations against FRBA for not being paid for its work.

Rapid Systems CEO, Dustin Jurman and CFO/VP Denise Hamilton. (Image: Columbia County Observer)

Rapid Systems CEO, Dustin Jurman and CFO/VP Denise Hamilton. (Image: Columbia County Observer)

Rapid Systems alleged everything from fraud and double-dipping to sexual promiscuity over what it called the “FRBA Fraud Scheme.”

At the heart of the lawsuit were allegations money was being misspent, “to pay inflated salaries to employees, who then fled to South America, and that grant money was used for inflated fees to consulting companies which were owned by FRBA principals.”

Rapid Systems claimed FRBA was very generous paying management consulting fees of $10,000 a month to an entity known as the Government Service Group (GSG), along with a pro rata share (3% of the grant) for a “Grant Compliance Fee” and an additional 13% of the grant as a “Capital Improvement Program Administrative Fee.” And you thought only Comcast and Time Warner Cable were creative conjuring up fees. When added up, it appeared just one consultant — GSG — would walk away with 16% of the entire grant — nearly $4 million in total “management fees” before a single broadband connection would be made.

The lawsuit also claimed the grant money was gorged on by the leadership of both non-profits, one who allegedly relocated to South America the lawsuit states in another aside. The two “were being paid fees in the amount of $8,500 a month to themselves cloaked as administrative and community outreach funds,” according to the lawsuit.

Phillip Dampier: To be a credible supporter of community broadband, it is responsible to call out the disasters so that they are not repeated.

Phillip Dampier: To be a credible supporter of community broadband, it is responsible to call out the disasters so they are not repeated.

Meanwhile, the public eagerly awaiting something better than the non-broadband AT&T and some independent phone companies were supplying in the region couldn’t get answers about the project’s progress. Neither could the media, which reported the business phone number for the FRBA would ring unanswered for hours or days. Those hired to provide community outreach about the broadband project were frequently unable to answer even basic questions about the network or its status, or where the principals involved in the project even met.

By 2014, Opportunity Florida’s Facebook page claimed the network was 90% complete. But the project now decidedly downplayed how many homes and businesses would get service. Instead, the middle mile network promoted itself as an institutional network, dedicated primarily to serving “community anchor institutions:”

The FRBA system provides lower cost, high capacity broadband to Community Anchor Institutions, commonly referred to as “CAIs.” CAIs include local government and public agencies including schools, libraries and hospitals. The NTIA grant was initiated with these unserved or underserved CAIs as the intended target. Most government and public services have moved, or are in the process of moving, to paperless transactions and record-keeping and need the additional broadband and Internet based capabilities. Another benefit of the FRBA system will be capacity to schools and libraries as both those institutions face online and digital mandates.

Commercial ISPs willing to use the network to offer service to individual non-institutional customers were invited to visit an Opportunity Florida webpage (now gone) for more information. There is no evidence any major ISP ever bothered. In fact, even institutional users didn’t seem very interested. We remain unclear if there was ever a single paying customer on the network, despite a report filed by the NFBA with the federal government that claimed through September 30, 2012, the NFBA had 11 anchor institutions, zero residents, and zero businesses hooked up to its network.

A year later, the Columbia County Observer went further and called some of those involved in evangelizing the project “clueless,” and based on the post-mortem of what has happened since, they may be right.

Those directly involved in the project have since displayed a stunning lack of knowledge about its operations and practices, or what has become of the $24 million:

The unfortunate "I see nothing, I hear nothing, I know nothing" brigade.

The unfortunate “I see nothing, I hear nothing, I know nothing” brigade answers questions from the media.

  • Gina Reynolds, the last executive director of FHREDI, which administered FRBA, claimed the network was running fine when she left in the summer of 2015 to start her own economic development consultancy. She may be among the very few that got out before the project ultimately fell apart. Although FHREDI managed to pay her for her services, it suddenly lacked any resources to pay anyone to replace her after she left;
  • Greg Harris, a Highlands County commissioner and FHREDI director, disclosed at a recent county commission meeting FRBA was in Chapter 7 bankruptcy and the group that oversaw it — FHREDI, was being dissolved. But like the phoenix rising from the ashes, some of those involved in FHREDI and FRBA are now associating themselves with a new group called the Florida Heartland Economic Region of Opportunity (FHERO). Says Harris: “We didn’t really know what FHREDI was doing. They were spending most of their opportunity on FRBA and the rural broadband. It got away from what we really needed to focus on.”
  • Terry Burroughs, an Okeechobee County commissioner, is FHERO’s chairman. But last year, the ex-telephone company executive was a FHREDI board member. His memory is excellent about where the taxpayer-funded equipment to run the network eventually ended up: in warehouses in Lake Placid and Tallahassee. But his answers were more vague when asked how things went so wrong. Burroughs tried to put substantial distance between himself and the failed wireless broadband network: “When I first got on the board, they were trying to negotiate with a contractor. Gina [Reynolds] was working with that, and it went on and on and on. There was probably a network at some given time, but I don’t think a last mile ever deployed. When I got there, the last mile was dark. … I never knew of a paying customer. They were trying to build a telephone company, and they were doomed to failure.”
  • Paul McGehee, business development manager for Glades Electric and a FHERO director, did an even better job explaining he knew nothing, saw nothing, and heard (almost) nothing: “The operator who was contracted to run it as a company stepped away from it,” McGehee said, adding he could not recall the contractor’s name. The flaw in FRBA’s plan, according to McGehee, was that while the grant bought the equipment, there were no federal funds for operations. “No one wanted to step up and operate the network, and there was no way to pay the tower leases… The end product wasn’t a viable sustainable thing.”

fhrediToo bad nobody bothered to consider that before spending $24 million of the taxpayers’ money on a non-viable network.

Commissioner Jim Brooks didn’t seem too bothered by the admissions of total failure. After hearing an explanation about the network’s demise and the money spent on it, he told his fellow commissioners he “didn’t have a problem with it.”

A multitude of articles that have documented this disaster (including our own from September 2011) illustrates what can happen when over-enthusiastic consultants overwhelm projects with happy talk not recognized as such by a board that has little or no understanding of the technology, the broadband business, or, in this case, the project itself. The claims and projections consistently simply bore no reality… to reality. What is even more concerning is some of those consultants didn’t work for free, and may have tapped a substantial portion of the total available grant for themselves.

It is also remarkable and disappointing to read candid assessments about a project “doomed to failure” from those with direct knowledge and or involvement only after the liquidator from the federal government turns up. As stewards of public taxpayer money, one expects more than a shrug of the shoulders and a quiet shuffle dance out of FHREDI into a new, reincarnated “rural economic development” initiative. How can we trust the same mistakes won’t be made again?

We remain strong supporters of community broadband, but messes like this hand potent ammunition to corporate-ISP-funded think tanks that use these kinds of failures to sully all public broadband projects. We must call out of the bad ones to be seen as credible supporting the good ones. It also never hurts to learn from others’ mistakes.

Among the biggest reasons this project was a flop (beyond the dubious skills of those in charge of overseeing it) was its size, scope, and technology choice. The biggest challenge to any rural broadband project is always “the last mile” — the point where the connection leaves a regional fiber network and reaches a nearby neighborhood’s utility poles and finally enters your home. It also happens to be the most costly segment of the network, and often the hardest to fund with government subsidies. But it is the one that makes the difference for individual homeowners and businesses who either have broadband or don’t.

Rural Floridians endure more broken promises for better broadband.

Rural Floridians endure more broken promises for better broadband.

Like too many middle mile projects of this type, the story initially fed to the press and supporters is that such networks will somehow alleviate rural broadband problems. Only later do supporters realize they are actually getting an institutional middle mile network that will offer service to hospitals, schools, and public safety buildings — not to homes and businesses. Ordinary citizens cannot access such networks unless a commercial ISP shows interest in leasing it to resell, which is unlikely. The closest most will ever get to experiencing an institutional network they paid for is staring at the fiber cable stretched across the utility poles in front of your house.

FRBA was too ambitious in size and scope, and a credible consultant should have advised those in charge to get credible evidence that a network built with grant money could be sustained without it going forward. If not, scale back the project or don’t apply for the grant.

This project proposed a wireless backbone to power a large regional wireless network. Winning support among anchor institutions was predictably difficult, because many already have existing contracts with commercial telecom companies. With government funding available in many instances, an institution can get full fiber or metro Ethernet service easier than a rural farmer can get 6Mbps DSL from a disinterested phone company.

The evidence shows there were few takers — institutional or otherwise — of what FRBA had to offer. Did the project organizers not see this lack of interest as a problem as the network prepared to launch? After launch, there were almost immediate signs it lacked enough of a customer base to sustain itself. Did the project backers assume the government would bail out the network or dump millions more into it to make it viable to sell to homes and businesses? Such assumptions would have been irresponsible.

There are too many underutilized middle mile or institutional fiber networks already built with taxpayer dollars that remain off-limits to those who paid to build them. Utilizing those networks by extending grant funding for last mile projects would be helpful, as would sufficient subsidies to assure middle mile construction is followed by last mile construction and actual service. We remain big believers in fiber to the home service. Although expensive, such projects are best positioned for success and future viability and can take advantage of the massive amount of dark fiber already laid in many areas. Some cities prefer to run the networks themselves, others contract day-to-day operations out to independent operators. Either would be preferable to a network that took six years to build and fail, without any evidence it could attract, support and sustain enough customers to support anything close to viability.

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