Troubles brewing in broadband

[David Kulp]

Yesterday the state's Massachusetts Broadband Institute sent a letter to all towns advising them not to accept the new WiredWest operating agreement and said that the state would not fund and build a network with WiredWest given its current business plan.

This was quite a bombshell and will certainly create a lot of news and discord. (The Ashfield News just went to press for December, so it won't be in there!) Here's my take on this from the Ashfield perspective.

First, the MBI raises some important issues - most of which have been debated at length among officials from the towns, WiredWest and MBI. Some of the topics could warrant further discussion. But by throwing down the gauntlet, MBI has taken a very strong position against WiredWest and it will make resolving this very challenging. WiredWest is the grassroots broadband voice of western Mass, so the charges leveled against it that essentially insinuate that western Mass towns can't make informed, prudent, responsible decisions on our own is felt as paternalistic and insulting by those who have invested 1000s of hours into this problem.

What are the key issues?

1. Ownership. The MBI is concerned that the towns are taking on too much risk if WiredWest owns all of the network assets while the towns continue to pay the debt. Practically speaking, few of us in the towns want the burden of literally owning and managing the cables and electronics. Furthermore, a regional network would require shared resources such as electronics cabinets and equipment that would be located in one town but would serve many, so it doesn't make sense for a town to own all the resources that are within its borders if some of those resources are shared by others. To save money and for efficiency and redundancy, a regional network would be designed such that residents in one town would be dependent on others. For example, it might be cheaper to serve some residents in a town from cable coming from a neighboring town. There are many examples. It is impossible for a town to remove itself from a regional network without causing troubles for other towns. On the other hand, it is possible to design a network in which each town is independent of every other, but it is not really a "regional network" and it is a lot more expensive.

Instead, WiredWest proposes that the network be owned by the cooperative and each town has an ownership stake in the cooperative proportional to its capital investment. Financial returns or even the sale of the network in a liquidation would be in proportion to our ownership. The cooperative is controlled democratically with votes proportional to each town's financial investment in the network. The strategy is logical.

Moreover, being a part of a larger regional network reduces risk because there are more subscribers in a larger geographic area. If a network is run independently in each small town then there is greater risk that troubles will undermine the sustainability of the network.

2. Business Plan. The MBI is concerned that the financial model is overly optimistic and risky. They don't believe that the network will be able to reimburse the town's debt. Part of the criticism is that WiredWest is "fully insourced". This is simply untrue. WiredWest describes a business in which most activities are outsourced, but not all. The purpose of this is to minimize the cost to residents as much as possible. There is risk in starting a new business and performing some parts of the business in-house, but the potential trade-off is profit returned to the town — us, the owners of the network — instead of giving the profit away to commercial interests and causing rates to increase. 

I wonder how much the MBI is influenced by private industry that wants a piece of the action. After all, if towns in western MA knowingly choose to take the risk of running some parts of the business in-house, isn't this a reasonable risk that the towns are capable of deciding? Is this really a show-stopper such that the state refuses to pony up its promised matching funds? Or is the MBI too closely aligned with private interests?

MBI claims that they have more detailed concerns about the business model that they will share "in the weeks ahead." Perhaps they will dribble them out to maximize press coverage. In the meantime, WiredWest released an analysis of its business plan that was performed by a national consultant, which identifies some concerns, but overall "did not find anything show-stopping".

In Ashfield I've been closely tracking the development of the WiredWest operating agreement and business plan. During the last two months, the Select Board, Finance Committee and Technology Committee have had several meetings with different interested parties to be sure that we choose the right implementation strategy. There are several options besides WiredWest. We could build a wireless network, we could contract with a company to build and operate a fiber network for a long (e.g. 20-year) term, we could have MBI build a fiber network and we could manage it all ourselves through contracts with private vendors (like Leverett). The town is still evaluating its options and doing its due diligence. 

There will be another broadband meeting this Monday night where we will meet with Crocker Communications, which is the ISP for Leverett's fiber network and we'll also talk more about the MBI and WiredWest controversy. You're welcome to come.

Ultimately, as promised at the town meeting when we authorized the borrowing, there will be a public forum, probably in January, when a recommendation will be made for the town's approval. 

While no decisions have been made, yet, I personally expect that Ashfield officials will recommend the WiredWest cooperative strategy after reviewing all its reasonable options. All other fiber optic options are likely to be more expensive and with greater risk or less control. There is no other plan that proposes to reimburse the town's debt and there is no other plan that proposes to offer cheaper service than WiredWest.

David

[jean cherdack]

Can you tell us who and what Massachusetts Broadband Institute is? Is it a trade group of for profit internet providers?
Thanks,
Jean Cherdack

---

From: David Kulp
Sent: ‎12/‎2/‎2015 8:24 PM
To: ashfield-broadband
Subject: [ashfield-broadband] Troubles brewing in broadband

--
You received this message because you are subscribed to the Google Groups "Ashfield-Broadband" group.
To unsubscribe from this group and stop receiving emails from it, send an email to ashfield-broadb...@googlegroups.com.
To post to this group, send email to ashfield-...@googlegroups.com.
Visit this group at http://groups.google.com/group/ashfield-broadband.
For more options, visit https://groups.google.com/d/optout.

[David Kulp]

The Massachusetts Broadband Institute is part of the Massachusetts Technology Collaborative. MTC is a pseudo-public institution outside of Boston that is funded by the state to promote economic development through public-private partnerships in research and development. The MBI is the state agency that is administering the $50M of money that the state legislature allocated for last mile broadband access, of which $40M is allocated for the construction of broadband networks in underserved towns like Ashfield. This $40M represents the 40% cost sharing proposed for the construction of fiber optic networks in western MA. Although the towns are putting up the majority (60%) of the costs of construction, MBI has significant leverage in negotiating the partnership.

The process is that the town or "its agent", i.e. WiredWest on the town's behalf, will submit a grant proposal to the MBI that says essentially, "We've authorized borrowing of $$$ that we want to give to the MBI so that the MBI will build a fiber optic network for us with certain features and here is the sustainable business plan that will provide service to residents." The MBI's letter is pre-empting this process by telling the towns in advance, "if you form WiredWest under the proposed operating agreement and submit a grant proposal to us with your current business plan, then we will reject it."