WiredWest delegate David Dvore’s My Turn column/letter to Katie Stebbins, assistant secretary of innovation, technology, and entrepreneurship for the Executive Office of Housing and Economic Development, titled “Get out of the Way,” struck me as an interesting way to introduce the organization to that state agency.
I agree broadband needs to move forward, and that release of funds to towns is an important step.
However, impatience and demands are no substitute for the right formula.
Dvore begs a question: What stands in the way of broadband in western Massachusetts?
MBI released revised guidelines for municipal broadband networks in July. In the weeks leading up to that, it was clear MBI might require municipal ownership of assets. After release of the guidelines that required municipal ownership, WiredWest submitted their plan anyway.
Thus, the region was set up for a protracted stalemate with the state months ago by WiredWest’s own approach, which led to protest mobilized by WiredWest and “negotiations,” which yielded little tangible results.
On March 26, WiredWest admitted that it has no standing to negotiate with MBI, and that MBI will instead deal directly with selectboards, given they are accountable to the public and their tax payers as elected officials.
What has emerged from this realization by WiredWest is a new approach, which will cause further delay.
The most recent WiredWest strategy involves an a la carte resolution for selectboards to ask the governor to re-allocate funds for network construction and bypassing MBI entirely, requesting that selectboards cede their authority to WiredWest so that it will be perceived by the state as representing the towns, and demanding “veto” power for WiredWest on broadband guidelines.
Rather than seriously addressing its financial model, WiredWest is now taking an “eyes wide open” approach, saying, “we (the towns) know the risks, give us the money!”
Only, towns have not been able to have eyes wide open.
Many town finance committees have been unable to do a deep dive into the financial model since it was contained in largely inaccessible software, but Wendell did. Flaws identified in the model included cost underestimates and slim reserves to cover unanticipated costs, fiber plant replacement costs, or costs of reimbursing towns for fiber assets if they exit WiredWest. It was observed that the model generally favored risky rather than risk-averse estimates. The model also relies heavily on a questionable level of premium subscribers.
Simple spreadsheets breaking down MLP and subscriber costs, and estimating repayment of municipal debt service, offer no visibility to the sausage-works behind these simple numbers.
It seems more likely to me that WiredWest cannot offer $49/month basic service and break even, let alone pay back municipal debt service.
WiredWest often complains that its plan is overly scrutinized and that other plans must be equally scrutinized. In reality, WiredWest is the only plan to propose a start-up company backed by the bond ratings and wallets of taxpayers in already cash-strapped towns. Other so-called “go it alone” approaches, or alternative regional approaches, propose traditional municipal procurement of services models.
So indeed, the WiredWest model does require extra scrutiny and it is incumbent on town finance committees and the governor’s office to approach the WiredWest model with skepticism.
Another key issue involves municipal bonding. It turns out only three towns within the WiredWest region actually have bond ratings, a key factor in the ability to bond. Some towns are now examining other avenues, such as USDA loans, and are wondering why this option was not considered viable by WiredWest. One possible reason is because USDA loans require towns to own assets that these loans fund.
Even in recent compromise models, WiredWest still insists on owning portions of the network.
WiredWest addresses fears of failure by stating that the criterion for failure is whether or not broadband service is still offered.
The flaw in this outlook is obvious.
It has also come up recently that WiredWest needs an estimated $1 million in start-up costs that were not accounted for in town meeting authorizations or MBI guidelines for reimbursement. Where will this money come from?
If many towns in the region desire to go with WiredWest, the entire region, even towns who opt for other options, would be put into extreme jeopardy if a subset of towns enter a model that is destined to fail. A flawed financial model by WiredWest would literally plunge the entire region into jeopardy with no backstop.
Thus, scrutiny is paramount.
WiredWest does remind us that it has worked regionally for a decade or more to advocate for bringing broadband to the region. Towns should extend gratitude, however such gratitude does not afford WiredWest keys to a $150 million telecommunications infrastructure simply because it says so.
Towns can achieve broadband regionally, not leaving each other behind, without a public start-up company, but only if we try.
DiDonato is co-chair of the Wendell broadband committee and a member of the Wendell Finance Committee. The views expressed are his own.