News

Taking Aim at EAGLE-Net

9/28/2012 10:40 PM Eastern

WASHINGTON — Some telecom providers in Colorado are up in arms over what they say is a government-backed overbuild of existing broadband service, and they have some state legislators in their corner.

Ever since the Obama Administration started handing out billions in broadband subsidies under the American Recovery and Reinvestment Act of 2009, there have been rumblings from cable operators and other telecoms that new entrants are using those broadband stimulus funds to overbuild their existing plant.

Two weeks ago, four members of the Colorado House of Representatives wrote to express their concerns to Larry Strickling, head of the National Telecommunications & Information Administration, which is overseeing some $4 billion in Broadband Technology Opportunities Program (BTOP) grants.

“U.S. taxpayers are being force to subsidize a federal initiative whose most substantial accomplishment ultimately could be to put Colorado’s rural telecommunications industry out of business,” they said, mincing no words. They asked that NTIA suspend EAGLE-Net’s plans while it investigates.

EYEING EAGLE-NET

The reference was to EAGLE-Net Alliance, a local government entity established to use BTOP grant money to provide broadband services to anchor institutions — schools, libraries and health-care facilities — to 170 communities throughout the state. It received $100.6 million in government broadband stimulus funds, one of the largest grants.

EAGLE-Net’s service to government entities and nonprofits is not taxed.

A number of telecoms, including SECOM, a division of the Southeast Colorado Power Association, have been urging local politicians to weigh in, according to a SECOM representative. Jon Saunders, general manager of SECOM, said he would like to see the BTOP grant money to go to schools that don’t have high-speed broadband, rather than, in one instance, overbuild 32-plus miles of fiber to a school with 68 kids SECOM is already serving. He says he is offering connected high school, primary and middle schools a 100 Megabit Ethernet circuit for $125 dollars. “You can hardly buy a t-1 for that here,” he says.

Saunders said EAGLE-Net is planning to overbuild all 26 of the schools SECOM already serves. “Our concern is that they are overbuilding an existing network put in as part of our electric cooperative — which now stretches to 1,300 miles of fiber. “

Vince Kropp of American Cable Association member PC Telecom, one of a number of telecoms complaining about Eagle-Net, said the overbuild has hit his company hard.

“The purpose of the BTOP grant is to take broadband middle mile to unserved or underserved areas, and if there was service there,” Kropp said. “They said that they would collaborate with the local provider [and didn’t]. We clearly had broadband existing going back seven or eight years.

“The anchor institutions were well-served here. I am at something north of 90% overbuild on our middle mile. From what I have seen in the grant, the top two purposes to take it first to unserved and secondly to underserved areas.

“All of our schools have been connected with fiber going back as far as seven years ago,” Kropp said. “They are coming in and cherry-picking the anchor institutions.”

The BTOP grants have been targeted to anchor institutions, but Kropp sees a problem with that focus. He suggests that in the rush to get anchor institutions online, the overbuilding could hamper the ability of his firm and others to provide service to all the households the grant recipients don’t have to serve.

And, of course, there is the effect on his own business. “If they come in and cherry-pick our customers, it’s going to hurt big time,” he said. PC Telecom has borrowed money from the USDA’s Rural Utilties Service loan program and has had a “negative bottom line” for the last several years, he says, adding it’s a tough time, generally, to be in the rural telecom industry. Add in the FCC’s reforms of Universal Service Fund subsidies, which PC Telecom also gets, and the times could get even tougher.

An EAGLE-Net spokesperson said that it would be a statewide network reaching urban and rural areas.

Ken Fellman, EAGLE-Net legal counsel, said everything it has been doing is based on NTIA’s encouragement. “We are not violating any part of the grant.”

STATEWIDE MANDATE

As to claims EAGLE-Net was cherry-picking in existing service areas rather than going to unserved ones, he sid that could hardly be the case, since it is building out a statewide network. “Some parts of the state are easier to build in than others, and it is a three-year grant, so the argument that we are ignoring certain parts of the state and spending money in other areas is completely specious.”

An NTIA spokeswoman said the agency had received the letter from the state legislators and “will respond accordingly.”

An NTIA source maintained that the agency was vigorously overseeing the EAGLE-Net project, including talking with broadband providers to understand and address their issues.