Western Integrated Networks has based its financial formula on penetration rates that are "unreasonable" and might not have enough investment capital to fund the builds that municipalities have already approved, a financial consultant reported to the city of Los Angeles last week.
WIN executives criticized the report by Washington-based consulting firm Kaiser, Scherer & Schlegel, stating the analysts never spoke to the overbuilder. WIN's vice president of operations Bill Mahon told the board that backers — including J.P. Morgan — would not have invested in the company if its business plan was as faulty as the consultant report asserted.
Despite the negative review, WIN survived its first round of approvals when the city's Board of lnformation Technology Commissioners voted 4-0 to approve a city-wide franchise for the company's WINfirst service.
Paul Janis, assistant general manager to the city department, said regulators "don't care as much if one company goes under" so long as there's competitive options for consumers.
Though, officials do care that the city be protected should WIN run short on money. The operator currently has nearly $900 million in investment capital but eight franchises to build in cities including Sacramento, Calif., Dallas and Austin, Texas.
The BITC made a last-minute addition that set interim milestone markers within first phase of WIN's build. The operator must reach 25 percent of homes passed in the first area by the end of year two; 50 percent by the end of year three and the complete phase by the fourth year.
Should the operator fail to meet the milestones, the city can now summarily stop the build while WIN focuses on activating the area defined by the milestone.
The WIN application next must be vetted by the information technology and general services subcommittee of the Los Angeles City Council.
That approval process could be slowed, though. The city will get a new mayor June 5 and the election winner could shake up committee assignments. Business traditionally stalls during the power shift.