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Indiana telecom providers call state’s exclusive network deal ‘short-sighted’

By   /   October 12, 2016  /   News  /   No Comments

Calling it a “short-sighted strategy,” Indiana’s cable and broadband associations have spoken out against a deal that would license the managing and marketing of the state’s communication’s infrastructure to Ohio-based Agile Networks.

Indiana Cable Executive Director Joni Hart and Indiana Broadband and Technology Association President John E. Koppin sent a joint letter criticizing the move to Indiana Finance Authority Director Dan Huge after the state announced the deal with Agile Networks earlier in September.

Agile Networks would pay $50 million for the 25-year rights to manage the network, including gaining control over the state’s cell and radio towers, fiber-optic cables and streamlined rights of way. The state said the move would help expand broadband to rural areas, but Hart and Koppin said in the letter that the Indiana Finance Authority (IFA) admitted there is no mechanism in place to require Agile to extend service to underserved communities.

Agile Networks photo

AGILE NETWORKS: The Ohio-based company is poised to capture an exclusive deal with Indiana to manage that state’s communications infrastructure.

Agile has a similar agreement in Ohio and used the towers to build a wireless broadband service around the state.

The cable and broadband executives fear the same thing could happen in the Hoosier State.

“Our companies will need to weigh carefully the wisdom of investing scarce capital in a market where the competition is subsidized by the State of Indiana’s considerable resources,” Hart and Koppin wrote in the letter, obtained by Watchdog.

Hart and Koppin also said the agreement was not negotiated transparently.

“The existence of a state-owned fiber network … and the possibility that it might be made available for private use was not discussed in the [request for information], nor during the 18 months the industry worked cooperatively with the former Lt. Governor, Governor, Secretary of Commerce, [Indiana Office of Community and Rural Affairs], [Indiana Department of Transportation] and other stakeholders as part of the Rural Broadband Working Group.”

The two said those discussions focused on state-owned cell towers.

“Even after the industry made specific inquiries to the Governor’s office regarding the fiber backhaul to the towers, we were assured this would be a tower maintenance agreement. Had the administration been upfront about the nature of this proposal, the industry would have been very assertive in making its opposition, and the many reasons why the state should not take this approach, known,” Hart and Koppin wrote.

Huge, in an emailed response to Watchdog, called the process “very open and transparent” and said he was “puzzled about [the] industry’s reaction.” He wrote:

“The authority for this transaction was discussed and granted in two separate legislative sessions, and was well publicized by our local news media. Furthermore, the IFA issued a request for information (RFI) for this transaction, to solicit interest from the private sector. The RFI was issued in March of 2016, and sent directly to 16 private sector entities and posted on the IFA’s website. We received eight responses, and continued to have conversations with five of those parties based on the viability of their proposals. Agile Networks was eventually selected as the winning respondent because it demonstrated it could provide the most benefit to the State based on its ability to provide a sizeable up-front payment, future revenue shares, and help expand/improve broadband connectivity throughout Indiana.”

Huge added that IFA is reaching out to members of the telecommunication industry to address their concerns. He also noted that many details of the transaction still must be negotiated between the state and Agile Networks, so more details with be forthcoming.

Hart and Koppin write in the letter that Indiana now enters a “profit sharing” arrangement with Agile Networks that gives the state a vested interest in the company’s success.

It’s estimated the state will reap about $36 million in revenue during the first 25 years of the deal. Agile Networks can renew for another $10 million upfront payment after 25 years, and the state expects to reap $164 million during that period.

Gov. Mike Pence said in a news release that Indiana is “a national leader in partnerships that deliver sound financial returns and long-term benefits to Hoosiers.”

“This agreement, if approved, will put underused assets into full play, enhance Indiana’s communication capabilities throughout the state, and fund the state’s bicentennial projects,” he said.

Kyle Quillen, founder and chief technology officer of Agile, said his company wants to work with Indiana providers.

“Agile Networks is looking forward to working with Indiana to make telecom assets within the Hoosier state fully accessible and ready for use by the public and private sectors,” he said. “This will accelerate the advancement of Indiana’s infrastructure and position the state as a telecom policy leader.”

An Agile Networks spokesman told CantonRep.com the company expects to spend the first year tying together the network and would then extend broadband service into underserved areas to aid local providers in operating in those areas more cost efficiently.

Linked In photo

KOPPIN: The president of the Indiana Broadband and Technology Association says the deal with Agile Networks could stall broadband investment by other companies.

But the Indiana communications associations fear this move will hurt market conditions.

Reached by phone this week, Koppin told Watchdog.org he is meeting with legislative leadership to discuss the issue.

“We’re still working with decision makers to get some changes to the plan,” he said.

The state’s budget committee must still sign off on the deal.

Steven Barnes, wireless operations manager for New Lisbon Broadband and Communications, also sent a letter to Huge that was co-signed by nine other internet service providers and consultants. Barnes said he told state leaders who served on the rural broadband workgroup that the best way to help rural broadband grow was to reduce the barriers to entry, primarily access to state-owned assets and rights of way.

“With this agreement the State of Indiana just subsidized an out of state competitor and made them a middle man, increasing the barrier to growth of Rural Broadband in Indiana,” he wrote.

The co-signers asked for the opportunity to discuss the issue with Huge, but Barnes told Watchdog on Tuesday, three weeks after he sent the letter, he had yet to get a response.

“Politics as usual,” he said of the agreement.

Barnes said the opportunity to tap into the state-owned network wasn’t widely advertised.

“The users here in the state, wireless ISPs, knew nothing about that,” he said.

Barnes said in the interest of short-term financial gains, the state will stifle long-term small business development among small communications providers.

“Not only are they a middle man on what they bought from the state, but they may become competitors in those areas,” he said of Agile Networks.

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Johnny Kampis is National Watchdog Reporter for Watchdog.org. Johnny previously worked in the newspaper industry and as a freelance writer, and has been published in The New York Times, Time.com, FoxNews.com and the Atlanta Journal-Constitution. A former semi-professional poker player, he is writing a book documenting the poker scene at the 2016 World Series of Poker, a decade after the peak of the poker boom. Johnny is also a member of Investigative Reporters and Editors.