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CO: Critics: Federal program to boost web access muscles out private providers?

By   /   August 27, 2012  /   News  /   8 Comments

By Dan Njegomir | Colorado Watchdog

Federal government squeezes out local internet providers by laying their own cable.

DENVER — A $100 million, federal stimulus-funded project intended to expand high-speed Internet access in rural Colorado is raising an outcry from longtime local telecommunications providers, who say the effort is backfiring on the private sector and squandering public dollars.

About 25 small-town providers — mostly generations-old telephone co-ops and private mom-n-pops — say the federally subsidized effort needlessly duplicates their own budding, high-speed fiber-optic networks and will wind up stealing their biggest customers. They also say the project is poised to poach market share just when the rural phone companies have gone into debt to upgrade their infrastructure.

The ironic upshot, they contend, is something only Washington, D.C., bureaucrats could have cooked up: Federally bankrolled EAGLE-Net might wind up running federally leveraged telecoms out of business.

“It’s one branch of government competing against another,” said Alan Wehe, owner and general manager of the Blanca Telephone Co., serving parts of southern Colorado’s San Luis Valley. Wehe said his and other firms have started cutting back payroll, as they brace themselves for the blow.

EAGLE-Net, formed in 2007, is described on its website as “a cost-sharing cooperative that will deliver a carrier quality broadband network to more than 170 communities across the state.” In 2010, EAGLE-Net was awarded a $100.6 million grant through the Broadband Technology Opportunities Program under the National Telecommunications and Information Administration.

By Wehe’s estimate, his company has invested more than $5 million so far — borrowed from the U.S. Agriculture Department’s Rural Utilities Service loan program — laying a fiber-optic line from Walsenburg on the Front Range to Monte Vista in the western San Luis Valley. Now, an EAGLE-Net contractor is laying another fiber-optic line alongside it. Wehe says such “overbuilding” has become standard operating procedure for EAGLE-Net statewide.

For their part, EAGLE-Net execs say they’re simply trying to hew to their mandate and follow federal specifications, for which they broadened their focus to qualify for the stimulus funding.

“Our intent is to bring a new network into town,” said EAGLE-Net communications chief Gretchen Dirks. The organization’s head of business development, Chip White, said EAGLE-Net is “not trying to cut the local providers out,” but he added, “This is change and a new way of doing things.”

The windfall was part of the federal American Recovery and Reinvestment Act, championed by the Obama administration. The goal is to connect 234 “community anchor institutions” — schools, local governments and other public entities — through a high-speed broadband network. The network is supposed to be completed by August 2013.

The problem with that mission, say the local providers, is it’s largely unnecessary. They say they are providing high-speed Internet access to schools and other government services and institutions as their networks ramp up. They accuse EAGLE-Net of empire building, and they say the state-federal venture now seeks to take the most lucrative customers in rural climes — not just schools but also municipal and county governments — while neglecting some truly underserved locales in the high country that are expensive to build to.

Up in arms, they’re pushing back through an organized public awareness campaign and recently launched a barrage of letters to the U.S. Commerce Department, which oversees NTIA. The letters call on the Cabinet agency to rein in EAGLE-Net.

“(EAGLE-Net) is moving aggressively to overbuild … This is wasteful use of taxpayer dollars,” wrote Jon Loe, general manager of Wiggins-based Colorado Communications Transport. “It is important to remember that CCT members … are USDA Rural Utility Service borrowers. It is unconscionable that BTOP funds are being used to overbuild fiber facilities that are already supported through other federal programs.”

Wrote Patricia White, general manager of the Eastern Slope Rural Telephone Association in Hugo: “A sad example of waste within the EAGLE-Net model occurs on (a) stretch of new fiber … approximately seventy miles from the Otis School to the Woodlin School in northeast Colorado … Woodlin School has existing fiber facilities placed by Eastern Slope. It seems only logical that these construction dollars could have been appropriated to areas of Colorado that have no services.”

While the providers say EAGLE-Net is overstepping its original parameters and even violating state statute by overbuilding and going head to head with the private sector, the agency’s leadership says it is squarely within its mandate and consistent with state and federal law for it to build a statewide rural network it believes is superior to what the private sector can offer. They stress they aren’t competing to provide phone service, only a data network, and that they are barred from serving anything other than public entities. EAGLE-Net also insists it wants to work with, not against, the local providers.

“We have an open door with them,” said EAGLE-Net’s Dirks.” We’re always willing to talk to (the rural providers) on the issues.”

Dirks and White say they are open to using existing fiber-optic lines of private providers who wish to participate. Yet, when they publicized their request for proposals to help bridge the gap over La Veta Pass, for example, they said Wehe’s Blanca Telephone Co. never responded. Only contractors seeking to lay new fiber expressed interest.

Wehe counters that EAGLE-Net’s management, in fact, has made little effort to communicate with his company.

“Either somebody shows and it’s not a decision maker, or I don’t get a call back,” he said.

He also dismisses EAGLE-Net’s claim of being able to provide faster, more reliable service. Wehe says his company offers 100 mbps speeds to schools in places like Fort Garland.

Dirks and White say no one is forcing school districts or other entities to use EAGLE-Net’s network, but that it offers rural communities an important option.

“Why should they not have a choice?” Dirks said.

Yet, Wehe said EAGLE-Net isn’t a free-market option but rather a boondoggle all taxpayers are forced to underwrite. He said such a project might have been applauded years ago — before the private sector stepped in and bridged rural Colorado’s digital divide. Now, he said, it’s just another government program that has missed its mark and is attempting to justify its colossal cost.

“They’re 20 years too late,” he said, adding, “I don’t think they care. I think they have to spend the money to fulfill the grant.”

Contact Dan Njegomir at [email protected]


Todd formerly served as staff reporter for Watchdog.org.

  • Thank you!

    I didn’t think anyone was engaged on this sham.

  • Larry

    Socialized Broadband = FAIL.

  • Dave Acklam

    Non-competitive local telephone monopolies, created by government…


    Government-sponsored ISP

    That’s like a war between 2 of your worst enemies – It’s hard to care who wins…

  • Darrien Riggers

    I don’t think the government should be in the business of owning and controlling markets. They always screw things up and cost too much.

  • Tech-Guy

    The fact of the matter is that these “generations old” telcos haven’t been, and still aren’t, up to the task of providing quality broadband services to schools at a reasonable cost. Colorado’s rural schools have been floundering for years and falling further and further behind their metro counterparts because the profit-driven telco industry sees no value in installing better connectivity into these outlying communities. Instead they now seek to block schools and government (which are the same thing remember!) from doing it themselves.

    The bottom line is whiners like Blanca Telephone’s Wehe want us to feel sorry for him because he’s shown up at the dance 4 hours too late and forgot to bring a date. While the medicine that’s a bit hard for these telco operators to swallow the fact of the matter is this: You’ve failed to deliver the service that Colorado student’s desperately need, so now you can shut-up and watch while those more suited to the challenge do it for you.

  • Cliff Orndorf

    Exactly which school in Blanca’s patch is lacking fiber optic connectivity? Is there a list of places needing new fiber? Thanks

  • Russ E.

    We signed as an eaglenet partner recently. Glad to provide service anywhere statewide. Email for quote, we beat all local prices, anywhere!

  • Steven Wright

    To Tech Guy:
    You don’t know what you’re talking about, and you’re being rude. Let me provide you the Reader’s Digest version:
    Many (understand I’m not saying “all”) rural telcos ALREADY provide high quality fiber-based broadband to schools in rural Colorado at reasonable prices. Many telcos have built this fiber infrastructure at their own expense, using free market practices.
    Now, Eagle-Net comes along with tax-payer dollars and lays down fiber RIGHT NEXT TO the fiber that’s already been provided by local telcos. And then they say “they’re not competing” with private telcos. Yet I know for a fact that some schools have switched from private providers’ service to Eagle-Net service. So you see, Eagle-Net has some LIARS running their program, such as Mr. Dirks. And yes, I’m naming names. I truly believe he is a liar; that he is misappropriating public funds. He should be replaced, face prosecution, and be required to repay the public for the funds he’s fraudulently spent while damaging rural small businesses.
    *Eagle-Net is NOT adhering to the terms and intent of the grant that provided them with their ability to take customers away from private telcos. They are CHEATERS.
    *Eagle-Net is overbuilding in areas that are already well-served with high speed fiber networks built by local telcos. They are PREDATORY.
    *Eagle-Net is NOT building fiber out to completely unserved areas. They are NEGLECTFUL.
    *Eagle-Net is lying about their intent, their past actions, and their benevolent interests. They are LIARS, FRAUDS, and CHEATS.
    The Eagle-Net leadership should be prosecuted, and made to make restitution for the damage they have caused.