$35 Million Prior Lake Telecom Proposal Pits City Against Private Business

PRIOR LAKE, MN—A recently minted $35 million taxpayer-backed telecom proposal in Prior Lake takes a sharply confrontational posture toward the very sector the project ostensibly aims to attract—private business. An $80,000 feasibility study aggressively singles out three telecom providers with thousands of Prior Lake customers that the proposed city network would compete for, even as it lays claim to “creating an environment in which the private sector can thrive. This is about enabling the private sector.”

The proposed municipal fiber-optic network is the centerpiece of an economic development initiative focused on converting the southwest suburb into a technology village with a data center and incubator to draw entrepreneurs and high-tech companies.

As the latest proposed government-owned network to surface in Minnesota, the Prior Lake proposal puts a new focus on the role of government in competing with companies it also regulates. The document states:
      o “It is unlikely that reliance on any of these providers will improve or enhance economic development. If you were a business looking to come or to build here, would you be attracted by them?”
     o “We discuss why business is not, cannot, be attracted to networks that are largely copper-based or that separate our lives into office capabilities and home capabilities.”
     o “We explain why the existing service providers are not motivated to build the network we envision or need if we are to attract high technology companies.”

Under the model recommended in the 93-page feasibility study, the city would market traditional triple play phone, video and high-speed internet services, as well as other digital services. The city system would in many respects duplicate telecom products already available to residents, going head-to-head with private carriers Integra, CenturyLink and Mediacom that currently offer speeds of 20 to 30 megabits per second.

“The scale of it is bigger than anything I’m aware of that Prior Lake has jumped into as a municipal project,” said Dan Rogness, Community and Economic Development Director. “It is a big step and I think that’s why there will be some time taken to vet this out before a decision is made.”

The report also criticizes a state law that gives local voters final say by requiring cities to hold a referendum before moving forward with a local telephone exchange as part of a municipal network. The city study characterizes the law as a “burdensome” and “outdated” statute used by telecom companies “to deny legitimate outcomes.” Especially noteworthy to residents and taxpayers is the city's troubling contention that “alternatives seem to exist” that would allow Prior Lake to circumvent a vote.

The risks to local taxpayers of government-owned networks have been underscored by serious financial troubles at FiberNet Monticello. A city-operated telecom network once hailed as a national model, FiberNet Monticello has lost millions of dollars and faces potential default—a case study that’s close to home in Prior Lake.

“Monticello has come up in some meetings. There’s the realization of course they paid for something with a revenue bond and now are defaulting on that,” Rogness said. “I think it has cast a shadow on the thinking of some cities about moving forward.”

Lookout Point Communications, a St. Paul consultant, drafted the study. Lookout Point Communications also served as a consultant to the nearby TonkaConnect proposed fiber network, leaving the project before the Lake Minnetonka Communications Commission rejected the estimated $80 million system in 2011.

The Prior Lake city broadband fiber network subcommittee involved in overseeing the report includes a nationally known activist for taxpayer-funded telecom, Chris Mitchell of the Institute for Local Self Reliance. Mitchell is an enthusiastic booster of TonkaConnect and FiberNet Monticello, among other government-backed networks.

“They (cities) all recognize that big companies have little incentive to improve a system. Full fiber networks are expensive to build, and the return on investment takes years,” Mitchell wrote in a 2010 opinion piece.

No telecom representative participated on the fiber subcommittee in the Prior Lake study. “This has come up in discussions that one of the next steps in the process to try and evaluate the recommendations is to have this reviewed and discussed with the providers,” Rogness said.

CenturyLink, one of the three private providers in Prior Lake, told FFM the internet speeds the carrier offers in the community are not reflected in the feasibility study. Lookout Point Communications did not respond to an FFM inquiry at the time of this posting.

Following two recent meetings of the Prior Lake Economic Development Authority to discuss the fiber network, the proposal will move on to a city council workshop scheduled for September 9th. City officials hope for a decision one way or another this fall.

                                     Comments or suggestions?  Contact Tom Steward at 612-354-2165.


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