FiberNet Management Company Parts Ways with Troubled Monticello City Telecom Network

     Hiawatha Broadband Communications pulls out amidst a range of concerns--

The news just keeps getting worse for the troubled Monticello publicly financed telecom system.  Recent news reports and events continue to confirm that Mayor Clint Herbst was right when he admitted “we shouldn’t be in the telecommunications business at all”.

Following up on the heels of FiberNet’s 2011 loss of $2.6 million (in spite of receiving a one-time $1.5 million legal settlement), the city notified bondholders that it needs to renegotiate the terms of $26 million in bonds that were used to construct the telecom network.   Soon after notifying bonders of its desire to renegotiate the bonds, the city reported first quarter 2012 results that showed a stagnating customer base and a projected annual loss of $2.1 million in 2012.

On May 25th, the company retained to manage and operate FiberNet gave notice to the city that it’s electing to terminate its $15,000 monthly management contract in 90 days.

“Many matters regarding FNM (FiberNet Monticello) are in flux and in the midst of those changes HBC had concerns about being able to continue to manage the project in accordance with HBC principles,” said Gary Evans, HBC President and CEO. “This seemed a prudent time to end the agreement with FNM and free the city to negotiate with other prospective managers.”

Earlier in the week Monticello City Administrator Jeff O’Neill had told the Blandin on Broadband blog “the system is performing well with FNM staff and HBC getting great reviews from customers…Monticello is fighting the good fight and doing what it can to enhance financial viability through cost cutting and development of new resources.”

FiberNet’s prospective budget cuts were expected to include HBC, though it’s not clear that was a factor in the Winona-based company’s decision to part ways.  “HBC understands discussions about refinancing the system and discussions with other potential prospective managers are underway to help assure the continued growth of the network,” Evans said in a news release.  HBC also expressed pride in launching FNM and in meeting subscriber projections for the system.

In an interview with the Freedom Foundation of Minnesota, Evans acknowledged reaching out to supporters of the proposed $70 million RS Fiber Network underway in southern Minnesota.  “We’re looking forward to working with the people in Renville and Sibley Counties and have informed them of our decision,” Evans said.  “We’ve told them if they have questions, we’d be happy to meet with them and discuss it.  But we haven’t heard back from them.”

FiberNet officials say the network faces bond payments of $882,668 in June and $943,670 in August.

                                 Tips or comments? Contact Tom Steward at 612-354-2192

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