Local Officials Acknowledge $63 Million Telecom Network Involves Risk for Taxpayers

WINTHROP, MN—Local officials promoting a sprawling fiber optic broadband network agreed that the $63 million proposal could be a substantial risk for local taxpayers. The proposed government-backed system would connect some 7,500 homes, farms and businesses in eight southern Minnesota cities.  Local elected officials from two counties (Sibley and Renville) have been promoting the venture currently known as RS Fiber.

Proponents say subscriber revenue will repay the bonds necessary to build the system.  If constructed, the system would be owned by the participating communities and counties in a joint powers agreement.  The proposed fiber network would offer the usual “triple play”:  fiber optic cable, phone and internet service to Gibbon, Winthrop, Gaylord, Arlington, New Auburn, Green Isle, Henderson and rural residents in Sibley County, as well as the rural “426” telephone exchange in the city of Fairfax, located in nearby Renville County.

“It makes me nervous and not sleep at night.  It’s a lot of money,” said Mark Erickson, Winthrop city administrator and leading proponent.  “The last thing I want to do is have this project not work out.  But we have a risk out here of doing nothing, too.”

Yet officials promoting the venture have ruled out taking a big risk themselves, backing off previous talk of holding a referendum.  They deny skirting state law that requires a 65 percent supermajority of voters to approve local government telecom services, citing an opinion from their legal team. “I’m not afraid of a public vote. It would delay us a year,” Erickson said.  “But 65 percent, it’s just not the American way.  It’s 50 plus one, it’s a majority.”

Opponents argue government should not and cannot compete with the high tech telecom industry.  “It’s absolutely wrong.  I can’t think of an area of government that has gone into a business setting and done well. Fannie Mae, Freddy Mac, the postal service, you name it,” said Steve Johnson, ex-mayor of Winthrop who works in the banking and insurance industries.

Others contend they’re pioneers doing “like our forefathers did when they settled this land”, characterizing the stakes in stark terms that could make or break their rural way of life. “If we do nothing, how do we stay competitive in the world market?  Education, agriculture, health care, or whatever?” asked Dave Trebelhorn, mayor of Winthrop.

To spread the word, officials have held dozens of public informational meetings where they tout the many benefits of their government-owned system.  According to materials distributed at these public meetings, RS Fiber would be faster, cheaper and provide service to many residents that are currently without high speed internet access. Thus far, some 2,900 residents have mailed in cards supporting but not committing to the service.  This number falls well short of RS Fiber’s original goal of obtaining commitments by last August from at least 4,000 potential subscribers.

“I think there are some cold feet.  It needs a push to bring it to a head,” Johnson said.  “The sad part is we’ve expended the time, effort and money on this when we could be concentrating on making Winthrop better.”

Some of the biggest names in the industry are among four private providers already offering service in different parts of the area.  Frontier Communications has ridiculed the proposed network’s numbers and projections, claiming they show RS Fiber would have to enroll every available household to be viable. Local officials defend their projections indicating the need for only 70 percent of residents to sign up.

“In a few communities in our county the services may be adequate, but our county is more than a few residents,” said Curt Reetz, a city councilman from Arlington. “Many are rural-based and some of our communities have no options for certain services.”

The Winthrop Telephone Company acknowledges the government-sponsored network could put them out of business—after 110 years. “I don’t think the government ought to be in private enterprise.  This rural community was built on the strength of private enterprise, not government,” said Danny Busche, general manager of Winthrop Telephone. “We’ve invested millions in the infrastructure already.  It would be impossible for us to toss that aside.”

Ironically, Winthrop city hall currently relies on the century old provider for internet service—for now.  Officials contend they’ve offered to partner with all of the private providers without success.  The potential fallout was stated in a blunt blog post by Winthrop’s city administrator.

“I don’t know if this project will put Winthrop Telephone out of business.  But if it does you could say it might be their own fault. We started talking with Winthrop Telephone nearly two years ago about partnering with us…” Erickson wrote.  “We even said we would be interested in finding a way for them to own the network once the bonds are paid off.  Our goal is not to own and operate the network.”

“We are a taxpaying business with four or five employees. We live and work and invest in our community and face going broke because we won’t give up what we do now to support a government-backed operation?  That really hurts,” Busche responded.

On January 19th, the $63 million question will go before the RS Fiber Joint Powers Board for expected approval.  In the next few weeks, each city council and county board will vote on whether they will obligate their taxpayers to participate in the project.  Officials say they will not repeat the mistakes made by other government-run telecom systems.

“We’re learning from Monticello’s mistakes, we’re learning from Windom, we’re learning from Burlington, Vermont,” Erickson said.  “We understand what’s at stake, not only from a positive perspective but from a negative perspective.”

To date, about $100,000 has been spent on the effort, including a $40,000 grant from the Blandin Foundation.

###

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


Print

Stay In the Loop

Stay Up To Date

Sign up today for our
e-update to find out what is
going on in your state and
local government.

FFM Tipline

We will do our best to uncover the wasteful spending you report.

Print