Escalating cost of fiber materials raises questions for similar projects
The recipient of a major federal stimulus grant and loan in southwestern Minnesota appears to be having second thoughts about proceeding with a broadband project spread out over three counties. The $15 million project which planned to expand broadband service in 15 communities may be in danger of going into the financial red zone, apparently due at least in part to the escalating costs of fiber optic cable.
Woodstock Telephone Company was approved by the Rural Utilities Service (RUS) to receive a $10.6 million grant and a $4.5 million loan from the American Recovery and Reinvestment Act (ARRA) to expand its fiber network by installing Fiber-to-the-Premise (FTTP) to an additional 3,600 premises in Lyon, Pipestone and Rock counties.
While there’s evidently been no formal announcement, the Minneota city administrator told the Freedom Foundation of Minnesota (FFM) that Woodstock Telephone informed her the company no longer intends to build a key facility in their community to house equipment for the network. FFM calls to Woodstock Telephone had not been returned at the time of this post.
“Our reaction is we’re disappointed because it was going to bring more competitiveness to the market here,” said Sarah Friesen, Minneota city administrator. “We do have high speed internet access, but they were also going to bring another option for television, too, not just the internet.”
The project was heralded in August, 2010 by the RUS, a branch of the US Agriculture Department, as a breakthrough for rural residents that would save or create 41 jobs. “More than 8,000 people stand to benefit, as do approximately 180 businesses and nearly 50 community institutions. In addition to the jobs this project will create upfront, it will help drive economic development and create jobs for decades to come,” according to the press release.
This week, however, Friesen told Minneota city council members that Woodstock Telephone officials informed her they’re “99 percent sure” they’re not moving ahead. A report in the Minneota Mascot indicated that fiber optic materials have dramatically escalated the cost of the project by more than $1 million. The higher than anticipated cost of fiber could also be a factor in several other taxpayer-funded broadband projects either on the drawing board or in progress throughout the state.
“The costs skyrocketed with the natural disasters that happened in Japan, where a lot of their fiber cable comes from,” Friesen said. “That’s why they pulled the plug on the thing. It wasn’t going to cash flow for them.”
Minneota was poised to sell a vacant lot for the fiber optic project and put a piece of government property back on the tax rolls, spending some $1,100 on legal and other fees in the process. Friesen indicated Woodstock Telephone would reimburse the city for those costs.
The sudden turn of events in Minneota revealed that others may be having second thoughts about the need for a taxpayer-funded system, as well.
“You keep hearing as a buzzword that rural Minnesota needs broadband to compete in the global economy,” Friesen told FFM. “But for city purposes, we have enough broadband for what we need. So I’m not sure if that need is out there in Minneota or not. I’m not sure that question has ever been asked or answered or not.”
If the $15 million project gets shelved, it would become the second Minnesota federal stimulus broadband project to return funding to Washington. The Leech Lake, Red Lake and White Earth Bands of Ojibwe were awarded $1.7 million to build and renovate public computer centers. Yet when the tribes did the math for the project, it failed to add up and they turned down the stimulus funding.
Tips or comments? Contact Tom Steward at 612-354-2192.
Posted on Fri, January 13, 2012
by Tom Steward filed under