BTOP Grantee Accused of Overbuilding Fiber on RUS-Funded Buildouts

PC Telecom is “nearly 100 percent overbuilt” as of this fall, CEO Vince Kropp. EAGLE-Net overbuilt about 94 miles of middle-mile transport as well as into anchor institutions that PC Telecom covers, he said. EAGLE-Net “basically mirrors our network,” he said. Although the 2012 construction hasn’t hurt Kropp’s business yet, he said he foresees a “competitive disadvantage.” EAGLE-Net receives grant money for construction and doesn’t have to pay municipal fees such as right-of-way charges and some taxes. The Rural Utilities Service funded PC Telecom’s infrastructure with loans of $7 million, Kropp said, and he “certainly raised the issue with RUS” once he learned of it, and told NTIA July 18.

Southeast Communications encountered overbuilding this summer, SECOM General Manager Jon Saunders said. EAGLE-Net never contacted him and violated an initial agreement three times, he said. “I witnessed it, took pictures.” Saunders notified NTIA July 30 and asked that it suspend activity. Rye Telephone Co. sent NTIA an Aug. 29 letter warning of how the overbuilding of SECOM would hurt its own business. EAGLE-Net is about 30 miles short of completely overbuilding the RUS-funded southeastern network of Blanca Telephone Co., Manager Alan Wehe said. The rural San Luis Valley is well served, but EAGLE-Net goes there anyway, and with no plans for local employees, he said.

EAGLE-Net doesn’t accept the providers’ premise and definitions of overbuilding, its executives responded. The entity is in ongoing dialogue with Saunders, Kropp and others and wants to work with them, Executive Vice President Chip White said. One element of these talks is the precise definition of overbuilding, he said. EAGLE-Net limits services to other governmental institutions -- schools, libraries, government buildings -- and doesn’t serve residential or commercial customers, he added. EAGLE-Net has an “open door” policy, spokeswoman Gretchen Dirks said.

"Right now, we're trying to gather information,” NTIA BTOP Director Anthony Wilhelm said of his recent visit. The agency wants a “granular sense” of what’s happening from concerned providers, he said. NTIA held “a series of meetings” with different parties last week, will “take a hard look” at any specific issues and doesn’t want to waste “taxpayer dollars,” Wilhelm said. NTIA is working with RUS and has coordinated “to take out some of the overlap” with broadband initiatives program grantees before, he said. EAGLE-Net and other parties “seemed amenable” to meeting, he said. Saunders met with both NTIA and EAGLE-Net, he said. NTIA requested data from SECOM, PC Telecom and Blanca, their officials confirmed. RUS is aware and working with all involved, an RUS official said. Saunders retains “serious concerns,” but is “open to proposals” to remedy the situation, he said after a Tuesday meeting with EAGLE-Net.

EAGLE-Net underwent a “change of heart” in recent years and wants to become a revenue-generating “player,” Bayfield, Colo., Mayor Rick Smith said: He was on EAGLE-Net’s board for 2 1/2 years and frustrated by a history of “cherry picking” locations. The grantee failed to live up to the terms of the grant, he said. Smith resigned in July on realizing the network will “leave behind” rural sites that need fiber most, he said. Colorado politicians are “completely in bed with this,” said Frank Ohrtman, the state’s former broadband communications manager. EAGLE-Net suffers from structural and ethical problems, he said. It uses grant money to pay legal fees, he told us. The entity declined to integrate the state’s $5-million broadband planning efforts, when in 2011 Colorado identified the regions receiving coverage, he said. “The planning side [of EAGLE-Net] isn’t telling the infrastructure side what’s going on.” There’s bureaucratic dysfunction within the EAGLE-Net board, “a total mess inside the organization, from what I'm seeing,” Smith said.

EAGLE-Net is receptive to the planning data Ohrtman cited, but wasn’t able to use it at the time, White said. Some criticisms arise because EAGLE-Net’s timeline is not always “in sync” with regional stakeholder expectations, White said. EAGLE-Net’s mission is statewide, he stressed. “Our grant was not just based on unserved and underserved.” Some critics miss “the depth of reality” that goes with complicated local permitting and award conditions, he explained. The communications shortfall is partly due to “prudent” spending, said Dirks. EAGLE-Net employs fewer than 30 workers and can’t hire 100 people to spread the message, she said. EAGLE-Net uses grant money for legal fees, but that “isn’t uncommon” and applies to many permitting and business activities, Dirks said.

The BTOP grantee struggled to make NTIA deadlines, its Q2 report shows (http://xrl.us/bnq9gp). “We're working on a two-year schedule to get this done,” Dirks told us, citing NTIA’s initial year-long environmental assessment. Skeptics point to geography and expediency for EAGLE-Net’s buildout strategy. Mountainous western Colorado is under- and un-served, but building’s “expensive” and a “lengthy” process with short annual construction windows due to freezes, Saunders said. “It’s quick and easy to build out here” in the eastern plains where SECOM operates, he said. Smith agreed: “They overbuilt in those areas because they were easy."

Four of Colorado’s U.S. Republican House members talked of the “troubling” overbuilding and of 25 small companies “blindsided,” in a Sept. 17 letter to NTIA (http://xrl.us/bnq8yx). County commissioners from Crowley, Otero, Routt and Phillips recently wrote concerned letters to NTIA. Silverton sent EAGLE-Net a letter blasting it in late August, but offering “unyielding support” Sept. 10 after a visit from White and Dirks. PC Telecom and SECOM have sought legal representation and hired New York-based public relations officials as frustrations mounted.

Overbuilding fears loomed as early as fall 2011, Colorado telecom engineer Corey Bryndal said. He wrote an August 2011 email to state telecom stakeholders that said EAGLE-Net engagement “remains elusive.” People worried then about “transparency, execution, and overbuilding existing investments,” more than half a year before any overbuilding occurred, his 2011 note said. The grant is “$100 million getting blown on downtown Denver and IBM,” rather than rural Colorado, he said.

Kropp, Saunders, Ohrtman, Smith and Bryndal said they all had difficulty communicating and trusting EAGLE-Net representatives, and all described a loss of faith. They initially endorsed the entity and its mission of providing service to unserved and underserved rural Coloradans. Beyond concerns about tax money being misspent, such developments should remain a top priority, the officials said. Communities were “screaming” about EAGLE-Net a year ago, Smith said. Kropp has a “bad feeling” about the future, and fears NTIA has given up on dealing with PC Telecom, he said.