WiscNet Audit Inspires Sharply Differing Reactions Among Wisconsin Stakeholders
WiscNet continues to be a point of contention in the Wisconsin Legislature and among telcos. Some see the nonprofit association, which provides broadband to around 500 members, as unfairly competing against private industry. A report from the Wisconsin Legislative Audit Bureau last week sparked many reactions among stakeholders and led to attacks against the association as well inspired defenders. The audit identified “inappropriate and illegal activity” in the controversial relationship between the University of Wisconsin (UW) and cooperative provider WiscNet, said the Wisconsin State Telecommunications Association, repeating charges it has made throughout the last year. UW and WiscNet disagree with the interpretation and see the audit as positive. WiscNet serves many of the state’s schools, libraries, state agencies, the legislature and university system but will be legally required to disconnect from the universities next year due to last year’s political battles.
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"WiscNet typically charges less for its services than commercial providers charge for similar services, in part, because WiscNet does not incur all of the costs that commercial providers do,” State Auditor Joe Chrisman said (http://xrl.us/bn7g99). “The lack of sufficient written agreements between UW-Madison and WiscNet for the provision of goods and services lead us to question the adequacy of reimbursements.” It noted that “continued monitoring will be necessary” as the University of Wisconsin system develops its own stimulus grant-funded Internet networks. WiscNet’s staff comprise “UW System employees and its operations are integrated with those of UW System Institutions,” the Legislative Audit Bureau found, which “obscures the distinction between the two entities.” The system paid WiscNet in excess of $2.3 million, which the auditor suggests the system reclaim by June 30.
The audit showed that the cooperative “provides exceptional service and saves taxpayers money” and clarifies “a number of long-standing misperceptions about WiscNet’s relationship to UW,” WiscNet declared (http://bit.ly/TcuqN3). The audit didn’t show subsidies from UW, it said.
Kevin Reilly, president of the UW system, defended its relationship with WiscNet in a Dec. 12 letter to Chrisman (http://xrl.us/bn7hcy). The audit clearly establishes that UW doesn’t subsidize WiscNet and that the association’s lower fees come from “market factors and WiscNet’s business model,” he argued. The cooperative model of WiscNet costs taxpayer members less, he said, and suggested that the legislative implications of 2011’s Act 32, which call on the UW system to disconnect from WiscNet in mid-2013, include “crippling, unintended consequences” if not changed. He foresees “multi-million dollar increases in network costs -- forcing students and/or taxpayers to bear the greater costs” thanks to Act 32, the letter said. “Negotiations are underway to divide comingled physical and financial assets” between UW and WiscNet for when the system ceases being a member, he added. UW will recover the $2.3 million from WiscNet, he said.
But the Wisconsin State Telecom Association said in a release (http://xrl.us/bn7hbe), that the audit revealed WiscNet’s “institutional arrogance, deceptive accounting, statutory violations” which WiscNet didn’t touch on when responding to the audit. “We finally have additional unsettling insights into the true nature of the fast-and-loose relationship between the UW and WiscNet,” said Association Executive Director Bill Esbeck in a statement. “Unfortunately, the UW doesn’t recognize the fact that it is time to address the root of the problem. In their official response to the report, they seem content to put perfume on a pig.” The association previously praised the Republican legislators responsible for questioning WiscNet and compelling the UW system’s upcoming detachment from WiscNet in 2013 (http://xrl.us/bn7hdp). Last year, the Institute for Local Self-Reliance characterized the battle over WiscNet as one to protect incumbent telcos against competition (http://xrl.us/bn7hed). Esbeck had attacked WiscNet for being “subsidized telecommunications services that compete with the private sector,” contrary to Reilly’s characterization.
The audit has divided Wisconsin politicians. “I'm concerned about the information this audit reveals about the relationship between UW and WiscNet,” Rep. Samantha Kerkman, a Republican, said in a statement. “Act 32 is a good starting point for reform, and this audit provides a greater understanding to inform decision-making going forward.” Act 32 will call for the University of Wisconsin system to disconnect from WiscNet starting July 1, 2013, as the audit explained. Kerkman’s office noted that the audit “highlights a number of issues that may confirm legislators’ concerns that WiscNet may have a competitive advantage over other providers in the market.” Democratic State Sen. Kathleen Vinehout had the opposite reaction after the audit. “It makes no sense to take the UW out of the equation in the administration of WiscNet,” she said in a statement (http://xrl.us/bn7he6). “The system is clearly working for our schools and local government.” Affordable Internet is “clearly in the public interest,” she said.