Colorado Stimulus Grantee Still Hotly Contested; House Oversight Hearing Pending

"This is a dog that needs to be put on a leash,” Rep. Cory Gardner, R-Colo., told us about the infrastructure grantee. “It’s the taxpayers who are on the hook.” His office raised concerns last year and he says there’s no shortage of Colorado witnesses ready to come forward.

But independent consultants CTC, hired by EAGLE-Net last fall, say in a 40-page report (http://bit.ly/Znvdvi) there’s no evidence of overbuilding because companies haven’t disclosed sufficient data. The recipient of a $100.6 million broadband stimulus grant, part of NTIA’s Broadband Technology Opportunities Program (BTOP), faced accusations of overbuilding mid-last year from smaller telcos (CD Sept 27 p6), a charge a CenturyLink executive repeated (CD Dec 26 p8). “Apparently the Maryland consultants never made it to Colorado,” Gardner said of CTC, noting it’s “pretty obvious that there’s duplication.” He criticized “all this overbuild on the eastern plains of Colorado” and building in Denver, with much less out west.

The broadband stimulus is largely successful, NTIA BTOP Director Anthony Wilhelm countered, pointing to benefits EAGLE-Net will bring Colorado schools. He described NTIA oversight as well as opportunities EAGLE-Net has shown to local companies, opting for lowest bids. Seventy-five percent of Colorado deployments leverage existing infrastructure and schools and other community institutions still lack adequate broadband, he said. “Duplication is in the eye of the beholder,” said EAGLE-Net spokeswoman Gretchen Dirks, disputing the allegations. Dirks emphasized EAGLE-Net partnerships and its statewide mission to serve, adding that the entity always planned to build out west in 2013. Proving duplication “requires looking at whether the new fiber is exactly duplicating existing fiber without breaks or choke points,” said Joanne Hovis, head of CTC and also NATOA board president. “Redundancy is not in and of itself a problem.”

The federal government suspended EAGLE-Net construction in early December, alleging unrelated problems with its environmental assessment process and route changes (CD Dec 10 p6). “The suspension’s a big deal for us,” said Matt Brooker, technology coordinator for a Buena Vista school district. EAGLE-Net will replace private provider options Brooker judged inferior. But he doubts EAGLE-Net will service them until August, a month after its scheduled start, and fears facing double billing, he said. Bandwidth is too low now, he added, praising EAGLE-Net’s potential. Currently, the network crawls if students use Google Earth, and the schools block streaming sites and limit YouTube and Netflix, Brooker said. “In rural Colorado, I feel we're intentionally kept bandwidth-starved,” he said of private companies. “Our budgets have been tight ... and that’s why we're sitting at 10 meg [Mbps] right now.” EAGLE-Net would bring Brooker’s schools 300 Mbps for costs no different than what he once paid for 10, he said. Only 4 percent of Colorado schools have 100 Mbps available, Wilhelm said. Hovis underscored the “enormous” educational needs for more bandwidth, including full fiber connections. The Schools, Health and Libraries Broadband Coalition called overbuilding concerns involving anchor institutions “misplaced” in a Tuesday letter to House legislators. EAGLE-Net is “anxious” to resume work, Dirks said.

NTIA wants to lift the suspension quickly and hopes for early spring, Wilhelm said, saying projections indicate EAGLE-Net can finish its work in the grant’s time allotment -- by fall 2013. EAGLE-Net probably won’t have enough money to finish construction nor sufficient incentive to, estimated Rick Smith, former EAGLE-Net board member and mayor of Bayfield, Colo. EAGLE-Net had spent $64.4 million of federal funding as of last September, according to its most recent NTIA report (http://1.usa.gov/YSv3eB ). EAGLE-Net CEO Mike Ryan repeatedly indicated he’s seeking other funding, Smith said. “You don’t have to adhere to a single government requirement” once EAGLE-Net leaves the bounds of its BTOP grant, he said. “I find [Ryan] to be a very slick character.” But EAGLE-Net can’t transition from an intergovernmental entity to a private carrier, EAGLE-Net’s Dirks said, calling fears “unfounded” and saying she’s not aware of a funding source search. Ryan stressed EAGLE-Net’s “sustainability” needs during a Feb. 13 meeting in Durango, Colo., Smith said. “That got me a little concerned he’s interested in making money.” Dirks agreed it'll need to make money, noting the project receives no subsidies beyond the grant and will need to run on the fees and its network. EAGLE-Net staff and representatives from Farmers Telco and FastTrack Communications discussed collaboration but the vendors were privately doubtful, Smith added. “The timeline means nothing” to Ryan, he said, suspecting “this is all a façade” as the BTOP money dries up: “The sunset will come on the grant. ‘We just didn’t get it done. Sorry.'”

Strickling met with EAGLE-Net, Gardner and others this February, “a good first step” that didn’t answer all questions, Gardner said. Strickling said he’s “committed to finding answers,” the congressman added. “I was extremely disappointed to see Larry Strickling’s response,” said PC Telecom CEO Vince Kropp of the NTIA administrator’s Dec. 21 letter to Gardner. NTIA officials had visited Colorado and requested data from several stakeholders, the letter said, saying NTIA seeks a “win-win solution” and “will continue to address these issues” during suspension. Kropp sent a 22-page letter to NTIA’s Wilhelm along with multiple attachments in October alleging overbuild. Gardner called Strickling’s reply a “non-answer” that “really didn’t acknowledge anything."

"You don’t walk away from $100 million” that EAGLE-Net has received through BTOP, said Blanca Telephone owner Alan Wehe, referring to NTIA’s investment. Building season resumes around March or April, so the suspension hasn’t hurt EAGLE-Net’s progress badly, he said. Wehe slammed EAGLE-Net’s location “cherry picking” that causes his own company to need fewer staff and have fewer options in areas he considers overbuilt. He criticized what he called “floundering,” but Smith said he suspects Ryan “knows exactly what he’s doing” and is “getting his house of cards in order.” The situation hurts planning and certainty, Wehe said: “The bank knows about EAGLE-Net, too.” Kropp faces what he calls overbuilding and worried about institutions EAGLE-Net looks to serve: “You take out the schools, any state agency, hospitals, libraries, you're taking out the bigger businesses,” he said. No one’s forced to buy service from EAGLE-Net, an aspiring “fair competitor,” Dirks said.

CTC warned that what may seem unfair and wrong at first glance calls for a granular look at data, routes, cost and service before labeling anything overbuilding, its report said. Brooker described what he sees as “tremendous” benefit, beyond faster service, in linking EAGLE-Net institutions through a statewide network. The CTC report also suggests EAGLE-Net suffers harsher scrutiny and criticism than similar BTOP grantees elsewhere. Gardner disagreed, pointing to stimulus projects in West Virginia and Florida, which he anticipates will come up at the congressional hearing (see separate report in this issue). Pete Kirchhof, Colorado Telecommunications Association executive vice president and EAGLE-Net critic, is scheduled to testify as well as Strickling. “The outcome will be the end of the abuse,” Gardner said. “The outcome will be to end the duplication.”