Guest Columns

HUDSON: WADING THROUGH THE WEEDS FOR ANSWERS

Free soaring EAGLE-Net is prey for rural phone companies in Colorado

The Colorado Statesman

Whoever first speculated that the road to hell is paved with good intentions may well have had Colorado’s EAGLE-Net Alliance in mind. During the Legislative Audit Committee’s investigative inquiry last week, Sen. Lois Tochtrop, D–Adams County, expressed the nearly universal sense of confusion pervading the committee room when she observed, “The deeper we get in the weeds here, the weedier it seems to get.”

It’s useful to think of EAGLE-Net as a “ghost ship” silently navigating a heavily traveled shipping channel in the dead of night without lights, radio contact or a discernible flag. Created as a special-purpose unit of local government by a coalition of local school districts, using Colorado’s Inter-Governmental Agreement process, the EAGLE-Net Alliance was launched with a $100 million federal stimulus grant to extend broadband access to underserved rural schools.

The Centennial Board of Cooperative Educational Services, representing Weld and Larimer counties, happened to have completed a survey of broadband access throughout rural Colorado shortly before the economic collapse of 2008. Its conclusions were both thorough and dismal. By comparison with surrounding states, our rural schools were found to be isolated in a digital Sahara with just 10 percent of the high-speed access recommended by the nation’s broadband priesthood. As the Obama White House was identifying programs that could swiftly infuse billions of stimulus dollars into a moribund economy, the Department of Commerce suggested they could launch a fiber-optic renaissance in rural America. It certainly sounded like a good idea, I’m sure.

Despite the recent academic achievements of many home-schooled students, it has become an accepted truth that personal success in the 21st century economy will be intrinsically linked to the ready availability of a fire hose sized digital connection during a student’s formative years. This precept is so popular that the federal government was funding a pair of similar initiatives long before Congress approved the American Recovery and Reinvestment Act in 2009. The U.S. Department of Agriculture provided broadband loans to rural telephone companies through its Rural Utilities Service, a remnant of the Depression era rural co-op program, as did the Federal Communications Commission through its Universal Service fund. The National Telecommunications and Information Administration joined this party with billions of dollars in 2009. It is alleged that the Agate School District on the Eastern Plains enjoys all three of these portals with fewer than 20 students, making them, in all likelihood, kids with access to more megabits per second than any other students in the country.

The Centennial BOCES was one of the first applicants to throw its request for funding over the transom at the NTIA. Shortly thereafter they were awarded $100.6 million to “Connect America’s Schools to Next-Generation Broadband” as touted on the NTIA’s Department of Commerce home page. Centennial wasn’t prepared to undertake this project alone, so they pulled in Ken Fellman, former Mayor of Arvada and one of Colorado’s premier telecommunications lawyers, to cobble together the EAGLE-Net Alliance as an IGA. According to Fellman, this caused some heartburn at NTIA despite the fact that the original application specifically provided for the creation of a successor entity to implement any grant. Follow-ing a three-month delay, EAGLE-Net was ready to roll and spend. Yet they were not really accountable to anyone in Colorado. Neither a creation of the Legislature or the Governor’s Office, they coordinated with but did not report to either the state Department of Education or the Department of Local Affairs. Nor are they subject to Public Utilities Commission oversight.

To understand what they were about to attempt, it is important to briefly examine the structure and history of the fiber optic and broadband networks in Colorado. There are so-called backbone carriers that provide the highvolume connections to regional super computers and the national fiber network, connecting to or co-terminus with local phone carriers. There are the last-mile carriers that include local telephone and cable companies. EAGLE-Net lands in the middle mile, connecting end users (in this case school districts and other public entities) with the backbone carriers. At the front end, it wasn’t clear exactly how any of this was going to work. During the dot.com boom in the late ‘90s, prior to the explosion of the cellular market, companies like Quest were busily burying thousands of miles of optic fiber, eventually overbuilding the broadband infrastructure, leaving vast quantities of so-called dark-fiber lying unused. It was presumed that EAGLE-Net would lease excess capacity from both rural telephone carriers as well as available dark fiber so as not to overbuild parallel with existing facilities. Their federal grant also requires them to provide open access to any public agencies that wish to piggyback on their capacity.

For whatever reasons, EAGLE-Net contracted with a constructor to deploy a brand new network utilizing a design-build agreement. Since the federal moneys were not a loan, but a grant, EAGLE-Net hit the ground running and burned through $92 million in less than two years. The wisdom of this approach is a matter of considerable debate. EAGLE-Net defends its decision on the grounds that it was the best way to integrate their network with pre-existing national, scientific and higher-education broadband networks that would then be available to Colorado schools — for example, astronomy students in Wray could actually schedule time to observe on the Hubble telescope. All, of course, grand stuff.

Meanwhile rural phone companies began to worry they were not going to get a piece of the action. There are no nastier public policy fights than jurisdictional disputes. Last February the NTIA suspended EAGLE-Net’s deployment because their contractor was making decisions on the fly, as permitted in its design-build agreement, regarding the specific routing choices for fiber optic segments. These changes represented diversions from the environmental assessments, which had been filed with the NTIA and further deployment was brought to a screeching halt. It took several months to update and correct these documents. Fellman is the first to admit that there was fault on both sides. At this point many of the rural telecoms pounced, contacting their state legislators and alleging a duplication of existing infrastructure, overbuilding of broadband capacity and demanding a public accounting of expenditures. Their lobbyist, Peter Kirchhof, launched a barrage of Colorado Open Records Act requests that inundated EAGLE-Net. Suddenly, no one wished to acknowledge responsibility for this redheaded child.

Although the Legislative Audit Committee has no legal supervisory authority over EAGLE-Net, it finally scheduled a hearing after eight months of delay and submitted six pages of single-spaced interrogatives to the Alliance. There was a preliminary scuffling about EAGLE-Net’s failure to promptly respond to previous legislative and CORA information requests, which Fellman rebuffed as the appropriate denial of extra-legal and frivolous inquiries. His management team arrived at the hearing with a detailed response to each inquiry from the Committee. What we learned is that only 65 percent of the system has been built out, while EAGLE-Net’s remain-ing grant money has dwindled to $8.4 million. They are, however, collecting more than a $100 thousand a month from 54 paying clients, about half of which are school districts. They expect to add another 10 or 12 districts upon completion of the $8 million dollar construction remaining. However you slice it that’s only a fraction of the state’s 178 school districts. And several remote schools, like Silverton, will not be reached before the money runs out.

EAGLE-Net would like the Committee to believe they have reached a tipping point that will attract additional customers as Front Range School Districts reach the end of their existing broadband delivery contracts — that the Alliance will serve as the low-cost provider capable of offering enhanced value through its partnerships with other educational networks. When this occurs they expect to begin throwing off sufficient cash to complete the original vision of reaching all the state’s underserved schools. They do boast happy clients, including the Cherry Creek School system, libraries and museums, but those fail to qualify as the underserved school districts originally targeted by the NTIA. Colorado’s rural telephone companies are forecasting an imminent bankruptcy. For many of them, the local school district has long been one of their largest customers. They view the EAGLE-Net Alliance as a federally subsidized competitor without acknowledging their own dependence on federal handouts through the Universal Service Fund that keeps many of them afloat. Prior to the break-up of the Bell System, AT&T propped up these rural carriers through a host of largely invisible subsidies. I remember as a Mountain Bell manager being briefed on the implications of divestiture by Ma Bell’s Vice-President for Network Services. An out-of-state foreman asked him what would happen with rural service and his reply was, “We earn 1 percent of our revenues from rural customers and that’s exactly how much attention they’ll get from us.”

Where the truth actually lies in all of this disputation, only time will tell. Certainly there doesn’t appear to be any malicious intent. EAGLE-Net would have been well advised, however, to create a rural carrier advisory committee. There is no reason why their network couldn’t work to the advantage of all concerned, and several companies have indeed cooperated with the Alliance. A larger issue is the federal propensity for distributing money without the right hand knowing what the left hand is doing. A similar wireless broadband initiative known as Open Range Communications failed miserably after squandering nearly $100 million in taxpayer dollars. Through each of these efforts you find yourself tripping over former Level 3 managers who have worked for the Omaha-based fiber optic giant that only survived the past decade’s economic upheavals thanks to the munificent fiscal ministrations of Warren Buffet.

The rural phone companies have no real point of leverage to use against the Alliance other than bad press. That leaves EAGLE-Net to fend for itself, as there doesn’t appear to be any political patron willing to rush to its aid. That’s the trouble with silent running.

Miller Hudson served two terms in the Colorado Legislature and was executive director of the Colorado Intermountain Fixed Guideway Authority. Most recently he was director of the Colorado Association of Public Employees and is now a public policy consultant. He can be reached at: mnhwriter@msn.com.