Stimulus offers messy test of public/private telecom models

As broadband stimulus funds flow into public/private partnerships, they are sure to reveal cracks that still exist in our understanding of how to balance public and private interests in telecom successfully.

Tonight the city council in Provo, Utah will discuss whether to grant a request to reduce monthly payment obligations from Broadweave Networks, which acquired the city’s struggling fiber-to-the-home network last year.

Broadweave argued it could turn the fiber operations around by replacing its open, wholesale-only model with one in which it played both the role of service provider and network operator. It’s not clear yet that the strategy will be successful. Now Broadweave wants to merge with one of the service providers on the network, Veracity Communications, using the temporary break in payments to the city — $1.5 million over two years – to get the combined operation up to speed. And that plea for financial help is raising concerns.

On one hand, the change may not be much strain on the city; Broadweave has made its monthly payments so far and will resume the regular schedule after two years. On the other hand, an editorial in Utah’s Daily Herald points out, the city could well ask why Broadweave, as a private company, doesn’t just seek private financing instead. The choice illustrates the uncomfortable position the city is in, invested in Broadweave’s success as it continues to pay off the debt it originally incurred to build the network.

“The larger lesson in all this is clear,” the Daily Herald editorial said. “Government should steer clear of enterprises that properly belong to the private sector.”

Folks in New England might feel differently. There, some customers of Fairpoint Communications have been asking the government to intervene in the private sector’s handling of their telecom and broadband services. Fairpoint, which is seeking financial relief from state governments as it racks up service penalties from its wholesale customers, has earned the wrath of customers in three states after acquiring Verizon Communications’ network last year. And those three states, like Provo, are uncomfortably invested in the success of a private company over which they have very little control. What is the larger lesson there?

I wish it were clear. The federal broadband stimulus program is likely to open a floodgate of not only public and private broadband operations but, in particular, broadband networks born of public/private partnerships. (And in many cases, the details of these plans are being rushed in order to avoid missing out on a chance for free money.) We’re still learning how to make these models work. Broadband stimulus projects will add a lot to that education. But it will be messy.

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