Court: Axia must keep 'middle-mile' broadband network operating

Middle-mile network operator loses one court round, opens new front

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A May court order requiring continued operation of the state's $90 million "middle-mile" broadband network remains in effect, despite an effort to quash it.

That development comes as the arcane legal dispute mushrooms, nine months after the network operator's surprise bankruptcy filing.

The First Circuit of the U.S. Court of Appeals on Nov. 17 denied a request to impose a stay on the order that it continue to oversee the network. That earlier order came May 18, in the form of a preliminary injunction granted by U.S. District Court Judge Timothy S. Hillman.

Axia NetMedia Corp. had appealed Hillman's order. But the three-judge appeals court, which sits in Boston, said that after reviewing arguments, it believes the status quo is best preserved.

"We conclude that a stay is not advisable at this time," the judges wrote.

Their finding secures service for customers of the 1,200-mile network known as MassBroadband 123. The state-owned system connects hundreds of public institutions in Western and Central Massachusetts to the internet, including police and fire departments.

The network is now run by an entity called KCST USA Inc. But Axia, based in Canada, has provided financing and remains on the hook to safeguard the network's operation. Court papers have revealed that Axia is the sole beneficiary of the trust that owns KCST.

A setback

The appeals court order against lifting Hillman's injunction represents a setback for Axia, which is fighting the network's owner in multiple courts in a dispute involving alleged damages of more than $30 million. The appeal was filed by Brian P. Voke of Campbell, Campbell, Edwards & Conroy in Boston.

The legal beef expanded this fall, when KCST USA Inc. filed what's known as an adversary proceeding in U.S. Bankruptcy Court.

The action is a separate lawsuit entered on the basis of a complaint from within the bankruptcy process.

Litigation has dogged the network from its inception. Its owner, the Massachusetts Technology Park Corp., engaged in civil actions against the network's builder and, later, its operator, racking up steep legal costs.

The network has been losing millions since it debuted in 2014, Axia claims, leading its successor to file for bankruptcy March 22.

State response

In response to the adversary proceeding, MassTech's lawyers are pressing the U.S. Bankruptcy Court to halt the new action and to instead compel arbitration to work out claims in the case.

MassTech's lawyers argue that the contract the state signed Feb. 25, 2011, with Axia NetMedia required the parties to enter arbitration to settle disputes.

The state claims that it delivered the network it promised.

The operator, though, argues that MassTech was late to turn over a system that Axia found to be flawed, including the absence of hundreds of expected institutional customers for broadband connections.

Parties to the sprawling case will be back in court at 12:30 p.m. Dec. 20. A hearing is scheduled then on MassTech's motion to compel arbitration over claims stemming from the dispute over the middle-mile network's operating agreement.

As the case expands, unresolved requests are stacking up.

For instance, the state has not been able to place a cable inside a Springfield facility that would allow it to access operations of the network, despite a court order saying the operator should allow that to happen.

MassTech staff have been trying to gain access to its system since Hillman ruled May 18 that Axia's side must provide passwords and other technical information.

The agency hasn't been able to use passwords it obtained June 9, after another drawn-out legal fight.

MassTech says it needs access to plan for a "safe and secure" transition to a new vendor. But Axia's side has said it fears disruption and is seeking legal assurances that it not be held responsible for problems caused by someone else.

Larry Parnass can be reached at lparnass@berkshireeagle.com, at @larryparnass on Twitter and 413-496-6214.


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