A reset for former 'middle mile' antagonists: Operator of MassBroadband 123 emerges from bankruptcy, pledges to work with state to strengthen fiber network

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Fresh from bankruptcy court, a little-known company can now focus on the business of "back haul" — moving data at the speed of light across the state-owned fiber network known as the "middle mile."

But after two years of feuding in U.S. Bankruptcy Court, that company, KCST USA Inc., and the state of Massachusetts might need to mend fences.

When KCST brought its financial woes to the Worcester court, it claimed that the Massachusetts Technology Collaborative's failure to deliver all promised wholesale customers for the network, MassBroadband 123, cost it millions of dollars in losses and forced it to seek protection from creditors.

Meantime, MassTech and Axia Net Media, a company related to KCST and the original holder of the contract, continue to fight in a different federal court in Worcester. The two have been adversaries in state and federal courts since before the network went live, costing taxpayers millions in legal fees.

MassTech once had a replacement

middle mile operator waiting in the wings, should KCST crash out.

But no collapse came.

People in Western and Central Massachusetts whose high-speed internet access depends on the middle mile were not affected by the wrangling, despite occasional ploys by lawyers to suggest public safety stood at risk. Among the middle mile's key customers when it debuted several years ago were hundreds of small public entities, such as police and fire stations, public libraries and town buildings.

Just not as many of them as KCST says it was told to expect.

For most people, though, KCST's bankruptcy was an out-of-sight, out-of-mind issue. As a business-to-business venture, KCST's name never appears on bills in people's mailboxes. It sells "back haul" on the middle mile to companies that, in turn, provide internet service to homes and businesses. As new municipal fiber networks continue to launch, many will be connecting to the internet through the middle mile.

Today, the two long-warring parties say they are ready to work side by side to get the most use possible out of one of the state's prized high-tech assets.

"That's in the past. We're focused on collaborating," Sarah Lang, KCST's chief operating officer, said of years of litigation, including work of an arbitrator appointed by a U.S. District Court judge. "All of that is behind us."

Brian H. Noyes, the spokesman for MassTech, also strikes a note of reconciliation.

"We look forward to working with KCST," he said in a statement, when asked how MassTech views future operations of the network.

Noyes said MassTech wants to ally in coming years with KCST, which holds a contract into 2023, to increase the number of public and private users of the network.

KCST left the bankruptcy process in July, after 28 months, on a new financial footing. That's because the arbitrator handling the U.S. District Court case revised terms of the original contract in KCST's favor.

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Noyes confirmed that the altered contract numbers are in effect, though Axia and MassTech continue to fight in court. Axia recently filed a second appeal of a U.S. District Court ruling to the region's federal appeals court.

For KCST, the new contract terms afford a new stability, its leaders suggest.

Steve Darr, who managed KCST during the bankruptcy proceeding, said in a statement that company staff actually expanded the customer base in the years the firm was in Chapter 11, seeking its turnaround. He said KCST is now in a position to operate a sustainable business "and capture opportunities in Western Massachusetts."

Terry Fergus, KCST's president, said it's time for a fresh start in the company's relationship with MassTech. He suggested, in a statement, that both share a goal: "To bridge the urban-rural digital divide."

Lang, who helps lead KCST operations from an office in Concord, said one objective now is to make the most of the $90 million the state and federal governments invested in the network to stimulate the economy after the advent of the Great Recession in 2008.

Part of that, to be sure, is pricing its wholesale services at competitive rates.

"That's definitely one of the things that I and the team are looking forward to — working with the MTC," she said. "That we stay relevant to the market. How that gets done is the next step."

The company lists about two dozen wholesale customers. In Western Massachusetts, they include one biggie, Charter Communications, and lots of smaller firms: Crocker Communications, WiValley Inc. (which is setting up wireless internet service in Florida and Savoy in Berkshire County), Fiber Connect LLC in southern Berkshire County. The telecom divisions of two municipal utilities — Holyoke Gas & Electric and Westfield Gas & Electric — both use the middle mile.

Westfield's Whip City Fiber unit is working with most of the small towns in Berkshire County creating their own networks.

KCST employs only about half a dozen people in Massachusetts. The network itself is managed with help from staff in Calgary, Canada, Axia's home base.

One incentive for KCST, now that financial problems with its contract have been addressed, is to be a candidate to renew its role before the current contract expires in four years.

"We would hope to continue to operate this network past 2023," Lang said.

As if to make that case early, she notes that during the bankruptcy proceeding, customers never lost service.

Noyes, of MassTech, said that the middle mile will be providing an essential link to broadband internet service for the many towns in the region now in the process of building municipally owned fiber networks.

And that, he said, achieves "a key goal from when the network was first envisioned."

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


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