Our Opinion: State's vaunted fiber network limps toward sustainability
Internet service providers would finally reach out to neglected customers in sparsely populated areas, the thinking went, by having access to cables threaded through 123 cities and towns.
But as a recent legal ruling makes clear, a state agency's big bet — paid for with $90 million in taxpayer chips — was based only on a hunch.
Worse, leaders of the Massachusetts Technology Collaborative, in a hurry to qualify for public stimulus money to create the 1,200-mile MassBroadband 123 network, decided not to conduct recommended market research, an arbitrator found.
Now, taxpayers will pay again.
Arbitrator Philip D. O'Neill Jr. rejected the state's unsupported request for tens of millions of dollars from the entities it tapped to run the network. Instead, he ordered the state to pay $12.2 million to compensate the operators for having to prop up a flawed system.
It didn't have to come to this.
The arbitrator determined that back in 2010 and 2011, Mass Tech rejected advice from at least three hired consultants, all of whom said it needed to test its assumptions about who would pay to use the future network.
If it had been diligent, Mass Tech would have learned that key private partners wouldn't be buying. "They absolutely refused to even consider connecting to the MB123," O'Neill wrote, speaking of companies like Comcast and Charter. Even public entities weren't connecting to the degree expected, due in part to unreasonably high monthly fees — another product of Mass Tech not doing its homework.
Yes, the "middle mile" brought high-speed service closer to long-neglected rural addresses. Close but no cigar, as the saying goes.
As hard work propelled by the Baker administration over the last two years has made clear, the real challenge — and biggest expense — lies in going the "last mile" to customers. Until the state offered up millions in public funding to the private companies, they remained uninterested in getting high-speed internet to rural homes and businesses.
Meantime, an effort to create clusters of publicly owned last-mile networks in towns is advancing with state assistance. Interestingly, that comes years after the Massachusetts Broadband Institute — a wing of Mass Tech — quashed a similar drive championed by the nonprofit Wired West. It took a near revolt at a February 2017 town hall meeting in Worthington to get the state to extend the same kind of financial support to local broadband leaders that it stood ready to provide private companies.
Not surprisingly, pushing ahead blindly on its initial middle mile dream led Mass Tech to blunder.
According to the arbitrator's findings, the agency made baseless assumptions about revenues from the new network, then saddled its chosen operator with a system that quickly became unsustainable. Internally, Mass Tech's chief financial officer recognized the problem even before the network was fully delivered to Axia NetMedia, the Canadian company that put in a winning bid to run the middle mile.
Axia's "win" was soon costing it $2 million a year, the arbitrator determined, after a month of hearings and at least a cursory review of a million pages of documents. (If bound up for a shelf, those documents would fill a thousand volumes, each holding a thousand pages.)
Axia quickly recognized it had been handed a bad deal. The company sought to "cure" its contract with Mass Tech, on the grounds that it received fewer customers than the agency had originally listed, as well as late delivery of the network.
Mass Tech's leaders refused to alter contract terms. Lawyers for both sides went to war, and the result after four expensive years of litigation is O'Neill's Oct. 2 ruling.
The cure Axia wanted is finally here. The arbitrator ordered that the contract, which remains valid into 2023, be changed to reflect the financial terms Mass Tech reached when it was recruiting a new operator last year, after a company affiliated with Axia filed for bankruptcy protection.
This legal and financial train wreck could have been avoided. The deal Mass Tech reached with a backup provider reflects the network's true value. By refusing to accept that reality, Mass Tech proved itself an unworthy steward of a prime state asset.
TALK TO US
If you'd like to leave a comment (or a tip or a question) about this story with the editors, please email us. We also welcome letters to the editor for publication; you can do that by filling out our letters form and submitting it to the newsroom.