Management company pulls out of Monticello’s fiber network

UPDATES BELOW WITH HBC'S GARY EVANS AND MONTICELLO PRESS RELEASE.

Hard times continue for the city-owned broadband network in Monticello, just northwest of the Twin Cities. Hiawatha Broadband Communications (HBC), the Winona-based company that has been managing the system, announced today that it is terminating the arrangement.

In a press release, HBC indicated that many aspects of the network, called FiberNet Monticello, are in flux and "in the midst of those changes HBC had concerns about being able to continue to manage the project in accordance with HBC principles."

Neither Gary Evans, the company's president and CEO, nor Monticello City Manager Jeff O'Neill had returned calls at the time of this post to talk about what this means for FiberNet. SEE UPDATE BELOW.

The press release cited numerous factors dogging the publicly-owned fiber network, many related to moves by its private competitors, including "a crippling lawsuit and subsequent appeals brought by telephone provider TDS, the economic downturn that struck in 2008 slowing growth in the community, accumulation of interest debt due to lawsuit delays, inadequate recovery of legal damages, and a series of predatory pricing practices by cable and telephone incumbents."

Monticello was one of the first communities in Minnesota to build its own fiber network in response to residents' demands for faster Internet service, but revenues have not been sufficient to allow the city to easily make its bond payments. In March, MPR News' Conrad Wilson produced a really nice story detailing the battle between public and private that's been waged in Monticello. You can listen to it or read it here.

Among other details, Wilson noted that the city is facing a large bond payment in June. "[B]uilding permits are down, so growth isn't what the city expected. It also faces an $880,000 debt payment coming up in June that will be difficult to pay. Right now the city is trying to work out a deal with its bondholders."

UPDATE: Gary Evans returned my call this afternoon and said HBC's decision to break with FiberNet Monticello was partially to give the city an opportunity to find a new management company willing to invest in the project, perhaps to expand it beyond the Monticello borders. He said the city asked if HBC might be willing to put in some cash, "but that simply wasn't possible for us. We're finishing a build across six communities in the southeastern part of the state, which has tapped our resources significantly."

"I think certainly the city is looking for someone who I believe perhaps has more resources and more interest in investing in Monticello than we do," Evans said.

He said uncertainty over whether the city will be able to make future bond payments was a factor as well. "We understand it's the city's business and they are the city's bonds. But still we also understand that bonding is a promise and so when people say we aren't going to use our resources to make any additional payments, it's troubling to us."

"At HBC, we like to think if we make a promise, we're going to fulfill it," he said. "While I wouldn't tell you that was a major factor, I will tell you it was a factor."

UPDATE: Monticello issued a press release late this afternoon thanking HBC for the "key role" it played in developing and delivering the fiber service and indicating that the city is moving on. "It is anticipated that a draft agreement for interim management services by another qualified and capable telecommunications company will be presented to the City Council for consideration at the next Council meeting."

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