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11/16/2010
Citynet: State Wasting Internet Funding, Favoring Frontier

by Eric Eyre, The Charleston Gazette. (11/16/2010)

With $126 million in federal stimulus funds in hand, state officials are buying expensive equipment that many public agencies in West Virginia don't need and allowing Frontier Communications to build a high-speed Internet network that shuts out competitors, Citynet alleged Tuesday.

After an exhaustive review of state records, Citynet executives concluded that state commerce and homeland security officials have "little or no concept of what they want to accomplish other than spend a lot of money."

"They have no idea what they're doing," said Jim Martin, president and CEO of the Internet services provider, after releasing dozens of state government e-mails obtained by the company. "They're just blowing money. Frontier and Verizon are driving this whole process."

Martin pointed to an e-mail that discloses the state's plan to spend $24 million on 1,064 commercial routers for the broadband network. The state never checked to see whether the public agencies receiving the equipment needed it, according to e-mails.

A state Office of Technology employee questioned the purchase, saying the network "edge" routers "may be grossly oversized." The employee recommended evaluating each site that would receive equipment, but state officials apparently never heeded that advice, Martin said.

"They're buying these deluxe, high-end routers to put in facilities that probably have no need whatsoever for their capability," Martin said Tuesday. "It's a complete waste of money."

State Homeland Security Director Jimmy Gianato said Tuesday that the state received a multimillion-dollar discount on the 1,000-plus routers. The vendor also agreed to provide free maintenance for five years, Gianato said. The state technology office ultimately signed off on the purchase, he said.

"We didn't want to buy something that was obsolete the day we bought it," Gianato said. "We were looking to buy the latest design."

Last spring, the state received $126 million in federal stimulus funds to expand high-speed Internet in West Virginia.

In its grant application, the state pledged to create a broadband network for all public schools, libraries, health-care facilities, 911 dispatch centers, and fire and police departments in West Virginia.

In September, Martin asked federal officials to suspend the broadband grant, saying then-Gov. Joe Manchin's office wasn't spending the funds as required by federal law.

Clarksburg-based Citynet alleges the state is using the federal broadband grant to "extend old, outdated telephone lines" for Frontier instead of building a network that Citynet and other telecommunications companies could tap into.

"The state's use of the grant hasn't met any of the goals and objectives that the federal government put forward," Martin said. "We're trying to create ... a highway that everybody can use. Right now, Frontier controls who gets on the highway, who gets off, and how much it costs."

Stamford, Conn.-based Frontier purchased Verizon's landline business and broadband network in West Virginia on July 1.

In 2009, state officials routinely relied on Verizon executives to answer questions while federal officials were reviewing the state's $126 million grant application, Martin said.

E-mails released Tuesday show that Gianato and Commerce Secretary Kelley Goes forwarded federal officials' questions about the grant to Verizon executives. Gianato and Goes, in some cases, then copied Verizon's answers verbatim and sent them back to federal officials.

The state agency chiefs never disclosed that Verizon was answering the questions, making it appear as if the answers were their own, Martin said. State officials also turned to Verizon's lawyers to answer legal questions, the e-mails show.

Several months after the grant was awarded, Gianato continued to consult with Verizon, asking at one point how many miles of fiber-optic network the company planned to add under the broadband expansion and how much that portion of the project would cost.

"The federal government kept asking simple questions, and instead of those being answered by state people, they had to turn to Verizon," Martin said.

Gianato said federal broadband grant officials knew all along that he and Goes were consulting with Verizon and passing along answers from Verizon executives. Many of the questions from federal officials were "network-specific" technical questions that only Verizon had the answers to, Gianato said.

"The folks at the National Telecommunications Information Administration [which oversees broadband stimulus spending] knew what we were doing," Gianato said. "They knew Verizon had the contract, so they knew where those answers were coming from."

State officials also misrepresented to the NTIA that they could assign the high-speed Internet expansion project to Verizon under an existing state contract, Martin said. The e-mails show that the state issued a "change order" before awarding the work to Verizon and Frontier.

State purchasing officials questioned the contract changes, e-mails show, but state lawyers never reviewed the new contract.

The e-mails also show that many public agencies won't be able to afford to sign on to the expanded broadband network, Martin said. Several agency directors have written letters to Gianato and Goes.

"We know for a fact that the services are unaffordable," said Mike Friloux, a former Citynet executive who serves on the West Virginia Broadband Council.

The council is scheduled to meet at 9 a.m. today. Martin and Friloux plan to raise questions about the state's use of the stimulus funds during the meeting.

"They clearly don't have the best interest of the citizens of West Virginia at heart," Martin said. "This is a once-in-a-lifetime opportunity to do the right thing, and we're about the miss out."

Acting Gov. Earl Ray Tomblin issued a statement Tuesday saying he would support the $126 million grant.

"The state has specifically met all of the requirements and guidelines set by the NTIA," Tomblin said. "Broadband will continue to be a significant portion of expanding the state's infrastructure. I am confident that state officials will continue to work diligently to ensure that this broadband project is carried out in accordance with all grant requirements."

Citynet obtained the e-mails after filing multiple requests under the state Freedom of Information Act. The company also has filed a federal records request with the NTIA.

Martin and Friloux said NTIA employees were asking state officials "tough questions" about the grant application in 2009. But the questioning stopped after Goes and Gianato started making calls to Sen. Jay Rockefeller's staff about the state's application, according to a timeline of e-mails that Citynet released Tuesday. "All the questions just evaporated," Friloux said.

Gianato said those allegations were "untrue."

"Obviously, we kept the senator's office informed about what we were doing," Gianato said. "But there was no pressure put on anyone."

Reach Eric Eyre at ericeyre@wvgazette.com or 304-348-4869.

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