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12/15/2010
Frontier, Citynet Face Off Over Broadband Grant

by Eric Eyre, The Charleston Gazette (12/15/2011)

Frontier Communications and Citynet executives squared off in a contentious debate Wednesday over the state's use of $126.3 million in stimulus funds to expand high-speed Internet across West Virginia.

Amid a flurry of testy exchanges, Frontier officials dismissed Citynet's criticism of the state's broadband expansion plan as nothing more than "rhetoric." Frontier executives said Clarksburg-based Citynet wants the state to build an "open-access middle-mile" broadband network that already exists - and tap into it free of charge.

"You're talking about reducing the cost to carriers [such as Citynet]," said Ken Arndt, Frontier's Southeast region president during a meeting of the state Broadband Deployment Council Wednesday. "You're not talking about reducing costs to customers."

Citynet executives snapped back that the state was building a "last-mile" broadband network to rural communities that Frontier would own and later use to shut out competitors by charging exorbitant connection fees.

"We're using taxpayer dollars, and Frontier's going to set the rates," said Jim Martin, Citynet's president. "They're going to decide what the price is."

The state was awarded the stimulus funds in February.

At the time, state officials announced plans to bring high-speed Internet to more than 1,000 "anchor institutions" - schools, libraries, public safety offices, health-care facilities and state agencies.

In September, Martin sent a letter to federal officials, alleging that state Commerce Secretary Kelley Goes and Homeland Security Director Jimmy Gianato weren't spending the stimulus funds as the grant stipulated. Martin also asked the National Telecommunications Information Administration, which oversees broadband funding, to suspend the state's $126 million grant.

Earlier this month, NTIA officials rejected Martin's allegations, calling them "untrue" and "unfounded."

Martin took his complaints to the state Broadband Council Wednesday. About 30 people packed a conference room at the state Capitol Complex.

After Frontier executives stated their support of the state's broadband plan - and Citynet officials outlined their objections - the two sides peppered each other with questions and allegations.

"We're not trying to attack Frontier," said Mike Friloux, a Citynet vice president.

"Come on," said Arndt of Frontier. "All you're doing is attacking the state, attacking Frontier."

"Your priority is the shareholder, not the citizens of West Virginia," Friloux said.

Arndt responded that Frontier's mission was to serve customers in rural America.

"It's not out of the goodness of your heart," Friloux said. "It's about your return on investment."

Martin alleged that West Virginia's broadband network transport costs are 20 to 30 times higher than in markets in neighboring states. Those higher costs are driving businesses out of West Virginia, Martin said.

Arndt challenged Martin to name a single business that has left the state because of network costs. Arndt said Macy's wouldn't have decided to open a distribution center in Martinsburg and hire more than 1,000 employees - an announcement that was made earlier this week - if there was any truth to Martin's allegations.

Martin also skewered the state's plan to bring broadband to 1,064 public agencies. Those agencies will be required to pay about $2,000 a month for broadband service, Martin said. That amounts to about $25 million a year - a bill that taxpayers ultimately will pick up.

Martin said Citynet supports "a network that will benefit West Virginians - not just state agencies, but everyone."

"Either we're going to move broadband forward or we're going to leave the status quo in place," Martin said. "The taxpayers basically get no benefit. We think that's wrong."

Frontier said its competitors would be able to connect to the broadband network - for a fee subject to federal review and guidelines - being built with the stimulus funds. Those companies could then expand coverage to households and businesses.

"This is going to be an open-access network," said Dana Waldo, who heads Frontier's West Virginia operations. "It's open, but it's not free."

Waldo and Arndt said no other telecommunications companies - including Citynet - are willing to build a "last-mile" network that brings high-speed Internet to rural communities across the state.

"Our perspective is all about growth," Arndt said. "We're not in the business of building a highway to nowhere."

Martin also asked the Broadband Council to suspend the $126 million grant. The state Attorney General's Office concluded this week that the council couldn't stop the grant because the Governor's Office - not the council - applied for and received the stimulus funds.

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

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