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HBC Steps Down from Managing FiberNet Monticello

| Written by Christopher | No Comments | Updated on May 30, 2012 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/hbc-steps-down-from-managing-fibernet-monticello/

In a surprise move, HBC has announced it will end management of FiberNet Monticello, though the actual time frame has not been announced. FiberNet Monticello is a FTTH network approximately 45 miles northwest of Minneapolis. HBC has been operating the publicly owned network, offering triple play services, since inception.

FiberNet Monticello has had a particularly rough road since citizens overwhelmingly voted to build it to create a locally owned alternative to cableco Charter and incumbent telco TDS. TDS landed the first blow against the network with a frivolous lawsuit. Though the courts tossed it out, the proceedings took a year and slightly added to the interest rate Monticello had to pay on its debt.

Since then, TDS invested in its own FTTH connections and Charter engaged in a vicious bout of predatory pricing in their attempt to drive competition out of Monticello.

Throughout it all, the City and HBC worked together to deliver the best broadband and customer service in the area. However, the network has not met its revenue targets (largely due to time lost from the lawsuit) and that has led to discussions about how to ensure the network would become financially self-sufficient as rapidly as possible.

HBC’s performance in Monticello has actually been impressive given the anti-competitive tactics of Charter and TDS. If you want to know why we have no cable or broadband competition in America, look no further than the refusal of state and federal agencies to investigate predatory pricing tactics used to deny subscribers to FiberNet Monticello.

Regardless, elected officials in Monticello were not happy with the status quo (covering FiberNet shortfalls from the liquor store fund) and new management will offer an opportunity to chart a new course. Though HBC has decided to withdraw, FiberNet Monticello retains most of its staff and may even be better motivated to meet this challenge. From the City’s press release (also below in full):

The City of Monticello would like to express appreciation to HBC for the key role they played in successfully developing and delivering high quality and reliable video, voice and internet service to the community. The HBC legacy in Monticello includes the development of a well-trained FiberNet Monticello staff and the establishment of a strong and loyal customer base, which provides a great starting point for moving forward with new management.

We have long supported the publicly owned, privately operated approach to broadband networks, but in our experience, the networks that have most succeeded have been operated by the owner.

The official announcement from HBC is as follows:

HBC Logo

Hiawatha Broadband Communications (HBC) has provided the City of Monticello, Minnesota, notification of its intent to end its management of the FiberNet Monticello (FNM) telecommunications system. The decision was conveyed Friday, May 25, in a letter to Mayor Clint Herbst from Gary Evans, HBC President and CEO.

Many matters regarding FNM 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. According to Evans, this seemed a prudent time to end the agreement with FNM and free the city to negotiate with other prospective managers.

Evans said HBC is very proud to have participated in the launch of the system and to move it to a position where its subscriber number forecasts have been met. Achieving that position, Evans indicates, is a significant accomplishment, considering the number of negative factors that affected the system in its early operations. Included were a crippling law suit 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 law suit delays, inadequate recovery of legal damages, and a series of predatory pricing practices by cable and telephone incumbents.

HBC understands discussions about refinancing the system and discussions with other potential prospective managers are underway to help assure the continued growth of the network.
All the employees of FNM are City of Monticello employees except for the General Manager, Ben Ranft, who is employed by HBC. Ranft will be re-locating to the home office in Winona, Minnesota, when the details of the transition to new management are complete.

Evans, in leaving the door open to future cooperation, emphasized that HBC believes that the City of Monticello is dedicated to making the network a success.

And the Press Release from the City of Monticello:

Monticello Logo

With the current management contract for FiberNet Monticello scheduled to expire at the end of the year, the City has held discussions with FiberNet Monticello manager HBC regarding operation of the system and renewal of the management contract. The City has also been exploring other operation and management options.

The City was recently informed by HBC that they do not wish to renew the management contract and prefer to end the agreement before the expiration date, as allowed under the current agreement.

The City of Monticello would like to express appreciation to HBC for the key role they played in successfully developing and delivering high quality and reliable video, voice and internet service to the community. The HBC legacy in Monticello includes the development of a well-trained FiberNet Monticello staff and the establishment of a strong and loyal customer base, which provides a great starting point for moving forward with new management.

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.