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First customers connect to Lake County’s broadband

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business Duluth, 55802
Duluth Minnesota 424 W. First St. 55802

Putting legal battles and naysayers behind them, Lake Connections, the Lake County-owned telecommunications company, has finally started connecting customers to its Internet, phone and TV services in Silver Bay and Two Harbors.

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“We’re getting a great response, and people are pleased with the service and the staff,” said Jeff Roiland, project manager for Lake Connections.

There has been no shortage of opposition to the project, however, and legal battles, delays and contractual issues have plagued the initiative since its 2010 inception.

Through all of the setbacks, the county continued stringing fiber-optic cable and touting the benefits of bringing broadband to homes and businesses throughout the area.

“Right now, we’re just focusing on finishing our build and turning up services,” said county administrator Matt

Huddleston.

Roiland said about 100 customers in Silver Bay, a town of 1,800, have been connected to services and a few beta testers are trying it out in Two Harbors, including Granite Gear, an outdoor equipment company headquartered in the town. Dave Johnson, the strategic accounts manager for the 28-year-old company, said fast Internet access has become essential to Granite Gear in recent years.

“It’s not just nice having faster Internet, but it has become an absolute necessity,” he said.

Before connecting to the Lake Connections network, Granite Gear’s entire office shared one DSL connection. Johnson said their art director used to work at night because he needed the bandwidth to update the website.

“Business is not just pushing emails back and forth. We maintain a website,” he said. “Doing business has become real bandwidth-intensive.”

Granite Gear’s use of the system is an example of the benefits that county commissioner Rich Sve hopes broadband Internet will bring to the community. He was a new commissioner six years ago when the county started pursuing grants and loans from the Department of Agriculture’s Rural Utilities Services to build the network. He said it will be vital for business in years to come.

“The old bricks and mortar will be coming down in some fashion,” he said “The demand (for broadband) is not going away.”

Sve cited health care and education as other fields that will rely on the Internet more often in coming years. Having a secure, fast network in place will allow people to stay in their homes longer thanks to innovations such as telemedicine, and access to cutting-edge technology also will draw and keep young people in the area, he said.

There is a risk with a

publicly-funded network, though. The Rural Utilities Service awarded Lake County a $10 million grant and $56 million loan for the project. The county made an initial investment of $3.5 million in the network, not counting legal fees or other costs, and already has started making loan payments, Roiland said. In order to be able to repay its debt and ensure that the business will be self-sustaining in the future, he said, Lake Connections will have to enroll at least 65 percent of eligible residents as broadband customers.

Sve said he understands his constituents’ concerns that the network may not be viable.

“I share that concern as a taxpayer. I think it’s legitimate,” he said.

But, he added, private companies have not stepped forward to provide the service, despite encouragement by federal and state government to do so. The county, therefore, opted to undertake the task.

While the 65 percent projection is a very rough estimate, Roiland said the response they’ve had in Silver Bay is promising.

“So far, we’re pleased with what we’re getting in Silver Bay and hopeful that it continues,” he said.

There is no easy answer for what will happen if the necessary number of subscribers don’t sign on for the service, Huddleston said.

“If things don’t work out, we’ll have to come back to the board,” Huddleston said. “There are so many variables. It’s hard to forecast.”

Paving the way

Christopher Mitchell is the director of the Community Broadband Networks Initiative with the Institute for Local Self-Reliance, a national research and policy organization with locations in Washington, D.C., and St. Paul. Much of his research focuses on community broadband.

He said that the Lake County network is unique in its level of investment. Four-hundred communities nationwide have made some sort of investment in a telecommunications network, but most are cities or towns making partial investments.

As something of a pioneer, he said, Lake County is paving the way for other counties that are considering similar investments.

“Lake County was smart to be proactive but they’ve also taken a step that’s been a bit early,” he said. “They’ve made some mistakes that others will learn from.”

Mitchell performed a case study of a municipal project in Monticello, Minn., that was not as successful as city officials had hoped. According to a Minnesota Public Radio report, that city defaulted on debt payments in 2012 after building its network. Despite a less-than-stellar result, Mitchell said, some benefits were realized.

Competition from the city’s service pushed private companies to offer lower rates. According to Mitchell, residents are paying $60 for packages that cost $150 per month in Rochester and Duluth — an annual savings of about $1 million for Monticello’s subscribers.

“Monticello’s business didn’t hit its targets,” he said, “but it’s not a disaster.”

He said that if Lake Connections has similar difficulties, private competition probably will be a factor. Private companies already have protested the project.

Mediacom, a private telecommunications company providing services in Lake County and elsewhere in the Northland, filed a federal complaint in 2011 regarding the project. Frontier Communications, another competitor, has raised concerns in the last two years about how, and on which poles, Lake County is stringing its fiber lines. Lake Connections officials say that those issues have caused project delays.

The project also faced a major hurdle in 2011, just a year into the undertaking, when there was a midstream change of leadership as contentious negotiations with the original project leader, National Public Broadband, caused the county and NPB to go their separate ways.

Then, a campaign was launched against the network by the Minnesota Cable Communications Association. Postcards were sent, a website was launched and residents were encouraged to sign a petition to put the matter of a county-built telecommunications system to a vote. The county also spent hundreds of thousands of dollars defending itself in a lawsuit filed by Orix, an investment firm that sued the county for backing out of a 2012 bond purchase agreement.

Through it all, contractors have been plugging along, laying out the network. Now, officials are encouraging people to sign up for service. Residents in Silver Bay can get on the installation schedule and those in Two Harbors and Phase Two, which includes Duluth Township, Knife River, Silver Creek and Beaver Bay, may be eligible for pre-sales. Phase Three construction, connecting more-rural parts of the county, started in May.

Online

For more about the county’s broadband project, visit lakeconnections.com

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