In June I reported on the latest issues with the Monticello FiberNet. The City had worked out a plan to offer the bondholders. In short they wanted to offer the bondholders something for the debt in exchange for owning the network outright. The bondholders would not be making their money back but the City was offering more than they might otherwise get for their investment.
Minnesota Public Radio has an update on Monticello…
In July 2012, the city defaulted on its debt payment. Now bond holders who financed the network’s construction are deciding whether or not to take the city’s settlement offer — a return of 22 cents on the dollar.
Monticello city administrator Jeff O’Neill said it’s unclear whether the city’s broadband network may ever generate enough business to give bond holders a better return.
In a statement, he said the city wants to reach a settlement that provides bond holders “with an early buyout greater than what their bonds are currently worth, in exchange from their releasing the city from further obligations under the bonds.” …
The bonds were issued based on the revenues of the system,” said Rick Frimmer, the attorney representing the city of Monticello’s bond holders. “The system failed to produce any revenues. That’s the risk that bond holders took.”
The article also looks at the role that Monticello has played in discussion of public networks. They were the poster child for public networks. As the article points out, they tried to get the local provider to upgrade their network. When that didn’t work the City decided to build. Then the local provider decided to sue and upgrade the network. The municipal network has had a tough time competing.
It’s a storybook version of how not to build a public-private partnership. I suspect that without the City moving forward the current provider would not have upgraded. The upgrade and competition have been good for local residents. But it seems like it has also been very good for the lawyers and costly for the City and I suspect the local provider. It’s frustrating when you think of broadband as a basic infrastructure.