Lake County gets first bid for Lake Connections broadband – what is the value of a community network?

The Lake County News Chronicle reports…

The federal government stands to lose up to $45 million on Lake County’s broadband project, Lake Connections, after the county accepted an initial bid of $3.5 million in its planned sale of the broadband network.

Pinpoint Holdings Inc. of Lincoln, Neb., submitted the bid for the network, which will serve as the minimum purchase price for the network in a sales procedure also approved by the county during its meeting Tuesday, July 24, in Two Harbors.

The article gives a succinct history of the finances of the network…

In 2010, the board received a $56 million loan and $10 million grant from the Department of Agriculture’s Rural Utilities Service (RUS) to construct the network and over three years, more than 1,200 miles of a fiber network was built throughout Lake County and parts of eastern St. Louis County. Most of the network was completed in June 2015, and the focus shifted to connecting eligible customers to the network with the county pledging $15 million of its own money to fund “drops,” or home connections, that also included a $3.5 million grant from the Federal Communications Commission.

On June 13, 2017, the county entered into a deferral agreement with RUS for principal and interest payments on the condition Lake County sell Lake Connections to provide the federal government with maximum recovery of the loan and grants. When the deferral agreement was executed, the county owed approximately $48.5 million on the RUS loan.

In August 2017, the county executed a memorandum of understanding with RUS in which RUS agreed to accept the sale price of Lake Connections in full satisfaction of the county’s debt for the construction of the network, according to documents provided by Lake County Administrator Matt Huddleston. If the Pinpoint bid is the winning bid, RUS will receive $3.5 million to satisfy the $48.5 million debt.

And the potential for next steps…

If more than five qualified bids are submitted, the top three bidders will be asked to submit a “best and final offer” within 10 days. If there are less than five qualified bids, each entity will be asked submit a final offer.

Lake County was one of five counties we looked at for the reports last year on Measuring Impact of Broadband in 5 Rural MN Communities. It looks at the value of the network in a different lens – specifically we looked at the benefits of the network to the residents. We found that community-wide the residents reap $13.7 million each year and the household value (community-wide) and increased by $38.5 million. We got to those numbers by looking at two formulas – the value of houses with broadband increase 3 percent (times the number of house with broadband) and annual economic benefit per household is $1,850.

That doesn’t pay for the network – but it does demonstrate the value of the network to the community. As part of the research for that report, we spoke to members of the community. Many were quick to say that given the chance, they would go ahead again to help the community reap the benefits.

This entry was posted in Funding, MN, Vendors by Ann Treacy. Bookmark the permalink.

About Ann Treacy

I have a Master’s Degree in Library and Information Science. I have been interested or involved in providing access to information through the Internet since 1994, when I worked for Minnesota’s first Internet service provider. I am pleased to be a part of the Blandin on Broadband Team. I also work with MN Coalition on Government Information, Minnesota Rural Partners, and the American Society for Information Science and Technology.

4 thoughts on “Lake County gets first bid for Lake Connections broadband – what is the value of a community network?

  1. I know that many will dismiss this comment as it comes from an insider, but the Lake County project made absolutely no financial sense from the outset. And it cost taxpayers $45 million. My concern is that policymakers will point to Lake County as a real world example as to why public money should not be used for such projects. If future projects are based on a Lake County “business” model, I would have to agree But it also hurts future valuable public/private partnerships through RUS and the very effective Minnesota Border to Border Broadband Grant Program, which is unfortunate.

    • You’re right. That’s where I think looking at the community benefits help. And taking into consideration the impact of not investing. I am just heading back to the Cities from the Iron Range – where people have friends and colleagues who are a pinch out of Lake Connections range and they are feeling losing ground.

      BUT what also helps is coming up with equations that lead to success. The grant/loan ratio in Lake County was ambitious.

  2. I agree with Jim’s comments and completely understand where Ann is coming from. Rural MN must have quality broadband. But what about the taxpayers in Lake County? Every Man, Woman, and Child is on the hook for $4,232.90 to pay for a debacle that no sane person should have supported. Had the people voted to take that risk, then that is one thing, but they never had the chance. This is going to put any future project that needs RUS funding to succeed at risk.

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