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Consultant says state broadband project created 'monopoly' for Frontier

CHARLESTON, W.Va. -- West Virginia government officials used tens of millions of dollars in federal stimulus funds to help Frontier Communications build a fragmented high-speed Internet network across the state that solely benefits Frontier, according to a consultant hired by Gov. Earl Ray Tomblin's administration.

The consulting firm, Vienna, Va.-based ICF International, found that West Virginia's $126.3 million statewide broadband expansion project has created an "unintended monopoly" and "unusable network except for Frontier."

ICF concluded that the project has "no practical use for the public or competition," according to the five-page confidential report obtained by the Gazette. The state is using $40 million of the stimulus funds to pay Frontier to install more than 500 miles of fiber-optic cable statewide.

Tomblin's consultant also accused Frontier of subverting federal regulations and driving up construction costs by "gold-plating" facilities -- installing up to six times more strands of fiber than needed at schools, libraries and other public buildings in West Virginia.

In addition, the report alleges "inadequate Frontier planning, reporting, purchasing and invoicing" has hampered the broadband project. Tomblin's office refused to release the document last week.

"These allegations are very serious and very specific," said Lee Fisher, who serves on the West Virginia Broadband Deployment Council. "There are statements in the report made about the misuse of public monies. The state paid money to Frontier, but they apparently have no substantiation of what they did with it."

On Thursday, Frontier called ICF's report "worthless."

The company noted that a federal agency overseeing West Virginia's $126.3 million project dismissed similar allegations about the project solely benefiting Frontier two years ago.

"The ICF report provides worthless, inaccurate and stale comments that merely repeat previously repudiated allegations," said Dana Waldo, senior vice president and general manager of Frontier's West Virginia operations. "It is totally incomprehensible that ICF failed to realize that the project's federal oversight agency investigated such red herrings and soundly rejected them in November 2010."

ICF did not respond to a request for comment this week.

Frontier: 'We've complied with all project guidelines'

The Tomblin administration hired ICF last year and paid the firm $118,000 for its analysis about the broadband project. Commerce Secretary Keith Burdette and Tomblin's top aides received ICF's findings in late April 2012, but decided not to make the consultant's report public.

Rob Alsop, Tomblin's chief of staff, recalled Thursday that he met with Frontier executives and asked numerous questions about ICF's "memo." Frontier refuted the allegations, Alsop said.

"We tried to work through these issues with Frontier, and we moved on," he said.

Frontier, which inherited the statewide broadband project from Verizon, said the company has done everything it's been told to do.

"Frontier has worked and continues to work with federal and state officials throughout this entire project, which has included numerous ongoing reviews and audits," Waldo said. "We have complied with all of the projects guidelines and strictly followed both federal and state directives."

Earlier this month, the Gazette requested a copy of ICF's report under the state Freedom of Information Act. Burdette withheld the document, calling it an "internal memorandum" that would be "embarrassing to some people." Burdette added that he didn't agree with ICF's assessment.

The Gazette independently obtained the report -- titled "Draft Discussion Points" -- earlier this week.

After the newspaper notified Tomblin aides Thursday that it had a copy, the governor's staff released the document to media outlets.

Earlier this month, the West Virginia Legislative Auditor released a scathing report about another part of the $126.3 million project. Auditors found that the state wasted at least $7.9 million -- and up to $15 million -- on oversized Internet routers that the state is hooking up to Frontier's 500-mile fiber network. The routers cost $22,600 each.

Network 'unusable by other parties'

Under the broadband expansion project, more than 630 "community anchor institutions" - school, libraries, jails, health centers, county courthouses, planning agencies and other government facilities - are receiving fiber that will speed up their Internet service.

Time after time, state officials overseeing the stimulus project have said West Virginia is building an "open-access" network that Frontier's competitors could tap into, a network that would provide affordable high-speed Internet service to 700,000 homes and 110,000 businesses in West Virginia.

State officials predicted that telecommunications firms would sign "interconnection agreements" with Frontier to use the state's new "middle-mile" broadband network.

But ICF found that Frontier, with state officials' blessing, is building a "private" network that shuts out competitors.

The fragmented "last-mile" network runs fiber "tails" from public facilities to street-corner telephone poles. The network doesn't connect the public buildings to each other, or back to Frontier's "central offices," telecommunication hubs where other broadband providers could access the network.

In its memo, ICF called Frontier's stimulus-funded fiber "unusable by other parties." The consultant suggested the state require Frontier to run open-access fiber from the government facilities to the central offices. That hasn't happened.

"As designed, the fiber extensions only connect the community anchor institutions to a private network that does not provide equal opportunity access," ICF's report says. "Without interconnection agreements, the network is not functional for other providers, the state or other users."

Frontier has yet to sign a single agreement with a competitor that wants to tap the fiber network.

"The report basically says they spent all this money to lock out all other companies and any open access," said Fisher, a Braxton County farmer who serves on the state broadband council.

ICF found that no other state or organization that received stimulus funds built a broadband network that resembles West Virginia's. Other states constructed middle-mile networks that the public could use and that link communities.

'Excessive fiber counts' drive up construction costs

ICF blasts Frontier for "inadequate project documentation" that fails to comply with federal grant rules.

The consultants call on Frontier to take "corrective actions" and advise state officials not to reimburse Frontier for "current invoices and design." State officials have used the stimulus funds to pay Frontier more than $15 million since April 2012.

Alsop said Thursday that state officials met with Frontier, and the company now submits proper invoices and documentation. "There's a process in place now to make sure there aren't any over-bills," he said.

ICF's report also alleges that Frontier installed "excessive fiber counts" - three to six times above industry standards - that drove up construction costs.

"As the steward of the broadband grant, West Virginia cannot be put into the position of improperly using public funds and cannot be a party to Frontier decisions that subvert, appear to subvert, or are not in compliance with federal regulations," ICF warned in the memo.

In response, Tomblin's aides, at the time, questioned Frontier executives about the number of fiber strands the company was running to the government facilities, according to emails released Thursday.

Frontier notified the governor's office that the state's "grant implementation team" -- headed by Homeland Security Director Jimmy Gianato -- directed the company to install the extra fiber strands to bolster "future capacity" for Internet service at the public buildings. Frontier said the cost of installing the additional strands wasn't significant.

"The overall cost to the project itself is negligible," Waldo wrote in an email to the governor's office in April of last year.

The following month, Frontier also provided the state with an "external audit" of its work on the $126.3 million broadband project. The audit - paid for by Frontier -- found "no material deficiencies."

In the report, ICF said state officials have few options for fixing the private-network problem they created with Frontier. The report suggests that Frontier's competitors get together to build their own "middle-mile, open-access" network that would connect to Frontier's fragmented fiber network.

But the consultants go on to say, "From any reasonable practical point of view, this is not feasible ..."

In November 2010, Citynet President Jim Martin wrote a letter to federal officials, alleging that West Virginia was using the stimulus funds to build a private broadband network for Frontier. President Obama's telecommunications chief, Lawrence Strickling, dismissed Martin's allegations. Strickling heads the National Telecommunications & Information Administration, which is overseeing West Virginia's $126.3 million project.

"Let me be clear," Strickling wrote to Martin in 2010. "NTIA's goal is to make this project succeed in accordance with the grant terms, not to derail."

Strickling's office would not comment Thursday.

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


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