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Broadband Battle Rages in the Badger State

Wisconsin State Telecom Association Deems WiscNet Unlawful

A fierce battle is brewing in Wisconsin over a proposed broadband network build-out, with the debate reaching the state legislature this week. WiscNet, a statewide broadband network, has been providing Internet services to member organizations in the Badger State since 1991, but has recently come under fire for its plans to use federal dollars to expand into four more communities. The Wisconsin State Telecommunications Association (WSTA) and Access Wisconsin (AW)—both of which represent state and local telcos— argue that WiscNet violates state law by fostering unfair competition and impinging on the ability of telcos to provide similar services.

The debate has been ongoing since October of 2010 when WSTA first launched a campaign against the University of Wisconsin's plans to use federal stimulus money to extend WiscNet's reach. This week, at the urging of WSTA and AW, Republican legislators introduced a bill that would make WiscNet's expansion plans unlawful, sever WiscNet from the University of Wisconsin at Madison's Division of Informational Technology, and prohibit WiscNet from making any profit through UW. The bill would also force WiscNet to return $39m in federal stimulus funds—money earmarked for public broadband build-out in the state. The proposed law would even go so far as to prohibit UW from taking National Telecommunications Information Agency (NTIA) broadband stimulus money or joining any entity that offers broadband to the general public.

Those rallying behind WiscNet say the outcome of this legal battle could effectively end low-cost Internet for the state's libraries and educational institutions, cost the state's public network millions of dollars, and even set a new precedent for future conflicts between public and private broadband. But for telcos in the region, the battle represents one more struggle in fending off what they see as unfair competition.

But in the days since the bill was introduced to the Wisconsin legislature, some industry insiders have criticized AT&T (NYSE:T) for being the real bully who started this fight. If the bill passes and WiscNet loses its stimulus funding, Wisconsin's state schools, libraries, and other public offices would necessarily turn to BadgerNet instead. Built in the mid-1990s, BadgerNet is Wisconsin's state wide-area-network—owned almost entirely by AT&T. And some analysts are saying that AT&T has exerted questionable amounts of pressure on the state legislature, hoping to shuttle the bill through at the eleventh hour.

Not surprisingly, there have been sharp words exchanged between sides. Wisconsin's State Superintendent of Public Instruction Tony Evers said last week, “These provisions [in the proposed law] will have a devastating impact on the University of Wisconsin System campuses and our schools and public libraries," financially and operationally cutting WiscNet and its Wisconsin institutions. He stated, “The provision in this legislation will very likely make it impossible for WiscNet to continue offering Internet access. If our schools and libraries must use other Internet providers, most will pay at least 2-3 times more than what WiscNet now charges."

As for turning to BadgerNet, UW's CIO Ed Meachen argued that such a move would be cost-prohibitive: “If the UW System used BadgerNet to meet its current bandwidth requirements, it would pay an estimated $8 million a year. It currently costs the UW System $2 million a year for WiscNet, which is provisioned so that the costs to the customers do not increase with increasing bandwidth. Instead, the fee is based on the size and type of institution.” Meachen says the UW System would spend $27 million for BadgerNet by 2016, based on an annual growth rate of 35 percent. “I, for one, would not want to stand before the taxpayers having just spent $27 million of their money when I knew I could have done the same thing for $2 million.”

But on the other side, WSTA's Executive Director William Esbeck said that a “duplicate network” would “increase costs for everyone and impact the ability of local telecommunications providers to invest in their communities.” He pointedly asked, “With scarce state resources, do we really need the UW using government money to stifle private sector investment and threaten local jobs and businesses?”

Esbeck cited statutes and provisions in state law 16.972(2)(a), that no Wisconsin state entity “may offer, resell, or provide telecommunications services, including data and voice over Internet services, that are available from a private telecommunications carrier to the general public or to any other public or private entity.” But in statute 16.972(2)(b), the law states that departments can “provide such computer services and telecommunications services to local governmental units and the broadcasting corporation and provide such telecommunications services to qualified private schools, tribal schools, postsecondary institutions, museums, and zoos, as the department considers to be appropriate and as the department can efficiently and economically provide.”

Still, Esbeck deemed WiscNet's expansion plans unlawful, stating, “The legal issues are being researched and lawsuits are a possibility. The UW does not belong in the telecommunications business . . . the current statutes are very clear on that point."

One thing is for certain: the timeline for a decision is likely to be short. Executive Director of WiscNet, David Lois predicts a new compromise proposal to emerge very early next week.

Update: On June 15th, local representatives rallied around WiscNet, and their efforts managed to save the state network. WiscNet will continue to receive the federal stimulus grant for expansion of fiber optic cable, and health care facilities, schools, and libraries. In the next two years, the state's Legislative Audit Bureau will undertake a thorough review of the cooperative, specifically examining its financial ties to UW. The audit report is due in January of 2013, and legislators would need to approve WiscNet's continued operation beyond July of that year.

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