Southwest Virginia loses $20.2 million for broadband Internet infrastructure

Southwest Virginia is now $20.2 million poorer in terms of funding for broadband Internet infrastructure.

That’s after the U.S. Department of Agriculture’s Rural Utilities Service rescinded a federal economic stimulus grant for a rural broadband project, following a disagreement between the two entities awarded the money.

Each of them – the Lenowisco Planning District Commission and Sunset Digital Communications – blames the other for the situation that’s prevented the project from moving forward.

No Contract

At issue is a failed negotiation of a contract between the two, which would have detailed their relationship with regard to the project. Both say their existing contract, used for about eight years of state-funded rural broadband work, is vague.

Ryan Elswick, vice president and chief operating officer for Sunset Digital, said it’s vague in all areas – including what payments the company must make to the planning district, for which it has built and from which it leases the infrastructure.

Skip Skinner, executive director of Lenowisco Planning District Commission, said the two entities’ differing interpretations of the contract meant a difference in more than $220,000 over three years in what was initially paid.

Skinner said a new, forward-looking contract has been a requirement from the beginning, before Lenowisco would accept the $20.2 million stimulus package, which included a $14 million grant and $6.2 million loan.

Skinner said a new agreement was needed because of the different scope of the project and the fact that it involved debt. But the two entities couldn’t come to terms.

“Because of the nature of the loan amount, and what Sunset had been proposing in terms of the lease reimbursement, for Lenowisco that was going to continue to keep us in a negative cash-flow position for 11 years before we broke even,” Skinner said. “That was a business model that we just couldn’t buy into.”

He said Lenowisco has also had ongoing problems with Sunset, including a refusal to provide revenue-sharing calculations, open records to auditors and provide information that the Virginia Tobacco Commission requires from Lenowisco to verify that it is meeting its grant requirements.

The Planning District Commission members, in a Thursday night resolution, voted to tell the Tobacco Commission that, because of the deterioration of its relationship with Sunset and customer complaints about Sunset’s business practices, Lenowisco might not be able to verify compliance with economic development requirements of the grants.

Elswick said his company provides excellent customer service – and it was Lenowisco that cut off contract negotiations when a revenue-sharing agreement could have been reached.

“They presented us with a 27-page contract, which we did find ridiculous,” he said, but added that the company is still willing to work things out.

No Internet?

According to a news release from Sunset, the money was lost “due to an economic development organization’s hesitation in moving ahead with the project.”

The release went on to accuse Lenowisco of walking away from an award that would have helped fuel the “major economic engine” of broadband infrastructure.

Elswick said the grant, which was awarded in 2010, would have paid to connect 2,500 homes to high-speed broadband service in Wise and Lee counties and create an estimated 73 jobs.

Without the money, he said, it doesn’t look like it’s going to happen anytime soon.

“If we were to apply again and there were another opportunity like this, we would most likely apply ourselves [without Lenowisco],” he said. “But the sad thing is I don’t think there will be an opportunity like this in our lifetimes. Stimulus grants … don’t come around very often.”

Elswick said that while Sunset applied on its own for funding for a similar project in Northeast Tennessee, it included Lenowisco in its Virginia application because it felt a public-private partnership would help in the competitive grant process.

He said the company, which has worked with the commission on broadband projects for years, hopes to repair its relationship with Lenowisco.

Karen Jenkins, spokeswoman for Sunset, said the company has been behind much of the broadband development in the region to this point.

“Sunset did all the work, built the fiber and had the brain power, and Lenowisco lent their government name to the project,” she said.

Skinner said he stands behind Lenowisco’s track record when it comes to installing fiber-optic cable. Over the years, he said, it has put down more than 500 miles of it.

“We wouldn’t be having this discussion if Lenowisco hadn’t taken up the challenge presented by the Tobacco Commission and others who put in this backbone cable to go out and seek funding for this network as it stands today,” Skinner said.

He said Lenowisco will continue to look at sources of funding to extend rural Internet service, including the possibility of using wireless technologies that weren’t available seven or eight years ago when the project began.

He said those technologies might ultimately be the most cost-effective solution to delivering affordable service.

dmccown@bristolnews.com
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