How we got here: Kent County’s Dig for a Gig

Kent County News - - FRONT PAGE - By DANIEL DIVILIO ddivilio@thekent­coun­tynews.com

CH­ESTER­TOWN — Last month, a team of three men could be seen dig­ging holes along Philoso­phers Ter­race in Ch­ester­town, with a spool of thick or­ange ca­bling parked nearby on a trailer. Around noon, one of their wives — or maybe a girl­friend, a sis­ter or a mother — served them lunch, tor­tillas topped with veg­eta­bles from a cooler in the back of her mini­van. The month be­fore, a sim­i­lar crew was do­ing the same work on Cam­pus Av­enue, in front of Kent County Mid­dle School. This is what the Dig for Gig, a pub­lic-pri­vate part­ner­ship ex­pand­ing in­ter­net ac­cess through Kent County, looks like as now. In an in­ter­view April 2, County Ad­min­is­tra­tor Shel­ley Heller and In­for­ma­tion Tech­nol­ogy Di­rec­tor Scott Boone spoke about the project’s his­tory, the is­sues en­coun­tered when the lead con­trac­tor went belly-up and the mis­con­cep­tions some have over just what the county bought. The county went from leas­ing 110 miles of fiber-op­tic lines to own­ing them fol­low­ing a work stop­page in the fall as FTS Fiber, the Monk­ton­based com­pany con­tracted to do the in­stal­la­tion, looked at fil­ing for bankruptcy. New agree­ments were inked and the county ef­fort is on track to be com­pleted be­fore sum­mer. “We’re about to cross the fin­ish line,” said Boone, who has pre­sented the project on Capi­tol Hill and at the White House. The project got off the ground in Novem­ber 2015, when the county is­sued a re- quest for pro­pos­als. Of­fi­cials were look­ing for some­one to build a se­ries of fiber-op­tic rings in the county con­nect­ing an­chor in­sti­tu­tions like schools, fire­houses, li­braries and town halls. While Boone over­saw the ef­fort, he char­ac­ter­ized the en­deavor as an eco­nomic de­vel­op­ment project. The idea was that, by pay­ing some­one to con­nect govern­ment in­sti­tu­tions, par­tic­u­larly schools to bol­ster con­nec­tiv­ity for stu­dents, the com­pany would have an in­cen­tive to go ahead and in­stall com­mer­cial lines. Think the four-tube Fort McHenry Tun­nel in Bal­ti­more. Kent County’s lines would oc­cupy one tube, while com­mer­cial lines pro­vid­ing ser­vices to homes and busi­nesses would oc­cupy the other three. There already ex­ists a fiber-op­tic back­bone run­ning down the East­ern Shore. It was a project cham­pi­oned by former U.S. Sen. Bar­bara Mikul­ski, D-Md.

The is­sue was last-mile con­nec­tions, that is, find­ing com­pa­nies will­ing to branch lines off the back­bone to con­nect homes and busi­nesses in ar­eas with very low pop­u­la­tion den­si­ties, i.e. too few pay­ing cus­tomers. Get­ting that last-mile con­nec­tion was a bat­tle waged by former state Sen. E.J. Pip­kin, R-36-Up­per Shore. Kent County of­fi­cials sought to en­cour­age those last-mile con­nec­tions by giv­ing a pri­vate com­pany the op­por­tu­nity to es­sen­tially pig­gy­back off the govern­ment’s con­struc­tion project. The thought was: If you are be­ing paid to dig trenches and drop in one set of lines for the govern­ment, why not go ahead and lay down ad­di­tional lines that can be leased to a com­mer­cial in­ter­net ser­vice provider like Ver­i­zon, At­lantic Broad­band or, in this case, ThinkBig Net­works? Those com­pa­nies were not in­ter­ested in lay­ing out the mid­dle- and last-mile con­nec­tions them­selves for a ru­ral area like Kent County. “The whole point of this was to open up com­pe­ti­tion for that last mile,” Heller said of the county’s project.

Orig­i­nal Con­tract

The prepa­ra­tion of the 2015 RFP was the cul­mi­na­tion of a cou­ple of years of work, Boone said. He said they mapped ev­ery house in the county to de­ter­mine where in­fra­struc­ture was needed. They over­laid that map with one des­ig­nat­ing an­chor in­sti­tu­tions to fig­ure out how to serve the pop­u­la­tion cen­ters. The goal was to build a foun­da­tion that would en­cour­age com­mer­cial ex­pan­sion of in­ter­net ac­cess. “When we wrote this (the RFP), we did not ask for a last- mile so­lu­tion,” Boone said. “We al­ways saw this as a way of en­abling that last- mile so­lu­tion.” A com­mit­tee re­viewed the con­struc­tion bids. At a Kent County Com­mis­sion­ers work­shop Feb. 18, 2016, com­mit­tee mem­bers rec­om­mended the hir­ing of FTS Fiber. “We had a list of things we’re look­ing for and they ex­ceeded ev­ery­thing,” Eco­nomic De­vel­op­ment Co­or­di­na­tor Jamie Wil­liams, who served on the com­mit­tee, told the com- mis­sion­ers. In ad­di­tion to build­ing out the county lines, FTS Fiber sought to con­nect “99.99 per­cent of homes in Kent County” with a gi­ga­bit of broad­band in­ter­net ac­cess, Boone told the com­mis­sion­ers at the work­shop. FTS Fiber CEO Brett Hill said his com­pany planned to build a fiber back­bone through the Shore down to Vir­ginia over the next two years. The com­pany pro­posed a one- time con­nec­tion fee of $ 400, with a monthly ac­cess fee of $ 99 for homes and $249 busi­nesses. Wil­liam Pick­rum, pres­i­dent of the three-man board of Kent County Com­mis­sion­ers, spoke at the work­shop about the im­por­tance of pro­vid­ing in­ter­net to homes. “All three of us feel that in­ter­net ac­cess is not a lux­ury. It’s a util­ity for mod­ern so­ci­ety,” he said. The con­tract with FTS Fiber was inked that April. The county signed a $4.5 mil­lion deal to light 54 an­chor sites through lines leased from FTS Fiber. On top of that, the county was on the hook for about $ 2.2 mil­lion for lease and main­te­nance over the next 10 years. That brings the 10year to­tal to a lit­tle more than $ 6.6 mil­lion. That main­te­nance costs and fees break down to $ 216,000 a year for ser­vice to the 54 an­chor sites. Dur­ing the April 2 in­ter­view, Boone said the county was pre­vi­ously pay­ing $ 88,000 a year to ser­vice 17 sites through two providers.

The Dig Be­gins

By early May, Boone was already re­port­ing to the com­mis­sion­ers that routes from Galena to Milling­ton were be­ing sur­veyed. FTS Fiber con­tracted with ISP ThinkBig Net­works out of Brook­landville to con­nect homes and busi­nesses. Then, on June 13, cer­e­mo­nial shov­els were passed out at the cor­ner of Morgnec Road and Wash­ing­ton Av­enue as the com­mis­sion­ers joined rep­re­sen­ta­tives from FTS Fiber and ThinkBig for a ground­break­ing cer­e­mony to launch “The Dig for a Gig.” “I’ll be the first one to pay $99 for 1G, be­cause what I have now is go­daw­ful,” Com­mis­sioner Bill Short said at the ground­break­ing. Boone’s sta­tus up­dates on the project be­came a reg­u­lar fea­ture at com­mis­sion­ers meet­ings. ThinkBig rep­re­sen­ta­tives at­tended coun­cil meet­ings at var­i­ous towns urg­ing peo­ple to sign up for ser­vice. “When FTS is com­ing in to de­ploy, we need to hit the en­tire area, be­cause they will ser­vice Galena and then move on to Bet­ter­ton and then move on to other com­mu­ni­ties. And who knows when we’ll be back be­cause we have to do the whole county,” Judy Mor­gan, ThinkBig’s di­rec­tor of busi­ness de­vel­op­ment, said at a Galena Mayor and Coun­cil meet­ing held Oct. 3, 2016. Kent County launched a web­site show­ing progress up­dates and a map where the lines were run­ning. ThinkBig opened an of­fice in Ch­ester­town. Many peo­ple through­out the county were ex­cited by the whole en­deavor, which, again, was re­ally two projects in one. “It’s a must for us, bring­ing the county into the 21st cen­tury, as well as the town of Ch­ester­town,” said Mayor Chris Cerino at an open house ThinkBig held Nov. 18, 2016. “It’s prob­a­bly along the same lines as when the first au­to­mo­biles came to down­town Ch­ester­town. That’s what this is in the 21st cen­tury.” Dur­ing this pe­riod, some in the county be­gan to com-

bine a govern­ment project with a com­mer­cial en­deavor. Lo­cal of­fi­cials quoted FTS Fiber’s pro­posed con­nec­tion costs and ac­cess rates for the com­mer­cial lines. At the Feb. 18, 2016 meet­ing at which the rates were an­nounced, Pick­rum voiced con­cern that $400 to con­nect would be too ex­pen­sive for some, no­tably stu­dents from low-in­come house­holds that need ac­cess. He called for that to be ad­dressed in ne­go­ti­a­tions. “This is an ab­so­lute must for me,” Pick­rum said. The county was only ever build­ing out lines to con­nect its se­lected an­chor sites and the rings around them. While build­ing that out for the county, FTS Fiber also was drop­ping its own com­mer­cial lines in part­ner­ship with ThinkBig Net­works in the same holes. That was why Boone’s maps of the govern­ment project looked just like the maps for the com­mer­cial back­bone FTS Fiber was putting in. Last May, Boone re­ported that Wor­ton, Kennedyville, Still Pond, Bet­ter­ton, Milling­ton and Galena had all been “lit.” The net­work was op­er­a­tional in those lo­ca­tions. Con­struc­tion was ex­pected to be­gin in Rock Hall last sum­mer. Ce­cil and Queen Anne’s coun­ties both con­sid­ered con­tract­ing with FTS Fiber for sim­i­lar projects.

Work Stop­page

The pub­lic con­fu­sion over what the govern­ment was buy­ing ver­sus FTS Fiber’s con­cur­rent com­mer­cial en­deavor grew into pub­lic con­cern as work ap­peared to slow, then come to a com­plete stop. Ru­mors swirled of fi­nan­cial is­sues at FTS Fiber. In late Septem­ber, Boone an­nounced that FTS Fiber was back at it work­ing in Rock Hall after a hia­tus. Still to come were in­stal­la­tions in Quaker Neck and Ch­ester­town. “So we’re mov­ing. We ex­pect to see more an­chor sites con­nected as weeks progress,” Boone said at the time. On April 2, Boone said county of­fi­cials were in the un­en­vi­able po­si­tion to know some­thing was go­ing on. He said FTS Fiber’s board mem­bers were hard at work try­ing to keep the project go­ing, but le­gal coun­sel fi­nally shut down the project. “Through Septem­ber, we were still bring­ing an­chor sites on,” Boone said. Heller said the county was not pre­vi­ously in­formed that work was slow­ing or stop­ping. She said it started as spec­u­la­tion and ob­ser­va­tion on the part of county of­fi­cials. “It was a while be­fore we had the full pic­ture of what to ex­pect,” she said. FTS Fiber ended up ex­it­ing the project in Oc­to­ber, as shown by a mem­o­ran­dum of un­der­stand­ing signed by the com­mis­sion­ers two months later. “As of Oc­to­ber 30, 2017, there cur­rently ex­ists se­ri­ous con­cerns among the Par­ties of FTS’s com­pli­ance and per­for­mance with the pro­vi­sions of the agree­ments it has en­tered into with the Par­ties,” the MOU states. “FTS has ceased mak­ing pay­ments to ven­dors, con­trac­tors and sub­con­trac­tors of the Project and has ac­crued sig­nif­i­cant un­paid and un­payable out- stand­ing in­voices, tax, and other li­a­bil­i­ties as well as op­er­a­tional ex­pense short­falls.”

A New Deal

Among the debts listed in the MOU is more than $3.6 mil­lion to DS Cap­i­tal Ven­tures LLC, an investment group, and $226,000 bor­rowed from ThinkBig CEO Mark Wag­ner. “As of Oc­to­ber 30, 2017, the Par­ties are aware or have been no­ti­fied that FTS has no op­er­a­tional funds avail­able, and no funds to pay its li­a­bil­i­ties,” the MOU states. “It is un­der­stood by the Par­ties that FTS man­age­ment has and may con­tem­plate a pe­ti­tion in bankruptcy.” The par­ties listed in the MOU are FTS Fiber, ThinkBig, DSCap and the county govern­ment. Un­der the terms of the MOU, FTS Fiber trans­ferred project and ring as­sets to DSCap, which con­tracted with ThinkBig to com­plete and man­age the project. The county agreed to pur­chase DSCap for the fiber strands lines as­so­ci­ated with its project. The county also set up a pair of es­crow ac­counts: one to cover ven­dor costs and an­other to pay com­ple­tion costs. Heller and Boone said the county walked away with a bet­ter deal. The county went from leas­ing 18 strands of fiber over 110 miles to own­ing 24 strands across the same dis­tance. That $2.2 mil­lion over 10 years for ac­cess and main­te­nance to the rings and lat­er­als light­ing the an­chor in­sti­tu­tions is off the books. Also, the num­ber of an­chors sites went from 54 to 66. The ad­di­tional 12 sites will serve as home­work hotspots, an idea Boone cred­ited to Kent County Com­mis­sioner Ron Fithian. Those hotspots in­clude parks, pools, beaches and other sites to which stu­dents could ride their bi­cy­cles, pick up a WiFi sig­nal and do their home­work. “This is a liv­ing, breath­ing project be­cause it en­ables us to keep go­ing far­ther,” Boone said, not­ing the county’s abil­ity to add more sites as peo­ple re­quest them. “Ed­u­ca­tion should be the num­ber one pri­or­ity of this whole project.” While the project was get­ting back on track, pub­lic con­fu­sion over what the county’s role in the project reached some­thing of a boil­ing point fol­low­ing a com­ment by Pick­rum. “Never was the in­tent of this whole project to en­sure that ev­ery home­owner or ev­ery fa­cil­ity in the county, to be hooked up to in­ter­net,” Pick­rum said at a Jan. 16 com­mis­sion­ers meet­ing. “The whole pur­pose was to pro­vide in­ter­net ac­cess to gov­ern­men­tal en­ti­ties.” What Pick­rum said was true. The county only ever paid, only ever planned to pay to con­nect govern­ment fa­cil­i­ties, but there had been so much talk of how the project was an eco­nomic de­vel­op­ment boon for the county from the com­mis­sion­ers, other lo­cal lead­ers and govern­ment of­fi­cials. In the process, a new com­pany formed, Kent Fiber Op­tic Sys­tems. Mor­gan from ThinkBig of­fered some back­ground on Kent FOS in Jan­uary. In an in­ter­view, Mor­gan spoke about how Dee Anna Sobczak, ThinkBig’s chief op­er­at­ing of­fi­cer, loaned money to FTS Fiber. Mor­gan said Sobczak then saw an op­por­tu­nity dur­ing FTS Fiber’s re­struc­tur­ing to ac­quire the fiber ring and es­tab­lish a new com­pany fo­cused on eco­nomic de­vel­op­ment in Kent County. Sobczak is now CEO of Kent FOS of­fer­ing to pro­vide dark fiber — lines that are not cur­rently be­ing ac­cessed — to busi­nesses. “Dark FIBER is the so­lu­tion to meet the crit­i­cal re­quire­ments for se­cu­rity, re­li­a­bil­ity, con­trol, and cost for both es­tab­lished and grow­ing Busi­nesses. Kent FIBER Op­tic Sys­tems is ready to ex­pand its ex­ist­ing net­work and pro­vide vi­tal FIBER Broad­band con­nec­tiv­ity for your busi­ness in Kent County, MD,” the Kent FOS web­site states. The county has no hand in Kent FOS. “We had noth­ing to do

with the for­ma­tion of Kent Fiber Op­tic Sys­tems, none at all,” Boone said. Un­der the MOU, the county agreed to pay up to $3.4 mil­lion for un­paid com­ple­tion costs and to pur­chase the 24 strands of fiber from DSCap, with $2.5 mil­lion to be placed in an es­crow ac­count to pay a list of ven­dors and $900,000 in a sep­a­rate es­crow ac­count to cover costs to com­plete the project. Heller and Boone boiled down the county’s fi­nal costs this way: The county is go­ing from pay­ing $4.5 mil­lion for in­stal­la­tion plus about $2.2 mil­lion for 10 years in main­te­nance and fees to a flat $7 mil­lion to own the net­work. That comes out to a cost in­crease of $400,000 while the county added 12 an­chor sites and went from 18 fiber bun­dles to 24. On the com­mer­cial side, Kent County has a rev­enue shar­ing agree­ment. The county is to re­ceive 5 per­cent of re­tail and whole­sale traf­fic, though Heller said no es­ti­mate has been pre­pared at this time for what the county ex­pects to take in.

On­ward and Up­ward

Mean­while, ThinkBig is still sign­ing up cus­tomers and ex­tend­ing lat­er­als off the com­mer­cial fiber back­bone. Mor­gan ap­peared at the weekly meet­ing of the Com­mu­nity Break­fast Group March 29 in Ch­ester­town. She said the $400 con­nec­tion cost and $99 monthly ac­cess rate are still be­ing of­fered. “Through the course of all of this, ThinkBig has grown,” Mor­gan said. Pri­or­ity is be­ing given to ar­eas with the largest cus­tomer bases. Mor­gan en­cour­ages any­one in­ter­ested in hav­ing fiber at their house to sign up with ThinkBig and to get their neigh­bors to sign up as well. “We are go­ing to build to those ar­eas that there is in­ter­est, in the or­der that and pri­or­i­ti­za­tion that we can most ef­fi­ciently and ef­fec­tively bring peo­ple on­line,” Mor­gan said. “Ev­ery­one who wants to have ser­vice, let us know, so that we can prop­erly plan our con­struc­tion sched­ule.” Mor­gan was asked that if in a de­vel­op­ment of 20 homes, 18 cus­tomers sign up, can the re­main­ing two get fiber later on? She said they can, but it will be an is­sue of tim­ing. She said there could be a de­ploy­ment dif­fer­en­tial — an ad­di­tional cost — to move those two homes up the con­struc­tion list. ThinkBig is now build­ing out com­mer­cial lat­er­als as it goes. Mor­gan said the com­pany has a cou­ple hun­dred sub­scribers in the county. She said ThinkBig part­nered with wire­less providers in­clud­ing Cam­bio WiFi and BridgeMAXX to pro­vide in­terim ser­vice as home­own­ers wait to get con­nected. “We have a cou­ple cus­tom- ers right now who are on a wire­less prod­uct through ThinkBig. They’ve taken advantage of that op­por­tu­nity be­cause they need in­ter­net,” Mor­gan said. Just as Heller and Boone said the county’s po­si­tion has im­proved fol­low­ing the project’s re­struc­tur­ing, so too did Mor­gan say of ThinkBig’s stake. Mor­gan said that when con­struc­tion slowed last year, ev­ery­one at ThinkBig was left won­der­ing how the dust would set­tle so they could get mov­ing again. “When it did set­tle, the re­sult re­ally was that ThinkBig is in a bet­ter po­si­tion now be­cause we now con­trol where we build and when we build. And that’s why we’re grow­ing, be­cause our team is ac­tu­ally do­ing a good bit of that con­struc­tion,” Mor­gan said.

FILE PHOTO

From left, Brett Hill of FTS Fiber, Kent County Com­mis­sioner Bill Short, Mark Wag­ner of ThinkBig Net­works, Steve Fisher of Whit­ing-Turner Con­tract­ing and com­mis­sion­ers Wil­liam Pick­rum and Ron Fithian break ground for the county’s fiber-op­tic net­work June 13, 2016.

PHOTO BY DANIEL DIVILIO

With a spool of ca­ble sit­ting across East Cam­pus Av­enue, a man digs a hole in front of Kent County Mid­dle School March 6 as part of the build-out of a coun­ty­wide fiber-op­tic net­work.

FILE PHOTO

Ch­ester­town Mayor Chris Cerino, cen­ter, takes a turn at ex­pe­ri­enc­ing a vir­tual re­al­ity game while Ch­ester­town Coun­cil­man Marty Stetson and Franklin Wag­ner look on dur­ing ThinkBig Net­works’ open house Nov. 18, 2016 at its new of­fice in Ch­ester­town.

PHOTO BY DANIEL DIVILIO

Judy Mor­gan of ThinkBig Net­works dis­cusses her com­pany’s ef­forts at ex­pand­ing in­ter­net ac­cess through­out Kent County to the Com­mu­nity Break­fast Group in Ch­ester­town March 29.

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