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