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Red flags for fiber project

October 10, 2012
The Journal

To the editor:

Red Flags should be popping up all over Sibley County's fiber project. The most recent "red flags" are due to concerns raised by two separate attorneys, one retained by the City of Gaylord and the other Sibley County's own bond counsel. Unfortunately, it appears that various city and county officials continue to move forward on a $77 million project that exposes every person living in Sibley County to financial risk. Consider these "red flags":

The consulting team responsible for the Monticello, Minnesota fiber project is working on the Sibley County project. The same financial advisor, the same telecommunications consultant, the company that ran the Monticello network and walked away around the time the city decided to stop making bond payments. In Monticello, the news media has reported that the city has stopped making payments on its bond and the municipal liquor operation is using its profits to help cover operating expenses.

An attorney retained by the city of Gaylord prepared a legal memorandum that stated, "I believe the financing involves substantial risks which should be considered."

Gaylord's legal advisor also disagreed with legal advice previously given to the project that a referendum is not needed before constructing the network. Even though state law requires a referendum, project leaders do not want voters to have a say in the matter and have ignored that requirement. Given the size of the bonding, voters deserve a say on the matter.

According to the Gaylord Hub, Sibley County's bond counsel provided legal advice to the county that it was not authorized under state law to participate in a project of this type. Unfortunately, county residents can't be sure what is in the document because the county's attorney claims the document is "privileged information" which means it is not publicly available for viewing.

The business model suggests 70 percent of all households will subscribe to two services. This number is not achievable. The trend in Minnesota is toward wireless. For example, according to recent reports nearly 30 percent of all households do not have a wireline connection and the number is growing. RS Fiber will be competing with large and small providers of telephone, Internet and cable services, all of whom have significant marketing and advertising budgets designed to keep customers from leaving and attract new customers.

RS Fiber plans to price 10 percent below existing providers according to the information on their website. Check with Monticello to see how pricing works in a competitive market.

It's time for RS Fiber and the local governments involved in this project to re-examine their participation in this project and better understand the financial exposure to the county's taxpayers if the network fails to meet its revenue and expense targets, just like what occurred in Monticello.

Brent J. Christensen


President & CEO

Minnesota Telecom Alliance



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