In a situation similar to the Frontier letters to Sibley we published last week, the cable company Mediacom has sent letters to Silver Bay and Two Harbors in Lake County to scare them into abandoning the rural county-wide FTTH network that they are building with federal broadband stimulus aid.
Interestingly, rather than sticking to the normal fear, uncertainty, and doubt (FUD) campaign, Mediacom apparently based its threats on a
draft previous version of the joint powers ordinance rather than the language actually passed by the resolutionsincluded in the current JPA. Whoops. [See Update below]
Mediacom, perhaps you should focus on improving your networks rather than stifling potential competition. Please send us copies of letters your community network has received from incumbent providers.
Without further ado, here is the letter [download pdf] sent to Silver Bay and Two Harbors on December 21, 2010 by Tom Larsen, VP of Legal and Public Affairs for Mediacom:
Re: Joint Powers Agreement with Lake
County Dear Mayor Johnson:
Mediacom prides itself in being one of America's leading providers of telecommunications services to small and medium sized communities. As you may be aware, Mediacom offers a highly competitive suite of high-speed Internet, cable television and phone services to homes and businesses throughout Silver Bay (the "City").
It has come to our attention that the City passed a resolution on November 15, 2010 approving a Joint Powers Agreement with Lake County (the "JPA"). Given the significant private capital that Mediacom has invested in order to make advanced telecommunications services available throughout the City, we were extremely surprised to learn that your resolution approving the the JPA includes the following finding in Section 4(e):
The Municipality hereby finds that the facilities composing the Project are necessary to make Internet and other communication services that are not and will not be available through other providers or the private market accessible and available on an equal basis to the residents of the municipality.
As Mediacom makes Internet and other communication services available on an equal basis to residents of the City, the finding contained in Section 4(e) is patently false. It appears that the JPA is an essential element in Lake County's ability to close on a $56 million loan and $10 million grant from the Rural Utility Service of the United States Department of Agriculture. Given that this outright false statement is being made by the City with the knowledge that it is both false and may be relied upon by the federal government when issuing $66 million to Lake County, the City may want to investigate whether it has incurred financial liability or criminal exposure by entering into the JPA. Mediacom plans to call this matter to the attention of the Office of Inspector General of the United States Department of Agriculture.
The JPA also appears to be an essential element in Lake County's ability to issue revenue bonds pursuant to Minnesota Statutes, Chapter 475. The JPA makes clear that it is your City's "need" for facilities that it supposedly does not "have" that is the justification for the revenue bonds. In fact, Section 6(a) of the JPA requires the City to make false representations that it will only be able to receive Internet and communications services if the revenue bonds are sold:
[A]dopt a resolution (i) evidencing its [the City's] intent to authorize the Issuer to undertake and operate the portion of the Project located within its jurisdictional boundaries, including a recital of the benefits to such Party [the City] from issuance of the Obligations to finance and operate the portion of the project located within its jurisdictional boundaries, (ii) making specific findings regarding the benefits of the Project, including the findings in Section 2 of this Agreement . . .
These false representations by the City may have also exposed it to significant legal liability from the purchasers of the County's revenue bonds on a theory of fraudulent inducement.
It is imperative that these material misstatements of fact be corrected. Accordingly, Mediacom requests that the City immediately take action to correct these false findings by rescinding or amending the JPA. We also request that the City immediately notify any and all affected municipalities (including Lake County), bond issuers, government agencies (including the Rural Utilities Service) or other persons or parties that the JPA contained material misstatements of fact and should not be relied upon.
Further, we request copies of all correspondence and/or information relating to the JPA possessed by the City, including a list of all municipalities, bond issuers, government agencies, or other persons or parties who may have been provided a copy of the JPA. Additionally, we request all materials, statements and/or other information which was provided to or considered by the City in connection with the JPA including the identity of any individuals making oral or written statements or representations to the City regarding the availability of Mediacom's Internet or other services offered in the City.
I appreciate your prompt attention to this matter. Please do not hesitate to contact me should you have any questions.
Lake County responded thusly [download pdf]:
Dear Mr. Larsen:
We have been provided with copies of the letters dated December 21, 2010, which you sent to the Cities of Silver Bay and Two Harbors in Lake County, Minnesota. We are sending this letter as a response.
First, let me point out that the Joint Powers Agreement (JPA) was not a condition precedent to the loan and grant of funds by the United States of America acting through the Rural Utilities Service. The Rural Utilities Service made the decision to award the loan and grant to Lake County well before the Cities of Silver Bay and Two Harbors decided to participate in the network through the JPA.
Second, it is regrettable that you did not have a current copy of the JPA to review. The current version of the JPA provides as follows:
The findings in section 2 are:
- It is in the best interests of the Municipalities to consent to the issuance of the Obligations by the Lake County HRA and the operation of the Project by Lake County.
- Each of the Municipalities will receive substantial benefit from the Project which will provide advanced voice, video and data services, accessible and available on an equal basis to residents of each of the Municipalities.
Section (6)(a) of the current version of the JPA states:
Each of the Municipalities will consider, if necessary and requested by Lake County, adopting an ordinance, or modify an existing ordinance to allow such Municipalities to issue an extension permit to Lake County pursuant to Chapter 238 of the Minnesota Statutes and all other applicable laws, rules, regulations and ordinances now or hereafter in effect. Each of the Municipalities further agrees to consider issuing an extension permit to Lake County if necessary and requested by Lake County in accordance with all applicable laws, rules, regulations and ordinances now or hereafter in effect.
As you know, Mediacom is a valued service provider in the Cities of Silver Bay and Two Harbors. Lake County’s network will be an open-access system, allowing Mediacom to reach additional consumers outside of the Cities of Silver Bay and Two Harbors without the risk and expense of expanding its cable system. It is a pity that you feel you have to resort to such heavy handed tactics, rather than choosing to continue to work in partnership with the Cities and join with Lake County to provide services on this new infrastructure.
If you have any further questions, please feel free to contact me.
Special Assistant Lake County Attorney
Update: After I published this story, VP Tom Larsen contacted me to correct my claim that Mediacom based its objection on a draft:
Given that these are real documents (not “draft” as you described) that were signed by Silver Bay’s City Administrator and Mayor and approved by the City Council, I hardly think my letter can be characterized as false accusations.
Mr. Larsen is correct, the language was not a draft. However, it was updated in a later version of the Joint Powers Agreement. I have attached both version of the Joint Powers Agreement here for readers to view (Nov 15 and Nov 25). Apologies for mischaracterizing Mediacom's actions. However, we will continue to maintain that a cable network is no more a substitute for a FTTH network than an ultra-light airplane is a substitute for a Boeing 777.