Model broadband effort of Monticello in peril

Once seen as a national model, Monticello's broadband network can no longer pay its bills.

The city, about 40 miles northwest of the Twin Cities, notified banks and bondholders Wednesday that it will no longer make debt service payments on $26 million worth of revenue bonds that were sold to build the fiber optic system in 2009.

The system, FiberNet Monticello, offers high-speed Internet bundled with phone and cable TV as a municipal service that competes with private companies.

The firm that's been operating the system, Hiawatha Broadband Communications, is also leaving. It filed a 90-day intent notice in late May to end its contract early. The City Council will meet Monday to discuss what's next.

City administrator Jeff O'Neill said that the city has no intention of abandoning FiberNet's 1,700 customers, including about 130 businesses.

"This system isn't going anywhere," he said. "We're not going out of business."

Despite the problems, he said the city has one of the fastest Internet systems in the country that has driven down prices and improved services by providing competition. But Tom Steward, investigative director for the Freedom Foundation of Minnesota, said that Monticello is a "cautionary tale" and a reminder that cities should stick to providing basic services like filling potholes.

"It shows you need to be really cautious when you're thinking about getting into competition with private providers," he said. The foundation is a nonprofit think tank that has inveighed against municipally owned liquor stores, golf courses and telecommunication networks.

June 7, 2012

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