Friday, February 25, 2011

NTIA's Strickling to Silicon Valley Governments on Stimulus Project Allegations: Drop Dead 02/25/2011 San Francisco -  Assistant U.S. Secretary of Commerce Lawrence E. Strickling yesterday kept on a collision course with the leaders of the two largest governmental bodies in Silicon Valley over the controversial $50 million BayWEB public safety broadband stimulus grant.
Assistant Commerce Secretary & NTIA Chief Larry Strickling, at Minority
Media and Telecom Council Summit of 2010
Strickling, who heads the National Telecommunications and Information Administration (NTIA) of Commerce, told officials of the City of San Jose and Santa Clara County, California that he and his agency would continue to move the project ahead at full speed.

The response came despite detailed, documented, and serious allegations by the two governments of substantial wrongdoing in the selection of the grantee, and outright charges of ethical breaches by public employees.

"We have taken your allegations seriously and reviewed the matter carefully," wrote the NTIA chief to Mayor Chuck Reed and County Executive Jeff Smith in a letter dated February 24, "but we decline to de-obligate, suspend, or otherwise impose high-risk special award conditions on the project on the grounds that such action is not justified at this time." 

San Jose & Santa Clara Document the Allegations, Again
Strickling was responding to the request dated January 18 by the two officials to have NTIA Grants Officer Ms. Sonja Wyatt "address the concerns raised in this letter by suspending the award pending corrective action." 

Reed and Smith have been calling for a series of federal reviews, a grant payment moratorium, and similar actions since they first leveled serious charges of ethical misconduct and mismanagement against regional managers responsible for BayWEB last September. In the January 18 letter, they also called on the federal Recovery Accountability and Transparency Board to investigate and suspend the grant.  

Strickling's letter responded to the missive of January 18, and to ones of January 31, and February 15 by Reed and Smith in which they iterated, with greatly added detail, many of the the specifics of their previously expressed problems with the project. In particular, the Reed–Smith letter of January 18, which runs to 11 pages, includes 44 footnotes, and attaches 13 exhibits comprised of scores of pages, is itself the single most exhaustive documentation of the crucial challenges raised to BayWEB.

In the most recent documents, with the January 18 letter serving as the foundation list of and documentation of complaints, the Mayor and the County Executive stated again that the application filed in Round 2 of the federal broadband stimulus program by Motorola, Inc. (now Motorola Solutions, Inc.; (NYSE: MSI), did not have an authorized local governmen- tal partner as its federally required local partner.

San Jose and Santa Clara have said for months that the local partner mentioned in the application, the BayRICS Policy Group, did not legally exist when the application was submitted. The lead regional managers of the application process have said variously that the Group either did exist or was in formation at the time. This publication was the first to print the fact that all 4 of the primary agency managers of the process that selected Motorola are immediate former employees of the company itself.

San Jose - Santa Clara Call the Cops
The most serious action taken to date by the two governments has been to request an investigation of BayWEB by Commerce Inspector General Todd Zinser.  IG Zinser confirmed in congressional testimony, given to the oversight hearing of the House Subcommittee on Communications and Technology held February 9, that his Office was indeed conducting an investigation of the grant award. Given Strickling's intransigence and unwillingness to examine the allegations about BayWEB to the level of detail provided by the Silicon Valley governments, Zinser's probe is today the best prospect for a thorough federal look at the issue.

NTIA's Strickling Sees No Evil
Strickling's rebuttal of yesterday was even more obtuse than the previous statements of the regional public officials, all employees of the City and County of San Francisco. The Assistant Secretary of Commerce, a presidential appointee, fully avoided answering the questions at any level of detail, or with any documentation approaching that supplied by San Jose and Santa Clara County.

"Among other things, we relied on the statement of support received from key governmental units within the Bay Area, including Santa Clara and the City of San Jose, which indicated to us that jurisdictions such as yours would move forward expeditiously in the event of a grant award to cooperate in the construction of this network and successful completion of this important project," responded Mr. Strickling. 

The Administrator argued against the other major objections of Reed and Smith to the BayWEB project. The City and County had alleged the selection process of Motorola was improper, that the project was not "shovel ready" as at least rhetorically required of stimulus grants, and that the 700 MHz spectrum license issued under a waiver by the federal Communications commission had been improperly transferred away from the control of the four cities, including San Jose, to which the waiver had been issued. 

Additionally the two jurisdictions asked that the project be suspended until local governance issues could be resolved, and questioned potential costs of the project to be borne by local tax payers.

For each question Strickling had a response that failed to address the concerns of the officials, telling them that the project would move forward without them if necessary, but that it would move forward.

"It is vital that all interested parties move forward with all dispatch to ensure that the citizens of the entire Bay Area benefit from this project," stated the NTIA chief.

The BayWEB Examination is our compendium of information on the project. We believe it is the most comprehensive such collection available. We have assembled links to all media coverage of the issue, to online documents secured by us from confidential and open sources, to documents secured by others and by this publication under federal and state public records filings, and to our own published reporting.

Note on awardee identification: The project grant was applied for by, and subsequently awarded to, the entity Motorola, Inc., formally traded as (NYSE: MOT). Motorola, Inc. was split into 2 new and separate companies, which both began trading on January 5, 2011.  The network infrastructure side of the business, all public safety equipment lines, and the network integration / management services divisions became Motorola Solutions, Inc. (NYSE: MSI). We have retroactively re-tagged our BayWEB stories with the MSI ticker symbol.

Thursday, February 24, 2011

Mediacom Asks USDA Inspector General for Federal Probe of Lake County, MN Broadband Award

Filing is the First Broadband Stimulus Complaint to IG of USDA to be Disclosed 02/24/2011 San Francisco   – Cable operator Mediacom has filed a complaint with the Inspector General of the U.S. Department of Agriculture, asking for a federal probe of the $66.5 million broadband stimulus grant/loan package awarded to Lake County, Minnesota. This, the first publicly disclosed filing about the broadband stimulus program issued to Agriculture’s Inspector General, comes as the new Republican leadership of Congress is pushing federal IGs to more rigorously examine stimulus program irregularities.

Federal inspectors general have wide ranging civil and criminal investigative powers, including the ability to audit grant applications and disbursements, execute search warrants, recommend suspension of grant or loan payments, and recommend indictments.  

Two days ago Lake County officials announced the retention of new consultants in hopes of jump starting the controversial project which has become a focal point in the national battle over public vs. private broadband investment.

Highlighting this particular controversy is the role of the County’s former lead consultant, Tim Nulty, the founder and past general manager of the troubled Burlington Telecom network, owned by the City of Burlington, VT. Central to the complaint filed by Mediacom Communications Corporation (NASDAQ: MCCC), which operates cable franchises in the largest population centers of the County, is the allegation that Nulty’s firm was retained to secure the $66.5 million under a federally prohibited “fee for success” contract.  

The federal project subsidy was issued by the Rural Utilities Service (RUS) of USDA, as part of the $7.2 billion broadband stimulus program of the Obama Administration. The lead County manager for the public broadband project, County Coordinator Matthew Huddleston, was not available to speak with this publication by telephone over the past week following his kind return of our first call. We hope to report on detailed responses to the Mediacom filing with full input from County officials.

Lake County's Fiber-to-the-Home Project
Lake County Courthouse, Two Harbors, MN
Lake County, which won the loan/grant combination award in Round 2 of the federal broadband stimulus program, seeks to build and operate a fiber-to-the-home (FTTH) network serving its very rural jurisdiction. 

Funding was announced by USDA on September 13, 2010, as one of 43 awards totaling $518 million issued that day in the penultimate group of competitive grants and loans issued in the RUS portion of the program. RUS gave out its last four broadband stimulus awards on September 30th at the legal deadline set by Congress.   

In addition to all residences in Lake County, the project is intended to serve eastern parts of adjacent St Louis County. Commissioners worked to craft a proposal to RUS that would result in the extension of the FTTH network to all residences in their jurisdiction now served by power or phone utilities, including the extremely low density areas outside the cities of Beaver Bay, Silver Bay, and Two Harbors.

The County, working through Nulty’s firm, National Public Broadband, applied to RUS in Round 1 of the federal funding effort as well, for an $11.050 million grant and a $22.435 million loan combination package. The project summary provided to RUS by the County and NPB in its first application stated, "The Project will be the first rural county fiber network in the U.S. to fully serve every home and institution that is currently served by wired telephone or electrical service. The advanced services offered will be priced lower than the very limited services currently available. The Project will be a public-private partnership between Lake County and National Public Broadband, a non-profit org." 

Core Points of Mediacom’s Complaint  
Mediacom bases its complaint to the Office of Inspector General (OIG) on 3 core points of financial viability, legal authority, and retention of outside consultants via an alleged "success fee" agreement. The firm, headquartered in Middletown, NY, was ranked the twelfth largest cable multiple system operator in the nation at 1.203 million subscribers, by the National Cable Telecommunications Association (NCTA) in its September 2010 listing.   

As part of its argument that the proposed project is not financially sound, the Company backs into the statement that the project is impermissible under the rules of RUS whjich forbid the "overbuilding" of existing broadband networks. The agency published its rules for Round 2 of the program, in its so-called RUS NOFA-2.  Currenlty broadband infrastructure does exist in the four communities of Beaver Bay, Silver Bay, Two Harbors, Aurora, and Hoyt Lakes. The probe request to OIG says that the County "ignored data as of the Application date that reveals that a very significant number of housing units have access to Internet speeds of 20 - 50 Mpbs."
Importantly however, the "overbuild" allegation -- one that is the primary concern with the stimulus initiative as voiced by many incumbent service providers large and small -- is not the central claim Mediacom most heavily documents in its request for a probe by OIG.

"From our perspective, this just doesn't work financially," said Tom Larsen, Mediacom's VP of Public and Legal Affairs, in a telephone interview with this publication. Larsen hones in on the lack of financial viability argument expressed in the firm's complaint. "Thirty percent of the homes in the service area are unoccupied according to the most recent census," he said. 

"Most of those homes appear to be cabins in the Superior National Forest," he argued. In Mediacom's view, those seasonal housing units work to greatly drive up the effective "homes passed per mile" of proposed new outside cable optical plant, in an area of already extremely low densities. 

"This ultra-low density results in a high cost per housing unit passed of $4,700 per unit and about $6,772 per occupied housing unit," says the Mediacom filing with OIG. "By comparison, these amounts are 3.9 to 5.6 times higher than the $1,200 per housing unit passed cost for a fiber-to-the-home system that was recently determined to be an appropriate cost for such a system in a more populated area." Mediacom clearly suggests that the capital cost of the system can never be recovered from such a low density subscriber base.

To drive home the point that the Lake County project is unsustainable, Mediacom alleges that County officials are operating under the false assumption that RUS will forgive what the company sees as inevitable, in its own calculation -- a nonperforming federal loan that results from the project. The company further alleges that at least one Commissioner has been quoted having had a conversation with a senior RUS official stating that RUS would forgive any such default. 

In our opinion, it would be highly doubtful that any manager within RUS, let alone a senior official, would make such a statement. RUS has a legacy begun under the New Deal's Rural Electrification Administration. The agency has been authorized by Congress to issue rural telephone loans since 1949. It has held a national loan portfolio across the intervening decades with an extremley low defualt rate.

In a series of legal arguments often heard when incumbents allege public network overbuilding, the cable operator states in its filing that Lake County has neither the authority under  Minnesota law to own or operate the network, nor to secure capital bonding for the local match contribution of $3.5 million required by RUS.  

The 26-page Mediacom complaint calls on OIG to "expeditiously investigate whether a BIP $66.5 million plus loan/grant combination awarded to Lake County, Minnesota to construct a last-mile broadband network in portions of Lake and St. Louis Counties, Minnesota was improperly obtained." The company further requests that no grant/loan funds be disbursed pending the investigation. RUS brands its part of the stimulus effort the Broadband Initiatives Program (BIP).  

Most recent media attention on the Lake County project, given the concerns expressed by Mediacom, have focused on Mr. Nulty’s roles in both the Burlington and Minnesota projects. Lake County is one of several points on the current national map at which public broadband advocates square off with industry. Burlington, the Green Mountain State's largest city, is another. Two local review committees and the state's Public Service Board have reported serious instances of fiscal and operational mismangment by Burlington Telecom that resulted in the default by the municipal network on a major capital equipment lease, and the high risk of further losses faced by city government.

Just what is the situation in Lake County? One finds it difficult not to admire the obvious public interest intent of the Lake County Commissioners, as they work to bring the benefits of ubiquitous broadband to their very rural local realm. Equally, any objective analysis of the public - private networking fights around the coutnry reveals instances of unprofessional attacks by incumbents on local officials attempting to support their constituents. Just as clearly, the largest cable and telephone company interests in the nation never wanted any part of President Obama's broadband stimulus program to begin with.

"I can say that there is a pattern of incumbent cable and telephone company behavior to prevent any kind of competition. They will use any means at their disposal to do so, regardless of how frivolous the charges”, said Minnesota-based Chris Mitchell, a leading community network advocate who heads the Community Broadband Networks project of the Institute for Local Self-Reliance.

It is thus a local dispute between what appear to be well intentioned County officials working to accomplish a public good, and a well managed cable operator making serious allegations about that effort. It is however a local dispute caught-up in a national debate over the proper role of government in broadband deployment -- a debate even further complicated by the partisan divide which marks federal policy. It is this roiling conflict that lands on the desk of USDA Inspector General Phyllis Fong.

First Broadband Stimulus Public Complaint to OIG, Others in Hopper?
Phyllis Fong, Inspector General, USDA
The Mediacom filing is only the second such probe request disclosed to the public across the entire $7.2 billion broadband stimulus program; the first disclosed as filed on the USDA side of the initiative. In November Santa Clara County, California requested an investigation of the controversial BayWEB $50 million public safety grant with the Inspector General of the Department of Commerce. was informed by a federal source that 2 requests for OIG investigations of broadband stimulus awards by RUS had been filed by the end of 2010. We have not been able to confirm the status of either filing, the specific project awards involved, or the identities of parties that requested the federal probes.

In early November RUS spokesperson Bart Kendrick informed us “It is USDA policy not to comment on matters under review by the Office of Inspector General.”  

Alan Mandl, a Boston attorney not involved in the Lake County matter who has represented New England clients both facing and carrying out overbuilds, observed, “Absent specific legal authority that permits taxpayers to bear the risks associated with a broadband venture, taxpayers should be protected against those risks."

"Lenders and public officials need to perform due diligence reviews of project legal authority and financial feasibility," cointinued Mandl, who previoulsy served as Assistant Massachusetts Attorney General for Regulated Industries. "Even where legislative protections of taxpayers have been enacted, as was true in the Burlington Telecom case, those protections alone did not prevent massive, unauthorized cross-subsidization of the municipal broadband project by taxpayers.”

Mandl tells us that in the Burlington project, where federal state, and city officials are all now investigating, “Cash was drained from general municipal funds and not repaid when the broadband project failed to generate sufficient revenues to cover its costs. Regulatory limitations on short term uses of municipal cash accounts were breached in order to keep the broadband venture going, according to findings by the Vermont Public Service Board.”

These situations are more likely to happen where, as Mediacom has alleged, the broadband project cannot withstand a reality check. “Federal taxpayers also are entitled to protections against unauthorized or imprudent projects,” concluded Mandl, who represented the incumbent cable operator and regional cable trade association in the Burlington proceeding, which is discussed in Mediacom’s complaint.   

GOP Congress Prods IGs on Broadband Stimulus
The powers and responsibilities of federal agency inspectors general cannot be taken lightly by any corporate or public official. OIGs have the powers to execute search warrants, recommend federal criminal indictments, and seek civil fines or monetary restitution. As seen last week in the first congressional oversight hearing of the broadband stimulus effort to be convened by the new Republican controlled House, the GOP leadership is urging greater action by OIGs to probe allegations of fraud and waste in the program. 

USDA Inspector General Phyllis K. Fong testified at the hearing chaired by Rep. Greg Walden (R-OR-07) of the House Subcommittee on Communications and Technology. Although Fong is well respected in the federal IG community, as witness by the fact she now heads the professional association of inspectors general, her testimony was lacking in any specific references to current OIG work on broadband stimulus.

To the dismay of several Republican Committee members looking for action on RUS grants and loans, she stated that her office will now more closely examine the broadband stimulus awards.  She stated she had waited for the General Accountability Office (GAO) to complete its most recent report submitted to Congress (of numerous previous full reports and letters) that looks at the program.

The Mediacom filing against Lake County is in this sense an opportunity for Inspector General Fong and her staff. It is an opportunity to conduct an objective and highly professional review of serious claims made against a dedicated local government body by a leading broadband service provider. It is also an opportunity fraught with the danger that her inquiry will be subject to the partisan crossfire which has taken over any effective oversight, by either party in Congress, of the broadband stimulus program to date.
Complaint 2 to OIG - Lake County Fiber Project 02 07 11 (2) 

Wednesday, February 23, 2011

Tech Policy Institute: 60% of USF Monies Go To "Inflated Overhead Expenses" 02/23/2011 San Francisco - The Technology Policy Institute, the Washington think tank supported by an array of often competing cable, telco, and tech giants including Google, today released a report that gives more support to the urgent need to reform the federal Universal Service Fund (USF).

The short but detailed report entitled The Universal Service Fund: What Do High-Cost Subsidies Subsidize? by research VP Scott Wallsten outright calls for "radical reforms" of the program now, as policymakers respond to the current "push to include broadband as part of USF".

The top line finding developed by Wallsten, who reviewed data from "1,400 recipients of high-cost subsidies from 1998 to 2008", is that "over half of subsidies, or $.59 of every dollar, paid through the High-Cost Universal Service Fund go to general expenses of firms, not to directly providing support to high-cost lines."

At the strategic level, the report argues "that the most useful reform would be to focus more on low-income assistance instead of high-cost areas." In the interim, Wallsten says that the current high-cost subsidies need to be fixed. The fix needs to be carried out by the Federal Communications Commission that oversees the fund, via the Universal Service Administrative Company (USAC) that does the actual disbursement of monies.

Wallsten recommends the Commission move immediately on 4 points:

  • Strongly consider subsidies for satellite broadband.
  • Move away from "cost-based, rate-of-return regulation," which gives "incentives to inflate reported costs."
  • In high cost areas served by multiple providers, target the subsidy to the lowest-cost provider, "not to whatever the incumbent already receives."
  • Consider auctions "to define the level and distribution of subsidies." 

Our Take: The TPI report is a concise, yet well documented, read that lays out the clearly needed policy goal of reforming USF. The Commission needs to "walk and chew gum" at the same time here. FCC needs to move toward support of broadband facilities and services with cost effective USF subsidies only as it reforms the subsidies themselves. We in the industry need to lead the charge to see that happen. 

No one can expect the America public to keep paying through the nose for a system clearly out of whack. As Wallsten shows us, USF is now mostly rewarding companies that know how to game the system, rather than providing cost effective support for either high cost areas or low income subscribers. Yes, America needs USF to support broadband. First America needs to reform USF.

Cue the screaming from those companies, and their trade associations, that are best gaming the system today. Press releases and agonized cries to follow immediately.

Tuesday, February 22, 2011

Experience Matters: TDS Retains Four Engineering Firms to Manage $136 Million in Stimulus Work

Retention of Four Firms with Deep RUS Experience Shows TDS Gets It 02/21/2011 San Francisco - TDS Telecommunications Corp. (NYSE: TDS) yesterday announced it has selected and retained 4 engineering firms to manage the implementation of its broadband stimulus funded portfolio of 44 projects in 20 states. The company is managing a full $136 million in awarded stimulus grants and loans, and its own "local match" funds used to secure those awards.  

The announcement by the Madison, WI based rural local exchange carrier (RLEC) marks the issuance of the largest single group of engineering contracts financed to date under the federal broadband stimulus program.

TDS, like its large telco colleagues Qwest Communications International, Inc. (NYSE: Q) and Windstream Corporation  (NASDAQ: WIN) all applied for broadband stimulus funds solely to the Department of Agriculture's Rural Utilities Service (RUS).

Windstream did so only in funding Round 2, after going on a months-long effort to change the application rules. Qwest worked with RUS to have the agency amend the rules in the second round, but did so by making far less noise about it. TDS as the only carrier of the 3 to seek funds in both rounds.

TDS and Windstream were 2 of the largest multi-project winners under the entire $7.2 billion program of the Obama Administration. Qwest, which filed the largest single funding request, at $350 million, of the entire program received not a thin dime.

Yesterday's announcement by TDS is proof, yet again, that after months of delays and even some level of funds returned to the feds by companies, the broadband stimulus funding is now flowing and something more than a minuscule rate. 

RUS Experience is Key
It is also proof of a cardinal rule of network development, and of dealing with a federal grant or loan agency: Experience matters. 

The 4 retained firms have track records of working with RUS, some of which go back decades. RUS, the only federal agency that prior to the stimulus handed out monies for telecom infrastructure, has its own bureaucratic hierarchy with field agents across the nation, its own rules, and its own procedures. As many broadband stimulus winners now attempting to work with RUS for the first time, those processes can be daunting.

TDS, as it looked for engineering companies to drive the network builds in its stimulus portfolio, first and foremost looked for firms with deep experience in negotiating that very specific set of procedures and rules. TDS certainly gets it, in terms of how to disburse federal monies -- a critical skill set all together too many other stimulus awardees are missing.

"RUS experience was absolutely essential in making our selections," said DeAnne Boegli, National Public Relations Manager for TDS in a phone interview this morning.  

“We selected these firms based on their experience, attention to quality work, and ability to execute our designs with professionalism and speed,” says Larry Boehm in the TDS release, director of Network Implementation and Optimization for TDS. “We made a commitment to taxpayers to complete this work within 36 months and these firms and their many skilled employees and subcontractors will ensure we meet that commitment.”

The 4 firms will, according to a TDS release of yesterday, "implement the broadband network designs which were completed by TDS Network Services teams and recently approved by the USDA Rural Utilities Service (RUS) as part of the American Reinvestment and Recovery Act."

Four Firms Selected
The professional engineering firms selected by TDS are:

MEComm Consultants, LP
For projects in: Maine, Michigan, New Hampshire, and New York.

Joseph D. Fail Engineering Co., Inc.
For projects in: Alabama, Florida, Georgia, Kentucky, Mississippi, Tennessee and Virginia.

CHR Solutions, Inc.
For projects in: Indiana, Michigan, Minnesota, and Wisconsin.

Rocky Mountain West Telecom (dba RMWT)
For projects in: Arizona, Colorado, Idaho, Missouri, Oklahoma, and Washington.

The company states that the projects will be completed "by the end of 2013", and that all 44 projects are "currently underway."

Monday, February 21, 2011

Motorola's BayWEB Broadband Stimulus Project Back in News

Personal Commentary on the Worst Broadband Stimulus Award in America 02/21/2011 San Francisco - Sometimes we just hate to be right. Yeah sure, we hate to be vindicated, proven right, or ever have all our head banging against intrans- igent bureaucracy validated. We just absolutely hate it. 

In late September 2010 we said that the $50 million broadband stimulus award for the so-called BayWEB project, issued to Motorola, Inc., now Motorola Solutions, Inc. (NYSE: MSI) was the worst, most troubling award under the entire national program. 

In the interim, most of the media in Northern California has ignored the story.  In that they are very good company, what with all the electeds in the City and County of San Francisco doing the same. Ignore the issue, it will surely go away. Don't worry that the lead folks that engineered this deal were all employees of said CCSF, who were also all former employees of, wait for it....Motorola. Move along, nothing to see here.

Last night, Oakland's KTVU-TV aired what is only the second broadcast TV report on this public funded disaster, which NTIA has still not repudiated. The station's report is as detailed as a TV news clip usually gets.

Commerce IG Zinser, Serious Adult
Last week for the first time this most putrid of broadband stimulus awards was inserted, by reference but not direclty named, into the Congressional Record. It was part of the testimony of Todd Zinser, Inspector General of the U.S. Commerce Department to the oversight hearing of the House Subcommittee on Communications and Technology. Mr. Zinser, who has documented serious problems with NTIA's management of the program for more than year, is now providing adult supervision at the federal table.

The IG at Commerce has taken on an investigation of BayWEB, at the urging of Santa Clara County.  The other adults dealing with this issue are Chuck Reed and Jeff Smith, Mayor of San Jose and Santa Clara County Executive, respectively. Playing the role of petulant child against the adults is former San Francisco Mayor Gavin Newsom, now, unbelievably, Lieutenant Governor of the largest state in the Union. More on his role in this mess later.   

Gavin Newsom, Petulant Child 
If you want to review the whole sordid tale of BayWEB, going back to the prior projects and staffing of the San Francisco-based public agency that created the project, start with any of the The Appearance of Impropriety series. The series launched in 2008. It is nothing short of chilling to see that tens of millions of public dollars were spent so recklessly on systems that our first responders rely on - sometimes for their lives. 

The series is written by Daryl Jones, a professional wireless engineer who specializes in public safety systems. What is Daryl's expertise to write such detail about a history he exposes as so wrong? I tell people, they only need know of one. His firm manages all the public safety radio systems that supported the entire multi-agency, multi-jurisdictional response to the San Bruno gas pipeline disaster. That interoperable system held up during that incident -- one that is clearly of national-level significance to the emergency management community -- flawlessly.  That's expertise, and plenty, for any of us.   

Word on the street is this isn't the last in-market media that is finally going to investigate. We say welcome to the party.

We've put together the most extensive compendium of news articles, video clips, original documents, and our own reporting and investigation, here: The BayWEB Examination.

The BayWEB Examination is our compendium of information on the project. We believe it is the most comprehensive such collection available. We have assembled links to all media coverage of the issue, to online documents secured by us from confidential and open sources, to documents secured by others and by this publication under federal and state public records filings, and to our own published reporting.

Note on awardee identification: The project grant was applied for by, and subsequently awarded to, the entity Motorola, Inc., formally traded as (NYSE: MOT). Motorola, Inc. was split into 2 new and separate companies, which both began trading on January 5, 2011.  The network infrastructure side of the business, all public safety equipment lines, and the network integration / management services divisions became Motorola Solutions, Inc. (NYSE: MSI). We have retroactively re-tagged our BayWEB stories with the MSI ticker symbol.  

Cyan Optics' Third Broadband Stimulus Win Shows Program Spending in Ramp Up

Rural Middle Mile Stimulus Opportunity Seen As Program Spending Ramps 02/21/2011 San Francisco - Newsflash: The broadband stimulus program is actually working. 

Cyan Optics, Inc. last week announced its third sales win from a service provider using broadband stimulus funding to expand its network. The announcement follows on the heels of weeks in January when it seemed not a day went by that Calix (NYSE: CALX), also headquartered in Petaluma, CA, announced another sales victory financed with stimulus monies.

So, take that wacky Republicans in Congress, and us you other critics of the program. The often maligned effort is now ramping up. The velocity at which financing is flowing to awarded projects is now increasing, here in 1Q 2011. That financing translates into real orders for equipment, contractors, and professional services. It translates into jobs for Americans.

We of all people know of the faults with the broadband stimulus program. We've pointed to more of them than most. We think those problems have been too often ignored by program managers, by the Obama Administration as a whole, and members of our own party in Congress. A small number of very bad awards and bad actors are only now starting to be properly investigatedDelays in scores of projects are well known, as are (now at least a handful) of award declines as seen in the give back announced last week by what passes for state government in Wisconsin.  

Aggressive Small Cap Firms Target Broadband Stimulus Opportunity
But...although the data remains obscure, thanks to the Obama Administration's continuing hypocrisy when it comes to open or transparent government, the simple undeniable is fact that money is now finally flowing at an increasing rate. Cyan is an exemplar of small cap firms that during the past 2 years of the broadband stimulus program have identified the specific niches and opportunities created by the unprecedented federal spending in the sector.

Cyan is joined by Clearfield, Inc. (NASDAQ: CLFD), Calix, Calix's acquisition target Occam Networks, Inc. (NASDAQ: OCNW), and Infinera Corporation (NASDAQ: INFN) in the forefront of smaller equipment manufacturers that early on launched broadband stimulus support programs to assist grant and loan applicants through the daunting federal process.

Cyan's Win with Woodstock Tel
Last week's announcement by Cyan focused on the equipment contract awards issued by Woodstock Telephone Company, an independent telco operating company based in Ruthton, Minnesota. Woodstock received a $ 15.184 million grant / loan combination award from the Department of Agriculture's Rural Utilities Service (RUS), announced by Agriculture Secretary Tom Vilsack on August 4, 2010. The Secretary's statement that day marked the agency's largest single announcement of stimulus awards.  

Woodstock chose the gear maker's Cyan Z-Series™ of multi-layer transport platforms, CyMS™ multi-layer management system and its recently-announced CyNOC advanced Network Operations Center (NOC) service to expand their fiber network with two transport rings to support over 3,600 premises in 15 communities across 3 counties in rural southeastern Minnesota. Woodstock, which has offered cable-Internet-telephone triple play services for years, is using the RUS funding to extend fiber-to-the-home (FTTH) high capacity infrastructure those communities.

Cyan Wins Highlight Middle Mile Stimulus Market
Cyan is a maker of optical transport equipment, a product set targeting middle mile sales opportunities among what the company tells us a current portfolio of "over 50 service providers in the US and Europe." The previous 2 stimulus funded wins by Cyan have been issued by the  National Telecommunications and Information Administration (NTIA) of the Department of Commerce.  The middle mile market opportunities for fiber and gear makers has been documented by many of us over the history of the broadband stimulus program.

The Cyan contract with Woodstock Tel however reveals a little seen middle mile opportunity within announced last mile projects financed by the Obama Administration's initiative. Most analysts have seen the broadband stimulus world as largely bifurcated by NTIA and RUS. The majority of projects funded by the former have been large scale middle mile new builds (i.e. Massachusetts), or expansions of existing  networks, often quasi public systems (Missouri, North Carolina, South Dakota), or expansions by carriers. Certainly the lion's share of RUS monies have been for access networks, with the larger portion of those awards breaking for FTTH projects over wireless.

Cyan's Woodstock Telephone award demonstrates the middle mile network opportunity created by the rural telcos and cable operators now expanding both their served area footprints and their higher bandwidth offerings. Cyan demonstrates the important middle mile opportunity within FTTH project fundings, not all of which is devoted to the access portion of the network. 

"Cyan participates most actively in the 'middle-mile' or transport portion of these BBS networks," the firm's VP of marketing, Frank Wiener, told us late last week over email. "There is growing consensus that the middle-mile networks are among the most efficient and effective investments in achieving the objectives of these programs as they provide an infrastructure which supports all regional institutions and end users for far less than the  cost of actually deploying a dedicated broadband drop to an individual subscriber."

Clearly this middle mile niche is additionally driven by the exploding mobile backhaul market. "One of the biggest inhibitors of many local loop or 'last-mile' broadband deployments," said Wiener "has been the lack of middle-mile connectivity from the broadband edge networks which provide connectivity of FTTH, DSL or Wireless subscribers to the internet and other compelling content sourced globally."

Previous Cyan Stimulus Projects at Clearwave and NebraskaLink
Cyan won its first stimulus supported project with NebraskaLink, as announced last September 13. NebraskaLink, a consortium of 7 service providers, won a $11.5 million stimulus grant from NTIA to deploy "450 miles of newly constructed fiber", connecting upwards of 1200 anchor institutions, 85,000 households, and 8,000 businesses, according to the company press release.

On January 18, Cyan announced that it and Juniper Networks (NASDAQ: JNPR) were designated the "strategic suppliers of transport and routing solutions rrespectively" by the Clearwave Communications unit of Delta Communications, LLC. Clearwave won a $31.515 million middle mile grant from NTIA which was matched with $11.351 million from the State of Illinois broadband program.

We expect more announcements by Cyan of "bbstim" fueled competitive wins now that federal funds are moving, and with the foundation of 3 public awards in-hand to date. "We also continue to see many new projects which are yet to be awarded," Cyan's Frank Wiener told us. 

Friday, February 18, 2011

FCC Says Verizon Hung Up on 10,000 Wireless 9-1-1 Calls

New 9-1-1 Verizon Outages Happen in Metro Washington, as FCC Issues Complaint 02/18/2011 San Francisco (Updated: 2:20 PM) - Calls made to 9-1-1 public safety answering points (PSAPs) are never supposed to be blocked or disconnected. Never. It doesn't matter if a caller is dialing from a wired landline or a wireless phone, a call dialing those three digits should never fail.

Update: As we were posting this story, the Washington Post, and public safety personnel on various Twitter accounts have reported enhanced 9-1-1 (E 9-1-1) failures in Arlington and Fairfax County, Virginia. These areas, like the two counties in Maryland that the FCC issued its letter about, are both in the Washington, DC metropolitan region, and both served by the Verizon public switched telephone network (PSTN). As of the Post's update of 1:40 PM, Arlington County officials are reporting "the 911 system is back in operation." 

The Federal Communications Commission just released a statement saying that in January Verizon (NYSE: VZ) broke the cardinal rule of 9-1-1 calls always getting through. 

FCC says that because of apparent faults in Verizon's network, "approximately 10,000 wireless emergency calls to 911 call centers in Montgomery and Prince George’s Counties, Maryland, during the January 26, 2011 snowstorm" failed to connect to their appropriate PSAPs. FCC wants to know what happened, and why it happened. 

Most significantly, FCC has serious concerns about the reliability of Verizon's larger network to handle 9-1-1 calls in all circumstances, as stated in the Commission's letter to the carrier.

James Barnett, Rear Admiral (ret.), the Commission's Chief of the Public Safety and Homeland Security Bureau, yesterday issued a letter to Verizon requesting that the carrier "provide the Commission with a full assessment of what caused the failure to connect, identify remedies to help prevent similar occurrences in the future, and implement solutions to quickly restore reliable network operations when there are problems."
The Commission is today saying "The Bureau’s preliminary findings show that on January 26th all 14 circuits in the Verizon network that properly route all wireless calls in Montgomery County failed and nine of 10 Verizon circuits in Prince George’s County failed over a five-hour period on the night in question.  This resulted in approximately 8,300 blocked 911 calls in Montgomery County and 1,700 blocked 911 calls in Prince George’s County that evening."
Barnett, in his letter to Verizon got right to the critical nature of Verizon's failure “… any 911 call which is not connected can have serious consequences, but the large number of missed 911 calls on January 26th is alarming. The public rightly expects that they can use 911 to reach the appropriate first responders in an emergency.” 
"In addition to the cases highlighted above," said the FCC in a press release of early afternoon today, Washington time, "the letter notes that similar incidents involving blocked 911 calls occurred in 2010 in Montgomery and Prince George’s Counties, with one incident resulting in delayed urgent medical attention for a caller who was unable to reach 911. A similar problem with wireless 911 calls being blocked from reaching a Fairfax County, Virginia 911 call center occurred on January 26, 2011 as well."
Prince George's County 9-1-1 PSAP in Bowie, MD (Photo:
Barnett's "Bureau is requesting that Verizon respond to the following questions, among others, to address the public safety concerns raised by the series of recent incidents in Montgomery and Prince George’s Counties:
Q) Is the problem localized to the 911 call centers using the Hyattsville and Rockville, Maryland selective routers?
Q) Was this the same problem that occurred in Fairfax County, Virginia?
Q) Can this problem occur elsewhere in the nation?
Q) Has this problem occurred in other states and if so, in which states?
Chief Barnett requested that Verizon complete its assessment and provide a comprehensive response to the FCC no later than March 10, 2011. In addition to the written response, Chief Barnett has requested a meeting with Verizon representatives within the next two weeks to discuss the matter and identify appropriate resolutions to address the problems identified."

Our Take: The FCC letter to Verizon raises the most serious issues about public safety calling access to PSAPs we have ever seen. The Commission does not typically ask the type of questions it is asking Verizon lightly. FCC's concerns with perhaps wider problems, perhaps below reporting requirement thresholds (our speculation here) become the key issue in this entire matter. The Washington Post's great reporting about 9-1-1 outages in two Northern Virgina counties today further, and critically underline, what should now be extreme concern with Verizon's network in the Washington, DC metropolitan area.

We've been through PSTN outages, and 9-1-1 outages when serving as a public telecom official. We predict Verizon's first response will be to cover this issue with their flaks, to deny much of anything at all is wrong. FCC and in-region officials should tell VZ to keep the press flaks out if it, and work to disclose what is wrong in its network. 

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