Feb. 10,1998 
 
 
Exclusive Use of Right-of-Way for Free Telecom Service - At What Price? 
The State of Minnesota has announced a 10-year agreement that grants exclusive use of the state's interstate freeway right-of-way (ROW) to a private consortium to build an 1,800-mile high-speed fiber optic telecommunications network. In exchange, the state and all public bodies -- including schools, colleges, universities, libraries, and municipal governments -- can use up to 20 percent of the network free. 

The network, called "Connecting Minnesota," could handle 3 million users simultaneously and will cost over $100 million to build. The two agencies that negotiated the contract, which the parties can extend an additional 20 years, are the state departments of Transportation (MNDOT) and Administration. They have asked the Federal Communications Commission (FCC) to rule whether the contract with the consortium (ICS/UCN and Stone & Webster) violates the federal Telecommunications Act of 1996, which prohibits exclusive use of freeway ROW. 

The telephone industry is concerned that the Legislature was not consulted before or during contract negotiations and will have no oversight of state telecom policy for a long time. (The state can renegotiate the contract after 10 years, but only with the consortium.) 

The state describes the network as a "backbone" that will provide more advanced capacity to rural areas and save MNDOT the expense of installing cable for its intelligent traffic systems. The state and public bodies also get more capacity while saving dollars currently spent on dedicated lines. Bill Schnellman, the DOA director who manages state telecommunications, says there is no high-speed rural network in place. "This isn't costing the state or local phone companies anything," he says, "so why not do it?"

Concerns about Greater Minnesota, Competition 
Local phone companies argue that a high-speed network does exist. They also think that free public access will come at the expense of rural telephone customers and may hurt economic development in Greater Minnesota. "With big users removed from the public-switched network, everyone else will pay more," Knickerbocker predicts. "With a smaller customer base, local phone companies will be forced to deploy advanced services at a slower pace and rural economies will suffer." 

Adeel Lari of MNDOT says the backbone, which he compares to a road system, should help local phone companies. "If there's more traffic on freeways," he says, "then there's more local traffic as well." Schnellman says the state has no intention of abandoning local providers. "The public sector will still use local companies when it needs private lines to connect to the backbone. We're not out to put local providers out of business. We'll use them as much as we can. But we're only doing what any organization would do to meet its needs and keep costs down." 

The MTA questions how those costs will be monitored because the contract doesn't mention how rates will be controlled. Schnellman and Lari believe market forces will provide control. "If the company's prices aren't competitive, it won't be able to sell its services," says Schnellman, "because it won't be the only game in town, the only way to get to other places. And how is it going to recover its investment if it isn't neutral and competitive?"  But that may not be the problem. "What's to stop the project builder from undercutting competitors unfairly?" Knickerbocker asks.  

Lari says choosing one company to build the network was a compromise between safety and competition. The contract's exclusivity prevents problems with multiple vendors burying cable along freeways. Lari also points out that any vendor can have its own cable buried by the consortium, though it must be done when the consortium buries its cable.  That means other vendors have one opportunity in 10 years. 

"Not a Real Opportunity" 
This option is "totally impractical, not a real opportunity," says Paul Hoff, general manager/CEO of Park Region Mutual Telephone Company, Underwood. "A company's decision to lay cable is not made lightly," he explains. "You have to set design criteria, get financing and purchase everything. The sun, moon and stars would have to line up, or something of that magnitude would have to happen, before any company could lay its cable exactly when the consortium was doing it." Hoff also disputes the idea that the current network is not advanced. "There is plenty of capacity that isn't used now," he says. "And all that's needed to enhance fiber optic cable buried years ago are new lasers." 

Though no one disputes that digging on freeways is a legitimate safety issue, telecom providers don't understand why Minnesota is the only state that will restrict access to interstate ROW to one telecom company. "The contract won't stop electric, natural gas and other utilities from digging on interstates," says Knickerbocker. "so why are other phone companies the only ones excluded?"

Uncharted Territory 
As the first state to make a deal like this, Minnesota has entered uncharted territory. That's why Knickerbocker wants the whole issue reconsidered. "At the very least," he says, "the financial arrangements of this deal cry out for legislative oversight. What lending institution would finance a venture where the biggest customer gets free service for decades? And what if the consortium can't make a profit? Won't the state get more involved because it wants the project to work? This contract risks too much for too long. That's why the Legislature should look at it after the FCC makes its decision."  
 
 

But Blue Earth Valley Telephone has taken care of its neighbors for more than a century. The company serves a large area of Southern Minnesota's Faribault County, but its approximately 8,000 customers still have access to state-of-the-art technology, including miles of fiber optic cable. And the company's parent company -- which also owns a cellular phone company, an Internet provider in Fairmont, and local phone companies in New Prague and Minnesota Lake -- employs 73 community-minded employees. Blue Earth Valley Telephone Company employees support their communities and are active volunteers in numerous local organizations. 

Susan Eckles, company vice president and director of marketing and public relations, calls the telecommunications business "fast-paced, exciting and fast-changing. It's vital to everyone's future," she adds, "that we keep up with the challenges this field offers. We consider ourselves a customer-driven company. We're constantly upgrading because we only succeed when we meet our customer's expectations."