City prepares to sell broadband operations Dec. 1, 2009 The city of Antigo’s controversial incursion into the broadband market appears to be reaching its conclusion.
Three years after a contentious Common Council vote to establish and fund a broadband utility, aldermen next week will act on a proposal to sell the remaining pieces to Wittenberg Wireless LLC, an affiliate of the Wittenberg Telephone Company.
The action will take place at the council’s regular December session Wednesday, Dec. 9 beginning at 6 p.m. at City Hall. It will also require affirmation by the board of directors of Wittenberg Wireless, approval by the Wisconsin Public Service Commission and a referendum vote by city residents, probably in April.
“We’re treating this as a normal utility sale,” Mayor Bill Brandt said, noting the steps the city will take to disengage from the project.
The sale carries a price tag of $1.6 million, payable over 20 years through a lease-purchase arrangement. The funds will be applied to the city’s bond payment which initially financed the utility. It will also be used to repay part of a a loan received from city coffers to fnance operations while the utility was not receiving adequate cash flow through subscribers.
The mayor noted that the utility was established through a $1.21 million bond and has also borrowed $630,000 from the city to cover various expansion costs. Those notes will begin to come due next year, he said, making this in excellent time to sell the service.
“The utility is not cash-flowing to cover payments at this point,” the mayor said, adding that if some sale had not been arranged, city taxpayers would have been on the hook for the dollars.
The demand is there, he said, but the costs of expanding services are high and the payoff comes only after a period of years, difficult for a municipality to manage.
“The city is a poor conduit to run a corporate business,” he said.
Brandt added that recovering $1.6 million of the $1.84 million owed on the now three-year-old system is not a bad deal.
“We feel we are getting a fair price,” he said. “It’s like a car. A three-year-old system is not going to sell for the cost of building new.”
Under the terms of the sale, Wittenberg Wireless will receive:
—the transfer of all broadband assets along with property located at 906 Edison St., the distribution centers at Century Avenue and Arctic Street, and a two-acre parcel at the east end of Freiburger Avenue,
—the turning over of all engineering and documentation associated with the design and construction of the utility.
In return, the company agrees to:
—provide the city with Internet services at the same fixed rate for the next 20 years.
—construct a fiber optic connection between the Wittenberg exchange and the city.
—ensure a corporate guarantee by Wittenberg Telephone Company.
—make voice and Internet access services available to all city residents within two years.
—and locate a business office in Antigo within one year of closing.
The agreement also notes that upon any default of lease terms by Wittenberg Wireless, the leased assets shall return to the city.
Brandt said that the broadband utility did fulfill its initial purpose—to preserve industries that had been in danger of leaving the community due to the lack of high-speed Internet and fiber optic availability.
“We still have all those businesses, and those jobs, here,” he said.
The mayor added that the broadband also fostered increased competition among private carriers that initially had turned the city down when it requested high-speed, affordable services.
“They basically turned us down and said we were too small a market” Brandt said. “The broadband has fostered a competitive environment with competitive rates.”
The city started construction on the utility in 2006 and connected its first industrial client in March, 2007. At the time, the city also developed wireless Internet for residential customers. It sold that portion of the utility in 2008 to Granite Wireless, now owned by Bertram Wireless Inc., which has since expanded beyond the city limits and serves almost 400 customers.
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