Does 395 project threaten local mom-and-pops?
As Frank Herbert wrote in his Dune series, “Fear is the mind killer.”
The question in the minds of many local businessmen is whether or not they have something to fear from Praxis, the company spearheading the Digital 395 project, and Inyo Networks, an internet service provider affiliated with Praxis.
And whether that translates into a small business and jobs killer.
“If people are happy with their current service providers, then they will stay with them,” said Michael Ort, CEO of Praxis, the company spearheading the Digital 395 project that was recently awarded funding from the American Recovery and Reinvestment Act.
Ort was responding to concerns from local internet service providers in the Eastern Sierra regarding the impacts that Inyo Networks’ connection with the project will have on their own businesses.
Ort is also the President and CEO of Inyo Networks, an internet provider company that is also a partner in the California Broadband Cooperative, which will operate the Digital 395 network once it is completed.
“CBC was created so that no one owns the Digital 395 project,” Ort said. “The community will own the network because the community will be the members of the co-op.”
Digital 395 is a wholesale company, according to Ort. It won’t sell directly to businesses and residences, but it gives service providers the opportunity to tie into the project on an equal footing and provide broadband to the area at the most inexpensive rate, he said.
Aaron Schat, owner of internet service provider Schat.net, described the Digital 395 “middle mile” project like “a water pipe running through the center of the valley. The ‘last mile’ is the pipe that goes to your house.”
Digital 395 will lay the middle mile “pipe” or fiber. It will then be up to service providers like Schat.net and Inyo Networks to provide the last mile service.
“It’s cool to get faster internet, but is it cool to get it by robbing me?” Schat asked, representing some local fear that Inyo Networks will present unfair competition among service providers. “We’ve built up the area as best as we could and now we’re going to get wiped out,” Schat said, referring to the 16 years that Schat.net has been servicing the community.
Schat is under the impression that Inyo Networks received a $20 million grant that it will be able to use to offset the costs it will incur to hook into Digital 395. By using grant money, Inyo Networks would not have to be concerned with recouping these start-up fees and would be able to offer lower rates to customers than the other providers who would be paying for their connections out of their own pockets and would therefore need to recoup their fees and would not be able to lower their rates.
Ort said Schat’s fears are unfounded.
In regard to the $20 million grant award, Ort said the confusion was coming from the fact that there were two grants floating around with Inyo Networks’ name on them.
“The first grant was the Digital 395 grant,” Ort said. Knowing that the entire project would cost approximately $101 million, and that ARRA grants require matching funding, the proponents of the Digital 395 project went first to the California Public Utilities Commission (CPUC) and its California Advanced Services Fund, or CASF, grants to try to secure funding that would be brought to the table as the match when the project approached the feds.
“CASF requires a certificated company to apply for the match,” Ort explained. “The CBC had not been formed yet, so Inyo Networks acted as the certificated company,” which is why Inyo Networks’ name is on the request to CASF for just under $20 million ($19,294, 717).
CASF awarded the match, but it was contingent upon Digital 395 getting funded the remainder of the money by ARRA and the Broadband Technology Opportunities Program. That award, approximately $81 million, came in round two of the funding awards, which was announced in August of this year. These two grants, plus the 1 percent that the applicant provided, made up the $101 million needed for the Digital 395 project.
“Zero dollars are going to Inyo Networks from these grants,” Ort said.
The second grant from CASF with Inyo Networks’ name on it was one that the company had indeed applied for to go forward with projects of its own.
“If I remember correctly it was about $1.7 million that we applied for from the state,” Ort recalled (according to the resolution that The Sheet found on the CPUC’s website it was actually a bit more than $2.2 million). The CASF grant was approved with Resolution T-17229, but again, it was contingent on receiving funding from federal grants.
“We decided not to pursue the grant on the federal side because we thought it would be too confusing to people,” Ort said. Therefore, a second resolution, T-17272, was approved by the CPUC which rescinded the original resolution, effectively taking the money back since matching funding was not pursued.
“Digital 395 was not funded in the first round of [federal] awards,” Ort explained. “So we had to make a decision and we decided that Digital 395 was the most important thing, which is why we decided not to pursue the Inyo Networks’ projects. We left the money on the table in order to get Digital 395 over the hump.”
Inyo Networks had hoped to deploy broadband technologies to underserved communities in the Eastern Sierra.
“We weren’t going to do anything in Mammoth and Bishop because those areas were already being served,” Ort said. “We used maps that were provided by the CPUC and local providers such as Schat.net to find the underserved areas where bandwidth was not fast enough and we had wanted to provide last mile connections to these areas using WiMax, which is like WiFi but with bigger bandwidth.”
The plans, as mentioned, were ultimately scrapped in favor of solely pursuing the Digital 395 project, but Ort claimed the threat of new competition pushed some local providers like Lone Pine Television to improve the speed of their network.
“Having the possibility of another provider brought the price down and improved service,” Ort claimed.
Lastly, Ort responded to Schat’s critique that Verizon already has a cable running up and down the 395, so the Digital 395 project is a redundant effort.
“They [Verizon] do not have fibers running end-to-end, and they are 20 years old.”
“The Digital 395 funding is a great opportunity that will never come again,” Ort concluded. “The providers should move forward positively with this gift and make something happen with it. I challenge them to take the benefits and pass them on.”