City picks Fone.Net for fiber-optics loop

City picks Fone.Net for fiber-optics loop

Jan. 25, 2001

By Janelle Holden
Journal Staff Writer

By a 4-3 vote on Tuesday, the Cortez City Council approved the next step in the construction of a city fiber-optics network.

Despite the objections of Mayor Joe Keck, the council gave city administrators the go-ahead to begin negotiations with Fone.Net, a Cortez-based telecommunications company and prospective administrator of the network.

"We’re pleased to have the opportunity to work with the city," said John Van Cleve, a managing member of Fone.Net and its chief negotiator. "We’ll do everything we can to make the plan workable and look forward to providing that service."

The city has been considering building a fiber-optics network for the past five years. Rick Smith, director of the city’s department of general services, estimated that the negotiations could take several months to complete.

"We feel like it’s a win-win situation. We’re just leasing the dark fiber — we’re not dictating what technology goes across it," said Smith.

"Nothing is lost by going forward," said Van Cleve. "If it turns out that the network is too costly and makes no sense, or somebody comes in here and offers to overbuild Cortez on their own nickel in a few months, then maybe we take another look at it. Both parties have indicated that if it doesn’t make sense at the end of negotiations, they can pull out."

Fone.Net was one of two telecommunications companies that responded to the city’s request for proposals in October. Under the current proposal, the city would invest $500,000 in a fiber-optics loop connecting schools, hospitals, and local government entities. The money would also be used to build a maintenance plant.

In return for maintaining the network and providing the equipment to light the fiber, Fone.Net would have the use of 12 strands of the 48 network fibers for the next 10 years. Another 12 would be used for a proposed "Govnet" that would connect 67 entities within the city.

Private businesses would be able to lease or use the remaining 24 strands from the city, which will retain ownership of the fiber.

For telecommunications companies that wish to lease "lit" fibers, instead of lighting and maintaining their own dark fibers, the city and Fone.Net plan to negotiate a reasonable access fee. Not only will the fibers provide high-speed data transfer, but also will allow telephone companies to compete with Qwest, formerly U S West, for local phone service.

REANET, a Durango-based telecommunications company, was the other company to respond to the request for proposals. However, several independent consultants concluded that REANET’s proposal didn’t meet the criteria of the RFP, and recommended the council negotiate with Fone.Net. Two other telecommunications companies declined to respond to the RFP.

Before the council began deliberations, former council member Bob Diederich asked current council member Larry Kautz to recuse himself from voting because he was "beyond a perceived conflict of interest." Kautz’s wife is a member of the board of Empire Electric Association, which, along with La Plata Electric Association, founded REANET. After consulting with city attorney Jim Hatter, Kautz did not recuse himself.

Along with Mayor Joe Keck and Mayor Pro Tem Fred Torres, Kautz voted against beginning negotiations with Fone.Net. Council members Jim Herrick, Cheryl Walken-horst, Karen Garner, and Bill Rutledge voted for continuing negotiations.

City Manager Hal Shepherd and Rick Smith explained that the proposal was a "sweetheart deal" for the city, and was necessary for business growth. The city will pay less for a "Cadillac," state-of-the-art network that provides advanced services than Durango paid for its limited point-to-point network, they said.

If the city chose to build and maintain its own network, it would have to hire additional employees at taxpayer expense. By allowing Fone.Net to run the network, the local company would hire additional employees, and cover the maintenance fees.

Keck wanted the council to hold off to see whether private industry would begin to bring the services needed without an investment of taxpayer dollars. He also was concerned that the deal would limit competition by allowing only Fone.Net complete access to the 12 strands.

"We haven’t looked at ways to meet the citiy’s needs without hurting the level playing field and stifling competition," argued Keck.

Van Cleve assured the council the agreement would allow for competition.

"During the negotiations we will establish a procedure by which other people who desire to use the network will be able to access that network," said Van Cleve in a Wednesday phone interview.

Alan Klein, president of Frontier Internet, another local telecommunications company, testified that Frontier would be interested in buying access to the prospective lit network rather than leasing the available dark fibers. He asked the council to keep access fees to the lit network reasonable, and to consider integrating the proposed network with Charter Communications’ cable network to Cortez homes.

However, two REANET representatives asked the board to put the project on hold until private enterprise could find a way to build the network on its own. David Sitton, a board member of Empire Electric and REANET, told the council that REANET’s next step was to begin bringing fiber-optic services to Cortez, which they plan to do with or without the proposed city loop.

"We feel like it’s a shame that the city won’t allow enough time to see whether we are able to compete from the standpoint of truly building this network out," said Sitton. "We have invested a ton of money, that ultimately is all of our money, to do this."

"The argument can be made, however, that public money is already going to squash competition," countered Herrick. "You’re here advocating that the city government not use public dollars to fund a private business, but yet you — as a quasi-governmental entity, by virtue of the way a co-op can borrow money — have been provided an unfair advantage."

After the council voted, Klein reiterated Herrick’s view that REANET has had a more-than-fair playing field to compete for Cortez business. "It is blatant and unfair competition which we strongly and vehemently object to," said Klein.

"If the deal had been the other way around, Farmers and Fone.Net would not have been at that meeting complaining to the city," commented Van Cleve.

At the end of the meeting, Garner resigned from the council, citing personal reasons.