Advertisement

Archive for Tuesday, January 29, 2008

Revenue from nonprofit goes to for-profit company

January 29, 2008

Advertisement

Internet company seeks city backing

A non-profit Internet service provider is seeking city backing for a loan of nearly $5 million. Enlarge video

Editor's note: The Lawrence Journal-World is owned by The World Company, which also owns Sunflower Broadband. Sunflower Broadband and Lawrence Freenet are competitors in the Lawrence Internet service provider market.

A $4.9 million request by Lawrence Freenet is raising new questions about the company's not-for-profit roots.

The company has promoted itself as a not-for-profit company with a goal of providing free Internet access to everyone in Lawrence.

But company leaders recently conceded that the majority of all the revenue that the not-for-profit receives goes directly to a for-profit company that is partially owned and led by Freenet's founder, Joshua Montgomery.

As Freenet asks for public assistance in a nearly $5 million expansion, some city commissioners have questions about Freenet's relationship to the for-profit company.

"I'm a little concerned about where the nonprofit stops and where the for-profit starts," Mayor Sue Hack said. "It begins to create some cloudiness."

Freenet has been in a contractual relationship with Community Wireless Communications since January 2006. That's when Montgomery started the company with $40,000 in credit card debt and began seeking other outside investors.

Today, Community Wireless Communications owns all the technical equipment, service trucks and employs all of the people who maintain Freenet's wireless Internet network in Lawrence. Freenet's only assets essentially are the right-of-way agreements that allow the network's Internet equipment to be placed on city water towers, traffic signals and city buildings.

Montgomery, who serves as CEO of Community Wireless and as Freenet's spokesman, said that for every $19.98 per month it bills its paying customers, the for-profit Community Wireless company receives $17.

Montgomery said that's appropriate because Community Wireless has spent $2.4 million in private money to purchase the equipment that allows the wireless network to exist.

Some city commissioners said they want to learn more about the relationship between the founders of Freenet and the founders of the for-profit company. Montgomery said he owns about 10 percent of the company but declined to name any other individuals who have an ownership interest in the business.

The for-profit company did not exist when city commissioners originally expressed support for the Freenet concept. In August 2005, city commissioners directed staff to work out below-market rate deals with Freenet to allow them to place equipment on city right of way.

Freenet sent city commissioners a letter in 2006 stating that they were going to do business with the new for-profit company, but the letter did not detail that Community Wireless was owned in part by Montgomery, who was the key individual seeking city subsidies for Freenet.

"I haven't been privy to how those two sides interact," City Commissioner Rob Chestnut said. "But if we have any interest in moving forward at all, we have to get those questions answered."

Montgomery said there hasn't been any wrongdoing. He said he attempted to find a contractor that he didn't have any involvement with to provide the needed services to Freenet but couldn't. He said when he started approaching investors to form a new company, they insisted that he have a personal stake in the company.

"For me it is a completely ideological thing," Montgomery said. "It is completely about making sure that everyone in the community has access to the Internet. It is not about the money."

Comments

lccaf 6 years, 2 months ago

By the way, Freenet was free to all until last summer. Of course this was because there service was so horrible it was the only way they could keep customers.

0

lccaf 6 years, 2 months ago

Luck_guess, What other "good things" that Freenet does? They're not even meeting there 10% free service.

By the way, if they are a viable non-profit with a realistic business plan, why are they NOT pursuing money through the grant process. Then no one cosigns and there is no interest or principal to pay back. Therefore, no need for Lawrence to cosign, no need for me to pay for it when it folds up.

0

Godot 6 years, 2 months ago

"Hey, Dad, its no big deal. It's not like you're buying me the car, all you have to do is co-sign. I promise."

0

a_flock_of_jayhawks 6 years, 2 months ago

lucky_guess says, "Where's all the press on the good things that Freenet does?"

That would be called advertising and marketing. Freenet would be responsible for that.

0

a_flock_of_jayhawks 6 years, 2 months ago

RalphReed says... "In any event, we have the capability to establish the same thing in Lawrence, especially with the cutting edge technology available at KU."

If you truly think that a not-for-profit (which is quite a bit different than a non-profit) is or will be capable of investing in new technology upgrades for their infrastructure as they become available, you are nuts. Their network will become a dinosaur in short order and Lawrence taxpayers will be left holding the bag. Good luck with that.

One other important aspect of their network is that it is unlicensed spectrum = prone to interference from other legitimate users of those bands.

What happens when the "synchronization of the street lights" needs to be revisited/maintained/upgraded and FreeNet is no more? You guessed it, Lawrence taxpayers get to underwrite that.

0

lucky_guess 6 years, 2 months ago

Fishy connection? Not nearly as fishy as Sunflower's response today.

Over 2 years the Freenet project has been underway with little to no coverage by the Journal World, our fair city's, "fair" daily paper.

Tonight, Freenet goes before the commission to ask for support (not direct funds mind you, just to co-sign a loan) in making significant infrastructure improvements so that they can start becoming serious competitors in the broadband market.

Is it a coincidence that the only news coverage given to Freenet in over two years is on the DAY OF THE CITY COMMISSION MEETING, and they run 2 articles, and they are both critical and slanted?

Where's all the press on the good things that Freenet does? A month ago Sunflower announces free internet for low income families and it makes the Journal World front page.Freenet's been doing it for 2 years. Zilch.

It's no surprise to me that the Journal World is acting as the public face for Sunflower here (World Co.'s major breadwinner, supplying over $50 of profits). Unfortunately crap like this is happening all the time. What I get really peeved about is when they claim to have 'integrity' as a 'fair' newspaper that represents the interests of Lawrence residents. Baloney.

0

StephenColt 6 years, 2 months ago


"The company has promoted itself as a not-for-profit company with a goal of providing free Internet access to everyone in Lawrence."

Doesn't seem to me like they are doing very well achieving that goal.


Most companies are striving to accomplish their goals. They wouldn't be goals otherwise. The goal of Freenet is to provide free access to everyone, which as of yet hasn't happened, however, that doesn't mean they aren't striving to reach that. First they began offering free access to low income families, now they are trying to expand that to all kids 18 and under. I imagine they will continue to work toward the goal of everyone in due time. I imaging that is what Sunflower is worried about.

0

Marion Lynn 6 years, 2 months ago

cont'd:

Is the 10% "investment" in the for-profit maybe a bit on the "unethical" side?

Maybe a bit but without that investment and the financial obligations which go along with it, the non-profit would be unable to function.

Example: Do you really think that the networks "donate" all that air time to those "non-profits" which plea endlessly on your screens for money for this "good purpose" ot that?

Do you think that the production of those commercials is free?

None of those things are completely free and people have to get paid.

Occasionally non-profts have to serve up to Mammon.

Further, it is perfectly legal and ethical for a non-profit to limit those to whom "free" services are provided, just as even the Salvation Army, the American Red Cross, the United Way and all other non-profits!

Until very clearly shown otherwise, I'm going to stand behind Lawrence Freenet.

Lastly, I beleive this action on the part of Sunflower to be merely another shot fired in the battle to promote the "Two-Tiered Internet"; an interent based on which companies and individuals can pay the most to get their websites to be marketed, found in search results and have faster loading speeds than those which are not.

If you want to keep the interent open and free, you must support operations like Freenet or you will see a "Ma Bell" of the internet which will make the old telephone company look like a piker!

0

Marion Lynn 6 years, 2 months ago

OK, I'm going to weigh in on this as I have more than a bit of experience with working with non-profits and if the LJW blows a gasket, so be it.

First, this is not about a non-profit "scamming"; this is about control of the internet and internet services by an already large ISP; Sunflower, et, al.

Free internet service operations have been halted nation-wide by already existing for-profit ISPs; just Google it a look around(I can't do all your homework!) but here is one link to a good article on the subject:

http://www.usatoday.com/tech/wireless/2007-09-19-wifi_N.htm

Second, most folks do not understand how non-profits really work in terms of fund raising, donations, what they can and cannot do for themselves; more as matters of practicality and cost than anything else.

No one "invests" in non-profits because such entities are just that; non-profit. Going to be tough to get investors to put money into a zero-return operation, so most non-profits contract with for-profit corps to provide the non-profits with services which would otherwise be unobtainable.

Investors will invest in a company which is contracted to a non-profit to perform various services for that no n-profit on a paid basis and there is nothing "scamming", unethical or illegal about it.

The investors simply required Josh to have some personal repsosibility; i.e.; personal committment to the company so constructed to perform those services for the non-profit.

I'd bet that his personal financial obligations to both corporations are a lot more than most of you would be willing to believe!

Josh has been very straightforward and open in discussing his financial relationships with both corps.

cont'd:

0

ohjayhawk 6 years, 2 months ago

I haven't lived in Lawrence for almost 13 years, so I don't know anything first-hand about Freenet. But, it's interesting reading in comments above that a $20/month fee is charged and that some people are being denied access when the (supposed) goal of Freenet is stated in the second paragraph of the article as the following:

"The company has promoted itself as a not-for-profit company with a goal of providing free Internet access to EVERYONE in Lawrence."

Doesn't seem to me like they are doing very well achieving that goal.

0

was_freashpowder 6 years, 2 months ago

Sue Hack Calling Shenanigans on a scheme to get money from the city for ones own self......naw couldent be ..... he must not have included her on the profit sharing ........... freenet if you offer public shares I have a feeling it will go through

0

75x55 6 years, 2 months ago

"their internet is much cheaper and no bandwidth limits!"

Do switch - the more the merrier.

And when their system is swamped and they start making 'business decisions' that eliminate all these 'unlimited' bennies, oh how they will howl in the wind.

Nothing is free, and nothing is 'unlimited'.

0

newsreader 6 years, 2 months ago

This article is the best advertising for LFN. I never woudl have considered switching until now, their internet is much cheaper and no bandwidth limits!

0

lccaf 6 years, 2 months ago

Since all the revenue goes to CWC how does LFN pay their expenses? Do they have expenses or are they just a shell for the for profit? 1100 users? After being in business for almost 3 years? Hmmm.

0

jrlii 6 years, 2 months ago

The structure of Lawrence Freenet has seemed kind of fishy to me from the get-go.

First, the very idea of calling itself "Freenet" and charging users $20/mo. seemed suspect. With a name like "Freenet" I was expecting it to be something volunteer-based like Seattle Wireless, not a non-profit supporting a few free users, while sending the bulk of their revenue to a for-profit supplier.

A disabled friend, wholly dependent on SSI & Medicade, Which makes him about as poor as you can get in this country, was recently rejected by Lawrence Freenet as not being eligible when he asked for a free wireless account. Kids only.

0

its_getting_warmer 6 years, 2 months ago

Let's review my gage of City Commission sentiments:

  • Provinding fourth level loan guarantee at probably no cost for this internet company, private or not. verdict: BAD

  • Writing a $ 6 million check to Fritzel family wealth by TIF financing of the Oread hotel garage in which citizens won't even be able to drive: verdict: GOOD

0

StephenColt 6 years, 2 months ago


Editor's note: The Lawrence Journal-World is owned by The World Company, which also owns Sunflower Broadband. Sunflower Broadband and Lawrence Freenet are competitors in the Lawrence Internet service provider market.


Does anybody know the website address for the world company so that I can analyze the relationship between all of their entities?

0

consumer1 6 years, 2 months ago

Two things, Does amyor hack have any money invested in the LJW????? Is she good friends with the SIMONS? I know she is.

0

jayhawklawrence 6 years, 2 months ago

Freenet or Scam-net?

This idea has similarities to Eagle Bend. Remember that one? We start a golf course that competes with another tax paying golf course and run it out of business. Free market capitalism, if allowed to work correctly, is the best way to allocate resources. When we meddle with it, we usually end up with less efficient distribution of resources and higher individual costs. Less services. Remember Econ 101?

We are still paying for Eagle Bend.

If you cannot afford Broadband access from several of the existing companies, you probably cannot afford to live in Lawrence. I sympathize a little bit, but this is a weak argument to justify the larger expense. I cannot believe the City commission is fooling around with this.

0

Ralph Reed 6 years, 2 months ago

Solomon (Anonymous) writes: "Ralph, if you can't see something wrong with a guy washing taxpayer money through a non-profit corp. to a for-profit company in which he has an ownership interest, then there's nothing anyone can say to make you see any differently. If the city wants to get into this business, let them run free internet as a public utility. Let the taxpayer fund it directly and let the city own it."


Solomon, read both articles again. All that's being asked for is for the city to be one of a number of co-signers to a loan. The purpose is so Freenet can save $57K in interest over time. The city is not 'getting into this business' as you say. I do agree with your proposal that internet access be created as a public untilty and funded the same way. But, there's way more involved with that than saying, "Make it so."


As for Freenet taking business away from Sunflower Broadband, Sunflower also has competition from the various DSL companies around here and from the access KU students have in the dorms. So, yes, I can see them starting a turf war. As a side note, I think the only reason The World Company doesn't own KLWN is that there's some federal law against a single entity owning all the media outlets in a single market. I'm not sure though and would appreciate some help confirming or denying my understanding about the law.


I'm me. Who are you behind your hood of anonymity?

0

Raider 6 years, 2 months ago

Stain (Anonymous) says:

Is Freenet taking business away from The World Company?

Ding ding ding!!!! We have a winner!

I'd be willing to be $100 that they are somehow behind this. They want to keep their little "monopoly" that has been created.

0

Eybea Opiner 6 years, 2 months ago

Ralph, if you can't see something wrong with a guy washing taxpayer money through a non-profit corp. to a for-profit company in which he has an ownership interest, then there's nothing anyone can say to make you see any differently.

If the city wants to get into this business, let them run free internet as a public utility. Let the taxpayer fund it directly and let the city own it.

0

newsreader 6 years, 2 months ago

I've always wanted to buy a business... Maybe the City should co-sign my loan for that too... I'll call it... "FREEGas" and it will be a gas station, but it of course will not be free.

0

75x55 6 years, 2 months ago

Stop calling it a non-profit, if it's not truly a non-profit.

If there is a question as to the company's standing - call in the IRS. That'll settle the issue in three to ten years.

0

macon47 6 years, 2 months ago

Joshua learned pretty well from usd-494 "its for the kids" He is just holding the children hostage Like usd 497 is. I can admire his "efforts" of helping The needy, but how much help Can we give people with out asking For something back I respect people that haul their selves out Of bed every day to go to a job, pay taxes, and support the community. I really get tired of everyone worrying so much about the degenerates that want to lay about all day playing on a free computer. What if some Joshua come lately appeared on The horizon offer a free service that you had dedicated your life's work to?

Ok, you mow yards for a living Joshua pops up on the scene, Calling on your customers, telling Them he will mow their yard for free If you convince the two next door Neighbors to pay Joshua to mow thiers?

Rob from the rich give to the poor How noble

0

Stain 6 years, 2 months ago

Is Freenet taking business away from The World Company?

Who is behind this little crackdown? We know it isn't because our mayor cares about ethics. Or maybe she cares about ethics when she personally isn't making money off a situation.

0

Ralph Reed 6 years, 2 months ago

hmmmmm, let's see. Co-signing a loan which will save a company some money compared with giving a multi-million dollar grant (tax abatement) to a company so it can set up business. I would vote for co-signing the loan.


Solomon (Anonymous) writes: "I checked out "Free"net. What I found is that it costs $20 per month to get their "free" service. The $20 that's paid to a non-profit corporation is (mostly) passed through to a for-profit company that is partially owned by the guy who is in charge of the non-profit. Very fishy."


My understanding is that the $20 cost is if you either; don't qualify for the free, family-friendly, filtered connection; or want access beyond the filtered connection. That's still a small cost for the service. I'm not sure, but I think the least expensive service from cable or DSL services is more than $20. In essence, Freenet provides affordable internet access to people who could not otherwise afford the access. What is wrong with that?


A little competition is good for the marketplace, so why shouldn't the World Co welcome the competition. In case you can't get to the Freenet response to the article, here's a comparison of the low-income services offered by both entities: Freenet Computer Free Monthy Service Free Connection Fee Free Modem Free Total (1Gb/Mo) Free Total (10Gb/Mo) Free

Sunflower
Computer Provide your own Monthy Service First 1Gb Free, $2/Gb over 1Gb Connection Fee $10/Mo Modem $5/Mo Total (1Gb/Mo) $15/Mo Total (10Gb/Mo) $33/Mo

Further, it strikes me that questioning this co-signing is an attempt to keep a section of our population from easily accessing the internet rather supporting that access.

I travel some in my job and I been to cities on both coasts that have "free" wireless access in a large part of the city. I'm sure it's paid for by taxes though. In any event, we have the capability to establish the same thing in Lawrence, especially with the cutting edge technology available at KU. I find it somewhat absurd that Lawrence cannot have city-wide wireless access - another indicator we're falling behind.


I agree with Kathy. There ain't no such thing as a free lunch. Somewhere, somehow, sombody has got to pay for it.


I'm me. Who are you behind your hood of anonymity?

0

Keith 6 years, 2 months ago

Good to see Sue Hack, our most ethical mayor ever, leading the charge.

0

beobachter 6 years, 2 months ago

If the hack has reservations, we know it's really bad. Sounds worse than Deciphera. And further why should City co-sign a loan for any for profit business and that is what freenet is.

0

Stain 6 years, 2 months ago

"It creates some cloudiness" - out of the mouth of Sue Hack?

LMAO!!!

She would know!

0

Kathy Gragg 6 years, 2 months ago

There is nothing truely "Free"

0

macon47 6 years, 2 months ago

lawrence has pretty much been a "rob from the rich give to the poor community". AND "lets slam the man" is a game the degenerates play every day here

0

Eybea Opiner 6 years, 2 months ago

I checked out "Free"net. What I found is that it costs $20 per month to get their "free" service. The $20 that's paid to a non-profit corporation is (mostly) passed through to a for-profit company that is partially owned by the guy who is in charge of the non-profit. Very fishy.

0

Joshua Montgomery 6 years, 2 months ago

Please See the Lawrence Freenet Project's Official Response

http://tinyurl.com/29v2qd

0

Commenting has been disabled for this item.