Archive for Wednesday, May 21, 2014

City advisory board recommends $1 million loan guarantee for high-speed broadband project

May 21, 2014


Downtown Lawrence and parts of East Lawrence are one step closer to getting the same type of super-fast Internet service being offered by Google Fiber in Kansas City.

A city advisory board on Tuesday recommended that the city provide a $1 million loan guarantee for Lawrence-based Wicked Broadband to launch a pilot project in the city.

"The clock is ticking here," said Douglas County Commissioner Mike Gaughan, a member of the city's Public Incentives Review Committee. "We don't need to be falling further behind in getting high-speed Internet into the community."

The incentives review board, however, was split on the issue. It voted 3-2 to recommend approval of the loan guarantee and some other incentives — including use of some city-owned fiber optic cable — for the project. Now the question will go to the Lawrence City Commission, likely in mid-July.

Wicked Broadband, which previously has operated under the brandname Lawrence Freenet, is owned by Lawrence school board member Kris Adair and her husband, Josh Montgomery. Montgomery said he's encouraged by the recommendation from the incentives review committee.

"This project will make Lawrence much more attractive to bringing new businesses to town," he said.

Montgomery said the loan guarantee from the city is critical because it shows other private investors that local officials have confidence in the project. Montgomery said he believes demand will be strong in downtown and the East Lawrence area. If the pilot project is successful, he said he is optimistic there will be enough private financing available to extend the super-fast internet service to all of Lawrence. Montgomery is estimating a citywide expansion will cost $30 million.

The project would bring 1 gigabit service to both homes and businesses in the city. That's the same speed that is available through the much publicized Google Fiber project in Kansas City.

Initially, though, the project would only be available to the downtown area, parts of east Lawrence and a small area of west Lawrence near where Montgomery and Adair live.

Montgomery said, if approved, the company plans to offer 1 gigabit residential service for $99 per month, and a slightly slower service for $49 per month. Residents would have to pay a $300 installation fee. Montgomery said Wicked still plans to offer video television service to subscribers as well, likely with rates ranging from about $20 to $50 a month.

The project, however, must still win a key vote from city commissioners. The public incentives committee has two city commissioner on it, and they were split on the issue. Mayor Mike Amyx voted against the plan because he said he wasn't certain the city could afford to make a $1 million loan guarantee.

City Commissioner Jeremy Farmer voted for the plan, saying that high-speed broadband Internet service was going to be a major factor in determining the future success of communities.

"It is an unprecedented investment, but it could bring unprecedented growth and development to the community," Farmer said.


Lawrence Morgan 3 years, 9 months ago

Congratulations, it's about time. Lawrence can not be left behind in this effort. The main thing is to bring all of the city, including Baldwin City, into this undertaking.

Amy Varoli Elliott 3 years, 9 months ago

Stop wasting my tax money on fly by night companies that already owe the city thousands of dollars

Mike George 3 years, 9 months ago

I wish I could "like" Ms. Elliott's post times 1000. This is shortsighted inbreeding at it's worst. Thanks to Mike Amyx for at least saying no once.

3 years, 9 months ago

Amyx is the man...I hope he understands that he has a lot of people's respect...probably doesn't hear near enough gratitude from us...

Matthew Herbert 3 years, 9 months ago

if you put your ear to the ground, you can ALMOST hear circus music playing somewhere off in the distance.

Mike Silverman 3 years, 9 months ago

This is an excellent decision by the review board and one of the best uses of our tax dollars I can remember in quite a while. Fiber broadband is the future and will have big positive impact on the future of our town. There's pretty much no negative outcomes - best case scenario, Wicked uses this as a springboard and in a few years, our city is wired for fiber. Even the less positive potential outcomes move things forward - this incentive could spur other companies to come compete (such as AT&T did in Austin when Google said they were coming to town), and in a worst-case scenario, there will still be physical fiber built that another company or the city could take over if Wicked can't do the job - this money is going to build something real.

I would use an analogy, if it were the 1870s and the railroad wanted an incentive to locate a stop in your town (vs passing it by entirely) I'd say yeah, you incentivize that railroad, even if it was a small one, regardless of your personal feelings about trains, because it is the difference between the town being left to dry or being a participant in the new economy.

Thomas Shorock 3 years, 9 months ago

"There's pretty much no negative outcomes - in a worst-case scenario, there will still be physical fiber built that another company or the city could take over if Wicked can't do the job - this money is going to build something real."

If that's your worst-case scenario, you have no imagination at all. Not specifically maligning Wicked (I sent 'em my $10), but closer to worst-case is we get about 2 blocks lit up in East Lawrence, get told, "Gee, that was really really expensive what with trenching and startup costs and all, oops, unforseen issues, and sorry about the reliability but we'll work on it", and then get asked to be on the hook for another million in backing because "you don't want to lose that first investment, do you?" Rinse and repeat.

Matthew Herbert 3 years, 9 months ago

worst case scenario? He takes the money, never develops the technology and never pays back the city..which based upon the fact that he currently owes the city money and his "freenet" idea never amounted to its promises.. isn't that unbelievable

3 years, 9 months ago


Dave Greenbaum 3 years, 9 months ago

Can you be specific about the track record? What about the operations are shady? You may be confused with Sunflower --->Knology--->WOW.

Dave Greenbaum 3 years, 9 months ago

I can tell you from personal experience that when Headquarters counseling center tried to get reduced price Internet for their life-saving mission of a suicide prevention hotline, Sunflower/Knology/Wow only gave them a token discount, AT&T gave them nothing and Wicked gave them free Internet as well as equipment and support. Having a non-profit division/for profit splits isn't unusual at all. I still don't understand which portions of KU are for-profit, non-profit etc. I do know that tuition and expenses keep going up.

Dave Greenbaum 3 years, 9 months ago

I assume you say the intro that indicated they were biased in the reporting "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" This disqualifies anything afterwards.

Bob DuPlenty 3 years, 9 months ago

Actually, you've got that exactly backward: by being open and transparent about it, it adds credibility to the reporting.

Mike Silverman 3 years, 9 months ago

I don't understand why some people have such a problem with Wicked, acting like they are some kind of fly-by-night service? They are a real, local company employing actual Lawrence citizens, providing pretty high quality (at least compared to some of the others) internet service to individuals and businesses in town and have been going for the better part of a decade at least. In other words, they have a real track record of building infrastructure and providing a service.

Dave Greenbaum 3 years, 9 months ago

I hear the same arguments about the Simon's family and the promises made to Sunflower employees, Sunflower customers, and the community. Ask any former World Co or Worldwest employee and they'd have a similar viewpoint on promises made to the community. Of course, Joshua doesn't by ink by the barrel so he can't exactly spin things in his direction.

Alexander Turing 3 years, 9 months ago

"For several years we have been served by Josh Montgomery and his other employees in a personal and friendly manner. They offer great servcie at the most reasonable cost....The students at Triangle [Fraternity] are consistently able to rely on quality uninterrupted servcie without limits on bandwidt or number of devices. The old contract prices we had with other companies offered little to no support, and terrible speed at double the cost. Josh has consistently tried to push Lawrence into new and beneficial infrastructure and innovation."

Eric. B - Triangle Fraternity - To see this letter in its entirety please visit the link below:

John Graham 3 years, 9 months ago

A solid business with a ten year track record of building infrastructure and providing service. Why then do they need the city to provide a $1M loan guarantee? $1M is not a large sum of money for a well managed business with a decade long track record of success. If they are such a sound business with a decade long track record and a "can't miss project" then they should be able to finance the pilot project themselves or obtain financing from a bank. They shouldn't need the city to guarantee the loan. The fact that they need a city backed loan guarantee suggests that financial backers don't believe in the company's ability to repay the loan and/or they don't believe the pilot program is a "can't miss".

Bob DuPlenty 3 years, 9 months ago

I would like to know what efforts the city made to connect with Google Fiber. There was a very simple process in which (if I'm not mistaken), all Google required to start the conversation was for either the Mayor or City Manager to formally request that a city be considered (I am not implying that this would result in Lawrence being chosen to participate).

Did that happen?

It seems exceedingly dubious that Wicked Broadband will compete against Google in the long run, and Lawrence FreeNet wasn't...great.

Alexander Turing 3 years, 9 months ago

The City has contacted Google a number of times:

"As I mentioned, Google Fiber did not submit a proposal to the city. City officials have told me they made sure Google Fiber was aware that the city was seeking information from technology companies. There was one other notable company that didn't submit a proposal: WOW, which is currently the largest cable and Internet provider in the city."

Bob DuPlenty 3 years, 9 months ago

That isn't what I asked, nor is it what Google requested cities to do. That sounds like the city issued an RFP. Google merely asked either the mayor or the city manager to ask to be involved. Mike Dever was mayor at the time.

Did Mike Dever or David Corliss pursue this with Google?

Bob DuPlenty 3 years, 9 months ago

The question actually is: do you want to provide $1M of loan guarantee to a hyper-local business that will eventually be bought-out/forced-out by the actual players in the fiber optic internet delivery game, or do you want to lay the ground work for the real deal?

Julius Nolan 3 years, 9 months ago

Actually would like to know how much of the "loan" winds up in Joshua's personal bank account?

Kevin Elliott 3 years, 9 months ago

I agree the owner is a jackwad for making outlandish statements to the public. And now you are guilty of that also. I have seen evidence to suggest he is terrible at pr but i find it immature and unprofessional to insinuate he is stealing money. I would also not say it because i would not be wishing to be sued for slander or libel, but that is just because i was raised to not toss out unsubstantiated claims aimed to alarm without having any proof. That is why i do not work for for fox news and also why i do not support al sharpton.

Dave Greenbaum 3 years, 9 months ago

I'd agree that Joshua is focused more on running an ISP rather than public relations. Too bad we don't focus on competence rather than spin.

Dave Greenbaum 3 years, 9 months ago

He's been running a successful ISP for quite a long time keeping it local. I'd call that competent. Sunflower sold out, Knology sold out. I wouldn't call them competent.

Alexander Turing 3 years, 9 months ago

"The internet feed is consistent, and the service is excellent. I am not a technophile: Josh and his staff are quick to respond to my questions, and take care of whatever is going on. Recently our UPS battery back-up aged out; they helped me identify what to order as a replacement, and were prepared to install it the day it arrived. They also tweak issues that they spot before I discover them (like a "hot spot" that was left unplugged in a study room over Thanksgiving). Typically I see them only when something external has happened to the system, like the squirrel that took out Phase1 of our electrical service this fall. They are responsive and have become an integral part of the team that keeps this building running smoothly"

Judy C. - Delta Upsilon Fraternity - To see this letter in its entirety please visit the link below:

Matthew Herbert 3 years, 9 months ago

from the article:

"the project would only be available to the downtown area, parts of east Lawrence and a small area of west Lawrence near where Montgomery and Adair live."

I'm just glad to hear that the city's loan will be going to enhance Montgomery and Adair's personal neighborhood. Not shady at all.

John Graham 3 years, 9 months ago

Montgomery, due to the leverage of the city backed loan, will be able to get his foot in the ultra fast internet business that he otherwise is not financially able to do. He will sell out his little business to a major player like Google or AT&T when the big boys decide to expand to Lawrence. His company that has no significant value now will be bought at a substantial premium due to the ultra fast internet business in Lawrence that he never would have had unless the city backed his over reaching plan (over reaching based on the size of business he currently has and lack of financial ability to fund his plan unless the city helps him out). This is the same story of years ago with the small local telephone companies scattered around KS that were bought out by Sprint at a large premium when Sprint wanted to expand. It is much quicker for a major company to overpay a small company for their product than for the large company to build from the ground up. In short Montgomery will become quite wealthy by selling the ultra fast internet service in Lawrence that he would never have been able to build without the city backed loan. Lawrence may need ultra fast internet but this is nothing more than a small business using city provided leverage to build a business that they can't afford on their own then selling out and taking the money and running. It may be the American way, I just hope Montgomery thanks the city of Lawrence when he sells his company for millions of dollars that would not have been possible without the city backed loan to get it all started.

I don't think the city should back the loan, just like I don't think the city should be giving tax breaks to every company that comes knocking on the door. If a business plan is a great idea, let the business fund it themselves. Since these businesses are not going to share any profit with the city then why should the city worry about helping fund these "can't miss business plans". I am not against ultra fast internet, but if it is such a can't miss then let the business do the financing or get the money from a bank.

John Graham 3 years, 9 months ago

Montgomery wants the city to back the loan either because the bank will not loan him the money without it or the bank will give him better terms with the city guarantee. He could go to a private investment banker, but that likely would mean he would have to give up some of the potential millions of dollars of profit he stands to make. So the best of both worlds is have the city be at risk for the loan if he fails, yet the city doesn't get any of the profits if he succeeds. Portions of the city may wind up with ultra fast internet but they will pay a good price for it. It's a great deal for Montgomery if it goes through, he has limited risk (the city takes the risk) and Montgomery gets all the profits. What a deal.

Alexander Turing 3 years, 9 months ago

Wicked Broadband is obligated to pay 5% of its gross Internet revenue to the City. This requirement would remain in place for any company that acquired the infrastructure.

No other telecommunications company pays this fee on Internet revenue.

The City gets paid for its participation in the form of:

1 A guarantee to operate the infrastructure as a common carrier. 2. 5% of gross receipts. 3. Economic growth in the form of gigabit services to both established businesses and startups.

John Graham 3 years, 9 months ago

Then the 5% of the gross the city gets is nothing more than a 5% tax by the city. Instead of $95 per month, charge $99. The city gets $4 and the company gets the same profit. The customer gets stung again. If a company is well run, has a good history, and a "can't miss business plan" banks should have no problem loaning measly $1M. So if the company is as great as you say why does it need a city guarantee to get a measly $1M? If the company is so great and the plan is such a "can't miss" why (as the article states) are private investors waiting to see what happens before they get interested? Regarding the infrastructure the article states Wicked wants to use city owned fiber optic cable. So it sounds like the city will be providing some of the infrastructure. It could reasonably charge the 5% as a fee for that use.

John Graham 3 years, 9 months ago

Also since KC has an area already with gigabit service, how about providing some facts about the economic growth directly attributable to gigabit service in the form of new businesses as well as to existing businesses. Since this is being sold as an economic driver for new and existing businesses there should be plenty of data from KC to see how they have already benefitted from the early stages of service.

Alexander Turing 3 years, 9 months ago

According to CTC Consulting Pg 41 (the City's own consultant)

"The 2011 study predicts that GDP increases by 0.3 percent when broadband speed doubles; and the effect is repeatable. The report states: “The study also shows that additional doublings of speed can yield growth in excess of 0.3 percent (e.g. quadrupling of speed equals 0.6 percent GDP growth stimulus).”

According to the KU Small Business Development Center report (Pg 25), there is $619M in economic activity in the pilot neighborhood alone. That means an increase of 0.9% in GDP would bring another $5.6M of economic activity to downtown Lawrence EACH YEAR.

CTC Consulting Report:

KU SBDC Report:

John Graham 3 years, 9 months ago

Provide real actual numbers directly related to the gigabit service in KC. Provide real businesses that are new to KC solely because they had gigabit service. Provide real existing businesses that have demonstrated real verifiable growth solely due to gigabit service. I hear of projections but I have not heard of actual real existing businesses that have been a demonstrated success solely due to the gigabit service. Not some estimate by a consulting firm hired to tell you how great it will be. Consultants are notorious for telling the client what they want to hear. I don't need gigabit service but I am not against it for those that need it I am just curious to see what can actually be shown to be directly related to the gigabit service KC has. Projections often have a way of never actually being met, so I would like to see real numbers.

Rob Chestnut 3 years, 9 months ago

If the City and County are interested in this concept, why would they not seek other proposals for the service? Typically, financial commitments require a bid process.

I would also be concerned about Mr. Montgomery's comments about he project:

"Montgomery said the loan guarantee from the city is critical because it shows other private investors that local officials have confidence in the project."

Private investors develop confidence in a project based on their perceptions of the market and the return possibilities. The fact that local government is willing to back some of the financing is a small consideration for a $25 million plus build out.

"Montgomery said he believes demand will be strong in downtown and the East Lawrence area. If the pilot project is successful, he said he is optimistic there will be enough private financing available to extend the super-fast internet service to all of Lawrence."

What if demand falls well below expectations? This loan guarantee will be part of a small pilot project for a few neighborhoods, and I doubt that this is a sustainable model. So, ultimately it will likely default or be sold to another entity that can further leverage the investment.

"Montgomery is estimating a citywide expansion will cost $30 million."

How good are the cost estimates? What is a realistic number of customers at a price point that is higher than other vendors? Can the revenue really sustain an investment of $30 million?

It is incumbent upon the elected officials to study the ultimate plan and determine if it is reasonable. What is the point of helping the pilot project if the larger plans do not make sense?

Clearly, high speed internet has an economic development impact. They need to be quantified and compared to the risk that is being taken. Is the community willing to take over the network if the project ultimately fails as a private investment?

Alexander Turing 3 years, 9 months ago

The City did, indeed, issue a competative request.

It got four reponses. Of the four, only one company - Wicked Broadband - was willing to commit to a city wide build out, gigabit service, specific prices and operating the network as a common carrier.

The RFI was reviewed by a committee of 9 members, of which 7 indicated that Wicked's proposal was the way to go.

John Graham 3 years, 9 months ago

Wicked can't commit to a city wide build out because they don't have the financial backing to live up to that commitment. Wicked apparently doesn't have the financial backing on their own to do the pilot program. They are in need of a $1M city loan guarantee before they can consider the pilot program. So don't talk about Wicked committing to a city wide build out that is estimated at $30M plus. One can commit to anything but unless they have the financial backing in place the commitment means nothing.

John Graham 3 years, 9 months ago

Alexander, Nice unrelated to topic personal attack. Whether Rob got re-elected or not has nothing to do with the concerns he posted. How about actually addressing his comments in an intelligent manner instead of trying to publicly embarrass him. He is not the one asking the city taxpayers to financially help his business.

Greg DiVilbiss 3 years, 9 months ago

My cable bill has dropped significantly since Knology/WoW took over, so if debt causes me to get lower bills then add on the debt.

Mike Silverman 3 years, 9 months ago

So after coming back here a day later to review the comments, it seems like there are no real arguments against the grant other then "ad hom" personal attacks on the owner of Wicked, which leads me to suspect that if this grant recommendation was for "Friendly's Local Broadband" rather then "Wicked Broadband owned by Josh Montgomery" then no one would really have any problem.

As citizens of Lawrence, we should focus on the actual issue which is whether it is proper for the city to support a legitimate and proven private business in providing a public good which almost all people agree is something that would greatly enhance the city's economic fortunes.

I would argue yes - for the same reason that the city pays for building and maintaining roads within its city limits (which, incidentally, are actually built by private businesses). It's essential infrastructure that is not being provided by private companies (can you imagine if we handled streets the way we currently handled broadband - hoping that some company would come and build a road to our house or business, and in the mean time just dealing with a dirt lane?)

John Graham 3 years, 9 months ago

Nothing against gigabit service. Would like to see real numbers from communities that have it compared to estimates from consultants. The bigger concern is working with a company that can actually do the job as promised. The city wide build out is estimated at $30M plus. The city is talking about working with a company that needs a city loan guarantee of $1M to be able to just start the pilot program. Wicked doesn't appear to have any other firm financial backing, rather they are hoping for private investors to join in once the ball is rolling well down the track. It comes across that Wicked is over reaching their business development capabilities. In short if you can't come up with the financing on your own (without city involvement) for the $1M start up costs, what makes anyone comfortable that they will be able to come up with the $30M plus for the city wide build out. Some of the people pushing for gigabit service seem to want it so badly that they don't seem to care if company offering it can financially live up to their promises.

Greg DiVilbiss 3 years, 9 months ago

I am really looking forward to Gigabit service in the area.

Whether or not Wicked Broadband gets the loan guarantee or not, I appreciate Joshua Montgomery vision and gumption to try and make it happen, sooner then later. I think his personality traits are a non-issue.

If profit is his motivation, so what! Why else would you start a company?

Now whether or not this is a matter for the city to get involved with, that is the question not whether or not Joshua has a pleasing personality.

Julius Nolan 3 years, 9 months ago

Maybe you think his personality traits are a non-issue, but how about his dis-honest business tactics and total lack of ethics?

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