During a legislative hearing Thursday, lawmakers expressed anger over the delayed launch and uncertain financial outlook of KentuckyWired, a broadband internet program that is supposed to stretch fiber optic cable to every county in the state.
The initiative has been hampered by difficulties in setting up agreements with owners of telephone poles that the fiber optic wire needs to hang from.
Phillip Brown is executive director of the Kentucky Communications Network Authority, the agency that oversees the project. He said that the project’s schedule is suffering because the agency hasn’t been able to make the legal agreements.
“Either we can finalize the agreement that gives us access to the poles we need to build into a location or a city, or we’re going to have to take the unfortunate step of redesigning the network so that we don’t need those poles anymore,” Brown said. “And what that means is we wouldn’t be building into those locations.”
Brown said that the state has agreements to make attachments to 88 percent of the poles that it needs, but still lacks agreements for about 6,600 poles.
The program — which was originally supposed to cost $324 million — is a public-private partnership between the state and private investors led by Australian firm Macquarie Capital.
The General Assembly set aside $30 million for the project and the federal government awarded $23.5 million through the Appalachian Regional Commission.
The private partners sold $271 million in bonds to finance the project and the state will pay back the debt by letting the group operate and maintain the network for 30 years.
Kentucky has to pay “availability payments” that range from $22.7 million this year to $56.6 million in 2045.
Kentucky plans on using the network for internet in state government facilities and universities and originally planned on redirecting about $11 million a year in federal funds that school districts use to pay for internet through AT&T, having them pay for service through KentuckyWired instead.
But after the state rebid the school district’s internet contract in 2015, AT&T protested, saying that KentuckyWired had an unfair advantage in the bidding process.
That leaves KentuckyWired on the hook for making the availability payments to Macquarie and without $11 million the state had planned on using to help fund the project.
'Boondoggle'
Bond Buyer Magazine gave the project its “deal of the year” award in 2015, commending the arrangement for its “innovative and forward-thinking strategy.”
But Sen. Chris McDaniel, a Republican from Taylor Mill and chair of the Senate Appropriations Committee, said the whole scheme had been improperly arranged.
“The same creativity in my humble opinion could border on not just civil, but possible criminal prosecution affiliated with the sale of these bonds,” McDaniel said. “I want a shutdown plan, with financial costs to shut it down, stop work. What’s it going to cost us to get out of this?”
The KentuckyWired project was conceived during former Gov. Steve Beshear’s administration — it evolved from an initiative that would focus on bringing broadband access to Eastern Kentucky into a statewide project.
Rep. Tim Couch, a Republican from Hyden, called the project a “boondoggle” and said it should be scaled back to focus solely on Eastern Kentucky.
“If we can get back to the original intent with this concept, I think you wouldn’t have a problem with the funding stream and what’s happening,” Couch said.
The initiative is supposed to include 3,400 miles of fiber optic cable stretching to every county in the state, creating the “middle mile” of a high-speed internet network.
Cities and businesses across the state would be in charge of building out the “last mile” to connect services to customers.
Rep. Jim Wayne said that lawmakers needed to reappraise the project and suggested that State Auditor Mike Harmon look into the matter.
"I think what we’re seeing here is a very ill-conceived program that had been designed with very good intentions," Wayne said.