Kentucky Wired Fiber Optic Project Defunded

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In 2015, The Kentucky Communications Network Authority (KCNA) and its board created the KentuckyWired network, the state’s open-access broadband network project that would give the Bluegrass State high-capacity internet service connections. Historically ranking 47th in broadband speeds and capacity, U.S. Rep. Hal Rogers believed the new fiber-optic broadband infrastructure would create a, “Super I-Way” of information technology jobs, transforming Kentucky into “silicon holler,” attracting new businesses, and promoting economic development in the once-booming coal industry counties.  

The KCNA planned a public-private partnership with Macquarie Capital, an Australian-based venture capital firm, to help in building, operating, and maintaining the 3,000-mile cable infrastructure. After the project was finished, the KCNA planned to lease the high-speed services to companies that would sell broadband access to residential homes and businesses in all 120 counties in Kentucky.

The border-to-border fiber communication project was supposed to be finished by the fall of 2016, but due to a series of delays that have cost Kentucky taxpayers over $8 million dollars in unforeseen expenditures, the Kentucky Senate has voted to end the project. 

However, according to Olympian News, Gov. Matt Bevin’s administration has warned it would likely cost more to end the project than it would to finish it. Currently, the project requires spending $30 million more due to delays, and the KCNA has asked the state legislature to borrow up to $110 million more to finish the job.

However, killing the middle-mile network project means Kentucky must pay off the $286 million dollar loan they acquired, to the Australian-based venture capital firm they initially partnered with. Along with paying the bondholders, Phillip Brown, executive director of the KCNA, believes its private sector partners could sue the state of Kentucky, spending taxpayer money in lawsuit settlements. Brown believes if the state can finish the network and get it up and running that the project “will break even and can cover its costs.”

Still, some lawmakers and private service providers are hesitant in defending KentuckyWired and trusting the network’s ability to turn a profit. The Olympian reported that state Sen. Chris McDaniel, chairman of the Kentucky Senate budget committee, doesn’t support continuing the network and believes it is unlikely the state will have to pay anything if it ends the project. “The fact is, from the day the ink was dry on the first contract, this project has been nothing but a series of delays and cost overruns,” he stated. “Throwing good money after bad on this boondoggle is not something I’m going to participate in.”

AT&T is one of the largest service providers in Kentucky, with 980,000 miles of fiber in the state and zero plans to partner with KentuckyWired, according to the account. David Osborne, the acting Kentucky House Speaker, said the broadband development put the state in “a horrible position,” but would prefer for Kentucky to complete the project to reap the economic benefits.

Kentucky lawmakers must now decide how to spend more than $73 billion of state and federal tax dollars in the annual budget proposal. The broadband project requires millions more in funding and will be impossible to continue without it, but so far, legislators have denied KCNA from borrowing more.

March 28, 2018      

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