Lake County broadband effort turns into fight over government stimulus help

On the outskirts of town, Granite Gear has been designing and manufacturing canoe packs and other outdoor gear for more than two decades.

The company sends high-resolution catalogs and other large files over the Internet to 400 retailers nationwide that sell its products, sales manager Dave Johnson said. But frequently it has a big problem.

"The upload speeds that we have available to us here, are such that our art director frequently comes in at night and does that, when no one else is tying up the Internet bandwidth," Johnson said.

To help businesses like Granite Gear and solve the internet woes of northeast Minnesota residents, Lake County began stringing fiber Tuesday in Two Harbors, which is on Lake Superior's North Shore.

The attempt to bring high-speed Internet access to a vast region has sparked a debate over the proper role government should play in upgrading the information superhighway. The cable industry aims to scuttle the project.

But few would argue that faster Internet speeds aren't needed in northern Minnesota, especially at companies like Granite Gear, where about 10 employees share a single DSL connection. Johnson said he works from home two days a week to take his load off the office Internet.

That all adds up to lost productivity, said Johnson, who notes that nothing has changed in the 11 years he's lived in Lake County.

"Generally I'm in favor of a market-based solution, rather than having a government come in and provide a service," he said. "This is one of those cases where the market hasn't met the need."

That, in a nutshell, is the big philosophical argument playing out in Lake County. Should the government subsidize competition with existing communications providers?

About two years ago, the county received a $10 million stimulus grant and a $56 million loan from the U.S. Department of Agriculture's Rural Utility Service to build a 2,000-mile-long high-speed fiber network. It was the biggest of 18 broadband stimulus awards in the state.

Initially the county applied for funding to serve only about 7,500 households that didn't have access to any broadband services. When the U.S.D.A. rejected its proposal, the county rewrote its application to include the larger towns already being served by phone and cable companies. That's when the cable industry got involved.

"It's not going to work for our business if the government comes in and spends $56 million to put us out of business," said Tom Larson, vice president of legal and public affairs for Mediacom.

The cable company serves Two Harbors and Silver Bay.

Larson said the project can't succeed without taking the majority of Mediacom's customers.

"We are going to fight tooth and nail to keep ourselves in business in Lake County," he said.

Mediacom and the Minnesota Cable Communications Association have sent postcards to residents and written op-eds in local newspapers raising questions about the project's viability. They've even convinced members of the House Energy and Commerce Oversight and Investigations Subcommittee to investigate the stimulus project.

County officials estimate they need 65 percent of households to subscribe in order for them to repay their loan.

Larson, of Medicacom, doesn't believe that's realistic. He said to reach that number, the county will have to sign up a lot of new subscribers in rural areas, as well as take the majority of customers away from existing providers in larger towns like Two Harbors.

"It's going to fail," he said. "I don't know how else to say it more plainly than that to the taxpayers of Lake County. It's going to fail, and they're going to have to pay it back."

Larson said Mediacom has invested a lot of money in its network in Lake County, but didn't cite a specific figure. He also said the company is planning to launch a newer, much faster cable Internet service.

But Lake County Commissioner Paul Bergman said Mediacom has not improved or expanded its service, and could have itself applied for stimulus funds.

Bergman said the new network is critical to improve the region's public safety. Twice in the past two years, including during recent flooding, the county lost 911 emergency service. He said a network with a backup line like the one the county is building will maintain service even if a line is cut.

He said the county also needs the new network for economic development.

"One of the things that I hear at class reunions is 'I'd love to move back home if I had a job,' " Bergman said. "Well here we bring in a whole new avenue where people, their headquarters might be in Minneapolis or Hong Kong, they could still work out of their house on a shore of a lake here in Lake County."

Bergman's goal is to attract more people like Andy Fisher, who quit his job as a computer programmer in Minneapolis 10 years ago to open a bed and breakfast near the tiny town of Finland.

Fisher is thrilled about the county project. He said he's suffered through years of expensive and spotty Internet service he gets through a Verizon cell modem.

"I'm going to do a jig I think when that happens! I'm going to be very, very happy," Fisher said. "It's going to open up a lot of opportunities for me to offer things to my guests as well."

The county's goal is to begin service to the cities of Two Harbors and Silver Bay by the end of the year.

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