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August 31, 2006

Minneapolis May Gain $1m in Deal

More wrangling over Minneapolis-Fi: The city's CFO noted that the $2.2m that would be advanced against services to US Internet would otherwise be gaining interest for the city. As a result, the firm suggests providing $1m in additional network services at no cost to the city. The city council will now vote (or perhaps has already voted--the tense is unclear) on signing a contract. Though, as these things go, that's almost certainly "voting to approve the executive branch being allowed to sign a contract."

Update: The city council approved going forward on Friday. Accounts from the Minneapolis Star Tribune and the St. Paul Pioneer Press. A short haiku on why the approval had to happen so fast and why one councilor voted against the quick approval.

As leaves fall from trees
obstructions leave our view.
planning becomes harder


Naked trees emerge
autumn challenges Wi-Fi
interference wanes


The council will vote Friday morning. There are essentially three parts: approve the selection of US Internet. approve the terms sheet and authorize the executive branch to complete negotiations and finalize the contract, and appropriate the $2.2 million.

Couple of comments on the Strib story:

"Council Member Cam Gordon asked what might happen if the wireless network were sold to another company, and whether the city could insist on having to approve such a sale because of its likely dependence on the Wi-Fi network."

"Karl Kaiser, the city's chief information officer, said Minneapolis can't prevent US Internet from being sold because the city's arrangement with the company is a public-private partnership, a business model the city sought because it lacked the money and technical expertise to build the network itself."

"'We have no ownership or management control over US Internet,'" Kaiser said. 'That is the beauty of our arrangement.'"

Leaving aside Kaiser thinking it's a beautiful thing to give up all control over this network, there is in fact a right of first refusal in the terms sheet. If US Internet wants to sell the network to anyone other than a holding company they set up, the City gets the option to buy the network at market value.

Why the City would want the right to buy the network at market value when it wasn't willing to pay for it up front is unclear.

Councilor Gordon's question was about what happens if US Internet is acquired. It's a small, privately held company that could easily be purchased by the likes of Comcast (now the city's cable franchisee after the territory swap with Time Warner) or AT&T.

This should be a concern for any city that chooses to enable a new, privately owned network. Anti-trust on this? Maybe, maybe not. But the fact that AT&T is getting into the business in Springfield doesn't bode well.

I don't know if this is the case in other cities, but in Minneapolis the council vote on an issue is just for show - the local equivalent of entering your comments into the Congressional Record.

So left before the vote, but my best guess is that the authorization to sign a contract with US Wireless passed on a 12 to 1 vote.

Two motions that would have given the council the opportunity to review the contract before it is finalized could not get a second. The reason? Leaves.

Staff told coucil that even if the council approved the selection of US Internet, appropriated the $2.2 million upfront payment, and approved the terms sheet, US Internet cannot not proceed with "some engineering work that needs to be done" until the contract is signed. It is apparently vital that this engineering work be done while there are still leaves on the treees. According to the deputy CIO, "We do have a higher risk of marginal performance when the leaves are on the trees [in the spring] if we delay this."

Mind you, they've been testing a one square mile pilot network since July.

So the contract will be final whenver staff chooses to sign it. The council will receive and file of some portions of the contract on the 18th of this month. Bizarre.

As the councilor who made the motions put it, "You can bet that the owners of US Internet aren't going to authorize someone else to go ahead and sign the contract before they have a chance to review it."

I don't mean to seem to negative about US Internet. or for that matter BelAir, whose hardware apparently made a crucial difference in the selection of US Internet over Earthlink (using Tropos hardware). I'm quite enthusiastic about the fact that a small local company was chosen. (I just hope they stay that way.)

An update. On September 1, the city council passed the following motion:

"Schiff moved a substitute motion that staff be directed to report back to the Ways & Means/Budget Committee meeting of September 18, 2006 regarding the contract clauses pertaining to: 1) The required City owned Fiber; 2) Wholesale access; 3) Rates for access to City assets; 4) Negotiated rates for network services; and 5) Penalties for non-performance. Seconded.
Adopted upon a voice vote."

On Friday, the item wasn't on the published agenda for today's meeting. At 11 am today, the item wasn't on the published agenda for today's meeting. At 1:45, staff reported to the committee that despite imminent leaf fall (real pretty in these parts of the country) they had not in fact completed negotiations on the contract they needed so desperately to sign before the council met again.

They did, however, commend themselves for negotiating the $2.2 million upfront payment down to $2 million, which I'm sure will calm Qwest down.

October 2 update - Now a month after staff said they couldn't possibly delay the contract by allowing council to see it before it was finalized, contract negotiations have not been completed. New target date is late next week, so that intersted council members can be briefed before the committee meeting on October 16.