State broadband network operator files for bankruptcy

Baker administration officials said they were exploring options

BOSTON (STATE HOUSE NEWS SERVICE) – The operator of the state’s $90 million broadband network in western and central Massachusetts filed for bankruptcy in federal court on Wednesday, and only has enough money to continue operating the telecommunications network until the beginning of summer.

According to KCST USA, it has been operating the MassBroadband 123 Network at an annual loss of more than $3 million, and the network, as constructed, is “not sustainable for KCST USA or any operator.”

In its bankruptcy filing, KCST attorneys say the 1,200-mile network was intended to bring high-speed internet access to more than 1,300 facilities in 124 communities and its anchor customers include hospitals, schools, government entities, and police and fire stations.

KCST claims that the Massachusetts Technology Collaborative did not construct and deliver the broadband network in accordance with rollout plans and only connected with fewer than 1,000 anchor institutions. They say they have enough financing to continue to operate the network for a minimum of 13 weeks.

“We intend to work closely with the Commonwealth and the Massachusetts Technology Collaborative to allow KCST USA to restructure its obligations to become economically feasible,” Steve Darr, who was named KCST’S chief restructuring officer, said in a statement. “Meanwhile, KCST will continue to operate the MassBroadband 123 Network so that customers will experience no interruption of service during the pendency of the Chapter 11 case.”

During a conference call on Thursday, Baker administration officials said they were exploring options, including working through financial negotiations with the vendor in the bankruptcy case and gauging the market to find an alternative provider, if necessary.

“We are looking at all avenues right now,” said Paul McMorrow, director of communications at the Executive Office of Housing and Economic Development.

There was no guarantee of any base customer level in the state’s agreement with its vendor, McMorrow said, and state officials have not seen anything – despite requests for information – to indicate that the network was rolled out in a fashion that caused material damage to the vendor’s finances.

According to KCST USA, it tried to address its operating loss with the state in 2013 and 2014 but “was rebuffed and met with litigation.” If KCST USA is unable to reach an agreement with the state, “it will be forced to discontinue its operation of the network,” the company said in a statement.

Massachusetts Technology Collaborative official Brian Noyes said the bankruptcy filing was “sudden news,” but added that the collaborative is pleased KCST intends to continue to operate the network while it is in bankruptcy, ensuring connections will continue to paying public and private sector customers.

“We look forward to working with Axia/KCST towards a successful resolution of its financial problems, which are solely its responsibility,” Noyes, the collaborative’s director of communications, said in a statement prior to the conference call. “Axia/KCST’s obligation to continue operation of the Network has been guaranteed by the large Canadian network operator Axia NetMedia Corporation, which continues to be responsible for ensuring continued uninterrupted service. [Massachusetts Broadband Institute] intends to continue to hold both Axia parties accountable under their contracts, and to ensure that MassBroadband123 will continue to provide quality broadband service to customers across Western and North Central Massachusetts.”

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