Count the 3,200 residents of Annandale, Minn., as particularly interested in the upcoming special legislative session. That’s because one of the bills Gov. Dayton vetoed last week included $10 million for rural broadband.
That isn’t much, as high-speed Internet projects go, half the amount that got spread around the state in 2014. But 20 percent of it was earmarked for Annandale. So the city’s plan to build a fiber-optic network that would serve all residents and 170 businesses didn’t get the funding that seemed likely.
Dayton criticized the legislation for not containing more money for rural broadband, something he has pushed for in the past. But he also was critical of the special provision for Annandale.
“The earmarking of $2 million for one specific broadband project undermines the program’s competitive process and sets a dangerous precedent,” he wrote in explaining his veto of the jobs and energy bill.
Even though they are only 50 miles northwest of the Twin Cities in Wright County, Annandale residents and city officials have been vocal for years about what they consider poor broadband service by the main Internet provider, Windstream.
Speeds are slow and long outages are patience-taxing, they say. Businesses have left town as a result or put up signs telling customers credit card transactions were temporarily unavailable, they say.
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Businesses have expressed envy of their counterparts in Monticello, Minn., just down the road, where the city built its own fiber network in competition with local providers.
So in 2014, when the Legislature made $20 million available for projects in underserved and unserved areas around the state, the city put together a plan to build a network. The idea was for the city to build the network and then contract privately for its operation.
Officials were confident of their $2.4 million request to the state but were disappointed when 17 "border-to-border broadband" awards were announced late last year by the state Office of Broadband Development and Annandale was not among them.
So it hired the lobbying firm Flaherty & Hood, flooded the Capitol with visits by officials and got most of the money it wanted included in the final bill this year.
No other project was singled out like that, either this year or last year. The earmark language was in the House bill, not in the Senate bill, but the final jobs and energy bill that emerged from a conference committee at the last minute included it.
Now that the funding has been vetoed, all eyes are on what comes out of the approaching special session, of course. City Administrator Kelly Hinnenkamp said if the city gets the money, the city council will have to determine how to go ahead with the project. The council has said it would issue bonds for $2.4 million in matching money for the project.
Why didn’t Annandale win an award in 2014 when it seemed to have a strong case? Its proposal would have served more businesses than other projects, for example.
The Office of Broadband Development said Annandale suffered in the state's evaluation for several reasons:
It aimed at a geographic area considered "underserved" when priority goes to "unserved" areas. That's a distinction the telecommunications industry pushed for a year ago, making it less likely that established providers would face direct competition.
The local match did not exceed 50 percent.
The Annandale area isn't considered very distressed economically.
The partner the city chose to work with didn't appear to have a lot of experience.
Dan Dorman, a former Republican legislator who is now executive director of the Greater Minnesota Partnership, said he thought the biggest obstacle was Annandale's strong economic development argument wasn't considered under the state rules.
He thinks the city is a special enough case – a poster child for poor service -- to justify the legislative earmark as an economic development project.
The Department of Employment and Economic Development, which oversees the broadband office and which did not support the special earmark, says it's trying to help Annandale create a stronger application for the next round of funding.
Which leads to the second question: Why, in a session supposedly friendly toward rural interests, did the Legislature agree to spend only $10 million on rural broadband development this year?
Dorman, who thinks the number should be more like $100 million, says the telecommunications industry pushed last year to define the award criteria so remote and expensive projects were favored. That, in Dorman’s mind, made conservative lawmakers this year look at the costs of paying for broadband and squeeze down on the spigot.
But another factor was the strong presence at the Capitol of wireless providers, particularly AT&T. The notion that wireless technology will make hard-wired fiber networks unnecessary gained traction this year, said Sen. Matt Schmit, DFL-Red Wing, a strong broadband proponent.
"There was skepticism about hard-wired broadband," Schmit said. "The wireless capacity is tremendous, but at it's core wireless is going to be a supplement," incapable of providing the robust service that business and education and other sectors need, he said. "It's too bad we didn't step up."
Schmit, by the way, thinks Annandale has perhaps the strongest case in the state for building a project but would prefer to see it go through the competitive process again, rather than get an earmark.
So when the Legislature meets again soon, the two things to watch regarding broadband are what happens to the Annandale money and whether lawmakers apply more of the surplus to broadband projects generally. Then, down the road if the Annandale earmark is removed, will the broadband office look on it with any friendlier eyes?