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Operator Of Bay State Taxpayer Broadband Network Files For Bankruptcy

March 24, 2017

The Coalition for the New Economy reported last month that Massachusetts’ taxpayer-financed broadband network was in bad shape. Now, according to a report Wednesday in the Boston Globe, “The company that runs the state-owned high-speed broadband network in Western Massachusetts filed for bankruptcy protection … claiming the operation has been losing money from its inception.”

Specifically, the bankruptcy filings said the network operator had been “unable to resolve ongoing financial problems with the state” and “predicts the network will operate at a nearly $3 million annual loss, and reported liabilities of about $19 million and assets of $529,000.” The state has been working with the operator, KCST USA (formerly known as Axia NG Networks USA Inc.), since 2011. According to The Berkshire Eagle, KCST has lost a total of $9 million in its partnership with the state.

It appears that underutilization was a significant problem. The bankruptcy filing also alleged that the state agency, the Massachusetts Technology Collaborative, “had connected the network to only 944 community organizations, instead of the nearly 1,400 it had promised.” KCST also said “fewer organizations than anticipated signed contracts to use the service, and as a result, revenue from the network were much lower than KCST had expected.”

How will the bankruptcy affect service? The Berkshire Eagle noted that an outside consultant promised “to prevent interruptions in service to existing customers of the network during the bankruptcy process,” but KCST also “warned that if it cannot come to more favorable financial terms with the state, it will discontinue operations.”

In all, the Massachusetts network has consumed nearly $90 million in taxpayer funds—$45.4 million from federal taxpayers and $44.3 million in “matching” funds from Massachusetts.