I’ve been reading dire headlines coming out of Kentucky related the operation of the 3,200 KentuckyWired statewide middle-mile network under the administration of the Kentucky Communications Network Authority (KCNA). Headlines have been warning about a shutdown of the network due to a dispute between KCNA and Accelecom, a for-hire operator of the network.

KCNA terminated the agreement with Accelecom in January. KCNA accused Accelecom of violating the operating contract. Accelecom was said to be using the network to provide retail connections while denying dark fiber connections on the network to other ISPs. KCNA also accused Accelecom of not allowing an audit and of not making payments to the State. The dispute between the two parties ended up in court and resulted in an order to give customer a 30-day notice in mid-April that service might be terminated.

The KentuckyWired network has been controversial since its beginning in 2015. The network got its genesis in discussions between the State and Macquarie Capital from Australia, a large international infrastructure funder. This agreement was touted as a public-private partnership, but Macquarie only funded about 2% of the network while eyeing a lot of profits to be made as the operator of half of the network as a wholesale operator.

Macquarie originally asked the State to fund $1.2 billion to fund the network – money that was not readily available at the time. The State signed an agreement with Macquarie to proceed and counted on funding from the FCC’s E-Rate program as a major source of funding. That funding was not actually available as had been promised by a consultant who was the husband of a Cabinet Secretary. The State pivoted to try to move all state buildings to the network but ran afoul of State procurement rules. Kentucky proceeded to fund and build the network since it still saw great value in the ability to bring backhaul to the many rural parts of the state.

There were a lot of problems building the network due to getting access to rural poles that were often in bad shape. The project went significantly over budget and took a lot longer to build than originally planned. Macquarie remained as the operator and renamed itself as Accelecom.

To some degree the network has fulfilled its goal and provides backhaul to 44 ISPs and directly serves a wide range of locations from court houses to hospitals. However, part of the dispute that led to the cancellation of the contract is that Accelecom wouldn’t provide dark fiber access to ISPs as is required by the open-access rules.

It’s a little unclear how many customers might go dark when Accelecom stops operating this month. In many cases, ISPs have other backhaul connections or are scrambling to find them. But it seems that some rural ISPs completely rely on the KentuckyWired connection.

I guess there are several lessons to be learned from this mess. One is that governments ought to be careful of the partners they choose for public-private partnerships. Macquarie Capital has been accused in numerous ventures around the world of skirting the rules and violating agreements to maximize its earnings. Kentucky would have been much better served by working with the ISPs in the state to build and operate a middle-mile network, as has been done in other states. Macquarie was chosen without the open bidding process and public discussions that would be expected for such a large undertaking.

The second lesson is that any agreement related to a network ought to have provisions that the network can’t be shut down if there is a dispute between the operators. It’s extremely rare for a network to go dark and strand customers. Even if Accelecom walks away, the network is still in place operating and there should have been a contractual contingency plan to keep the lights on while the parties separately negotiate dollar issues. The State and Macquarie will continue to point fingers at each other, but the truth is that both contributed to the current disaster.

The third lesson is that middle-mile fiber networks can bring great benefits. Kentucky is the poster child of a state with remote pockets of rural households, and the KentuckyWired network has brought broadband to areas that would not have otherwise had it. There are a lot of better ways to fund and operate a middle-mile network than the mess Kentucky created, but there is no denying that building the network was a good idea.