Agencies consider nonprofit status for UC2B

Agencies consider nonprofit status for UC2B

CHAMPAIGN — High-tech companies adapt quickly to changing markets. Government agencies don't, especially when two city councils and a university board of trustees are trying to coordinate.

So as the cities of Champaign and Urbana and the University of Illinois try to manage a $31 million high-speed Internet network and look at potentially bringing more fiber-optic cables worth tens of millions of dollars into town, they think setting up a nonprofit business structure will be the best way to manage it.

It is a part of the business plan that each agency has already approved for UC2B, and officials expect to have the nonprofit organization set up within the next few months.

Doing so, they think, would free the Urbana-Champaign Big Broadband network from bureaucratic red tape and pesky open-meetings laws. And they say it will be a fine balancing act to weigh the costs and benefits of direct government involvement with the pros and cons of a nonprofit management structure.

Nimble to compete

Officials hope that, at some point, UC2B will compete with giants like Comcast and AT&T. It has already hooked up the first 600 customers, said Champaign economic development manager Teri Legner, and it is adding customers at a rate of about 16 or 17 per day. Right now, about 1,300 customers are signed up.

It is a start, but offering Internet service to a few hundred people over the $31 million network, which was funded largely with a federal grant, is a tiny fraction of what officials are envisioning. They hope to have thousands of customers on the existing portion of network, which is currently available in limited areas of Champaign, Urbana and Savoy.

Officials hope to build that network out to the rest of the community, which presumably would add thousands more customers. They would like to offer television and phone services — and maybe some services no one has invented yet.

"We have to be able to be nimble and compete effectively," Legner said.

Under the existing government structure, that cannot happen, Legner said. The governing body of UC2B is made up of five public bodies: the UI Board of Trustees, the Champaign City Council, the Urbana City Council, a subcommittee that deals with policy matters and another subcommittee that deals with technical issues.

Getting any one of those to sign off on a contract or a business deal is, at minimum, a weeks-long endeavor. Getting all of them to approve one piece of legislation can, in some cases, take months.

A nonprofit structure could remove some of those barriers, Legner said. Elected officials could still maintain some degree of control because they would be responsible for appointing members to the nonprofit board.

"It best suits us for the type of system," Legner said.

Closed for negotiations

Even more than that, all of those public bodies are subject to the state's Open Meetings Act and Freedom of Information Act. While officials say their goal is to keep negotiations about the public project as open as possible, they also feel they need some flexibility to close their doors when a private Internet or cable service provider wants to negotiate.

"The work we need to do sometimes needs a closed meeting to have a more honest conversation," said Urbana Alderman Brandon Bowersox-Johnson.

Take, for instance, a cable provider who wanted to make an offer to UC2B officials to begin providing television service over the network, Bowersox-Johnson said. To really negotiate, the provider would have to open the books on what it was paying to media companies to broadcast their content.

That provider was contractually obligated to keep those rates confidential. So it could not negotiate in the public domain, and, without a closed meeting, it could not make an offer to UC2B.

Don Craven, general counsel for the Illinois Press Association, said the only way a UC2B body could negotiate with a private vendor right now is if there were not a majority of a quorum of the board present for the negotiation. For instance, two Champaign City Council members could meet in private with company officials without the Open Meetings Act kicking in.

Still a public body?

Whether the nonprofit would be subject to the state's open meetings and freedom of information laws could be a little more murky.

Craven said existing case law suggests that a nonprofit organization may not be subject to the requirements of the state's Open Meetings and Freedom of Information acts. In 1975, a court decided that the Northern Illinois Council on Alcoholism and Drug Dependence, which received 90 percent of its funding from public sources and carried out drug programming required by state law, was not a public body under open-meetings laws.

But Steven Helle, an emeritus journalism professor and media law expert at the University of Illinois, said the law creates a presumption that if a body carries out actions funded by public money, it is probably a public body.

"It's a simple concept, and if they want to presume otherwise, then they should have a much better reason than preference or convenience," Helle said.

He also said that a body could be considered public if it is held accountable to a public body. The Illinois State University Athletic Council, for example, was found to be a public body because it was accountable to the ISU senate, even though no members of the senate were part of the council.

Bowersox-Johnson said, whatever its form, UC2B is still a community entity, and he wants its business to be as open and transparent as possible. He said that those who are assembling the nonprofit are carefully writing the bylaws that will govern which conversations will be open and which will not.

Peter Folk, the CEO of Volo Broadband, a Champaign-based Internet provider, said he does not buy that argument.

"I have not seen any examples where they need to have a closed-door discussion," Folk said.

He said he can think of examples where he might want to have a closed-door discussion with UC2B officials as a customer, but not as a provider. And as a customer, he said, he would already be covered by existing confidentiality exemptions in the state's open-meetings laws.

He added, though, that if there truly are no instances where a provider would request a closed-door meeting, then there will not be any closed-door meetings.

"I don't think it's actually going to change much because, as I said, these closed-door meetings are not necessary," Folk said.

Not a nonprofit

The decision to go nonprofit came at the recommendation of consultant Diane Kruse, who was hired by UC2B to develop a business plan for the network.

Under the current structure, the procurement process is as open as the meetings — each bid and all the nuances of pricing and cost structures are open to the public and the bidders' competitors.

In a report, Kruse offered a number of alternatives to a nonprofit model: It could have been a public utility, a publicly owned company or a co-op, among other options. Each had its pros and cons, Kruse reported to UC2B officials.

UC2B officials ultimately felt a nonprofit was the best option: More funding options are available for the network than, say, if it were operated by city government. And it offers a more flexible business model that can evolve to address community or social needs.

On the other hand, startup funding may be difficult, and the nonprofit's mission may limit its ability to take advantage of new opportunities, Kruse reported.

UC2B officials say it looks like the best option.

"We studied a lot, and in the end, I'm comfortable with it," Bowersox-Johnson said.

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jimed wrote on December 16, 2012 at 10:12 am

Why are religious institutions getting hooked up for free.Just wondering.And Why are so many companies from out of town doing the work?Our goverment is going broke and freebies are still going out.

bmwest wrote on December 16, 2012 at 6:12 pm
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As I understand it, many religious institutions were included as part of the governmental, medial, and social services infrastructure of the community.  I'm guessing the idea was to include as many organizations as possible to get the service to as many areas of town as possible while still meeting the requirements for the grant.  The more dots on the map, the better you can justify running fiber to that area and, even if the grant doesn't cover the other businesses and residences in that area, it will be easier to expand to those areas now that the fiber is nearby for the church.  Churches also typically provide many social services such as computing centers and after school programs that help people find jobs, do better in school, deal with crises, and stay out of trouble.  So, churches are getting hooked up for free in the same way the United Way and the residences and businesses in underserved areas are getting hooked up for free but everyone, including churches, incurs the same monthly service fee.

I'm not terribly familiar with the construction contracts but I believe quite a bit of the construction workers are from the area, Rantoul I think.  However, the work is pretty specialized so there aren't enough companies in the area with enough trained workers to take on this large of a project in the time required by the grant while continuing to serve their existing customers.  I think the federal grant rules also prohibit setting a preference for local companies and it has to instead be based on the lowest cost to taxpayers.

I agree, though, that federal grants need to be cut back because we can't afford them and it isn't appropriate for taxpayers in North Dakota to be subsidizing our Internet just like we shouldn't be subsidizing a gymnasium for them.  It would be better to let the communities that stand to benefit from the investment choose to fund the project and leave federal projects to those that help break down large disparities between states and state projects to break down large disparities between communities, and community projects to break down large disparities between neighborhoods.  I'm guessing there would be fewer "roads to nowhere" if the people trying to build said roads had to justify and pay for the project out of local funds rather than spreading the cost across taxpayers from all states.

cretis16 wrote on December 17, 2012 at 4:12 pm

This is such a pathetic waste of money, it's irritating even to comment on it. How these gasbags can rob this much money from the taxpayers and drill an even bigger hole in the deifict is just plain crazy. For this boondoggle, you could have purchased the entire city a new laptop with wifi connection for a small fraction of this terrific waste. Now, this group is moving into the structure of a ton of administative salaries and benfits. This UC2B has got to be the poster child of excess.

spangwurfelt wrote on December 18, 2012 at 2:12 pm

If it gets me a decent internet service for which I don't have to pay a dime to the grotesque grabber-toads of Bend-over-here-it-Comcasts-again, then it's not a waste.

Real competition, folks. That's what's coming. Real competition. And Comcast hates that.

rsp wrote on December 18, 2012 at 2:12 pm

I called att to cancel service and they offered to cut the price in half. Their service was half as fast, kept interfering with the modem, and then there was the throttling. It was random, a few times a month, just enough to cause equipment problems. Now, the same modem works fine, no throttling, no equipment problems. And every other day we get ads for comcast.

cretis16 wrote on December 18, 2012 at 4:12 pm

Maybe we can get a federal grant to purchase local gas stations...then, we could provide those with low to moderate incomes free gas and those with few autos free gas. The city could chip in tax money, and seek a federal and state grant to assist.

rsp wrote on December 19, 2012 at 1:12 am

Maybe they can get all those funds to stop gambling on the price of gas and treating it like a commodity and it wouldn't keep going up with speculation. 

sameeker wrote on December 16, 2012 at 10:12 am

I see a bloated bureauocracy being created. Being nonprofit will not save the customers one dime. If it would, I would be all for it. While it is nice to have these things in a community, the government has to stop handing out all of these multi - million dollar grants. Neither the state or federal government can afford it anymore. The GOP is focused too much on assistance programs instead of things like this. Of course, there are corporate profits to be made from the grants, so they don't see any problem with spending for that.

bmwest wrote on December 16, 2012 at 7:12 pm
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I think a nonprofit cooperative structure with a nonpaid governing board similar to a credit union would be the best structure.  As a customer-owned coop, you'd have all the benefits of a nonprofit while getting involvement and support from the customers to keep it sustainable and grow it within the community.  The other option would be to set it up as a government utility similar to the U-C Sanitary District.

Champaignite wrote on December 16, 2012 at 9:12 pm

I would assume that churches are connected for free because they are not-for-profit agencies like schools and governmental offices.  Same reason that churches are typically exempt from property taxes.

QWERTY wrote on December 16, 2012 at 11:12 pm

I really don't get it... How can this be a nonprofit?  Sorry if I'm being dense, but I don't see what all of the hype is about...  I have UC2B internet now, and it costs me the same per month as my old service.  How is this a potential nonprofit while ATT isn't? 

sameeker wrote on December 17, 2012 at 7:12 am

They will create a big administrative structure and pay themselves big salaries. The customers will not see a dime in savings.

SaintClarence27 wrote on December 18, 2012 at 8:12 pm

What are you paying and what were you paying? (And that's aside from the quality issues)

rsp wrote on December 19, 2012 at 1:12 am

Not sure who you're asking. My att came to just under $40. The uc2b is supposed to be $20 give or take with taxes. I haven't been billed yet. Why would that make a difference? I bought a pair of shoes. Last year I wore sandals all winter because I didn't have the extra for shoes. Of course you're probably thinking why didn't I just shut off the internet and save $40 a month. My son lives with me and he's autistic. If I'm gone he calls me over the internet. Plus the other family he stays in contact with. He helps his niece with her homework in video chats. And my youngest grandson, he's 4, he's also autistic, will call him on the computer to show him pictures he's drawn and dvd or cds. Those things are priceless. 

SaintClarence27 wrote on December 19, 2012 at 10:12 am

So there is a difference. Because the claim was that there wasn't. And again, that's aside from the service (speed) difference.

rsp wrote on December 19, 2012 at 4:12 pm

Big difference. The same speed from att cost $60. So picture if you were trying to start something from home and couldn't rely on your service. Or needed in for class or your job. In any other county these basic services aren't even provided. They're too slow.

Local Yocal wrote on December 17, 2012 at 3:12 am
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Let's see,... a $31 million dollar federal grant to build it, is taxpayer money. It will be governed by many of the elected officials. How does the governance of this infrastructure escape the Open Meetings Act, and why would such a thing need secrecy at all? I don't understand why the government wants our tax dollars but then doesn't want the accountability that should go along with it. Shame on Brandon Bowersox for going along with this secrecy.

bluegrass wrote on December 18, 2012 at 12:12 pm

It seems like someone dropped $30,000,000 tax payer dollars on a city and said, "Build it, and they will come!"  Not exactly a great business plan.

And what was this thing they were going to build?  What great problem were they going to solve?  Well, apparently all the city buildings needed a $31 million dollar magic ring around the city to hook up all the city services together so they could access this thing called the "internet."  And even after installing this all basically free of charge, the people running it still presumably can't figure out how to make a profit, so they're considering making it "non-profit." 

And may I add that it comes as a complete shock to me that it takes time for the Cities of Urbana and Champaign, and the U of I Board of Trustees, and some random sub committee to make decisions, which make it difficult to micro manage this endeavour.  Totally, and completely shocking!  I don't think any rational person could have possibly predicted this problem.  Remember what the magic ring did to Gollum and Frodo?  It drove them mad.  The ring was made in the fires of Mount Doom. Only there can it be unmade. The ring must be taken deep into Mordor and cast back into the fiery chasm from whence it came.  Or maybe they'll figure it out.  Either way...

Sid Saltfork wrote on December 18, 2012 at 2:12 pm

Your analogy was precious...  

It was "free money"; and it had to be spent.  It makes no difference whether it is needed, or not.  It is "free money" so spend it before someone else does.  Federal, and state grants for campaign donations, and votes while debts go unpaid.