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.