Cities plan to spin off UC2B

Cities plan to spin off UC2B

CHAMPAIGN — Assuming city officials can adhere to an extremely tight timeline, Urbana-Champaign Big Broadband will be spun off as a private nonprofit agency, after both the Champaign and Urbana city councils directed their staffs to start working toward the transfer in a rare joint meeting on Tuesday night.

Privatizing what has until now been a government Internet service provider will allow it to operate free of public subsidy, city officials say, and enable business deals to move forward that could allow the high-speed fiber network to be built out to the rest of the community where it is not yet available.

But the new direction for the Internet network also came among concerns about minority inclusion, community representation and the openness of the new nonprofit board. It also presents a likelihood that the three local governments that now control the network — Champaign, Urbana and the University of Illinois — will have to extend their financial support to the private agency in its fledgling months.

"It's going to require some support, some administrative support, from the entities," said Champaign City Attorney Fred Stavins.

The $30 million UC2B project has received most of its funding until now from the federal government. The cities and the university received a federal grant in 2010 that paid for Big Broadband's construction in underserved neighborhoods to bolster Internet access in low-income areas where residents have more trouble getting on the Web.

That grant expires on Sept. 30, and any expenses the network incurs after that will be on the shoulders of the local governments if it is still in their control. City officials hope to have the network spun off into a private nonprofit by that time, but they expect it will still need some help from the cities for the first six months or so to get off the ground.

"Pretty soon the grant will run out and the entities will have to provide some financial support," Stavins said.

Urbana City Council member and Mayor pro-tem Charlie Smyth said he was not happy with the details for the nonprofit spinoff being presented to the elected officials roughly two weeks before they need to be approved in order to keep the timeline moving. He said Urbana Mayor Laurel Prussing, who was in China on a trip to Urbana's sister city on Tuesday, was not happy with the rushed deliberations either.

Beyond the incorporation of the nonprofit, city administrators believe the network will be financially independent of local government. They expect the nonprofit will operate like any other Internet business, where subscriber revenues and business deals pay for operating expenses.

It might still take some work to get there. Officials estimated that they would need a minimum of 2,700 subscribers in the early phases of the network to be financially sustainable. UC2B principal investigator Mike Smeltzer said that, as of Tuesday, "more than 1,000" subscribers were on the network.

The local government agencies will maintain some control: The nonprofit will be governed by a nine-member board of directors, with three members appointed from each Champaign, Urbana and the University of Illinois.

The control the cities can exert on the 501(c)(4) nonprofit will be limited. Urbana City Attorney Jim Simon said that if they exert too much control, the Internal Revenue Service can determine that the nonprofit is a "sham" and deny its tax-exempt status.

Some council members struggled with that loss of control and how to ensure it maintains the values the government agencies have maintained to this point.

For Champaign council member Deborah Frank Feinen, the city's high objectives for procuring minority contractors was one of those concerns.

"I'm struggling with how do we sort of put our stamp and tell them to go forth and do that," Feinen said. "And I think we do that with our appointments."

Feinen said the agreement in front of them on Tuesday was a compromise that will help facilitate the expansion of the network, "which I think the community is really ready for."

The bylaws for the nonprofit will require that meetings of the board be open to the public, but "they may be closed if the directors feel it is necessary to speak confidentially," Simon said. City officials did not apply the requirements of the Open Meetings Act to board meetings because the law "raises a whole series of requirements and burdens that would tend to slow down the operation of this entity."

The Rev. Zernial Bogan said the city councils might want to add one more member to the board — a community representative — to ensure that residents' interests are addressed and the community remains involved.

"The community representative is very important, and the community expects to be involved," he said. "The community does not expect to be shut out just like that."

Champaign resident Craig Walker said he worries the cities will lose sight of UC2B's original purpose — to serve the underserved community — in appointing members to the nonprofit board.

"This process cannot lose sight of the fact that it would not even exist if not for the underserved community," Walker said.

Gerard said the nonprofit agency will allow the Internet service provider to be more flexible and it is important to remember that UC2B will be in a very competitive Internet market.

"It has to be competitive," Gerard said. "It has to win."

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