A newly filed lawsuit accuses the operator of Maine’s highly touted Three Ring Binder fiber-optic network of misusing federal funds because it failed to provide the infrastructure needed to bring affordable, high-speed Internet connections to residents in rural areas.
The lawsuit by Biddeford-based Internet service provider GWI claims that Maine Fiber Co., which built and now operates the $31.7 million network, installed too few connection points for local distributors to tap into. That makes it prohibitively expensive to physically connect the 10 gigabit-per-second service – fast enough to download a Hollywood feature film in half a second – to homes in remote areas, the suit says.
GWI, which is incorporated as Biddeford Internet Corp., filed the lawsuit Monday in Cumberland County Superior Court. It accuses Maine Fiber of breach of contract and fraudulent concealment, and claims that the dearth of connections violates rules for the $25.4 million federal stimulus grant that was used to build the network.
Maine Fiber CEO Dwight Allison denied the allegations Monday, saying any insinuation that Maine Fiber misspent taxpayers’ dollars or neglected rural Mainers is a ploy to draw media attention to a simple contract dispute between two businesses.
“It’s disturbing to hear them say that we have not met the grant requirements,” he said.
Allison said Maine Fiber has been in a payment dispute with GWI, the network’s largest customer, for months. He said the lawsuit came as a surprise because the two companies had agreed to resolve their differences through mediation.
Lauri Boxer-Macomber, a Portland attorney who represents GWI, agreed that the lawsuit’s allegations pertain to a contractual dispute between GWI and Maine Fiber, and that they should not be confused with accusations of criminal misconduct.
“The nature of the claims are civil and civil alone,” she said.
Still, GWI’s founder and CEO, Fletcher Kittredge, said during a news conference Monday that Maine Fiber has misused a portion of the federal stimulus grant for its investors’ gain and has shortchanged rural Mainers.
LAWSUIT BLAMES FINANCIAL MOTIVE
The Three Ring Binder network, built with the $25.4 million grant and $7.4 million in private investment, was completed in mid-2012, six months ahead of schedule and within budget. Connecting more than 100 communities from Skowhegan to Perry to Frenchville, it consists of 185,000 strand miles strung completely on telephone poles in three loops that wrap around the state, including rural areas that previously lacked high-speed Internet access.
The network does not connect directly to homes and businesses, so it requires third-party Internet service providers such as GWI to build and maintain “last-mile” connections to individual customers. The greater the distance between customers and the fiber-optic backbone, the more expensive those last-mile connections are to maintain.
The lawsuit accuses Maine Fiber of neglecting its responsibility to Maine’s service providers in favor of building additional network connections that stretch outside of Maine to reach more potentially lucrative customers to the south.
According to the lawsuit, that violates an agreement that Maine Fiber made with GWI, which made the original application for the stimulus grant in 2009, then transferred the money to Maine Fiber, a company formed specifically to build and operate the Three Ring Binder.
“(Maine Fiber) achieved the transfer of ownership of the (Three Ring Binder) project … with the knowledge and intent to create a network designed to serve multinational corporations outside of Maine at the expense of local last-mile service providers such as GWI,” the lawsuit says.
Allison, with Maine Fiber, said the National Telecommunications and Information Administration, which awarded the federal grant, was aware of the out-of-state network connections and approved them.
MAINE FIBER: CONNECT POINTS FINE
Other defendants named in the lawsuit include Allison and Maine Fiber’s other lead investor, Robert “Bobby” Monks. Monks is also a member of the board of directors of MaineToday Media, which publishes the Portland Press Herald.
GWI’s Kittredge said Maine Fiber strung much of its fiber-optic cable along highways and away from neighborhoods, where it would have been less expensive for Internet service providers to connect to residential customers.
The purpose of the lawsuit is to compel Maine Fiber to either install additional connections or sell the 1,100-mile fiber-optic network to someone who will, Kittredge said – and GWI would be interested in buying it.
But Allison said GWI is the only entity that’s complaining about a lack of connection points. He said GWI started complaining only after it fell behind on its payments to use the network. No federal agency or regulator has accused Maine Fiber of improperly using the stimulus grant, he said.
Kittredge denied that GWI has underpaid, saying he believes it actually deserves to be refunded about $728,000 because Maine Fiber’s network has failed to meet the broadband provider’s intended purposes.
The contract with GWI does not specify how many connection points the network must have; it says only that they must be “frequent,” Allison said.
“Our response is: They are,” he said. “They are no further apart than 2,500 feet across the entire 1,100-mile network. There are hundreds and hundreds of connections for GWI or anyone else to tap into.”
J. Craig Anderson can be contacted at 791-6390 or at: