6/21/2017 - West Virginia's U.S. Senator Shelley Moore Capito says $3 million in federal funding from the U.S. Department of Agriculture will help to provide broadband Internet access in Barbour, Randolph and Upshur counties.|
According to Capito's office, the grant will be matched with $450,000 in local funds to deploy fixed wireless broadband to over 3,500 households and business in the Central West Virginia Development Association LLC.
The funding may be used for leasing or acquiring property and construction, providing two years of free service to facilities such as schools, fire stations and public libraries and establishing a community center to provide online access to the public.
She says affordable access to high-speed internet is critical to the state's economic growth.
FRONTIER FIRED VP SENATOR MITCH CARMICHAEL AFTER HE SUPPORTED A BROADBAND EXPANSION PROJECT IN WV LEGISLATURE THEY DID NOT SUPPORT. WV RANKS BEHIND NEARLY ALL STATES IN REAL BROADBAND. - Hur Herald
BROADBAND PROMISES, BROADBAND DREAMS - WV Paid Frontier $4.7 Million For Improper Charges, Federal Report Says
Eric Eyre, Staff Writer GAZETTE-MAIL
6/17/2017 - The state of West Virginia and Frontier Communications squandered $4.7 million in federal stimulus funds designed to expand high-speed internet across the state, according to an investigative report released Thursday.
The U.S. Commerce Department’s Office of Inspector General found that Frontier padded hundreds of invoices with extra charges, and the state improperly reimbursed Frontier for those “loading” and “invoice processing” fees, even though federal grant rules barred the state from using stimulus funds to pay such project costs.
The scathing, 31-page report declared the payments “unreasonable” and “unallowable.”
Meanwhile, Frontier saw the tacked-on charges as a “revenue opportunity,” according to an internal company email cited in the report. Frontier employees referred to the extra fees as “markups” and “profit.”
What’s more, Frontier misled the public about the amount of unused fiber cable — called “maintenance coil” — the company installed across the state, according to the report. The extra fiber, which is stored at public facilities and used for repairs, drove up the broadband expansion project’s cost.
Frontier wound up placing 49 miles of spooled-up, unused fiber across West Virginia — four times the amount the company had disclosed to state officials, according to the report.
In 2014, a Frontier consultant alerted a company employee about the excessive amount of fiber set aside for repairs.
“OMG! ... it looks like not only do we not know how much fiber we actually placed,” the consultant wrote in an email, “but we don’t know how much of what we placed is coiled up on poles. Looks like our previous estimate of 12 miles of coil for the entire project is way off the mark.”
The consultant added, “This is 4 times greater than we told [a state official] earlier. I don’t think we need to tell [the state official] unless she asks again.”
The Frontier employee told federal investigators he discounted the email at the time and dropped the matter. In retrospect, the Frontier employee acknowledged that the email now “troubles” him.
Frontier denied all of the report’s findings that the stimulus funds were misspent.
“Frontier maintains that the administrative costs associated with the project were proper, and the report acknowledges that any reimbursement issues were the result of an honest misunderstanding between the State of West Virginia and the federal grant administrator,” said Andy Malinoski, a company spokesman.
Malinoski noted that an accounting firm told state officials in 2013 that they could reimburse Frontier for administrative costs.
“Frontier was transparent in its dealings with the state of West Virginia on the [broadband] project, and independent reviews conducted by an outside accounting firm found Frontier to be in compliance with the grant’s terms,” Malinoski said.
After the investigation, the inspector general asked West Virginia officials whether they wanted to respond to the report’s findings. The state declined. State officials also did not respond to a request for comment Thursday.
In 2010, the federal government awarded West Virginia $126.3 million in stimulus funds to expand high-speed internet to schools, libraries, health clinics and government buildings. The grant money included $42 million for a fiber cable network.
The state asked Frontier to install 915 miles of fiber to hundreds of public facilities across the state, but scaled back the project to 675 miles. Nonetheless, the state paid Frontier the entire $42 million initially set aside for the project. Frontier finished the project two years ago.
The company improperly tacked on $4.24 million in extra charges to pay for administrative costs, according to the federal report. Frontier labeled those charges as “loadings.” On invoices, the company also referred to the overhead expenses as “Plant Administration Overhead Allocation” and “Outside Work Equipment Allocation.
State officials told investigators that a federal broadband administrator gave the state the go-ahead to pay the extra fees. But the federal administrator denied he had done so, according to the report.
“There appears to have been a substantive miscommunication ... ,” the report states.
Another $465,000 in improper payments went to Frontier to process invoices, the report says.
The company initially marked up each invoice by 35 percent.
“The rate has been established so that this is a revenue opportunity for Frontier via [Frontier senior executive],” a Frontier manager wrote in an email.
After a state official complained about the percentage-based fee, Frontier started charging the government $450 an hour, or $1,800, to review every invoice. Investigators questioned whether it really took employees four hours to review an invoice, and a Frontier employee admitted to federal investigators that the $1,800 fee was an “estimation,” according to the report.
“Frontier’s true costs appear to be nowhere close to the amount charged for processing the invoices,” the report concludes.
Frontier internal documents referred to the markup as “profit.”
In many cases, Frontier’s fees were higher than the estimated price for bringing high-speed internet to a particular public facility.
“While the findings are significant and disturbing, they were not unexpected,” said Jim Martin, CEO of Bridgeport-based Citynet, a rival internet firm that made similar allegations against Frontier in a lawsuit filed last year. “The lack of compliance with the grant terms by Frontier and others highlighted in the report extends further than the indirect costs and excessive coiling of fiber. We are hopeful that the findings in this investigation will lead to further work to expose the remaining improper conduct that occurred throughout this project.”
The inspector general’s investigation started about three years ago. The office has referred its findings to the National Telecommunications and Information Administration, a federal agency that administers broadband grants.