BEWARE OF GEEKS BEARING GIFTS

Wi-fi Plan, Touted by Paper, Emanates from Firm with Negative Assets and Negative Net Worth and Negative Income and only One "Plant in Service"

Mayor gets Excited about yet another Half-Baked Plan

Echoes of PabstCity?

By Michael Horne
(C) milwaukeeworld.com

The Thursday, October 13th Milwaukee Journal Sentinel headline screamed from the top of the page: "Wi-Fi plan may give city a digital edge / Firm offers to create wireless network at no cost."
The story outlines the plans of a company named Midwest Fiber Networks LLC to provide the infrastructure for a citywide wireless internet system valued at more than $20 million.
Although a television news report indicated that service would be free in the city, that is not the case. Midwest would lease the system to other operators, who would presumably pay market rates for the product.
A key factor in the Midwest Fiber Networks proposal is that it would gain use of the city's underground conduit system, over one thousand miles of municipal asset that is over a century old, and carries such things as the city's internal communications for police and fire departments, and a number of other services, some of them confidential.
The Common Council has been considering some form of use of the conduit system for some time, and Joe Klein and I have written many times on this subject here at www.milwaukeeworld.com . Klein, who has a proposal of his own for broadband is the only person registered with the City of Milwaukee to lobby for broadband issues. Midwest Fiber Networks has not registered any lobbyist for its proposal, which would indicate they have been working on it for fewer than 15 days (the maximum amount of time one may pursue an issue without a lobbying license in the city) or that the firm simply couldn't be bothered.
Or, as you will see below, maybe the company didn't have enough cash to spring for a lobbying license.

The story in the paper Thursday was a surprise for some aldermen, since the mayor sprung it out of nowhere, and it does not seem likely he has fully vetted the firm or the concept it promotes. Especially troubling is the track record of Midwest Fiber Networks -- at least financially.
The outfit that promises a $20 million Trojan Horse for the City of Milwaukee showed an operating income in 2003 (the most recent year available) of ($269,000). That's negative $269,000, or what your accountant would call a loss. This was somewhat ameliorated by non-operating income of $163,000 for a total loss of $106,000. The year before, the firm lost $120,000, with non-operating income of $0. The company's assets consist of $11,000 in cash, $154,000 in accounts receivable and a $500,000 note receivable, for total assets of $665,000.
As you can see, except for the $11,000 in cash, the firm's assets mostly consist of people promising to lend the firm money and to pay their bills to the firm.
The company values its telecommunications plant in service -- its one and only telecommunications plant --at $1,226,000 for total assets of $1,891,000, while its long term debt -- its obligations under capital leases is $2,015,000. That leaves a stockholders equity of negative $245,000.

It is curious that both the Mayor and the Journal Sentinel have jumped at the wi-fi plan of this unknown company, especially since others have tried to present the mayor with a better and better-financed broadband proposals.

Journal Communications, the owner of the Milwaukee Journal Sentinel owns an outfit called Norlight, which is in the data transmission business, and I have placed two calls to that corporation to ask if Norlight has any involvement in this hastily-conceived project. [Journal Communications says Norlight has no involvement in the project.]

We shan't take the time here to talk about the distinctions of broadband and wi-fi, except to say that the latter is of limited use unless the former is substantially constructed and interconnected, of which there is no mention in the proposed plan. Recent examples in the Gulf Coast should be sufficient reminder of the necessity of an integrated plan.

The Journal Sentinel story correctly states that any proposal would require Common Council approval. This is one instance where the council should be particularly wary of hasty action, because the real asset that the city owns -- its incomparable underground, municipally-owned conduit system -- is the real prize in this game.
This system is truly an asset, albeit an underappreciated and undervalued one. It would be a shame if the city were to let go of it, or sell rights in it at a price below its value, which seems to be the path we are headed on.

The wi-fi is the window dressing. The underground conduit system is the asset. As I said at the top of the article, Beware of Geeks Bearing Gifts.

I would appreciate your comments.
Michael Horne
horne@milwaukeeworld.com

FINLEY CRONY GETS SEAT AT GALA FUNDRAISER

The Milwaukee Public Museum is planning a gala fundraiser next week, and one of the purchasers of a table at the event informed the museum director that he would not be able to use his seats at the event. So what does Museum Director Dan Finley do? Invite some local big shots with deep pockets, and hope for a donation? No. Instead he invited his wife, who invited Dan Vrakas to the event. Vrakas is running to replace Finley as Waukesha County Executive. Rocket science? No, Political Science.