Fiber Partnership Between Axia and Bloomington, Ind., Dissolves

Bloomington's partnership with Axia for citywide fiber has dissolved after there was apparent disappointment on both sides of the deal.

by Ernest Rollins, Herald-Times, Bloomington, Ind. / April 24, 2017

(TNS) -- Bloomington's high-speed broadband future is in the air after the city announced its partnership with Canada-based fiber infrastructure investor Axia has dissolved.

The break in the partnership came Thursday afternoon, and Mayor John Hamilton said he thinks there is disappointment on both sides.

“The negotiations made clear that Axia as the operating company was very bullish on Bloomington, on their model and their match,” Hamilton said. “But their private equity partners, which joined in the last year or so to support the U.S. expansion, could not pull the trigger to invest the tens of millions of dollars that Axia felt were appropriate to invest.”

Axia CEO Art Price said in a Thursday telephone interview that the proposed Bloomington model didn't fit its parent company's return/risk/reward profile, and that projects of this kind have to raise shareholder's capital. Partners Group is a global private markets investment manager that acquired Axia NetMedia in March 2016.

While the open access model approach proposed for Bloomington has been accomplished internationally, it would have been the first time the company would embark on this kind of model in the United States. Open access would allow any company to locate on Axia’s physical fiber infrastructure for a fee.

“While Axia’s management team strongly believes in the merits of our open access model, our business case does not deliver financial returns required by our owners to compensate for the risks inherent in being the first company to offer this unique model in the United States,” Price wrote in a letter addressed to Hamilton and dated Thursday.

In December 2016, city officials and Axia executives announced the partnership and signed a letter of intent to develop a citywide, open, gigabit-class fiber optic broadband service across Bloomington.

Axia was scheduled to provide its engineering feasibility report by Friday, after the city granted a three-week extension of the original deadline. Price said the results of that report will be made available to Hamilton and the city.

The report may include a final cost and more details about whether the company could create Bloomington’s infrastructure. A citywide network could cost $50 million or more, according to Axia executives. Price complimented Hamilton on his "bold move" to implement such a system, adding the partnership's dissolution is a reflection of Axia's United States business model and not Bloomington.

While Hamilton said the dissolution is disappointing, he remains undaunted and is still committed to creating a citywide fiber network, which was part of his platform as a mayoral candidate.

Now, finding another partner who can make that vision a reality is the next step. But the search may be easier this time around, Hamilton said.

Price said the U.S. cable and telecommunications market is much more active than in international markets. He added the choice to dissolve the partnership happened, in part, because of the way capital investments are deployed in the United States versus Axia's more concentrated markets.

"It’s not all minus and pluses, but it is different," Price said. "The U.S. has a regulatory and a capital market framework that is different, and that’s primarily because it’s so big. I think the mayor is on the right path, and the community is on the right path — it’s just that our unique business model couldn’t quite make it to the goal line."

Hamilton said he had always expressed interest in working with other companies if Axia was unable to meet the city’s fiber goals. His administration has a lengthy list of potential replacements. When the city sent out requests for information about providing a citywide infrastructure, 12 providers responded, including Smithville Fiber and AT&T.

In addition, the providers who weren't picked but were still considered front-runners were notified back in December and told that just because their companies weren't selected didn't necessarily mean they were out of the running.

“The reason (Axia) kind of ended up at the front of the line was that they hit all three of our characteristics: no public investment, open-access design and ubiquitous build,” Hamilton said. “We are going to go back to others and see how close they can get to those three goals.”

Even though the partnership is over between Axia and the city of Bloomington, Hamilton said the process yielded valuable information and led to more discussion of fiber in the community.

Smithville Fiber declined to comment on the announcement, and representatives from AT&T did not respond to a request for comment before the print edition deadline. Comcast, however, emailed a statement expressing its willingness to consider Bloomington's technological advancement.

"This news does not impact our commitment to investing in technology across the state, as exemplified by our recent launch of 1-(gigabit) service here in Bloomington and across our Indiana coverage area," Mike Wilson, public relations director for Comcast in Indiana, wrote in an email. "We've always valued our relationship with the mayor and the people of Bloomington. We remain amenable to sitting down with the mayor and his team to collaborate on furthering technology for Bloomington residents."

Since the city’s announcement of its intention to partner with Axia, Hamilton said, providers such as AT&T, Comcast and Smithville Fiber have marketed the launch of new or expanded fiber service, which he said is good for the city and its residents.

©2017 the Herald-Times (Bloomington, Ind.) Distributed by Tribune Content Agency, LLC.