Mountain of overdue bills said to threaten 'middle mile'

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This story has been modified to include comments by MassTech spokesman Brian Noyes.

Unpaid bills threaten the state's 1,200-mile fiber-optic network, putting public safety communications at risk as vendors clamor for $375,000 owed them.

That's one argument lawyers for the Massachusetts Technology Collaborative are presenting in U.S. District Court in Worcester, as they seek an order compelling the network operator to fulfill its contract despite its March bankruptcy filing.

Court filings and arguments in the case offer a look into the high-stakes struggle to preserve the MassBroadband123 "middle mile" network, which debuted in 2014 and provides fast internet connections to hundreds of local government offices, schools and public safety departments, including dozens in Berkshire County.

Threats to its continued operation imperil not only the network today, one insider warns, but its future revenue and viability, as public confidence falls.

The network was constructed with $90 million in federal and state funds. It serves 120 cities and towns.

Axia NG Networks USA Inc. was selected in 2011 by the state to run the network, but relations between the two soured, with Axia claiming the state failed to build the system it promised and missed completion deadlines. In the U.S. District Court case, the plaintiff is Axia NetMedia Corp.; MassTech is the defendant.

Both sides claim the other is resisting arbitration as they battle for the upper hand in ongoing litigation — a standoff that continued this week.

In a teleconference Tuesday, an attorney for MassTech told Judge Timothy S. Hillman bills are piling up and vendors like Verizon and Integration Partners, which provides maintenance work, could cut service.

"The network support structure is beginning to fall apart," Robert J. Kaler said. "It presents an immediate threat."

Kaler appealed to Hillman to act to safeguard network operations, expressing disappointment over court delays.

"Another week goes by and the clock ticks down on the bankruptcy," he said.

Kaler pressed the judge to issue a protective order, even if it has to be adjusted later, due to risks to the network.

"It might be very hard to get a replacement operator here," he said.

But Harold B. Murphy, an attorney representing KCST USA Inc., formerly Axia NG Networks USA, downplayed risk to the network, arguing that vendors listed as creditors in the bankruptcy filing cannot discontinue service.

However, in filings, MassTech notes that 11 of the 20 largest creditors in the bankruptcy case actually have contracts with the state agency, not the network operator. As such, they may not be required to maintain services, as is the case within bankruptcy proceedings.

That point of law remained unresolved, with Hillman telling the attorneys he would take the matter under advisement. It is not known when Hillman will rule on MassTech's request that the operator be ordered to preserve the network's functioning through a permanent injunction.

"Frankly, I just don't think the sky is falling here," Murphy said. He said vendors won't bail. "They have no right to discontinue service ... when they are listed as a creditor in our bankruptcy proceeding."

DETAILS EMERGE

Even as the dispute plays out in the Worcester federal court, MassTech is hurrying to find a possible successor to Axia, as it is commonly known. The agency held a bidders' conference last week and is accepting responses through May 1.

Under the bankruptcy proceeding, Axia could end its management in June, according to one legal timeline. It claims to have lost around $10 million as operator and faced a $2.8 million loss this year.

MassTech has said it is working to repair relations with Axia as one way to stabilize the fiber-optic network, though the U.S. District Court proceeding remains sharply antagonistic.

In a filing April 13, MassTech provided an affidavit from Philip F. Holahan, the agency's deputy executive director and general counsel.

Holahan said MassTech had that day received three notices of default from two "critical" vendors that keep the network operating. One came from Level 3 Communications, a company that provides what Holahan termed an essential network connection to the internet.

The company said that due to lack of payment of $27,707.60, MassTech faced "service interruption" as of April 27. In a court filing, MassTech claims that it has forwarded bills to Axia at its corporate headquarters in Calgary, Canada, and was not told that bills were not being paid.

Also, Verizon has notified MassTech that due to unpaid bills, the phone company has the right to require that network equipment be taken down from the company's poles "at your cost."

"The loss of services from either of these providers would be irreparable to the viability of the network," Holahan said in an affidavit.

In a separate affidavit filed April 10, another MassTech employee said Verizon is owed $225,000 for pole license fees.

That staffer, Technical Director David Charbonneau, said Axia had failed to pay its most recent quarterly installment on its annual fee to the agency. Not getting that sum, $147,095.89, deprived MassTech of money it needs to administer and oversee the network.

In an earlier affidavit, Charbonneau flagged what appears to be a significant problem for MassTech. Because Axia has managed the network with little oversight for three years, it alone holds vital information on the system's operation. Charbonneau said the agency lacks the "familiarity or expertise" needed, should it have to step in and run the network.

For instance, MassTech does not have access to records, passwords and "root passwords," he said in the affidavit.

It also lacks current information on any changes made to the fiber network over the past three years, he said, and does not know the status of field maintenance work or even whether insurance coverage is up to date.

CONFIDENCE ISSUE

Aside from the financial and technical threats it says it faces, MassTech's legal team argues that unless the court orders Axia's unit to preserve current operations, the network's future is in jeopardy.

In a filing April 10, MassTech presented affidavits from three people who use the network, including Peter d'Errico, the Select Board chairman in Leverett.

That Franklin County town built its own last-mile broadband network and uses the middle mile to connect to the internet.

Due to uncertainty about the network's status, d'Errico said he is recommending his town find an alternative connection. Axia's bankruptcy filing, he said, "has caused us, and is continuing to cause us, great concern that the MBI Network could abruptly stop functioning ... [a situation that] has badly shaken my confidence in the network."

Nathan DeLong, IT director for the Hampden County town of Wilbraham, said in another affidavit that the community depends on its connection to the state's network to run its 911 emergency system and police and fire dispatching.

"Loss of function in and access to the MBI Network would be catastrophic," DeLong said in his affidavit.

Charbonneau, of MassTech, said in one affidavit that experience has taught him that vendors in his industry do not hesitate to cut off service when bills go unpaid.

He said he has heard customers of the network, including those that sell bandwidth to retail users, express concern about a collapse of the system.

The agency reiterated that fear in a court filing last week. Its lawyers pressed unsuccessfully for action "today" on a permanent injunction amid mounting bills.

"It has now become clear that the amounts past due to MTC vendors are massive, and that multiple threats to default MTC and pull service from the network are being received and/or are likely imminent," they wrote in an April 14 filing.

The default notices received so far, they said, "are merely the beginning of a cascade of similar notices and threats to shut down critical services."

When asked Wednesday by The Eagle to comment on the litigation and risks to the network, MassTech spokesman Brian Noyes provided a statement on behalf of the agency.

It said it is seeking in U.S. District Court to compel Axia to honor a performance guaranty set when the network contract was awarded.

"While we are aware that certain invoices for services provided prior to the bankruptcy filing have yet to be paid, MassTech and the Commonwealth are taking all available steps to enforce the Guaranty and ensure that there are no interruptions in service on the network," the statement said.

Further, the statement notes that through the bankruptcy proceeding, the network operator has obtained additional financing from its parent, Axia NetMedia. "We understand that some of those funds will be available to pay the vendors that are continuing to provide critical services on the network."

Reach staff writer Larry Parnass at 413-496-6214 or @larryparnass.


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