Broadband in the Berkshires

Amid Axia uncertainty, state moves to ensure MassBroadband 123 doesn't go dark

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WESTBOROUGH — Though one company claims it's losing millions running the state's 1,200-mile fiber-optic network, as many as a dozen others may compete to step into the fray.

To ensure that the $90 million MassBroadband 123 system doesn't go dark, stranding hundreds of institutional customers, the state is recruiting a new network operator, should the current one, formerly known as Axia NG Networks USA Inc., go under.

The Massachusetts Broadband Institute briefed representatives of 13 companies Wednesday morning on what one executive acknowledges is an usual bidding process — one conducted on the double-quick and with limited financial disclosures.

The institute is lining up a Plan B, even as it works in multiple courts to resolve a dispute with the current network operator, now known as KCST USA Inc. but still referred to widely as Axia.

Also Wednesday, separate hearings before two judges in U.S. District Court in Worcester took up issues related to operations overseen by Axia, as well as its March bankruptcy filing.

Harold B. Murphy, an attorney for the network operator, told Judge Elizabeth D. Katz in a bankruptcy court hearing that his client is working to resolve litigation upstairs in another federal courtroom. He said two hearings have been held and another is planned Thursday to resolve a business dispute, amid requests for a temporary restraining order and preliminary injunction that have been sought to safeguard continued operation of the middle mile network, as it is known.

"We remain interested in doing that, and hope those conversations can occur," Murphy told the judge. He added that the talks have not yet produced specific terms governing future network operations.

Outside the courtroom, Murphy declined to elaborate on the status of those talks.

Bankruptcy backdrop

Axia's bankruptcy filing was the elephant in the room earlier Wednesday, as officials with MBI briefed prospective bidders and provided a look inside the network's financial condition.

The session was mandatory for prospective bidders. It follows the MBI's issuance of a request for proposals March 31, days after learning of Axia's bankruptcy filing.

Timothy Connelly, chief executive officer of the Massachusetts Technology Collaborative, which oversees the MBI, said in an interview with The Eagle that he was pleased with the turnout.

"It seems like a lot of people are interested," he said. "There were a lot of firms."

Companies have until May 1 to submit proposals on how they would run the network.

Connelly told representatives of the companies, some listening in on a conference call, that despite Axia's bankruptcy filing, he believes the network can be run profitably.

"We have a wonderful asset called the middle mile. We think there's an outstanding commercial opportunity," Connelly told the companies, in a session at the MassTech headquarters in Westborough.

Based on the last two quarters, the network operator's revenues work out to $3,183,600 a year, according to the MBI's presentation. That revenue comes from 18 wholesale customers, 533 "community anchor institutions," 119 other end users and additional proceeds.

Axia's revenues have been growing, Connelly said, though the company reports in one of its bankruptcy filings that it is losing $2,800,000 a year.

In its March 22 bankruptcy filing, Axia said it anticipated revenues of $2,900,000 — a figure close to the MBI's statement. But it said it faced operating expenses of $5,700,000.

Connelly said if the state goes with a new operator, contract terms will be more simple. He said Axia found the financial picture not "to their liking ... You will be different."

He sought to reassure bidders that they can make money based on Axia's current roster of clients and customers.

Cornell Robinson III, a senior project manager for the MBI who works on the middle mile, said the existing Axia contract need not be a model.

"We're starting back at zero ... for the new agreement," Robinson said.

When pressed by one prospective bidder for more financial information, Connelly said any new contract would not resemble what he called the "complex" deal with Axia.

"Give us a sense of what the model is that works for you," Connelly said. "Give us your best shot."

A new operator is expected to pay a "platform fee" for use of the network, then provide all management, including customer service.

"We're trying to have the uncertainty come out of your equation," Connelly said of the arrangement.

Quick action

Connelly acknowledged that the state is operating on a tight timeline to find a new partner, should the bankruptcy proceeding result in Axia dropping out.

He and others made clear that the state will review responses from bidders even as it pursues negotiations with Axia that could result in it remaining on the job.

"We don't know how that is going to turn out," Connelly said of the bankruptcy case, "and will not comment on that."

"We're trying to accelerate everything here," Connelly told the tech firms' representatives. "We're trying to give you our best answers today ... but there are circumstances beyond our control."

Companies represented at the briefing included two regional utilities, Holyoke Gas & Electric and Westfield Gas + Electric. Also present were executives with Crocker Communications, OTT Communications, 186 Networks, Century Link and Access Plus Communications, among others. Adam Chait of the Berkshires-based Fiber Connect, participated by teleconference.

The state is asking bidders to explain how they would provide a smooth transition from Axia. That led one bidder to ask about customer information held by the current operator.

"We would seek to obtain all those records to give to the next operator," Robinson said.

Court action

Katz, the bankruptcy court judge, told attorneys in the later Worcester hearing that she is eager to be updated on progress in the other federal court regarding litigation. A status hearing was scheduled for May 10.

The Wednesday bankruptcy court proceeding was also attended by Stephen Darr, who is acting as chief restructuring officer for Axia. Darr rose to explain why official mail from the bankruptcy court to the company's Concord address had been returned. Darr blamed the problem on an incomplete address and said he was surprised to find a building in Concord as large as the one the company occupies.

"To reassure the court, yesterday I paid the rent," Darr said.

Murphy said that Darr has met with Axia employees since the bankruptcy filing.

"We're trying to do this in an organized fashion," Murphy told Katz.

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


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