Bonner County wireless company raises concerns federal funding use

A small internet service provider near Sandpoint has been caught in the middle of delayed information, a rush to provide federal funds and a process that could lead to government officials using taxpayer dollars that would give an advantage to the provider’s competition.

Ryan Green is the president of Kaniksu Networks, a small internet provider that has about 450 customers in the area east of Sandpoint, including Hope and Clark Fork.

“We got started because there was a huge gap in internet speeds from the current providers,” Green said. “We invested about $250,000 of our own money into this and we have about 450 customers that we are serving with internet service.”

Idaho, like all states, obtained $1.25 billion from the CARES Act federal pandemic relief package. Of that, about $50 million was earmarked to increase broadband service.

With that money, Bonner County began receiving requests for proposals for projects to improve internet service. Intermax Networks, which has about 4,500 customers from the Canadian border to St. Maries, submitted requests for 14 projects to use the federal money to expand internet access to rural areas.

However, six of those projects would essentially cover the area already served by Kaniksu, meaning taxpayer dollars could be going to give Intermax an advantage over the smaller company, Green said.

“We have invested significantly in our business. We have strong customer loyalty and a strong following,” Green said. “Our biggest issue is that our competition is able to come in and essentially build up their own infrastructure at taxpayer expense.”

Green informed Bonner County Commissioners about the perceived conflict, and they held an executive session last month at which Green and Mike Kennedy, president of Intermax Networks, were able to make arguments about why the projects should or should not move forward.

“It’s a hard thing to wade through,” Kennedy said. “In the case of Bonner County, the need is huge. We went on the data we had.”

Green explained that the Federal Communications Commission requires service providers to report how many customers they have every year. Kaniksu provided that information but the reporting is dated, meaning the latest FCC reports don’t show the company’s updated customer base.

“The whole grant application is a little bit rushed,” Green said. “I think some of this is stipulated because of the CARES Act. Any project that gets funded must be completed by Dec. 15. That’s a very tight deadline.”

Green contends it should be county leaders who make the decision on awarding the grants. On July 29, Green obtained an email written by Bonner County Commissioner Dan McDonald in response to a Kaniksu customer. McDonald replied in the email: “Thanks for your email. I agree with you and Kaniksu on this.”

However, the county commission has punted the decision on the projects’ approval to the Idaho Department of Commerce, Green said.

Commissioners “know the community better than anybody else would. It makes sense to me that they would make the decision,” Green said. “The state won’t know the rural areas this service would provide.”

Kennedy said while he’s sympathetic to the Kaniksu’s position, it’s part of the business model of smaller companies providing internet service. He noted that Green put in proposals for coverage areas that were challenged by Ziply Fiber, which purchased the infrastructure in four states from Frontier Communications.

“We had people build into areas we were serving 10 years ago,” Kennedy said. “Our choice was, do we learn how to compete better or do we whine? I don’t want to say Ryan (Green) is whining. But the reality is, it’s a patchwork of service areas. There are people who are just outside our service areas who are desperately in need.”

As for the argument that taxpayer money would give Intermax an unfair advantage, Kennedy said the government has provided subsidies for everything from electricity to railroads since “the dawn of time.”

“There has always been some level of government subsidy in this industry,” he said. “Where the cost to serve people will never return a private company’s investment, those areas remain underserved or the government steps in with a subsidy.”

Green said he’s hired an attorney to make a formal challenge with state commerce officials. A decision could come as early as this week.

“From our perspective, I don’t know how (county commissioners) can say we agree with Kaniksu but not take action,” Green said. “We are formulating our own response with our attorneys. The county is the one who should have made that call as far as we are concerned.”