West Va. could lose $2.5M in broadband funds as Citynet spars with Frontier, CWA

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West Virginia might have to return $2.5 million in broadband stimulus funds if competitive provider Citynet can't convince the National Telecommunications and Information Administration (NTIA) to approve its middle mile fiber project to extend broadband services throughout the state. The project is also under fire from Frontier Communications (Nasdaq: FTR) and the Communications Workers of America (CWA).

This $2.5 million amount is part of a broader $126.3 million stimulus grant the state was awarded in 2010. If it can't use the money by the end of the year, the state will have to return it to the federal government.

Citynet wants to use the money to build nine facilities that it said will give West Virginia direct connections to the national Internet "backbone" in Pittsburgh and Columbus, Ohio, reports the Saturday Gazette-Mail.

In October, the NTIA decided not to approve the project, citing a number of issues including the state not giving them information about its proposal to return about 100 unused routers they purchased from Cisco (Nasdaq: CSCO) in 2010.

The agency also said Citynet had not provided it with letters on which communities would benefit from its network build, and that there was an $880,000 shortfall in the project budget. The NTIA said it was concerned that Citynet would not be able to complete the project by the end of this year.

Jim Martin, Citynet's CEO, said in a letter to West Virginia government officials that it would cover any budget shortfalls and that it could finish the project on time.

"The state should not be penalized and required to send back residual funds because of timing concerns that are just now being presented, especially since much of the delay over the past month was caused by the federal shutdown," Martin wrote in a letter to the state.

Besides the NTIA, Citynet's plans have come under fire from the state's dominant service provider Frontier and the CWA union.

"We have questions whether the project may be duplicating an (Internet) network that's already there," CWA's Elaine Harris told the Saturday Gazette-Mail.

In March, West Virginia Gov. Earl Ray Tomblin canceled a statewide broadband summit because of a federal investigation into the state's alleged misuse of a part of the stimulus grant meant to extend broadband services to hospitals and libraries.

West Virginia is hardly alone in having problems with using broadband stimulus funding. A similar issue arose in Louisiana where the U.S. Dept. of Commerce revoked its $80 million Broadband Technology Opportunities Program (BTOP) grant in October 2011.

For more:
- the Saturday Gazette-Mail has this article

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