Illinois Rejects Internet Buildout Bids

Published May 31, 2016

Illinois’ $96 million high-speed Internet plan stumbled out of the starting gate after state officials rejected all bids for 1,000 miles of state-owned fiber optics from Chicago to Collinsville. As a result, the project was rebid in mid-May.

The Chicago-to-Collinsville installation would cover 55 counties in East-Central Illinois and is the largest of five regional fiber-optic projects statewide that won a total of $173.9 million in federal broadband stimulus funding last year. The project is the only one that will be directly managed by the state.

“The state is in no position to be spending tens—if not hundreds of millions of dollars—on a project with no clear projections on the returns,” said John Bambenek, chief forensic examiner for Bambenek Consulting in Champaign, Illinois.

“Right now the state isn’t paying its K-12 schools, Medicaid providers, or social service providers on a timely basis,” Bambenek added. “So instead of the state meeting its commitments to the most vulnerable members of society, we’re wasting millions putting fiber in the ground when it’s unclear who will actually use it.”

‘Low-Quality Bids’
The East-Central portion of the grant uses more than a third of the stimulus funds and about half of the $60.2 million in Illinois matching funds for all five projects, most of which are starting construction or about to name contractors.

The state is operating under a deadline: The improved network has to be up and running by June 2013 to qualify for federal broadband stimulus funding the state won last year.

Bambenek says Illinois Gov. Pat Quinn (D) has been a major driving force behind the initiative. “Rural broadband has been a pet issue of Gov. Quinn going back before he was governor,” he said.  “The rebid was partly because so many bidders did not follow procurement rules and the general low quality of bids. In no small part this has to be because more reputable vendors have to question whehter the state will pay them on a timely basis as well.”

‘A Job for the Private Sector’
Scott Testa, an assistant professor of business at Cabrini College in Philadelphia, says state involvement in this type of project could run into many of the same problems as the numerous failed municipal wi-fi projects throughout the country.

“In virtually all cases, cities who were convinced to bankroll municipal wi-fi projects with promises of positive economic returns were stuck with white elephants as private partners pulled out or never became involved in the ventures in the first place,” Testa said.

“The government shouldn’t be involved in this,” Testa said. “The private sector and market dynamics should control the access for these types of projects.”

In addition to understanding when such projects make economic sense, private sector backing of the efforts also means no taxpayer outlays. That’s always important and is especially so for Illinois, which is struggling with budget shortfalls, pension underfunding, and several other serious economic problems.

“As a taxpayer, I wouldn’t want to be paying for this type of project,” Testa said. “This is something the private sector should do.”

Phil Britt ([email protected]) writes from South Holland, Illinois.