In the face of two years of legislative wrangling, telecom complaints and transition planning, non-profit Internet provider WiscNet is still standing.
Many observers see its continued existence as something of an open question, but not Executive Director Dave Lois. Even in the worst-case scenario, Lois is confident WiscNet will survive.
“WiscNet has always worked as a community, we’re very proud of that,” Lois said. “I talked about us being a business, but your question was about business, how the heck are you going to survive? We really approach it as we’re a community. That would be a community in a disaster and we know when communities get in disasters they tend to pull together and do amazing things. And I firmly believe that’s exactly what would happen.”
WiscNet, a membership-based cooperative Internet provider that started in 1990, has been the center of some controversy in the Legislature ever since 2011. Telecoms argued WiscNet — which served as UW’s Internet provider and still provides that service for the state’s libraries and most school districts — was effectively being subsidized by the university, violating state law that prohibits the university from competing with the private sector.
WiscNet rejects the subsidization argument, pointing to payments between UW and WiscNet as signs of an agreed-upon business relationship. Lois notes WiscNet started as an outgrowth of UW employees and was intended to be an extension of the Wisconsin Idea.
“We took the good stuff associated with research and communication networking and pushed it out to the corners of the state,” Lois said. “And in certain circles, that’s a threat to the telecommunication industry. I think there’s an obvious angst there, but as a threat, I think that could be as much a poor perception as reality.”
Since Republicans took control of state government, the Legislature has passed a series of laws explicitly outlawing a cooperative relationship between UW and WiscNet and set a Jan. 1, 2014 deadline for the two entities to sever their relationship.
WiscNet and UW are finally on track to separate their assets and exist as two independent entities, but not for at least another 14 months. While both will have to patch gaps in fiber network coverage that the other filled, UW is expected to retain most of the ownership of existing fiber networks, while WiscNet will maintain much of the hardware associated with managing traffic over those networks.
That has prompted a question among observers: How can WiscNet serve its customers if it’s essentially rebuilding its infrastructure? Lois is mum on some of the business strategies, but maintains confidence that the capital is there to restore network capabilities following the split.
“The WiscNet membership has been paying for this stuff all along,” Lois says. “We’re a 501(c)(3) nonprofit business, so we are a business. Everything we’ve been doing for the last 25 years we’ve had to make sure we’ve provided services to our members that are of value such that we could operate our business. The important pieces of that when you’re already paying for all those services, when you’re already paying for all those services … we have a strong business model behind it. What we’re doing is we’re losing about 26 of our members. And truthfully, they’re big members … but they’re only about 20 percent of our business.”
An IRS form filed for 2011 listed WiscNet’s total revenue at just over $8 million and total expenses at $5.7 million.
Until the split happens, however, UW would still use WiscNet for its services and vice versa, prompting some legislators to ask for more details on why there’s no other way to go about it. Sen. Sheila Harsdorf, R-River Hills, has said she’ll need more information from UW before she can vote to push back UW’s deadline to separate from WiscNet.
Lois admits that it’d be a “worst case scenario” if the Legislature does not push back the deadline for the separation of assets, but he also believes the Legislature wouldn’t make that move. Right now, most school districts and libraries depend on WiscNet for their Internet services and legislators have been keenly aware of that relationship. Any immediately disruption to WiscNet’s services would likely cascade down to its membership and cause more problems than an extension would.
“It’d be disruptive to the UW System, too,” Lois said. “We’re talking about shutting down the business of the university, we’re not just talking about using this to access the Internet for what we do at home. All of the business of the university is done across the network.”
The more realistic threat to the non-profit is how it operates in the marketplace now that the telecoms are starting to match or undercut WiscNet’s prices in some areas. At least seven school districts have switched from WiscNet to standard telecoms in the last few months, with some citing the price points as a reason.
Lois says it’s “awesome” that the telecoms have been able to offer affordable rates to those districts and added that WiscNet has been a part of driving those costs so low in the first place. But he acknowledges that some members have come to the group with concerns over the future.
“It’s reasonable, ” Lois said. “We’ve been in the political spotlight for two years and it hasn’t been easy. So the question is a natural one, but the answer is that we’ve got a strong business model, we’ve got a solid budget, we’ve got money and capital available to us to build out the new network pieces and we have numerous options to put those pieces in place.”
— By Jason Smathers
WisBusiness.com
