A new controversy regarding the future of a nonprofit cooperative that provides high-speed Internet services to most public schools and libraries in Wisconsin stems from an old debate about the public and private sectors competing with each other.
While a recent state audit showed WiscNet offers Internet services to its public clients at a much lower cost than what is available from the private sector, critics contend that's only true because the tax-exempt cooperative benefits from public subsidies that give it a competitive edge.
State lawmakers passed a law in 2011 that restricts how the UW System provides Internet services -- and thus its involvement with WiscNet. Barring changes before the law takes effect July 1, WiscNet supporters maintain the unfortunate result will be higher costs for taxpayers.
"The big question is this: Should the public support the creation of low-cost Internet service to public entities or should all Internet services be private, even if it quadruples the costs?" said state Sen. Kathleen Vinehout, D-Alma. "I would argue the public wants the most efficient system and the lowest costs possible."
But regional Republican lawmakers Sen. Sheila Harsdorf of River Falls and Rep. Kathy Bernier of Lake Hallie say it's not that simple, and they expressed concern about an entity aided by public grants and a cozy relationship with the UW System having an unfair advantage over private companies.
Still, the GOP legislators acknowledged WiscNet provides an extremely popular service for schools, libraries, universities, technical colleges, local governments and nonprofit health care providers in their districts. The problem, Bernier said, is nobody knows how prices charged by WiscNet and private Internet providers would compare if allowed to compete on a level playing field.
The telecommunications industry, which has lobbied heavily against what it calls the inappropriate relationship between the UW System and WiscNet, insists a changeover to private providers would not lead to sticker shock for public entities that subscribe to WiscNet.
"For the last year, my members have been working very hard at product offerings that will meet or beat WiscNet prices," said Bill Esbeck, executive director of the Wisconsin State Telecommunications Association, who claimed legislative changes made private companies feel confident they could compete fairly with the nonprofit.
Ross Wilson, chairman of WiscNet and education technology director for Chippewa Falls-based Cooperative Educational Service Agency 10, doesn't buy it and called it naive to compare the private sector offerings with WiscNet's end-to-end network services necessary for the next generation of applications.
"Make no mistake. We're saving the taxpayers big bucks," Wilson said, explaining that the lower rates are made possible by the "gigantic buying power" of a nonprofit system with 495 members.
The report released last month by the Legislative Audit Bureau indicated WiscNet members paid an average of about $500 a month for Internet services that would have cost nearly $1,200 if delivered by commercial providers, although Esbeck said "shoddy accounting practices" by the UW System make it impossible to know how much of that difference was the result of subsidies.
Bernier and several other rural GOP legislators, including Reps. Warren Petryk of the town of Pleasant Valley, Tom Larson of the Dunn County town of Colfax and John Murtha of Baldwin, supported a successful effort in 2011 to amend the state budget to allow the existing WiscNet system to continue for two years. At the time, they sent a letter to Assembly leaders calling for the compromise "to ensure that the citizens in rural Wisconsin have broadband Internet service."
Bernier said she signed the letter because she didn't want her local schools, libraries and hospitals left in the lurch but even then had a gut feeling that "we're on a slippery slope of using millions and millions of taxpayer dollars to build a system that competes against our private-sector businesses that provide Internet service."
While Vinehout characterized Republicans as believing anything that can be private should be private, she asserted it makes no sense to take the UW System out of the equation in the administration of WiscNet.
"The system is clearly working for our schools and local government," she said. "Low-cost Internet for public entities is clearly in the public's interest."
The audit made several recommendations, including that UW System officials explain by July 1 their plan for obtaining Internet services, disclose by Oct. 1 the extent to which UW institutions support grant-funded networks, improve documentation of financial agreements and recover by June 30 any balance remaining from $2.3 million in prepayments it made to WiscNet for services in the 2011-13 biennium. The auditors said that setup could violate statutes generally prohibiting state agencies from using annual appropriations to pay for services in future years.
Esbeck expressed dismay at what he called the "illegal" payments that were part of a "fast-and-loose relationship" between the UW System and WiscNet.
"The UW's shoddy record keeping is just the tip of the iceberg," Esbeck said in a news release. "The institutional arrogance revealed in the report shows a disregard for state statutes and the irresponsible use of scarce taxpayer resources."
Bernier said she also was concerned about the findings of poor record keeping.
In a seven-page response to the audit, UW System President Kevin Reilly promised to implement new policies to ensure its practices are in line with state statutes and the audit's recommendations regarding prepayments and written contracts.
Reilly also stressed the audit found no evidence the UW System subsidized WiscNet -- instead crediting WiscNet's cooperative business model for its ability to charge lower prices than the private sector -- and said the law change scheduled to take effect July 1 would result in multimillion-dollar increases in network costs, to be borne by students and taxpayers, and negatively affect the UW's ability to participate in broader research networks and fulfill its teaching mission.
Law Change Sought
"We ask the Legislature to modify the statutes in order to avoid these crippling, unintended consequences," Reilly wrote.
Even if UW institutions are forced to end their WiscNet memberships, as called for under current law, Wilson said he would expect WiscNet to continue to provide the same level of service for remaining members.
"The rest of us will miss our university members terribly, but nobody will miss a beat. We're good to go," Wilson said, calling it a shame that costs would rise for the UW System under that scenario because it would have to duplicate existing services.
Whether the Republican-controlled Legislature is willing to revisit the law is unknown at this point.
Harsdorf, chairwoman of the Senate's Universities and Technical Colleges Committee, said the focus should be on ensuring the UW System complies with state law and communities still have access to high-speed Internet.
What is clear, Bernier said, is that the relationship between the UW System and WiscNet will get much scrutiny in the next few months.
"It is a big deal coming down the pike," Bernier said.
Distributed by MCT Information Services
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