Maine would seem to be the poster state for broadband stimulus funding. In addition to being largely rural, it is geographically remote, meaning no one builds a network through Maine to get to anywhere else.

Add to that the fact that during the years when most telecom and cable companies were building out their broadband infrastructures, Maine’s two largest incumbents -- Verizon Communications Inc. (NYSE: VZ) and Adelphia Communications -- were seeking to sell off the state network and going through a bankruptcy-driven breakup, respectively. The result was a substantial lag in network investment.

So it shouldn’t have been a shock when a public/private partnership, Maine Fiber Co., won a $25.4 million grant to build what is called the Three-Ring Binder, an middle-mile fiber optic network that will include three fiber rings in Western, Northern, and Downeast Maine. Maine Fiber’s intent is to lease dark fiber as an open access network, and not to sell commercial services.

This no-brainer network has become controversial, however. It is now facing a challenge from FairPoint Communications Inc. , which bought Verizon’s networks in Maine, New Hampshire, and Vermont, and has gotten a bill introduced in the state legislature prohibiting the state and state-owned divisions from providing telecom services to non-state entities.

In addition, the non-profit Maine Fiber has been unable to gain CLEC status -- since it is an open access network and not a service provider -- and so it now needs special action by the state legislature to gain access to 36,000 utility poles before it can begin construction. With a 2012 deadline looming to get the network up and running, delays are a major concern.

At the heart of the dispute is Fairpoint’s insistence that Three-Ring Binder is a government-funded duplication of its own fiber optic network. Those who want the new network built complain that Fairpoint refuses to lease dark fiber on its network, that its fiber optic network lacks the necessary capacity, and that its leased services are too expensive.

One of the major proponents for Three-Ring Binder is Networkmaine, the consortium charged with running a statewide network connecting UM campuses, the state community colleges and public schools. That statewide network was originally funded by state-ordered Nynex refunds, then later by the e-rate program.

Because of Maine’s recent history with incumbent network operators, Networkmaine has lagged other state groups in building its research network, says Jeff Letourneau, associate director, Communications and Network Services for the University of Maine and the acting executive director of Networkmaine. The state network initially used ATM and frame relay services but found those couldn’t scale. When other research networks were moving to IP/Ethernet over fiber, Networkmaine was a bit hamstrung, he sats.

For example, in 2005, the six New England states got together to create a regional research network. But while the southernmost states -- Connecticut, Massachusetts, and Rhode Island -- were able to execute a successful request for proposal to get access to fiber networks, the northernmost states -- Maine, New Hampshire, and Vermont -- were not, according to Letourneau.

“That’s when we realized that we had to do a grassroots kind of effort here and work with independent telephone companies and smaller competitive CLECs and see if we can’t find a way to get what we needed to stay competitive with our research and education peers, which is access to dark fiber, while not looking like a threat to these smaller entities. We wanted to make sure they understood that this would be a win-win for everybody.”

In late 2006, Networkmaine teamed up with The Jackson Laboratory, a leading genetics research lab in Bar Harbor, and used a combination of state grants and Jackson’s private R&D money to put out an RFP for a 450-mile dark fiber network to connect Maine to the closest Internet 2 gigaPOP (point of presence) in Cambridge, Mass. In January, Networkmaine announced it is deploying the Ciena Corp. (NYSE: CIEN) CN 4200 FlexSelect Advanced Services Platform on that network.

Two service providers -- Mid-Maine Communications and Oxford Networks -- stepped up to build a link that got close enough to Cambridge to reach dark fiber facilities available in Massachusetts, Letourneau says.

Networkmaine still needed to cover the state and to build resilience into its networks via rings, and that is where Three-Ring Binder comes in. The broadband stimulus program represented a way to extend fiber into the truly rural areas of Maine -- Arostook, Hancock, Washington, and Moosewhack counties -- that aren’t along the I-95 corridor, Letourneau notes.

By creating Maine Fiber Company, which is spending $7 million in private funds from GreatWorks Internet in addition to the federal money, proponents of this approach believe they are doing the most good, because anyone will be able to lease dark fiber.

That may be true, says Jeff Nevins, spokesman for Fairpoint, but this network still represents competition to the fiber Fairpoint is also building.

“We’re not against bringing $25 million in federal money into Maine, the way some people have said,” Nevins said. “And we are not opposed to the competition. What we want is a level playing field.”

Fairpoint has invested more than $90 million in building fiber optic networks in Maine, New Hampshire, and Vermont since acquiring the Verizon networks there, and has plenty of network capacity for Networkmaine and others, Nevins says. He asserts that Fairpoint won’t lease dark fiber because it is against company policy to do so. “We want people on our network.”

And that’s a problem for Networkmaine, according to Letourneau. He maintains Fairpoint’s rates for leased access are two to three times higher than those of dark fiber access via Maine Fiber Corp. With a lower cost for middle-mile fiber, Networkmaine will be able to invest its limited capital in more last-mile fiber, he contends.

“High-speed broadband access is center to our mission, there is no way you can get around it these days,” Letourneau says. “We went through half a dozen years where our research was being held back because a couple of private companies weren’t willing or able to make the investment in the infrastructure. We can’t ever be in that position again. We are probably the last region in the country to do this. We are not being cutting edge here -- we are just keeping up with the Joneses.”

Nevins concedes that Fairpoint’s rates are probably higher -- but that’s because Fairpoint isn’t getting tax dollars to build its network and must recover its investment in the marketplace.

“They are going to sell to the same customers we are going to sell to, and if you have a federally subsidized network you have an unfair advantage,” says Nevins.

Fairpoint and Maine Fiber are currently in discussions -- at the behest of state officials -- looking for a middle ground. Nevins admits that might be hard to find. Fairpoint would like Maine Fiber to use its network for the middle mile and invest instead in last-mile facilities, but that could well mean giving up the $25 million in BTOP funding, since there are no set procedures for dramatically altering a broadband stimulus application once it is awarded.

Letourneau believes the original Three Ring Binder will be built as planned, pointing to early vetting of the project by the state's Broadband Strategy Council. Maine Fiber has even offered Fairpoint the opportunity to build and operate the network, using its union labor force, Letourneau says.

“Politically, we think we have a lot of support,” he says. The current session of the Maine legislature is scheduled to wrap up this month. “I’m confident that they will back us.”

— Carol Wilson, Chief Editor, Events, Light Reading