Waupaca Online could have a new owner within a month.
When the Common Council met Tuesday, Feb. 21, it accepted an offer from Northern Telephone and Data, of Oshkosh, to purchase the city’s high-speed, wireless Internet service for $225,000.
The vote was 8-0, with two aldermen – James Boyer and Paul Lehman – absent.
“It would be our goal to close this as soon as possible,” Bill Miller, president of NTD, told the council.
City Administrator Henry Veleker said the hope is to close within 30 days.
The $225,000 offer includes Waupaca Online’s equipment inventory and installed customer base.
Miller said NTD will pay the city $125,000 at closing and the remaining $100,000 within a year. Financial statements, such as their line of credit from a bank, can be provided, he told the council.
Mayor Brian Smith asked that the $100,000 be paid to the city in early January 2013.
As part of the company’s offer, it will:
• Assume the city’s liability of its 20mg AT&T contract. The liability to the city for terminating the contract before its end date is about $83,000.
Veleker said the contract is for the city’s pipeline to the Internet. “We had a five-year deal with them. We’re about 20 months into it,” he said. “NTD will cover that penalty. Anything we can do on the contract to help them out, we will do, like negotiating more bandwidth.”
• Have a dedicated 5.0mg circuit for city use – free for five years. This is a value of $5,340, as a 5.0mg circuit through NTD is about $89 a month, Veleker said in a Feb. 17 memo to the mayor and Common Council.
• Hire Waupaca Online employee Kevin Dimmock full time. Ralph Schmal, who has served as consultant to the city, would be used on a limited basis during the transition. The company would not need to use the utility’s space at City Hall beyond a short transition period.
“We will have a facility here someplace,” Miller told the Common Council. “We will probably segment with some of our Oshkosh staff.”
The telecommunications and business services company was created in 1993 and provides local and long-distance telephone services as a Certified Local Exchange Carrier, as well as other services for both business and residential customers.
Those services include Internet service, web hosting, email hosting, security systems and monitoring and credit card processing.
NTD owns its owns fiber optic network that extends from Fond du Lac to Green Bay and a fiber and copper network throughout downtown Oshkosh, Neenah, Appleton and Green Bay.
In addition, the company owns and operates a fixed-point wireless network that extends from Fond du Lac to north of Appleton. From Oshkosh, it extends to the west end of Lake Poygan, to the Winchester area and back toward Appleton/Kaukauna.
NTD currently services about 1,000 business and residential customers over four radio frequency spectrums. By using that technology, the company is able to provide connections up to 20mb x 10mb in many areas.
The company has experience merging with other companies, to form larger partnerships. Most recently, NTD merged with the Appleton-based Athenet to create a regional service area that extends from Milwaukee to Green Bay.
NTD plans to initially use Waupaca Online’s logo.
Waupaca Online currently has about 270 customers, and Miller said they want to bring stability for the customers and more customer service availability.
“It’s a nice expansion for us,” he said.
The mayor said, “Most of us (at the meeting) have Waupaca Online or had it. We look forward to you taking it to the next level.”
Veleker said no city tax dollars were put into the utility and it did make a profit.
Miller commended the city for making a municipal-owned network profitable.
In an interview with the County Post West, Veleker said, “I think they will have the wherewithal and expertise and real desire to come in here and do a real good job with it.”
It was about 10 years ago that the city undertook the project, because there was a need in the community for broadband, he said.
“The council at the time was very forward thinking and said, ‘Let’s try this,'” Veleker said. “There was a lack of options in the community and other communities in the state had already gone through it.”
When the city started the utility, it did so with the idea of just providing the service to businesses.
However, in conversations with other municipalities, the city of Waupaca learned there was a residential market and that if they were to go wireless, there would be lots of potential, Veleker said.
“Wireless was affordable to deploy, compared to fiber, he said. “We capitalized the whole project with about $600,000. It is debt free and is being sold free.”
Probably the most important decision the council made, Veleker said, was to build its own stand-alone tower.
That tower cost about $200,000. About four years ago, the tower, which had a number of leases on it, was sold by the city for $600,000.
“At the time, we had about $400,000 in debt, so we paid that off and ended up with about $180,000, which could be used to support the operation,” he said.
Through the years, some in the community criticized the city for starting the utility, saying the city should have never done it.
“We did it, in my view, for the right reasons,” Veleker said.
Those reasons included to provide a choice and a broadband competitive rate and to also provide tax stabilization and quality of life.
“Waupaca Online delivered back to the city $280,000,” he said.
Assuming the $225,000 sale price and also including the $180,000 after the tower was paid off, Waupaca Online will have made a total of $685,000 for the city, Veleker said.
“We accomplished the goals. We didn’t use taxpayer money. We funded it through user fees,” he said. “The objective person would call it a success.”
The utility faced troubling times during the past couple of years, and last October, the Common Council voted to seek a buyer for Waupaca Online after the utility lost more than 50 customers in 12 months.
The down economy and stiffer competition affected Waupaca Online’s customer base.
“We probably should have had a discussion two years ago where we talked about beefing up the marketing budget,” Veleker said. “We’re at the point now where the private sector can come in and expand the service. As a municipality, we took at as far as we could. Because we’re a government, we had to talk about everything openly.”
He believes that transparency resulted in some customers feeling uncertain about the utility and thus seeking different options.
The sale of Waupaca Online will help the city when it puts together its 2013 budget, and Veleker thanks Dimmock and Schmal for their efforts.
“Essentially, the two of them ran it for nine years and did a decent job for us,” Veleker said. “The city wasn’t in the position and didn’t have the motivation to carry on. It was time to step back and let someone else run with it. They did an admirable job.”
He also appreciates Waupaca resident Dale Brahmsteadt’s efforts in helping the city find a buyer. The city hired him to identify potential buyers for Waupaca Online.
“He found 10 or 11 companies. From that list, we identified four that had a stronger interest than the others. They were sent information packets,” Veleker said.
NTD was the only company that made a site visit and an offer.
Veleker said that because of Waupaca Online, “there are people out there who have Internet who wouldn’t have it otherwise.”
Of its 270 customers, about 150 have been with Waupaca Online for more than five years, he said.
When NTD brought a proposal forward, he checked out the company’s background.
“They’ve been in the business 20-plus years. They started selling long distance,” Veleker said. “I think it’s a good fit. They’re real excited about expanding their business to Waupaca.”
Veleker said Waupaca Online’s customers will continue to receive good service.
“There are some things they (NTD) want to do to enhance the product for the customer. It should be a really interesting and exciting time for them the next couple of months as they come on board,” he said.