|First Look: Another $30M RUS Loan Hits the Dust|
|Written by Dave Burstein|
|Thursday, 02 August 2012 21:05|
WiMAX provider Mainstreet Broadband shuts down suddenly. 1,200 homes in Decatur County, Georgia may be shut down at any time, as Broadband South LLC d/b/a Main Street Broadband ceased August 1st without notice. They've apparently been in trouble for a while, as I expect to confirm if RUS releases the data. Jonathan Adelstein, who has to clean this one up, didn't make the loan. He inherited it from Hilda Legg, who made a slew of loans valuing rural wireless providers at $3-5K/likely subscriber. Many are unsustainable.
"In March, I wrote that RUS writeoffs could easily reach $300M, hoping to be proven wrong. A friend in rural telephony forwards a comment "one third of his many rural telco clients are underwater, worth less than their RUS debt, with cash flow insufficient to pay RUS loans, selling spectrum to raise cash. Scary, but under-recognized." I suspect that's exaggerated, but clearly we're not out of the woods.
Decatur County added $2.5M for local service, which despite a big marketing push only attracted 1,200 customers. That's possibly not even enough to pay for the tower rentals and backhaul, although Justin Schuver at the local paper reports they are trying to salvage the network. Most of Mainstreet customers appeared to be in small cities where they had the choice of DSL, cable or both. It's very, very hard to win customers to fixed wireless in that case.
Congressman Cliff Stearns was right subsidy money is best spent on reaching the unserved.
Here's what left of Mainstreet Broadband
Notice to Customers and Vendors
We regret to inform you that as of today, August 1, 2012, Broadband South LLC (d/b/a Main Street Broadband, the “Company”) is forced to cease operations. Despite certain assurances, we have been unable to reach an agreement with our senior lender, the U.S. Department of Agriculture’s Rural Utilities Service (“RUS”) that would have enabled us to continue operations.
We encourage you to make immediate arrangements for an alternative broadband supplier, as the network will eventually be shut down. We apologize for the inconvenience caused.
Broadband South LLC