Tag: fiber optics

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Politics Politics Feature

The Loop

It’s difficult to tell who exactly emerged victorious from last week’s MLGW board meeting that finalized approval of the sale of its interest in Memphis Networx to Denver-based Communications Infrastructure Investments (CII). The big losers, however, were easier to spot: MLGW ratepayers, who saw the public utility’s $29 million investment in the city’s fiber-optic future go up in a cloud of virtual smoke.

MLGW ratepayers once owned 80 percent of Networx but watched that share slip below 50 percent in 2006, when private investors operating under the umbrella of Memphis Broadband, LLC guaranteed a $7 million loan to prop up the sagging business after the Memphis City Council refused to do so. Shortly thereafter, the new majority owners instructed Networx management to search for a buyer, a search that culminated last week with the approval of the sale to CII.

Given the disastrous course this public/private partnership has taken since Memphis Networx’ creation in 1999, the fact that a cloud of confusion and suspicion hangs over the final dissolution of that partnership should come as no surprise. Whether such suspicion is justified or not, it isn’t reassuring that representatives of Networx and MLGW have been less than forthcoming about how the final deal evolved and, further, have failed to voluntarily disclose several eyebrow-raising facts connected to the sale.

How close, for example, are the private investors and current and former officers of Memphis Networx to the presumed buyer? Close enough that buyer and seller share at least one mutual strand of DNA.

Robert Blow, a Virginia/Memphis-based telecommunications entrepreneur and one of the original investors in Memphis Broadband, was only 52 when he died of a heart attack in July 2002. Based on documents and comments from sources close to Networx, the Blow estate is still involved in Memphis Broadband, a group that includes local investors such as FedEx founder Fred Smith, Dunavant Enterprises, former NBC chief executive Thomas Garrott, and AutoZone founder Pitt Hyde, among others. Blow was also a founding partner of Columbia Capital Partners, one of the venture-capital firms backing CII, the Colorado-based holding company in the process of buying Networx.

Blow was, additionally, a founder of Paradigm Partners, a venture-capital firm that worked with Memphis Broadband to develop a $30 million institutional fund to help finance Memphis Networx. After the telecom crash of 2001, however, the funding environment for telecoms stagnated, and Paradigm bailed on the project shortly before Blow’s death.

Current Networx board member Andrew Seamons was also a partner in the Paradigm firm. When Paradigm disintegrated in 2002, he joined Pittco, an investment firm affiliated with retired AutoZone CEO Pitt Hyde. While there may be no direct financial links between Networx’ private investors and CII (like all new business environments, the wireless-infrastructure industry has quickly developed its own set of knowledgeable “insiders”), repeated claims by Networx representatives that CII just called out of the blue to see if the Memphis telecom was for sale seem implausible, given the relationship between the original Memphis Broadband group and Columbia Capital.

On July 5th, the day MLGW’s board voted to sell Networx to CII, Seamons made it clear that inquiries regarding the private investors’ holdings wouldn’t get very far. When asked whether any of the Memphis Broadband participants were invested in Level 3 Communications, the prominent infrastructure company that’s most likely set to acquire Memphis Networx once its financial situation is stabilized, Seamons explained that lots of people probably own a piece of Level 3, because “it’s a big company.”

Level 3 Communications isn’t directly connected to CII. But CII’s founder, Dan Caruso, was a founding executive of Level 3. Caruso was also the CEO of ICG Networks, which was owned by Columbia Capital and M/C Venture Partners and which was ultimately bought out by Level 3. When ICG was purchased from Level 3 by Columbia Capital and M/C Venture Partners, the Denver Rocky Mountain News reported that these two firms stood to “profit handsomely from the deal.”

Speaking on Seamons’ behalf, MLGW and Networx board member Nick Clark explained that, as an investor at Paradigm and Pittco, Seamons probably knew somebody employed by every group involved in the bidding process.

Possibly true. But what’s the real story? Is the telecom infrastructure business a tiny world where everybody’s in everybody else’s business? Or is it a big world where nobody knows much about anybody? Or is it, as Networx officials would have it, both?

It’s a Small World, After All

On the day the MLGW board voted to sell Networx, it was acknowledged that Networx CEO Dan Platko and Tom Swanson, the McLean Group consultant who was enlisted to aid in the sale of Networx, were anything but strangers. In 2000, the two telecom veterans were employed by Intira, a communications company founded in St. Louis by former Networx CEO Mark Ivie. Intira also employed former Networx controller Jeff Rice.

It was also noted that Platko signed a contract offering Swanson $2,000 a day to consult with Networx’ sales division through his personal firm, TJSwansonCo, almost two months before Networx approached the McLean Group to assist with the sale of the company.

According to Networx officials, the McLean Group was contacted in December 2006. Platko signed Swanson’s contract on October 5th. Previously, Swanson had only been identified in the record as a representative of the McLean Group. It’s unclear if Swanson consulted in both capacities simultaneously.

After MLGW’s vote to sell Networx, Swanson claimed that he and Platko hadn’t done business together since they worked for Intira. Several sources close to Networx, however, say Platko was trying — unsuccessfully — to bring Swanson in as a consultant before Platko was named CEO. Those sources have also told the Flyer that there was a falling out between Platko and his predecessor, Mark Ivie, just prior to Ivie’s departure in 2006. Platko and Ivie were friends from their Intira days, and Platko lived with Ivie after being recruited to Memphis. After Ivie’s departure in 2006, Networx elevated Platko to CEO.

So who is Dan Platko? Prior to being recruited by Ivie, Platko was employed by Infinium Labs, a video-gaming company out of Florida that became infamous in that industry for burning through tens of millions in investor capital without producing a product. Press releases dating from 2004 identify Platko as Infinium’s vice president of operations.

Infinium (later renamed Phantom Entertainment) was founded by Tim Roberts, who also co-founded Intira with Mark Ivie. Platko and former Networx controller Jeff Rice worked for both Intira and later Infinium.

Confused yet? It gets worse. Between his time at Intira and Infinium/Phantom, Platko was employed at a director level for Equant, a division of France Telecom. He worked at a similar level for Relera, a Denver-based managed-services company that launched in January 2000 and partnered with Level 3 Communications — the same company rumored to be Networx’ ultimate suitor — shortly thereafter. While there’s no evidence that Platko and CII founder and former Level 3 exec Dan Caruso ever met during this period, the incestuous nature of the high-speed infrastructure industry makes the absence of some contact seem unlikely.

What Does It All Mean?

The majority of CII’s $11.5 million bid for Memphis Networx goes toward the retirement of Networx’ $7 million debt, plus interest. The private investors involved in Memphis Broadband split the $2 million remaining (their original investment was $5.5 million), leaving only a modest $944,000 to be returned to MLGW coffers.

End of the story? Maybe not. Networx posted modest operating profits in 2005, and sources still inside Networx say the company has done better since. Those same sources suggest that the company’s outstanding debt — which will be eliminated once the CII deal goes through — is the only thing standing between Networx and sustained profitability. That makes Networx an excellent buy for a holding company like CII, whose plans for the future may well include minimizing overhead, maximizing revenue, and positioning the company for sale at a tidy profit.

Between debt retirement and significant reductions in Networx staff over the past year, it would appear that much of CII’s job has already been accomplished. Now money that might have been applied to debt can be used to infuse Networx with additional operating capital, so it can expand infrastructure, attract new customers, and, yes, make money.

Silence Is Golden

Somebody stands to make a lot of money as a consequence of MLGW’s $28 million loss. Maybe those people aren’t connected to Networx’ private investors, but clearly, the high-speed infrastructure business is an insiders’ game, and the evidence suggests that there are plenty of insiders on both sides of the Memphis Networx deal — a deal that was presented to MLGW and, more importantly, to the public as a “now or never” choice: Memphians were told that any delay in decision making could queer the deal and send Networx spiraling into insolvency.

Shortly after news regarding Networx’ sale was announced, Nick Clark admitted that he’d known the telecom was in trouble for at least two years but kept quiet for fear of scaring off customers. Former and current Networx employees have claimed that the board outlawed the practice of issuing press releases some time ago. No news, good or bad, came out of Networx from December 2005 until the sale was announced earlier this summer. Networx’ Web site, for example, hasn’t been updated since March 2005.

Intentionally or otherwise, Networx’ minority public owners and the city’s elected officials were actively shut out of the sale process. Apparently, no one in MLGW management or on the Memphis City Council (which in theory has financial-oversight responsibility for the utility) was aware that Networx was in such dire straits.

Why would the Networx board keep MLGW management and the Memphis City Council in the dark? Why wasn’t the council given at least an opportunity to protect the ratepayers’ interest in the company by reconsidering their earlier decision not to provide additional funding before being presented with a fait accompli this summer?

In the spring of 2005, at about the same time as Networx’ initial request for more money from MLGW, Doug Dawson, a consultant hired to determine a fair market value for Memphis Networx, cited high overhead, big commissions, and immediately vested retirement packages as contributing factors to the company’s anemic financial condition.

In reality, most of the concerns listed in Dawson’s report had begun changing as far back as 2000, when Mark Ivie replaced Networx founding CEO Ward Huddleston. But once the media started running with Dawson’s report, the damage apparently was done. Sources close to Networx say that the negative reports and political squabbling, along with the ripple effect of the 2001 telecom crash, scared off customers and investors alike.

By 2006, however, the telecom industry was in turnaround mode, and Memphis’ telecom had posted its first-ever operating profit. According to Networx insiders, debt was the only thing standing between the troubled company and substantial profits. Given an opportunity to explore their options, the City Council may have been more cooperative this time around than they were in 2005. Council members Carol Chumney, Barbara Swearengen Ware, and Henry Hooper have all said as much.

Where Are We Now?

When is a deal not a deal? When lawsuits get filed, of course. Immediately after the CII deal was approved last week, lawyers for New York-based American Fiber Systems filed a declaratory action lawsuit to determine who really presented Networx with the best bid. Ohio-based BTi Corporate, the other losing bidder, is also trying to keep its hat in the ring.

In an angry outburst at MLGW’s board meeting to approve the deal, BTi rep Dave McCabe called Networx’ bidding process a joke and claimed that the fix was in “from day one.”

But was it? Perhaps. Perhaps not. But at the very least, in a world as parochial and interconnected as this one seems to be, the line between insider and outsider trading seems little more than a hazy blur. Stay tuned.

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Cover Feature News

It’s Now or Never for Networx

CREDIT: Richard Thompson

Who made the best bid for Memphis Networx? Was it the well-funded seven-month-old holding company from Colorado — Communications Infrastructure Investments (CII)? What about New York’s proven infrastructure firm American Fiber Systems (AFS)? Or was it BTi Corporate (BTi), the darkhorse candidate that wants to turn Memphis into the bio-tech research hub of the Americas?

MLGW’s board says CII won the bid fair and square. The other bidders say the fix was in from day one.

It might be helpful for the City Council to hear all three companies explain why they think they made the best bid. But given the long, strange saga of Memphis Networx, such an occasion might distract from the unspoken question that loomed like a family curse over last Thursday’s vote by the MLGW board to sell Networx for a cash return on its $29 million investment of just $994,000: Namely, how in the world did Memphis Networx become lodged so inextricably between the frying pan and the fire?

Networx representatives made the case that delaying the company’s sale any longer will send it into a tailspin of irreversible loss. “It’s now or never” has been a reoccurring theme in the Networx debate. But when “now” is a paltry return of $994,000, “never” isn’t much of a threat.

The MLGW board meeting did reveal several apparent flaws in the bidding process. A presentation delivered by the McLean Group — the consulting firm hired to assist Networx through the sale — may have done more damage to the credibility of the consultants’ ultimate findings than anything brought to the podium by angry representatives of AFS and BTi.

McLean Group chairman Dennis Roberts and junior consultant Tom Swanson made the losing bidders sound so bad it became impossible to imagine how such nonserious bidders could have made it to the final three in the first place.

As the deal was explained to the media by Nick Clark — who sits on the boards of both MLGW and Memphis Networx — the bidding process was managed quietly through the McLean Group to weed out frivolous bidders and to avoid conflicts of interest. In a sneering assault on BTi’s credibility, one McLean Group consultant announced that a BTi principal had been making his living installing stereo equipment. (BTi founder and CEO Paul Allen has since stated that nobody in his telecom company has ever installed stereo equipment.)

The McLean consultants also said Allen’s company didn’t follow the rules and that its bank letters were unconvincing. They said BTi representatives didn’t show up for a scheduled due diligence meeting. (BTi has given the Flyer a letter from Thomas Murray of Fifth Third Bank reconfirming its interest in financing the Networx purchase based on a thorough process of due diligence.)

AFS’ problem, as identified by the McLean Group, was basically that they couldn’t show anybody the money. AFS has filed a declaratory action suit to prove their seriousness.

No BTi representatives were present when McLean consultants trashed their company’s bid, but AFS CEO Dave Rusin was visibly disturbed by the McLean Group’s findings. He shook with anger at times while explaining in measured words how his company survived the dot-com crash in 1999, weathered the telecom meltdown of 2001, and is a serious and reputable company.

He convincingly answered charges that his company wasn’t good for the cash by asking what was wrong with the $60 billion available to AFS’ historically cooperative financiers: Sierra Venture Partners, Lucent Venture Partners, North Atlantic Capital, and Hamilton Lane.

Dave Danchak, AFS senior vice president of corporate development, angrily said that the McLean Group’s figures didn’t look like anything he’d ever seen before.

Germantown resident David McCabe, a representative of BTi Corporate, arrived for the second half of the marathon meeting.

“They’re hiding something,” he insisted, accusing the McLean Group of spinning the facts.

McCabe also challenged the McLean Group’s assertion that BTi missed its due diligence meeting. He said that Networx representatives called unexpectedly on a Wednesday afternoon and asked if BTi could assemble its team and be in Memphis the next morning. According to McCabe, doubts were expressed on the front end as to whether or not his people could make it on such short notice, but they said that they would be in Memphis as soon as possible.

McLean consultant Swanson admitted that the due diligence process had been “accelerated,” a fact conveniently left out of the McLean Group’s original narrative, which alleged that the stereo-installing bunglers of BTi just couldn’t follow the rules. “Their story keeps changing,” McCabe declared.

After listening to McCabe’s indignant rebuttal of the McLean’s Group’s analysis, the MLGW board concluded that the McLean Group and BTi had had “a miscommunication.”

Although Rusin and Danchak of AFS had initially refused to comment on BTi’s proposal, the AFS reps returned to the podium and expressed sympathy for their competitor.

“Mr. McCabe talks about how the story keeps changing,” Rusin said. “Well, guess what? We come here today and find that the numbers have changed.”

Rusin and Danchak then unveiled their company’s lawsuit. MLGW board chairman Rick Masson expressed concern that the suit was part of an intentional ploy to further devalue Networx, which has only enough operating capital to survive for a month to 45 days.

CEO Dan Platko then delivered a grim assessment of Networx’ financial condition, and Clark described what might happen if the sale was delayed. Staff cuts would be necessary, he said, service would then decline, and customers would flee. According to Platko and Clark, it was doomsday eve for Networx, and the clock was ticking.

In spite of potential conflicts of interest, Clark maneuvered back and forth between his dual roles as MLGW governor and Networx board member. He spoke of the need for a transparent process and occasionally played the role of devil’s advocate, despite the fact that the Networx board had approved the sale to CII and had signed a binding agreement with the company.

Clark cited a Flyer story and asked a series of questions supposedly based on this newspaper’s ongoing coverage of the Networx sale. But Clark’s Flyer-based line of questioning left out the same embarrassing facts about possible conflicts of interest that were raised in the article that he’d omitted in a previous report to City Council chairman Tom Marshall.

After confirming that Platko had once been employed by Intira, a company co-founded by former Networx CEO Mark Ivie, Clark moved to another subject, without mentioning the fact that Swanson — the McLean Group’s allegedly unbiased third party — had also been a vice president at Intira. Nor did Clark mention that Swanson, prior to assuming his McLean Group duties, may have accepted a lucrative, paid consulting gig with Networx via his personal firm, TJSwansonCo.

After Clark’s omissions were noted, Platko and Swanson admitted that they’d worked together at Intira. Swanson later said that prior to the Networx deal, he and Platko hadn’t done business together since leaving Intira. However, a contract signed by Platko on October 5, 2006, suggests that Networx’ chief executive offered Swanson $2,000 a day for consulting with Networx’ sales division, a month before the McLean Group was called in to assist in Networx’ eventual sale.

The information becomes doubly troubling in light of Networx officials’ repeated failure to identify Swanson as having any duties above and beyond the work he was doing through the McLean Group. (Detailed questions submitted by the Flyer to Swanson and Platko have yet to be answered.)

“It was an imperfect process, but it’s an imperfect world.” This, more or less, was the opinion MLGW board members unanimously expressed prior to finally signing off on the sale of Networx to CII.

In a two-to-one vote with one abstention, the board passed a resolution to go forward with the sale of Memphis Networx to CII. In light of AFS’ lawsuit and mounting concerns within the City Council, it’s unclear what that resolution ultimately means.

Documents dating from 2004 show that Networx executives and at least one board member were actively negotiating to sell Memphis Networx to AFS in an unpublicized all-stock deal.

Although sources conflict on the details, it appears that Networx officials’ enthusiasm for closing the original deal may have faded when it was discovered that the offer would be small and paid in stocks, especially in light of the fact that MLGW, as a publicly held company, is prohibited from owning stock in a private company.

When asked last Thursday, Networx board member Andrew Seamons said it was highly unlikely that any of the private investors would have an interest in absorbing the AFS stock into their share of the sale. Seamons is professionally affiliated with Pitt Hyde’s Pittco investments. Hyde, who recently stepped down from his position as AutoZone chairman, is one of the original private investors in Memphis Networx.

Over the weekend, one highly placed proponent of the Networx sale to CII circulated news items intended to prove BTi was in over its head on the Networx deal.

Considering the board’s vote to sell Networx to CII, it’s hard to imagine what anyone stands to gain by further discrediting BTi. Unless it’s the fact that continuing the debate over who placed the best bid shifts focus away from the only questions that matter: When did Networx’ executives know the company was in a tailspin; and how were the company’s finances managed from that point on?

If the McLean Group was contacted to assist with the sale of Networx in December, as reported, serious concern over the company’s finances had to be growing by the time Platko offered Swanson $2,000 a day for services that have yet to be sufficiently explained.

Networx’ history of questionable decision-making ranges from disastrous technology purchases to a miscalculated deal with ServiceMaster that cost the telecom thousands of dollars a month for nearly a year. How did that history change when new CEO Platko found out that his company was in serious trouble? Did he tighten up the company’s belt or did he enable spending that further exacerbated Networx’ dire situation?

Platko and his predecessors had the advantage of using Networx’ private status to withhold information whenever anyone attempted to delve too deeply into the specifics of the company’s spending practices. The choice Networx executives have given its public owners — nothing or next to nothing — demands answers not available in the financial postmortems Clark has delivered to the press.

Epilogue: When Platko replaced his former colleague Mark Ivie as head of Memphis Networx in 2006, MLGW’s ratepayer/owners were not notified of the change. Clark, an appointed steward of the public’s interest in Networx, has described the lack of attention given to such changes at a company funded (in part) by public dollars as “fortunate.” To interpret his comment as “the less the public knows about what’s being done with its money, the better” may be unfair, but it’s also unavoidable.

Clark says he recognized that Networx was experiencing trouble when he joined the board in 2005. Ironically, given the final outcome, he says he kept quiet for fear of scaring off potential customers.

MLGW has fully enabled this disaster. Its board members have harbored concerns about Networx’ financial well-being for at least two years but allowed Networx to keep a low profile while the telecom was clearly wasting away. Silence and complicity in the name of maintaining Networx’ “competitive edge” precipitated MLGW’s recent “damned if you do, damned if you don’t” decision, wherein the only thing worse than selling its valuable telecom asset for a $28 million loss is not selling it right now … for a $28 million loss.

On Tuesday the Memphis City Council voted to discuss Networx-related issues at a meeting of the MLGW committee. Details of that committee meeting were not available at press time.

See MemphisFlyer.com for updates on the Networx story.

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News News Feature

Networx Down

Let’s begin with a very simple statement of facts: MLGW, Memphis’ taxpayer-owned public utility, has invested somewhere in the neighborhood of $30 million in a fiber-optic system called Memphis Networx. It has co-owned Networx for eight years with a group of prominent Mid-South business leaders incorporated under the name Memphis Broadband LLC. MLGW is now selling its share in Networx for $994,000 to Communications Infrastructure Investments (CII), a telecom-savvy holding company in Denver, Colorado.

To be more accurate, CII is paying $11.5 million for the company and the majority of its assets. After debt retirement, the private investors get to split $2 million among them while the city of Memphis gets a hard rock to suck on. To date, MLGW’s accounting for this unprecedented mishandling of rate-payer money amounts to little more than an official “oopsie.” Yet somehow, public outrage seems minimal.

If people are confused, it’s little wonder. Networx has always been something of a mystery, and media coverage of the hastily announced sale has been skeletal at best, conflating at every turn the interests of the private investors (profit) with the public concern and the historic function of a civic utility (sustainability and service). Reports of the sale have further confounded the issue by questioning the wisdom of MLGW’s initial entrance into the telecom industry, rather than exploring the circumstances surrounding its hasty, financially devastating exit. Again, let’s take things slowly.

Memphians don’t know what Networx is, and it’s tempting to suggest that’s by design. The company was never intended to be a service provider, though it sold itself to the city with fairy tales about bringing high-speed communication to underserved areas and — as one member of the City Council put it — “the Internet to poor people.” If our civic leaders had bothered to read the fine print, they would have known that the company’s promises were predicated on Networx turning a profit. And, from a net perspective, it never did.

So what exactly is Memphis Networx? Pretend that the market for drinking water is fragmented, with many different providers each claiming to have the tastiest, cleanest, best water. The problem is, they don’t have a way to get their product to the customer. The providers don’t want to cut their profits by spending the capital to install a better delivery system, so the city builds its own pipeline and rents that system to the providers, who in turn sell water to the citizens. Some of the providers sue the city, fearing that it will become a competing water provider with an unfair advantage over the private sector. Replace the word “water” with “digital technology” and you’ll have a rudimentary understanding of what Memphis Networx does.

Memphis Networx is a loop of 144 high-speed fibers running underneath the entire city. In addition to the subterranean fiber, Networx’ major physical assets include a secure, earthquake-proof data center with a satellite hookup and a pair of 2,000-gallon diesel generators in case the power goes out and a lot of high-tech gadgetry.

So what went amiss? According to MLGW commissioner and Networx board member Nick Clark, the technology and business plan began to fail in 2002, but that’s merely a signpost pointing the way to the current precipitous juncture.

Private venture capitalists and public utilities have a very different set of expectations. Public utilities plan over a 50-year horizon, according to Herman Morris, who was president of MLGW when Networx was created in 1999. Venture capitalists expect to see a return in three to five years. To that extent, Networx was handicapped out of the gate when the licensing process was drug out over 18 months by telecoms like Time Warner, which wanted to prevent Memphis from obtaining a competitive edge in the industry. By the time Networx was fully launched in 2001, the telecom-industry boom was nearing collapse. But the problem cuts deeper.

Networx could have started out on a better foot by doing some of the good things it promised, like bringing Internet connections to underprivileged neighborhoods. The profits wouldn’t have shown up right away, but such a move would have given the company a civic-oriented face. It would have built brand awareness and pride within the community. But all of these positive developments were predicated on eventual profits. However, big bonuses for executives were not tied to profits, and neither were generous housing expenses, instantly vested retirement plans, or fat, private-sector salaries. And all of this rampant spending was going on back when MLGW still owned an 80 percent share in the company it couldn’t watchdog or control.

In June 2005, MLGW president Joseph Lee, who was no fan of the Networx deal, put his personal reservations aside and lobbied the city to put more funds into the company.

“We don’t believe that having a $32 million stake in [Networx] and failing to get a $6 million loan guarantee should result in us losing such a strong equity position,” he said, stressing the value of the Memphis utility’s majority share in the public/private telecom venture. But the City Council, unable to see where all the money had gone, refused to provide Networx with additional finances. At that point, MLGW’s 80 percent share dropped to 49 percent, and Networx became virtually invisible. As projected, however, Networx posted its first, miniscule profit for the 2005 business cycle. The news went largely unheralded.

Clark admits that he’s harbored concern for Networx’ fiscal health for over two years. Why didn’t he say anything about it? Because “that information was not required to be publicly revealed.”

Responding to mild, if somewhat misdirected, criticism posted by media critic Richard Thompson at mediaverse-memphis.blogspot.com, Clark wrote, “The very act of publicly commenting on the financial stresses of a venture capital entity can have the adverse consequences of causing the opposite of what is in the best interest of the rate-payers.” So instead of commenting, and potentially scaring off, a few Networx customers, Clark and MLGW CFO John McCullough kept mum.

Clark recently released all of Memphis Networx’ financial summaries to the media, but the broad numbers don’t retroactively explain even half the story. Clark was simply playing by the rules as they were established on day one. What’s private is private, and what the private side does with the public’s money is also private.

What’s frustrating is that there were provisions in the Networx operating agreement that would have allowed MLGW to break off its relationship with Memphis Broadband to seek other partners or operate the network independently with greater transparency and oversight. Based on the current deal, MLGW could have paid the private investors $2 million and become its sole owner. In debt, yes. In dire need of capital, yes. But also subject to the same open-financial-records policy as any other taxpayer-owned entity.

All that is history now. But it is imperative that Memphians — and their government representatives — understand that dumping Networx at a $29 million loss would be a big mistake. Two independent sources have confirmed that Memphis’ telecom property was a major factor in enticing ServiceMaster to relocate much of its operations here. Although that doesn’t show up on Networx’ ledger as a profit, it’s a significant return on the city’s investment, and there’s more where that came from. It’s also difficult to place a value on the streamlined linking of Memphis’ fire and police departments, and the benefits and savings that might be realized by using Networx’ data center to centralize more of the city’s sprawling IT network. Businesses are going to continue to require data security and storage. Across the country, broadband will expand, and in broadband-poor cities like Memphis, it will expand spectacularly.

There are many questions remaining to be answered concerning the Networx deal: Why did the company obliterate its sales staff? Who is COO Dan Platko, and why does he live in Atlanta (or Denver, depending on whom you ask or which online networking tools you trust). Why weren’t local investors given first dibs on the deal? But the biggest question is a simple “why.” After scraping its way to near sustainability and surviving to the point where broadband is a necessity and municipal wireless is catching on, why sell Networx now?