— by Don Webster —

Remember OPALCO? It was that friendly, financially conservative San Juan electrical Coop that did such a great job of supplying our electricity at rates below much of the nation. It had the foresight to take the initiative to bury most of its transmission lines to improve reliability and also to include fiber optic cable in its main lines. Somewhere along the way its leadership and BOD decided to become the big fish in the direct-to-consumer provision of broadband services here in the islands and to do so without member support.

Back in early 2013, OPALCO made a proposal to utilize its broadband infrastructure to allow improved broadband connectivity. OPALCO would provide the backbone and the ISP businesses (such as Rock Island and Orcas Online) would deliver the service to islanders. Early adopter sign-ups were solicited to determine the interest amongst OPALCO members. Approximately 900 members or 8% of the membership committed to the program. This commitment level was massively short of the startup criteria (5100) and the plan was abandoned. But wait! Although the vast majority of members did not support this internet proposal, the OPALCO BOD and management continued to toil away on an internet development.

In November 2013 the OPALCO BOD decreed: “OPALCO shall accelerate expansion of our local member-owned, robust and reliable high-speed data infrastructure to provide Internet, phone and emergency communication services to our members”.

2014 and the OPALCO BOD continues on its track of questionable decisions. The BOD selects Mr. Hildreth as the new OPALCO General Manager after concluding that it did not need to do an Executive Search to find the best candidate for the position. There is nothing wrong with promoting from within but it should not have been done without undertaking the prudent due diligence of soliciting outside candidates and interviewing them prior to making a selection. This is particularly important when you have a small organization like OPALCO.

OPALCO also hires a Senior Consultant, Mr. Gerry Lawlor. His role was “Leading the business plan development and the go-to-market strategy for Island Network, a division of Orcas Power & Light Cooperative”. The Internet Business plan, dated December 31, 2014 envisages working with the local ISP businesses such as Rock Island and Orcas Online but also concludes that the ISP providers could not, on their own, roll out the program at the rate the OPALCO management and BOD desired. OPALCO decided that it needed to be a direct seller, a competitor to the local ISP businesses. Of course that means that OPALCO will shoulder more of the business risks. Note also that the Business Plan has a very vague Exit Strategy section with no apparent triggers or the projected cost to the membership if this new business should fail! Just a hand-wave at bottom-line risk management!

On February 19, 2015 (less than 2 months after the Internet Business Strategy was published), OPALCO suddenly announces it has purchased Rock Island Communications. Talk about something out of the blue! A deal put together in secret, without any public or member input. Certainly not something contemplated in the 7 week old Internet Business Plan. One may ask why the secrecy?

Why did OPALCO decide to be a direct seller in competition to the ISPs and later suddenly decide to acquire Rock Island? Lofty goals had been set for the number of subscribers that were required for the financial success of this broadband enterprise. First they made the decision to become a direct seller and compete with the local ISP businesses. More recently they recognized that even with direct sales by OPALCO they could not achieve their targets. To quote from an email I received from Mr. Lawlor defending the OPALCO actions “This is a service level that could not be met by any of the local ISPs including Rock Island without the investment been made by OPALCO. The subsequent decision to move ahead with a purchase of RI was driven purely by the economics and need to hire the necessary staff to support the client base.” That really doesn’t sound like an OPALCO comment. It sounds more like something CenturyLink would say.

So over time, OPALCO has morphed from a failed proposal to supply the high speed broadband backbone to local ISP businesses, to becoming a direct ISP competitor and ultimately buying the largest ISP in the San Juan Islands. What does that really mean to the remaining smaller local ISP businesses? Only time will tell but it is likely to diminish their ability to compete against the financial resources and marketing that OPALCO can muster. Competing against local private businesses doesn’t sound like the OPALCO I used to admire.

“to Morph”: To change gradually and completely from one thing into another thing usually in a way that is surprising or that seems magical. (Merriam-Webster Dictionary)

The “Morphing” of OPALCO. Surprising to me, certainly! Magical? I think not.

The OPALCO BOD has made a series of poor decisions starting when they decided to ignore the minimal member support (8% of members) for their original 2013 internet program.
• They simply found a new way to move forward, using in part monies from rate increases they have unilaterally levied against all members. Later they decided that rather than just supplying the high speed backbone they would become direct business competitors of the existing ISPs.
• The OPALCO BOD concluded that they did not need to see if any better candidates existed for the General Manager’s position. How do they know that if they don’t look at others? This is the top leadership role in OPALCO. Ultimately Mr. Hildreth is one of the two individuals (the other being Mr. Lawlor) credited by the OPALCO BOD with coming up with the Internet Business Plan.
• They hired a Senior Consultant (Mr. Lawlor) to develop the Internet Business Plan. The December 2014 Business Plan puts much of the financial risk on the back of OPALCO (and therefore its membership) instead of experienced broadband businesses. It lacks any meaningful exit strategy or risk assessment for the Cooperative.
• They decided to buy Rock Island Communications. That was not part of the 7 week old Business Plan but apparently their plan was already in trouble. They needed the resources of Rock Island to help them achieve their growth targets.
• The BOD loved the Business Plan enough to hire the Senior Consultant (Mr. Lawlor) as Executive Vice President of the newly acquired Rock Island. Sweet deal. Mr. Lawlor has assured me that “The community is desperate for an alternative for both data and voice service”. Now I am not certain how Mr. Lawlor measures desperation but to my knowledge there are only two data points. 8% of our membership was willing to sign up in the 2013 program. The 2014 OPALCO member survey which indicated that only 34% of the participating membership was dissatisfied with its current internet service. Neither data point is an indication of a “desperate community” on my scale and certainly not a mandate or endorsement by the membership to launch this program.

There is nothing magical about the morphing of OPALCO. The BOD, management and consultants are pushing ahead with their plans creating an undisclosed financial risk to the COOP without any indication of support from the majority of the members or a robust exit plan.

It is both sad and irresponsible. I believe at its heart most of OPALCO is still predominantly those hard-working, friendly folks who provide us reliable electricity. It has been taken over by a BOD and management who have their own agendas, ambitions and ignore the reality of what the membership wants and is willing to pay for. We, the members, are and will continue to be footing the bill when it fails.

All this member can do is vote with my wallet and my membership at the Annual Meeting. I won’t be signing up for the OPALCO internet offering and I will vote against any current incumbent Director who is up for re-election. I urge others who do not like the current OPALCO direction to speak up. Together, we the members own OPALCO. The BOD and management should be responsible to its members.

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