The company that runs the state-owned high-speed broadband network in Western Massachusetts filed for bankruptcy protection Wednesday, claiming the operation has been losing money from its inception.
KCST USA filed for Chapter 11 protection in US Bankruptcy Court in Worcester, saying it has been unable to resolve ongoing financial problems with the state. The company predicts the network will operate at a nearly $3 million annual loss, and reported liabilities of about $19 million and assets of $529,000.
MassBroadband 123 provides high-speed fiber optic service to 124 communities in Western Massachusetts, and was built with $90 million in state and federal grants. The Massachusetts Technology Collaborative signed a contract with KCST in 2011 to operate the network, which provides Internet access to hundreds of schools, hospitals, and government agencies throughout the region.
But according to the filing, the collaborative handed off control of nearly all the network in early 2014, instead of doing it gradually over a 12-month period. As a result, said KCST, the company was unable to manage the network in an orderly manner. KCST also said that the collaborative had connected the network to only 944 community organizations, instead of the nearly 1,400 it had promised. It also said fewer organizations than anticipated signed contracts to use the service, and as a result, revenue from the network were much lower than KCST had expected.
In July 2014, the Collaborative sued KCST in anticipation the company would not fulfill its contract. In August, a Suffolk County court ordered KCST to continue running the network until the dispute could be settled through arbitration, but that process has yet to begin.
A spokesman for the collaborative declined to comment on the case.
Steve Darr, KCST USA’s chief restructuring officer, said his company hopes to emerge from bankruptcy “as an economically viable organization.’’ Darr said KCST USA will continue to operate the network throughout the bankruptcy proceedings.
Hiawatha Bray can be reached at hiawatha.bray@globe.com. Follow him on Twitter @GlobeTechLab.
