An internet service provider that left more than 30,000 rural customers without broadband connections has been stripped of its state contracts, state and local officials say.
Virginia’s Office of Broadband determined this month that RiverStreet Networks, unable to acquire financing, is incapable of completing its broadband deployment work in Virginia. As officials work to find new providers to take over multiple projects, a federal deadline looms. The government will reclaim funds unspent by the end of the year.
The federal money in question comes from the pandemic-era American Rescue Plan Act, passed into law after federal and state leaders determined that areas without broadband were falling behind during the COVID-19 shutdown.
In Patrick, Henry and Franklin counties, where RiverStreet contracted in 2022 and 2023 with the West Piedmont Planning District Commission to bring internet to 14,547 potential customers, the company has completed only 40 connections: 29 in Franklin County, 11 in Henry County and none in Patrick County.
West Piedmont notified the broadband office at the end of June that RiverStreet had not identified a funding source to complete the work, Chandler Vaughan, director of the Office of Broadband, said Wednesday.
“Well, it’s certainly been frustrating, and I have dedicated a tremendous amount of my time to this project,” Henry County Administrator Dale Wagoner said Wednesday. “I’ve served as lead [on the project] since day one and the first grant application.
“It’s most frustrating for our residents who we’ve been promising broadband to for many years now.”
Wagoner said that officials from the three counties — collectively called the West VATI, or Virginia Telecommunication Initiative, project — are working with West Piedmont to secure a new ISP to take over the work.
“We’ve had some very promising discussions about it and we’re very confident about the process of this, moving forward,” he said.
A new provider won’t be working purely from scratch. Appalachian Power is a partner in the projects and has completed a significant amount of utility pole placement, officials have said. Appalachian has also strung fiber optic cable on those poles in what is termed the “middle mile” process.
From there, RiverStreet was expected to run the cable to locations in the “last mile” segment. But it hasn’t completed any work in nearly a year, officials said.
That includes West Piedmont’s East VATI project, which covers Amelia, Bedford, Campbell, Charlotte, Nottoway and Pittsylvania counties. RiverStreet had completed connections to about 35% of 27,997 potential customers, data provided by West Piedmont shows. In Campbell County, only 4% of the work is done, while nothing has been finished in Nottoway.
A separate project focused on Dinwiddie County alone has seen no work done for 5,009 locations. Yet another West Piedmont/RiverStreet project, in Pittsylvania County, has provided potential service to 854 out of 2,105 locations.
Multiple attempts to reach RiverStreet representatives through email or LinkedIn were unsuccessful. Phone calls to the company headquarters in Wilkesboro, North Carolina, and to its Danville office were unanswered, with no voicemail available.
In a late-May meeting with Patrick County supervisors, the company’s vice president of business development, Greg Coltrain, said that after RiverStreet was approved for funding from another federal source, the Broadband Equity, Access and Deployment act, or BEAD, it expanded the full scope of the company’s deployment efforts.
The ISP was granted $44 million via BEAD for new areas, some of which overlap with Patrick, Henry and Amelia counties. Coltrain said that RiverStreet needed more money, which it had not secured at the time of that Patrick County meeting.
Now RiverStreet’s BEAD funding is in jeopardy, as well. Vaughan, the broadband director, said that his office has issued the company a corrective action plan regarding that aspect of its funding, and a determination is coming soon. The broadband office did its due diligence on BEAD awards last summer, Vaughan said, and in the fall, RiverStreet told the office that it was going to seek additional resources.
The money it intended to raise was for the match it had to provide, to combine with the federal, state and local money that was going into the projects, Vaughan said.
Seeking additional funding wasn’t a “red flag,” he said. It’s normal for internet providers to do so, whether it be selling a majority stake to private equity, or taking out a bank loan.
“But I think the thing that is different about RiverStreet here is that they have not found that interest in the market,” Vaughan said.
And now it has run out of time.
“In terms of it becoming evident that they were running out of internal capital to proceed with the project, that became clear in the spring of this year, to us, which is why we started that corrective action plan process,” he said.
Finishing the work
The West project was funded through a $33.5 million grant that the state administers via the Virginia Telecommunication Initiative, largely funded by ARPA. Another $59.4 million comes from match funding that RiverStreet and local government partners provided, according to West Piedmont.
The East Broadband Project received an $87.0 million VATI grant, with $65.4 million in match funding from RiverStreet Networks and local governments.
The money must be spent before the federal government will reimburse it, and there is a deadline after which the government will keep the money that hasn’t been accounted for.
The U.S. Department of Treasury has issued notice that it may extend the end-of-year deadline to the end of June 2027. West Piedmont has requested that extension, sent to Treasury via the broadband office, but has not received a reply.
The West Piedmont Planning District Commission was “shocked and frustrated” when it learned that its deployment partner was having trouble seeking new financing, said Michael Armbrister, the planning district’s executive director.
“I’ve had a really good working relationship with several of the folks from RiverStreet,” Armbrister said. “A lot of the folks that we worked with on the grants themselves have been great to work with. I think some of them were kept in the dark, as well.
“We were essentially kept in the dark about their finances and their search for additional financing until really just a couple of months ago, when it started to become more clear. … Our goal all along has been to connect folks and give them access to broadband. That’s the reason that we jumped in and participated and partnered with RiverStreet and the counties, was just to connect folks. That’s still our goal.”
The state Department of Housing and Community Development, under which the broadband office operates, had notified West Piedmont that it intends to take back unspent East VATI project money from RiverStreet. Armbrister was not sure how much that is, but hopes to get that transferred soon so that it can help fund the remaining work.
West Piedmont will rebid the East VATI project, county by county, he said.
“I think we feel pretty good that we’ve got enough funding, and then working with DHCD on potential future grant opportunities and some other things, that we’ll be able to continue the projects and complete them as we originally intended,” Armbrister said.
A process with many delays
In Bedford County, officials on Monday announced their own request for proposals to resume the project. Under the 2022 VATI East contract, RiverStreet established access to 1,294 of its 2,253 contracted locations there — just over 57% — according to information that West Piedmont supplied.
The county was ready with an RFP it had already prepared, county broadband manager John Putney said in a text message exchange.
“Our residents have already lost more than a year waiting for broadband service, and we were unwilling to risk additional delays of days, weeks, or longer,” Putney wrote. “We informed both DHCD’s Office of Broadband and WPPDC of our preferred course of action, and neither organization expressed any objection to or criticism of the County proceeding with the procurement.”
Five other VATI projects in the county, with Zitel, Shentel and Verizon, “enjoyed tremendous success,” John Putney said in a recent written report to the board of supervisors.
“Unfortunately, our experience with RSN has been markedly different,” he wrote.
Most of the remaining work is in the New London and Blackwater Road areas of eastern Bedford County and the Huddleston area in the county’s southern portion, according to a news release. The county tentatively expected proposals by July 31.
“This is a positive step forward for Bedford County and, most importantly, for the families and businesses that have patiently awaited broadband service,” Bedford County District 2 Supervisor Edgar Tuck said in the news release.
“Our objective has always been simple: complete this project as quickly as possible and ensure that every resident receives the reliable broadband service they were promised. We greatly appreciate DHCD’s partnership and its continued commitment to helping us accomplish that goal.”
Vaughan, Armbrister and Henry County’s Wagoner all were hopeful that the projects can end on time, delivering on the promise of providing internet access in remote parts of the commonwealth.
“It hit many delays along the way,” Wagoner said. “No one anticipated the State Corporation Commission taking as long as it did to approve Appalachian to hang the wire. We ran into issues of VDOT [Virginia Department of Transportation] and permitting, and just seems like it hits setbacks at so many different points along the project. …
“Hopefully this will be a solid path forward that we can get broadband to our residents in the very near term.”
