Federal stimulus dollars are supposed to help state economies. One Maine business says a potential grant to the state's university system could hurt.

FairPoint Communications is objecting to the University of Maine System's participation in a bid for stimulus funding, saying it would lose customers to the university's proposed broadband network expansion. Both GWI, the Maine telecommunications company that is working with the university, and FairPoint are vying for a chunk of the $7.2 billion that will fund at least one broadband-infrastructure project in each state as part of President Obama's American Recovery and Reinvestment Act. (This is separate from the funds going to states to help their education systems minimize cuts.)

GWI is seeking $32 million to expand a Maine-based research and education network to 10 of the university's campuses and outreach centers that are currently unconnected to that system. The fiber-optic-based network, used to transmit large amounts of information online, would also extend to 38 total courthouses, jails and other government facilities. The projects would be in areas that are among the poorest and most rural in the state.

Meanwhile, FairPoint wants $20 million to complete its infrastructure and offer a 90-percent availability rate by 2011, said Jeff Nevins, a spokesman. He said that since the University of Maine System is tax-subsidized, the stimulus funds would lend its broadband network an unfair edge in the telecommunications market.

"We question the fact that we are going to be in competition as a private business with a publicly funded, publicly supported institution," Nevins said. "That's the issue, is that these are public monies that are going to compete with private enterprise."

Earlier this year, FairPoint bought Verizon's landline service in northern new England, making it the largest telephone company in Maine. The University of Maine System itself is one of its biggest customers, with nearly 140 outlets, according to Jeff Letourneau, associate director of communication and network services for the University of Maine System.

Letoureneau said there is no reason why the system shouldn't apply for the stimulus money. "If you look at the federal statute, both state and public and not-for-profit and commercial entities are all eligible entities for going out for these federal funds," he said.

State Senator Larry Bliss said he was taken aback when FairPoint officials raised their complaints at an Aug. 3 meeting of the Broadband Strategy Council on which he serves. The council is reviewing broadband-infrastructure proposals and will soon endorse one or more for federal funding.

"It caught us all by surprise, it kind of came from left field," he said. "It's a bit irrational because the purpose is not to select a winner and a bunch of losers, but rather to encourage proposals to move forward through the federal process."

State Rep. Cynthia Dill, chair of the council, said it is "perfectly appropriate" for the University of Maine System to apply for the funds; in fact, she encouraged it to do so. "The stimulus bill encourages public-private partnerships, and I know for a fact that other universities are very active in applying for stimulus money in connection, in conjunction and in collaboration with other private interests," she said.

Maine, along with Vermont and New Hampshire, is among the last states to invest in broadband infrastructure. There are nearly 30 state and multi-state regional optical networks connected to National LambdaRail, a nationwide infrastructure for research and education.

Letourneau said officials from the University of Maine System had originally discussed expanding its network through FairPoint, but the company declined over the course of several meetings. However, Nevins said that to his knowledge, FairPoint had never told the university "no." He also said it had no idea that it planned to expand its network.

Letourneau said he is determined to bring stimulus funds to the university system. "We're a very rural, very poor state and what we've been doing is saying, hey, we need to help create opportunities to buy services we're looking for. We're going out and beating bushes encouraging commercial service providers to go out and get these funds," he said. "When they build it, we'll come."