Learning from Burlington Telecom: Some Lessons for Community Networks

Publication Date: 
August 18, 2011
Author(s): 
Christopher Mitchell - Institute for Local Self-Reliance

In little more than a year, Burlington Telecom went from being a hopeful star of the community fiber network movement to an albatross around its neck. The controversies surrounding it have encouraged cable and telephone companies to use it as Exhibit A in their case against communities going into the telecommunications business. However, most of those criticizing Burlington Telecom have very little understanding of what went wrong and how it happened. Examining what actually happened helps to explain how these problems may be avoided, as the vast majority of existing community networks have already done.

[Download the full report]

In 2007, ILSR issued a case study on Burlington Telecom. The report argued that Burlington Telecom was a model for how communities could build their own next‐generation fiber‐to-the‐home broadband networks.

This report revisits and updates that report, analyzes Burlington Telecom’s situation (for better and for worse), and extracts useful lessons for other communities pursuing community fiber networks.

In preparation for this report, ILSR examined many documents, including those available due to the investigation of Vermont’s Department of Public Service. We interviewed many people from Burlington, including former BT employees, citizens active around the project, and City Council members. We discussed Burlington’s situation with a number of others intimately involved in community broadband networks around the country and posed questions directly to a representative of BT.

This report catalogs many of the problems Burlington Telecom encountered as well as potential solutions for other communities may have to deal with them. It also discusses some of the benefits from Burlington Telecom in order to offer a complete picture of BT's contribution to the community. This is the most comprehensive discussion of Burlington Telecom available.

Comments

BT

Following the BT story for the last few years on behalf of the consumer's side, I personally think the biggest challenge BT had was in its marketing.  I think most of us loathe cable and telco's regular prices, but changing providers can and is a major hassle for most people.  Identifying the triggers to enable a successful switch is absolutely critical when a new entrant confronts well-established incumbent providers.

No matter what you offer, customers who are satisfied with their current provider are not likely to switch without major incentives.  Dealing with confrontational retention reps at their current provider, taking time off to deal with installation issues, changing e-mail addresses, right down to those who feel they have to "clean the house" before a rep arrives to install service all can preclude customers abandoning current providers.

So how to the bully boys do it?  Expensive marketing campaigns and incentives, mostly.  In areas where telco IPTV is competing with traditional cable, cash incentives, rebates, and freebies are pervasive.  Verizon motivated a lot of switching with free flat screen TV's (low end models with small screen size in reality, but they looked good on the ads).  Frontier Communications tries to wrest customers away from Time Warner with "free computers" (low-end netbooks), "free satellite TV" or dirt cheap Internet promos (all with loads of fine print and term contracts).

Those promotions work for unsophisticated consumers who don't read and understand the fine print.  Rebates work with those obsessed with the lowest possible rates -- but they tend to be the least loyal.

Verizon and AT&T love the high value "prepaid Visa rebate card"-route.  Sign up and get $100+ in the form of a gift card.  They also heavily discount promo rates.  That can attract media attention from stories about how consumers can save money on subscription TV.

As you noted, after the promo expires, customers are stuck with much higher rates, but marketing experts turn back to the "motivation" factor to assure themselves most customers will grudgingly pay the regular price because they don't want the hassle of switching.  Those obsessed with the lowest price will ping-pong between providers on various promo deals.

All of these expensive marketing campaigns make it much more challenging for community networks to pay off their construction costs, and can even contribute to revenue challenges if/when the price war breaks out, although in my experience, most of that pricing battle takes place during customer retention efforts, not in publicly available marketing offers.

This is when you bring the ace up your sleeve out.  Community fiber networks are much more technologically advanced than the competition, and this is where better service comes in as a factor.  That starts with better broadband speeds.  BT failed miserably, in my view, selling customers overpriced, under-speed broadband.  They still are:

3M/3M: $34.00/month (Triple Play price*)

8M/8M: $50.00/month (Triple Play price*)

20M/20M: $72.00/month (Single Play only)

These prices are outrageous for what consumers are getting.  I understand the broadband backbone constraints some community networks cope with, but customers ultimately do not care about your problems.  These prices are totally non-competitive with Comcast, which pitches two times the base speed for around the same amount in a bundle, and that speed is set to go higher later this year.  Customers are mostly concerned with downstream, not upstream speeds.  Tech mavens, who will also be the fiber-to-the-home evangelists and community advocates for your business, will appreciate and celebrate upstream speeds, but not at these rate tiers.

How many times have we seen community networks teeter on the edge because they thought too small.  Fiber networks are designed to "think big."  EPB, Green Light, and Fibrant know this very well.  BT does not.

BT should be selling at least 10/10Mbps service for $34, 30/30Mbps for $50 and 50/50Mbps for $72 (you could probably pitch it for $80 and still undercut Comcast).

With average users not likely to pound those connections, incremental costs to deliver them should not be too great on average.

I also agree BT needs to follow the rest of the industry and focus on the triple play bundle.  The reason this bundle is sold is because it adds "stickiness" -- the more services a customer gets from one provider, the less likely they are to find another.

It is true - you have to spend money (and lose money sometimes) to earn more money, especially when you are the market disrupter.  The phone companies know it takes incentives to motivate customer change.  Some other ideas might include referral bonuses ($50 credit for you and the new customer you bring), marketing partnerships with area technology stores who will let you sell and sign up customers in-store, and emphasis on unique aspects of your service the others don't have.  Look for media opportunities wherever possible -- free/discounted service for community centers, customers you've helped through some sort of jam, online fairs and seminars on hot topic issues like child safety, Internet scams, identity theft, etc.  Have a media-friendly event and then call them to participate.  Telecom stories can be difficult for the media to cover when they are not camera-friendly.  Seminars and fairs and appearances on local TV tech-stories can be.

When BT started to face fiscal challenges, it ultimately became a political target, and the right wing would have considered community-funded broadband "socialism" gasoline to pour on no matter where the network was.  Remember Mooresville and Davidson, N.C. and the trolls in The Salisbury Post comment section whenever a Fibrant story appeared.  There are corporate backed astroturf groups on the national level targeting these networks philosophically, and while I think it is important to assign one person to chase down and challenge the BS, it should never preoccupy a network administrator.

Avoid using politically polarizing people to be your defender.  If you are an incumbent elected official, you are instantly a political target for the opposition and those who support them.  The assigned truth-teller should be visibly apolitical and stick with evangelizing and defending the network on the facts.  Let your supporters tackle the political nonsense.

I think we need more organization and dialogue between community providers to share what works and what doesn't and stay organized with a united front against detractors. BT often seemed to be too often on its own and could have used a more organized community defense, which cannot happen without their willingness to participate in it.

 

Phillip Dampier

Stop the Cap!