Vermont

As someone who has long researched and followed developments in Burlington Telecom (BT), the city-owned triple-play full fiber-to-the-home network in Vermont, recent developments between BT and the Mayor's office have been deeply disappointing. For those who haven't heard, BT is in the middle of a major controversy -- and it is hard to tell just what is going on (for background prior to current problems, read my Burlington Telecom Case Study and Fact Sheet).

I have wanted to comment on the situation for many weeks but have been waiting as each day seems offer another piece of the BT puzzle. I'll be offering more commentary about it in the future. However, I do not want to the let the current problems lend any credence to the idea that BT has failed. BT is caught in the middle of a political controversy around the Mayor but should continue providing the best telecom services available in the community.

BT has two main problems currently:

1. It has not passed the entire city within the timeline to which it agreed in receiving its Certificate of Public Good (CPG)
2. BT has, apparently, borrowed $17 million from the city's pool (used generally for short-term financing of projects) in contravention of its CPG which states that any money borrowed from the City must be paid back within 60 days.

   This CPG condition makes running a network more difficult for BT than it would for a company like Comcast - who can readily self-finance short-term borrowing. Across the U.S., communities have to deal with laws and regulations that benefit private companies over public networks.

   When the economy fell apart, BT was unable to refinance its debt to continue its expansion and chose to borrow from the City to continue connecting new customers. This was the right decision - the CPG did not anticipate such conditions and the terms for outside financing in late 2008 were wretched.

I say "apparently" borrowed above because it is far from clear if all of those funds actually went to BT. As Steve Ross explains here, it is not even clear if BT really required all that it borrowed from the City. Until the Mayor can produce a thorough explanation, I think it prudent to note that this is more of a political controversy surrounding the Mayor than a fiscal problem for BT.

The biggest problem is that Mayor Kiss (elected in 2006, after BT had initiated its residential services) and his Chief Administrative Officer (CAO), Jonathan Leopold, have decided to run BT as though it were privately owned.

After Tim Nulty, founding General Manager, left in 2007, the CAO became much more involved in the network and stopped sharing much of the network information with City Councillors and the citizen-oversight boards. These boards noted that they could no longer oversee BT properly as they were never allowed to see the documents and get information that Nulty had routinely shared.

To be fair, running a network like BT against a behemoth like Comcast is difficult under the best of circumstances -- which encouraged BT to hide any information that could be used to Comcast's advantage in competition. However, as a publicly owned entity, BT has certain obligations that it has failed to uphold. And this lack of transparency has led directly to the problems of recent months. (I do not want to cast CAO Leopold as a villain in this, evidence from Burlington suggests he has greatly helped the city in ways unrelated to BT but the utter lack of transparency on BT creates many questions).

Perhaps most troubling is not what information has been restricted from public consumption, but what information has been - and continues to be - denied to the City Council. See a recent article noting the Mayor's refusal to share its business model with the Council under any reasonable circumstances:

That may be why a key document requested for review — BT’s financial pro forma and foundation of its current business model — can only be viewed in Leopold’s office. Councilors are forbidden from taking notes or taking it home to read.

Nonetheless, BT has been a great success in many ways. As noted in several of the citizen forums in Burlington since this controversy began, the BT services have proven far more reliable to everyone and the speeds offered by BT to local businesses (unmatched by Comcast and FairPoint locally) have resulted in new businesses moving to town and expansion by existing businesses.

Further, the city-owned network has saved millions for the city since it replaced the leased lines Burlington used to rely on. The schools and city buildings have far greater access to bandwidth at a fraction of the cost, improving educational opportunities and making city services more efficient.

We are organizing our resources on BT currently and will launch a page that includes much more information about the situation. For all that it has done right, BT also offers many lessons for other communities that want to build a next-generation network.

In particular, municipally-owned networks must be balanced with an appropriate amount of both freedom and oversight from the City government. That the City Council cannot gain access to key documents and explanations is frustrating. Just as public power agencies are regularly audited, city-owned communications networks need oversight. However, as telecom is a fast-paced world, the network must have the freedom to act quickly on contracts and be able to hire salespeople based on commission, for instance. Communities developing a governance structure for their network should pay attention to Burlington.

Map courtesy of Wikimedia commons

Vermont's proposed East Central Fiber Network is moving forward, confident that the strength of their application for federal broadband stimulus funding will get them an award. Atlantic Engineering has been surveying pole and prepping so they can get started as soon as possible.

They are also offering network-branded apparel - it reads: ECFiber.Net Community owned Fiber-Optic network. I think this is pretty fricking cool - it shows the enthusiasm these folks have.

Geoff Daily has given EC Fiber his stamp of approval:

First off, compared to the VTel project, I'm immediately inclined to favor ECF's by the simple fact that they're a public project, which the original stimulus language suggested should get priority, and they're looking for a loan rather than a grant, and I think so long as a project will be self-sustaining, it's always better to loan money that you'll get back some day than to just give handouts of free money. I also prefer ECF's project because they're going to be bringing fiber to every home in their service area. They're not going to leave anyone behind, creating second-class digital citizens. Finally, I think that ECF's project has a greater chance of establishing a model that the rest of the country can learn from, proving both that fiber can be economical in rural areas and that open multi-service networks can be financially viable.

Vermont was also one of the four states to receive the first awards for mapping broadband. Vermont is doing the work in-house:

The new federal funds will be managed by the Vermont Center for Geographic Information (VCGI) to implement the Vermont Broadband Mapping Initiative, a collaborative broadband data collection and verification effort involving partners from the public, private and academic sectors.  This team -- VCGI, the Vermont Telecommunications Authority, the Vermont Department of Public Service, the University of Vermont’s Center for Rural Studies, and Vermont’s Enhanced 9-1-1 Board -- will use the latest technology to create a comprehensive and verified broadband availability map. 

A local television station recently covered the EC Fiber Network in a good video segment.

Meanwhile, communities near Rutland (which is south and west of the EC Fiber network) are banding together to build their own network and are working with Valley Fiber (the initiative employing Tim Nulty helps communities build their own networks). They are in the process of finding towns willing to commit to the project. Comcast previously encouraged the Rutland City Council to avoid the project by misrepresenting their own network as a fiber network - nothing new there.

The plan is for the Rutland Redevelopment Authority to form an LLC (limited liability corporation) and to apply for federal funds made available for rural broadband expansion under the 2008 Farm Bill.

In return, towns would receive payments in lieu of taxes, or PILOT, and revenue sharing based on a town's volume of participation when the company becomes profitable – something that Nulty estimated would happen at the end of the fourth year in business. Participating towns can also expect that every residence will be connected "without excuses," product packages – including cable television, Internet and phone service – cheaper or on par with private competitors like Comcast and "superior service."

So far, the proposed network has 5 municipalities officially expressing interest. They are aiming for 14 partners in total.

One of their motivations is a recognition that both the EC Fiber areas and a potentially expanding Burlington network will really disadvantage them if stuck with the pokey investments made my cable and telephone companies who seem to forget that people in rural New England need broadband too.

Image from the National Atlas of the United States, which is in the public domain.

What can states do?

Many states want to improve broadband access for their citizens. Some states genuinely want to act and others are content to give some money to industry-front group Connected Nation and form a Task Force in order to give the appearance that they are doing something rather than actually taking action.

However, the problem is difficult because in a time of severe budget crunches, states may not have the funds to invest directly in infrastructure or help communities do so themselves. There are some options - and I recently highlighted one: Virginia's Broadband Infrastructure Loan Fund.

The Virginia Resources Authority (VRA) now has a revolving loan fund to help communities build the broadband infrastructure they need. Unfortunately, the fund has started empty but they are in search of grants to get started until the state can seed it.

Even without the revolving loan fund, which keeps a very low interest rate for loans, the VRA is available to help communities that want to approach the capital markets for infrastructure funds. Communities may not have sufficient experience in this arena or may just benefit by having the VRA combine multiple small needs into a larger package at a better rate.

Elsewhere, the Vermont Telecommunications Authority was supposed to serve a similar function but seemed to be immediately captured by Fairpoint and turned into a tool for private companies.

One of the most basic things a state should do is ensure it has not created barriers to public investments in broadband networks. It may be a few years old, but the American Public Power Association created a list of laws blocking or retarding community broadband networks. These should be repealed. Those arguing that the public sector has too many advantages should read our discussion about the level playing field.

Capitol photo by Rob Pongsajapan