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Chris Mitchell In Burlington, Vermont on September 19th

Members of the Burlington community are hosting a luncheon on Friday, September 19th, to discuss ways to help keep BT local. Chris, as one of the leading experts on municipal broadband, will be leading the discussion. We have followed BurlingtonTelecom's challenges and victories since 2008.

The event is titled "How Do We Keep Burlington Telecom Local?" and will be at the CCTV Center for Media & Democracy in Burlington. From the announcement:

Many Burlington residents and activists are concerned about the City of Burlington’s plans to sell Burlington Telecom to a private entity by 2017. While the City is committed to BT as a driver for economic and community development, it currently has no specific plans to retain a meaningful ownership stake in the new entity. 

The event is part of a series of community talks aimed at maintaining public input as the City prepares to move forward. 

A free discussion will begin at 11 a.m.; it will be followed by lunch for $15. You can now register online. For those who want to learn more about the network and keep up on the latest developments, CCTV of Vermont has put together a resource page detailing upcoming steps with news coverage, video, and court documents. 

Burlington's Civic Cloud Collaborative Wins Knight Foundation Award

The John S. and James L. Knight Foundation has awarded a Knight Prototype Fund grant to the Civic Cloud Collaborative of Burlington, Vermont.

The Civic Cloud Collaborative is a group of eight organizations using Burlington's gigabit network to create civic and public spaces. The group describes the Civic Cloud project on their website:

The Civic Cloud will be available for the community to use as a platform for public, non-commercial Internet applications and digital creative works. Several applications will be deployed during an initial prototyping phase of the Civic Cloud. High-definition live streaming will be provided for community media outlets to webcast live public meetings and cultural events. WordPress websites will be hosted for several Vermont non-profits including rescue squads, food shelves, job banks and historical societies. A collection of volunteer-developed applications and a state-of-the-art website deployed to the Civic Cloud will help Big Heavy World preserve and promote Vermont-made music. Lakecraft, an educational, multi-user game aimed at youth and adults that gamifies the Lake Champlain Basin, will also be one of the first applications to run on the Civic Cloud.

Vermont Public Radio also reported on the award. From the article:

“We’re interested in it being a non-commercial space on the Internet,” said Bradley Holt, a Burlington-based developer who heads CodeForBTV, the local chapter of Code For America, an organization for public service software developers.

The cloud service, Holt said, will provide hosting capacity for local community organizations seeking to use the Internet to advance the public interest.

For more, check out the press release from Code for BTV, one of the collaborative members.

Video: Burlington Telecom Coop Effort Moving Ahead

In December, 2012, a group of local residents decided to engage in an effort to turn beleaguered Burlington Telecom into a coop. The effort has advanced and the organization, Keep BT Local, continues to gain pledges. To date, the organization has collected pledges in the amount of $108,000 for equity and $156,000 in loan pledges.

Keep BT Local is ultimately shooting for membership pledges from about 4,000 residential and business customers. The goal has been to collect $250,000 worth of pledges to move forward with incorporation this month.

Local Chanel 17 carried a discussion on the effort to get more info on the business plan. Alan Matson and Don Schramm, who head up the Steering Committee talked with host, Matt Kelly, about the venture and took calls from viewers.

In addition to a discussion about the the heart of what is "local," the group discussed the business plan and where challenges may arise.

The discussion is about 30 minutes long.

Coop Status for Burlington Telecom? Maybe.....

Burlington Telecom may be headed for some changes. Due to the mismanagement of the prior Burlington Mayor Administration, the network took on an unsustainable amount of debt and damaged its reputation. Some of the plans to make the network sustainable again involve privatizing it. Unfortunately, as we have seen with public power privatizations, such an action typically results in worse services and higher prices due to the loss of local control.

Operating under the name Keep Our Telecom Local, a group of local residents and business leaders want to ensure BT remains owned by the community by turning it into a cooperative. At a December 13 public meeting, the group of about 50 volunteers gathered and talked strategy. According to a Burlington Free Press article on the meeting, attendees broke into smaller groups to discuss specific issues and plans.

The next step will be efforts to increase publicity for the movement and the creation of a business plan. Currently, a committee is forming to determine the best way to file for a Vermont Certificate of Public Good. Another committee is looking into formation of a board of directors.

Most municipal networks do not have to contend with the problems that have plagued Burlington Telecom. But even with all of the problems faced by this publicly owned network, the community still sees great value in rescuing it rather than abandoning it. The Burlington community appreciates the incredible value of keeping their broadband resource local. From the article:

Don Schramm, one of the organizers of tentatively named Green Mountain Broadband Fiber, said it makes sense to pursue a Third Way.

“Keeping our telecom locally owned means that the jobs stay here, the money spent stays here, the profit stays here — and most importantly, the control stays here,” Schramm said. “We will have a broadband cooperative responsible to our community needs, not the profit wants of out-of-state owners.”

We applaud the community for recognizing the value of this great asset, the importance of local control, and their efforts to keep BT local.

Burlington Telecom Announces a Gig and Computer Repair Services

We have covered happenings at Burlington Telecom, both positive and negative, extensively. We are glad to report some interesting new developments of this Vermont municipal network. BT is rolling out faster connections and using its competitive advantage in customer service to offer some computer repair services. Joel Banner Baird at the Burlington Free Press reported:

Without cash reserves and promotional enticements available to BT’s commercial competitors, the fiber-optic Internet/phone/cable provider will focus on its strength in customer service, said interim General Manager Stephen Barraclough.

As our readers know, BT is in the midst of a pending lawsuit with Citibank, wherein the financial giant says the city still owes it $33.5 million. The network's troubles, including misuse of public funds by the previous Mayor, have hurt its ability to generate income and Burlington's credit rating has suffered.

While fixing PCs certainly won't pay mounting legal fees, it will make life easier for customers. Details include a $25 diagnostic fee and a rate of $45 per hour plus materials. More about the service is available on the PDF of the official anouncement.

A more recent announcement puts Burlington among the few communities with citywide access to a gig. Burlington Telecom is in the midst of upgrades and will be offering 1 Gbps service and 40 Mbps service starting on December 1, 2012. Both options are symmetrical.

40 Mbps - $99.99 per month

1 Gbps - $149.99 per month when committing for one year; or $199.99 per month with a month-to-month arrangement

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View a PDF of the official announcement flyer.

A gig for $150 to residential connections is one of the best deals we have seen in the nation and is far superior to what FairPoint DSL or Comcast Cable offer in town.

Burlington Telecom Partners to Increase Digital Inclusion

On its facebook page, Burlington Telecom has announced a partnership with ReSOURCE, a local nonprofit, that will make refurbished computers available to qualified Burlington families.  

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Citibank Finally Files Suit Against Burlington Telecom

After more than a year of expecting Citibank to file suit against Burlington, they finally did. Burlington Telecom, a muni FTTH network, now illustrates the worst case scenario for muni broadband. After the founder of the network left following disagreements with the Mayor, the Mayor's Administration ran the network into the ground (leading us to recently publish the report "Learning from Burlington Telecom: Some Lessons for Community Networks."

Burlington had financed its network with a municipal capital lease, rather than the more commonly used revenue bonds, meaning that the actual network secures the loan. In this arrangement, the network is technically owned by the lender (Citi) and Burlington leased it. So when Burlington decided to stop paying the lease for the network, it became Citi's problem.

And Citi had a lot of problems due to the games massive banks were playing having killed the economy. BT became just one more non-performing asset. They did nothing while the City continued to run the network without making lease payments. Now Citi is suing for the world (this is how these things work) but it isn't clear that Citi can actually get what it demands (the State has a say in whether the network simply gets shut down, which Citi is presently asking for). And if the network did get shut down, Citi would be in a worse position to recover any of its losses because the value of the network is far greater than the sum of its parts.

State law says that losses from a public telecom venture cannot be carried by taxpayers, which is where we return to an interesting document prepared by the Mayor's Administration. As reported by Blurt:

In its lawsuit, Citibank notes that a letter written by attorney Joe McNeil on behalf of Burlington "expressly warranted to Citibank that at least 40 percent of Burlington's revenues were derived from sources other than taxpayers' funds and would be available to fund payments to Citibank, and further, that Burlington had the financial resources and ability to make all payments to Citibank for the full term of the agreement."

I read that document last year and remember being fairly surprised as it appeared to be incorrect from my non-lawyer reading of the law. This is just another case in which the Mayor's Administration played too fast and loose with essential infrastructure.

We have watched in dismay as Burlington Telecom transitioned over the past four years from a model community network to the worst case scenario. This situation proves only that community networks can suffer from bad management in some of the many ways private telecom companies can suffer from bad management (resulting in anything from bankruptcy to prison).

Communities can learn lessons from Burlington's situation -- chief among them that transparency is important. As with other public enterprise funds, the operation should be regularly audited and oversight must be in place to catch errors early, when corrections are easier and less costly.

Unfortunately, Burlington Telecom is in a very bad position presently. The actions of the Mayor's Administration made that position worse than it could have been. Time will tell if it can be saved. Given its important positive contributions to the city (millions of dollars in community savings, increased economic development), the City would benefit from its continued operation.

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.

Gary Evans of HBC Discusses Burlington Telecom Situation

In a bimonthly local show, Burlington City Councilmember Karen Paul discusses City issues. In the recent show, she discussed Burlington Telecom with Gary Evans, the head of Hiawatha Broadband Communications (HBC). Evans has been helping BT get back on its feet after struggling for years. HBC is a private company most notable for strong success in overbuilding cable companies in SE Minnesota as well as running the Monticello FiberNet for the City.

For those who need an update on what is happening to BT since its problems were widely publicized, this is a great place to start.

The Burlington Telecom Mess in Perspective: a Letter to the Community

We are posting another perspective about Burlington Telecom, this time from Tom Streeter, a Professor of Sociology at UVM and author of Selling the Air, The Net Effect and other works about telecommunication.  He circulated this letter in the community and gave us permission to republish it here. Read his original PDF here.

There's no doubt that the Burlington Telecom situation is a serious mess. But in all the accusations and counter-accusations, it can be hard to get some perspective on the nature of the problem. I've been studying things like cable TV, the internet, and telecommunications for most of my career, and I think a sense of the larger picture might help.

First, nobody has been accused of lining their private pockets with public money. There is nothing about the current scandal reminiscent of the one surrounding BT's former legal antagonist Adelphia Cable, whose CEO is still cooling his heels in jail for essentially stealing from his own company. Second, Burlington Telecom is hardly alone in having a hard time paying the bills. Vermont's primary telephone service provider, Fairpoint, filed for bankruptcy late in 2009, and cable providers nationwide are scrambling for ways to stay alive nationwide in the face of the first annual decline in cable subscriptions in the industry's history. Times are extremely tough throughout the industry, and the fact that BT is in a financial tight spot is by itself hardly surprising.

Another thing about telecommunications is that it is an infrastructure business. Like roads, bridges, and sewers, you have to build most of the thing to completion before you get the benefit; no one will pay the toll for a bridge that goes halfway across the river. So you have to spend the money up front in hopes of making the money back years into the future, a future which is impossible to know with certainty. BT had to spend the money to build the system – the fiber optic lines, the home installations, the controlling equipment – based on a guess of what the revenues would be many years down the road. There's a basic uncertainty in infrastructure construction, then, and the constantly changing world of high tech compounds the problem. There are better and worse guesses, but speaking as though revenue and cost estimates for 2010 could have been made with absolute certainty in 2005 is asking for the impossible.

Some accuse BT's first manager Tim Nulty of having been a charismatic pied piper who presented overly rosy revenue projections, but the same could be said for Steve Jobs – for all his successes like the iPhone he's got a long string of failures to his name as well – and he is one of the most admired business managers in the world. It takes a mixture of vision, charisma, and judgment to get any big project like this off the ground, and hindsight will always be able to find some errors in the early stages of a project. The debates between Nulty and the Kiss administration that led to Nulty's resignation – Kiss and Leopold wanted to move cautiously and work towards making the existing system self-sustaining, Nulty wanted to invest more in marketing and building out in order to grow the subscriber base – should be seen in the first instance as different judgments between reasonable people about how to deal with a fundamentally uncertain situation. Maybe if you look at it carefully you might conclude that one side has been more right than the other, but if you think it's black-and-white, if you think the answer is obvious, you don't understand the issue.

The inevitable uncertainty that comes with high tech projects means that the history of communication systems is strewn with expensive mistakes much worse than BT's. Back in about 2005 when BT was getting its start, many cities (e.g., Philadelphia, Chicago) were guessing that city-wide Wi-Fi systems were the way to go, and have since had to scale back or abandon their efforts. Mobile phone companies at the time were investing huge sums on the theory that consumers would pay handsomely to watch short video clips of news and sports events on tiny phone screens (this was before the iPhone and YouTube sent consumers straight to the internet to get such things for free). More recently, global TV set manufacturers seem to have made a bad bet on the hope that everyone would pay for expensive 3D television sets. Expensive bad guesses come with the territory.

BT Logo

Which is why it needs be said that, five years down the road, BT remains a pretty good idea. It has not met its original targets for profitability – given the economic climate, the same is true for almost the entire industry – but Burlington now has a durable, highly flexible state-of-the-art fiber-to-the-home system that can deliver both existing services and be easily adopted to future trends. It's quite valuable; it provides services that people want now and will want and pay for in the future, and makes Burlington more inviting to citizens and businesses. Like everyone else, BT did fail to anticipate the financial downturn, which in turn caused subscribers to scale back on extra services like premium cable channels (throughout the industry, the best source of revenues). And it ran into technical difficulties installing cables in certain neighborhoods and a few other hiccups. In the larger scheme of things, these are problems, but not signs of gross negligence. When the City of Burlington set out to build BT, we can now say it made a reasonably good bet.

So what's the problem now? The tragedy of BT is not that it was a bad idea to begin with or that one could have foreseen all of the difficulties it now faces. Rather, the current mess is a product of a perfect storm of a difficult financial landscape with a fatal political misjudgment. Publicly run utilities often work well; Burlington Electric is by some measures the best run electric provider in the State. But, because they are publicly owned, they come with a higher expectation of transparency and public understanding. The Kiss administration seems to have forgotten that. "Trust us" may work in the private sector, but for a public enterprise, even a supposedly self-sustaining one, that's not enough. When the Kiss administration was looking for ways to deal with BT's financial shortfalls, whether or not what they did was illegal, they should have gone fully public. They should have seen it as their job, not just to solve the problem, but to build public understanding and support for a solution that was both financially and politically acceptable. If journalists or skeptical City Council members did not understand, the overwhelming concern should have been turning that understanding around immediately. "It's easier to beg forgiveness than to ask for permission" does not apply to publicly owned enterprises. True, the Burlington Free Press has a long history of attacking Progressive politicians, so the Freep should not be mistaken for the public at large. But that is no excuse for ignoring a broad sense of public concern. Kiss's approach, which has boiled down to inarticulate claims of innocence with very little effort to effectively communicate both the nature of the problems and the solutions, has created a vacuum of public understanding which has been filled with politicized maneuvering, recriminations, and overheated "gotcha" journalistic coverage.

Politicians and the press should be focusing now on efforts to find practical ways to maintain Burlington Telecom in some form. Investigations should go forward with an eye towards solving the problem, not just finding guilty parties to blame. The financial complexities of BTs relationship to banks and the City need to be scrutinized with an eye towards getting things back on a sound footing while taking into account the inevitable uncertainties and long-term nature of this kind of project; patience will be required for any solution to work. But the lesson learned is that both financial solvency and public legitimacy have to be part of the solution; in fact, each requires the other. And for public legitimacy to be restored, at this point it is clear that new management needs to be brought in, regardless of what one thinks of past management.

But the Kiss administration, and the Progressive community in general, need to face up to the fact that the whole thing has been handled in a politically disastrous way. I helped campaign for Bob Kiss in his first run for mayor, and it saddens me deeply that this mess has delivered a serious blow to the Progressive moment in Burlington, damaging three decades of carefully built trust and good will, nearly guaranteeing that Progressives will have a much harder time getting elected in the foreseeable future. The Progressive movement is founded on a belief in democratic involvement in decisions that affect us all; by loosing sight of the role of leadership in generating and adopting to the public understanding necessary for that involvement, the Mayor's office has shot itself in the foot, and caused us all some pain.

Tom Streeter