The East Central Vermont Community Fiber-Optic Network (ECFiber), a 235-mile Fiber-to-the-Home (FTTH) network that currently connects over 1,200 customers across 24 small towns in east central Vermont, is doing well. It’s doing so well, in fact, that a capital investment group will commit $9 million in long-term financing to the network, a loan that will allow ECFiber to expand and spend down some of its existing debt.
ECFiber announced last month, that it will use about half of the funds to activate 110 miles of existing fiber this year and add 250 more miles of fiber in 2017 bringing the network to approximately 600 miles. Network officials will use the remaining funds to pay down $7 million in debt; the move will allow ECFiber to save money through reduced interest rates and spread out loan payments over a longer period of time.
Stability Begets New Financing, New Possibilities
The news of this new injection of debt financing comes several years after the original plan to build a larger 1,900-mile, $90 million FTTH network ultimately didn’t materialize in the aftermath of the financial crisis of 2008. When ECFiber failed to secure debt financing for that larger plan, the network scaled back its ambitions, turning to direct investments and raising $7 million from 479 local investors to construct the current network.
This self-financing strategy (for more, listen to our Chris interview Carole Monroe, former General Manager in Community Broadband Bits podcast #177) made ECFiber a reality. This new financing will allow the network to expand at a faster pace and allows ECFiber to significantly stretch its footprint. In the past, the crowd funding approach allowed for targeted, smaller expansions.
The network became eligible for the new debt financing after ECFiber officials took proactive steps in recent years to demonstrate the network’s commercial stability. First, they released audited financial statements for the past three years and showed positive cash flow since the end of 2014. In addition, ECFiber officials took advantage of a new Vermont law that allowed them to change the network’s official governance structure. The shift away from a somewhat unusual inter-local agreement into a “communications union district,” is more familiar and appealing to investors.
“[The restructuring] was an important thing,” said ECFiber Treasurer John Roy. “It would have been much more difficult to borrow by going to investors and financiers (as an inter-local agreement entity) and they would say, ‘Huh, what?’ But if you say you’re a ‘union district,’ that is a recognized ‘body corporate and politic’ and they understand that.”
In order to determine where to expand, network officials are asking Vermonters in the region to pre-subscribe. Communities with the highest number of sign-ups will move to the front of the expansion list.