A Solution to Burlington Telecom’s Woes: Subscribe!

Greg Eplerwood has chaired the two Burlington Telecom citizens' oversight committees and has paid closer to attention to BT than just about anyone. He submitted this opinion piece to us as well as shorter versions to local media in Burlington.

We are happy to publish it and hope others enjoy hearing from this unique perspective from the community.

Let me make one thing perfectly clear: I’m not an apologist for anything illegal, tergiversating, unethical or stupid that BT’s management may have done in the building of our municipal telecommunications system. But otherwise I am an unabashed supporter of our state-of-the-art, triple-play, fiber-to-the-premises information infrastructure. Between my wife and me, we subscribe to BT’s Standard Plus cable with HD and DVR, one home and two business telephone lines, and a 20 Mbps symmetrical Internet connection. Needless to say, our monthly bill is above average; however, we are pleased with our service and happy to pay it.

With all the bad news coming from various parties—the Department of Public Service, the Public Service Board, Comcast, two consulting firms, two resident litigants, private groups offering ‘assistance’ and the broadcast and print media in their incessant reporting of the mess—it would seem inevitable that Burlington’s reputation, bond rating, tax rate stability and world-class telecommunication system are all going down the crapper. Not to mention the damage that the Kiss administration may have done to the local Progressive Party.

Subscribership—literally the lifeblood of a venture like BT’s—has remained stagnant over the past two years. I don’t know about you, but hardly a week goes by without at least one, sometimes two, sales pieces coming in the mail from BT’s direct competitors: Comcast and Fairpoint. But when was the last time you’ve seen or heard a sales pitch from BT? As recently as 18 months ago I was blaming this on poor marketing. Since then I’ve been blaming it on BT’s low cash flow.

Putting blame aside for the moment, I ask my fellow residents, businesses and institutions of Burlington: If we refuse to subscribe to BT, who are we punishing? A better question might be this: Of the following players, which would you most want to see harmed if BT were to fail: Mayor Kiss, Chief Administrative Officer Leopold or your fellow Burlingtonians? If you are truly concerned about tax increases to pay BT’s debt, or fearful about abruptly losing your BT service, then I’d wager you would NOT choose to punish your neighbors. But that’s exactly who will be harmed if the only option we think is open to us to focus our wrath upon the Mayor, the CAO or the City Council. What BT needs right now is revenue, not vitriol.

I challenge those Burlington residents, apartment building owners and landlords who are currently not BT subscribers to subscribe to BT tomorrow. I challenge Fletcher Allen’s Board Chair Roger Stone and President and CEO Melinda Estes to figure out how FAHC could avail itself of one or more of BT’s services. And I extend the same challenge to UVM’s Board of Trustees, President Mark Fogel and Provost Jane Knodell.

Unlike a number of other anchor institutions in our community, including Champlain College, Dealer.Com and others, FAHC and UVM have proved impenetrable to BT’s sales efforts thus far, in spite of the fact that they and other institutions collectively spend easily a million dollars each year for their cable television, telephone and internet services. Yes, residential subscriptions are important to the viability of BT, but as anyone in wholesale and retail business knows, it’s the commercial and institutional clients that can make or break an enterprise. I don’t want to ‘pick on’ FAHC or UVM—there are a number of sticky technical matters that they and BT would have to work out—but I feel that a city’s largest institutions have a responsibility commensurate with their size to “buy local,” particularly when the quality is top rank and the cost of the service is competitive.

Our city enjoys a world-class telecommunications network—the envy of many communities around the United States—with competitive rates and a staff eager to work with any potential and existing customer to meet their needs, no matter how advanced or complex. Its customer service and technical service is also first-rate, and so should there be any impediment to subscribing?

Perhaps there is. I believe the fundamental reason that BT’s subscriber count has remained so low is that there has been a critical absence of “ownership mentality” among our residents, institutions and businesses. Why is this important? Because after the early adopters and enthusiastic supporters subscribed, too few of the remaining homeowners, landlords, businesses and institutions felt they had any financial stake in the future of the BT enterprise.

But why don’t Burlingtonians feel they have a financial stake in BT if BT is a municipally-owned system? Few Burlingtonians have thought about this, but BT is actually not a municipally-owned telecom system, nor has it ever been. The fact is that State law all but made it illegal and impossible for BT to be truly a municipally-owned system by limiting the City’s access to public financing and its ability to use City resources to market BT.

The Northeast Cable Television Association (NECTA), working through in-state instrumentalities such as Adelphia, convinced our lawmakers and regulators that limiting public financing not only minimized risk to taxpayers, but also that it would be counter to free enterprise if the State were to allow our City to compete head-to-head with them unless encumbered with legislative language that limited City elected leaders and departmental staff in what they could say and how much time they could spend “selling” the system to their fellow residents. Although the Vermont legislature bravely upheld the basic principle of municipal ownership of a telecommunication system, the Public Service Board nevertheless had to impose legislatively-based conditions on the City that severely handicapped the operation from being a true municipally-owned network.

Think of it: normally when a city wants to develop a municipal project that benefits its citizenry but has very significant up-front construction costs, it passes a bond measure. The voting taxpayers approve the bond, and then pay back the loan over time. The voters in this way demonstrate their good faith in the enterprise, become financial stakeholders with a vested interest in promoting its success, and commit to overseeing the operation. In hindsight, there’s no way to know whether or not a bond measure of the magnitude required to build BT’s network would have passed, but with the State law in place there was no way even to try.

At the end of the day, without taxpayers’ ownership interest in BT, the only truly vested stakeholder would be the financial lender—an out-of-town bank.

Imagine if the State of Vermont dictated to private cable operators like Comcast that they couldn’t use shareholders’ money to raise capital to build and own their systems, but instead they had to enter into a lease-purchase contract with an outside bank which would actually own the system until the loan was paid off in 20 years. Only then would the company and its shareholders own the system. Plus, during those 20 years the company president, CEO and the company’s other divisions would be prohibited from actively promoting the company’s services. Pretty crazy scenario, right? Yes, but these terms are basically the same ones to which the City of Burlington had to agree under state law.

Under these conditions, which the cable industry characterized as “leveling the playing field,” Burlington Telecom was operating from day one under the playing field with its competitors, not on a level one. At the same time that Burlington’s taxpayers were being protected from risk, they were also being denied any direct and palpable link between their subscription dollars and BT’s financial success. Without a sustaining sense of responsible ownership, subscriptions prematurely plateaued, and what made matters worse was inadequate marketing, spiritless mayoral leadership and, for some embarrassing reasons, an inability to bring the system underground to the core downtown and wealthier parts of the city.

So what can the average citizen do right now, at a time when our state’s regulatory agency, our state’s attorney, a criminal court and the FBI are involved in our financial mess? The only thing that we Burlington residents, businesses and institutions can do is put behind us any debilitating animosity, anger or fear we may harbor, and pursue the only positive alternative that we still have within our power to extract ourselves from this dilemma: subscribe to one or more of BT’s services.

If the residential, commercial and institutional subscribership of BT were increased by 20% over the next year—that amounts to fewer than 1,000 new sign-ups, contracts or pledges to leave competitor’s contracts—the enterprise will be in a vastly superior financial position that would, in turn, improve our ability to minimize its negative impacts on City revenues, maintain some local control over its management, and facilitate a smoother and earlier transition into profitability. The City is at a critical stage in its negotiations, assisted by its financial advisory firm Dorman and Fawcett. If it can show evidence of an increase in BT’s subscribership and revenues within a more positive public climate, the City will gain considerable advantage in its bargaining position at the table.

Building a telecommunications system is an enormously costly undertaking and a 20-year pay-back period is not unreasonable, in spite of the rosy promise of premature profitability made by BT’s early promoters. We cannot reverse past mistakes, and if we dwell on them without doing something positive right now, we’re only hurting ourselves. The network may yet be saved and become the profitable asset that we all dreamed it could be.

Because of my fairly well-known history as chairman of two BT citizens’ advisory committees, I’ve been asked recently by several folks my opinion about the City’s situation with BT. I have been astounded at the number of times that a BT subscriber has told me that he or she would be willing to pay more for their BT service so the network could remain under local control and otherwise kept out of jeopardy. I have not solicited these comments—they’ve been mostly volunteered to me, un-prompted. This was something I never expected to hear amidst this heated climate, and I felt heartened that perhaps my call to subscribe to BT might not fall on deaf ears after all.

The City and Dorman and Fawcett are doggedly pursuing a deal that we hope will result in a more professional management of BT while maintaining some degree of local control and revenue. Meanwhile, we citizens should not feel out of the loop and powerless. There is something positive we can do right now. Subscribe. And from what I can see, there are many of us who are ready and willing to do exactly that. Think of it not as giving a hand out, but lending a hand up to this wounded critter, BT, so it can live another day to serve us well, and far into the future.

Greg EplerWood, Burlington, January 12, 2011