This is the transcript for episode 283 of the Community Broadband Bits podcast. Stephen Barraclough joins the show to discuss lessons learned from Burlington, Vermont's network Burlington Telecom. Listen to this episode here.
Stephen Barraclough: But what we have now is an amazing infrastructure that's highly cash flow positive highly profitable and has very significant growth potential.
Lisa Gonzalez: You're listening to episode 283 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez at the November Broadband Communities Economic Development Conference in Atlanta. Christopher interviewed Stephen Barraclough from Burlington Telecom in Burlington, Vermont. Stephen has been instrumental in reshaping BT as it's weathered stormy times over the past few years. Christopher interviewed Stephen prior to the final decision on the fate of BT and in November 27 city council meeting Burlington's local leadership voted to sell the network to Schurz communications and ZRF partners. Learn more about what happened and is happening in Burlington by checking out our coverage on MuniNetworks.org. Stephen and Chris in this interview talk more about lessons learned in how to pick up a network that seemed difficulties after a prior mayor's administration mismanaged BT and kept difficulties hidden from the city council. Burlington had to overcome trust issues and find a way to move forward. Now here's Christopher with Stephen Barraclough and Burlington Telecom.
Christopher Mitchell: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell with the Institute for Local Self-Reliance I'm in Atlanta today for the broadband Communities Conference the Economic Development Series and we're doing a live interview with Stephen Barraclough the general manager of Burlington Telecom for the past many years. Welcome to the show. Chris good to be with you. So Stephen for people who aren't familiar Burlington Telecom was one of the earlier municipal networks, fell upon hard times and ultimately ended up running up a debt. There's a there's sort of a conflict in Burlington as to what went wrong. We're not really going to focus on that today we're going to talk about you came in at a time when Burlington Telecom was very distressed it was not really financially viable it seemed like what was happening in that time 2012-ish.
Stephen Barraclough: I think it was actually March 2010 and the blue ribbon commission that the city appointed to look at the problems that BT had gotten itself into had just issued reports which basically said that there was something here to save and that should be made to save it but it would probably need to be sold. I was bored in and really the first things I was told is you know there's no money to borrow cashflow was running six figures positive a month and did the figure out how to get it to break here. No positive or lock the doors and turn the lights off behind you say the first thing there are a number of phases. BT one was to stabilize things and actually get positive cash flow. Luckily we had a number of things we were able to do in terms reducing costs and a couple of big things we'd found where we've been overcharged for things that we're able to get to claim back so that provided cash in the early days had to take a lot of cost out of the business which unfortunately meant we had to lose number of people but there were quite a few opportunities to basically start to reduce the level of costs in the business and a big help at that time were HBC Hiawatha Broadband Communications who had been one of the entities that the city the Blue Ribbon Commission brought in to provide an evaluation of BT it was clear to me when I first became involved that they were listening to HBC name particular Gary Evans more than others.
Stephen Barraclough: One of the first things I had to do was put together a financial plan for BT and knowing that the first thing they would do with the financial plan that I produce would be to give it to Gary Evans and HBC and say what you think about this then I preempted them and involved Gary and his then chief financial officer and actually helping me put a plan together and they actually came to Burlington on several occasions while we were through the situation and actually became part of the plan authorship rather than the plan reviews and that was the start of a long and ongoing relationship with HBC right out of southeastern Minnesota.
Christopher Mitchell: It just so happens that me being in Minnesota I knew of them. I had great respect for Gary Evans who has since retired is still doing interesting things but he spent so much time in Burlington I was trying to wonder if he's going to buy property out there. Maybe he even did.
Stephen Barraclough: No, he rented property out there and and yes there was a period where he'd spend one or two maybe three or four days a month for one or two years. And he remains a great friend. Today we speak every few weeks and and he's been instrumental in shaping my views on BT and and really helping BT to come through a very difficult situation.
Christopher Mitchell: One of the things that I think is interesting is that individuals can matter a great deal and Gary is someone who can can do that now. You want to make sure you weren't taking all the credit for turning around Burlington Telecom you said that's more of a team effort.
Stephen Barraclough: It's always a team effort when you come to something so fundamental insists on multiple levels. I mean one the people on the ground who who were at BT who had to face meaningful changes in the work they did and how they did it as we needed to become leaner more nimble and more efficient at what we did say major challenges their whole other set of challenges in dealing with Citibank and the litigation. We owed them 33 and a half million dollars. They eventually settled for ten and a half million dollars. A lot of work and effort including the current mayor of Burlington and a whole raft of other people involved in that major milestone. The current team who were there at the moment to probably about half the workforce has remained from the original. The other half is new people there have worked incredibly hard over the last several years and now have have gone from something that people regarded as toxic to having real pride and passion in what they do and if there's anything that's satisfying out of this journey which I have absolutely loved it's the fact that we have this really neat local business that is now highly cash flow positive but with a team who is not a job it is a huge pride and passion and a belief that they making a difference.
Christopher Mitchell: Well I want to talk about how you got there and as we're talking the future status bring telecoms not been resolved but people who are listening already know it because it's been inserted into the beginning of the show so that's why we're not talking about that kind of process of where it is today in terms of ownership status but to give people a sense how many customers did you have then when you took it over versus how many you have today.
Stephen Barraclough: We had well over 4000 when I took over in early 2010 but we were getting weekly sometimes daily bad press articles. We were getting threats of litigation from Citibank and a multiple audit from different entities if I could just jump in. I
Christopher Mitchell: remember clearly I forget the gentleman's name as a reporter for The Burlington Free Press and it seemed like his job was solely to churn out articles about how bad Burlington Telecom was at one point.
Stephen Barraclough: It certainly felt like at the time it felt like no matter what you did way you turned you were just waiting for the next shoe to drop the next bad article to come out. And one of the consequences of that is it started really spooking some of the residential subscribers. And so for the first couple of years we actually kept losing subscribers, so our subscribers went down to below 4,000. And for me the concerning part was could I cut costs fast enough to enable us still to remain in business. And the reason they were leaving us was you know mainly residential, very few commercial subscribers left us but they're concerned that one day they get home and there was no service. We just had to close the doors something that was never going to happen because the public service board wouldn't have allowed that to have happened there had been an orderly wind down of BT's operations. But nevertheless that happened, and we focused really on cutting costs and then looking at the perception of BT and it was clear that not only were we spending too much money on many things. We also had a customer service problem as well and customer service problem driven by multiple things. One we are a business in crisis so people at BT were nervous too. We had you know some early stage equipment here we are one of the first builds and as you'll know the way one of these operations works isn't like you buy a Ford car or you buy a Chrysler you buy a Ford and GM Chrysler gearbox a Subaru windscreen wipers it's all different things that come together and with our equipment aging some of it was starting to be less reliable than it needed to be. And every time you try to change something then that often causes unintended consequences somewhere outside our platform was not as stable as we needed to be but we had no money to do anything about it.
Christopher Mitchell: Just to jump ahead. How many subscribers do you have today.
Stephen Barraclough: We have 7,300 subscribers today. And growing in double digits every year for the past several years.
Christopher Mitchell: I feel like there is almost a singularity there because everything you've described is several years of things getting worse and somehow you turned the corner. What do you credit in Britain telecom turning around.
Stephen Barraclough: I think there are two or three milestone events won in early 2011 late 2013 early 12. We stood back and looked at what are we. What are we trying to do here. We have failed municipal local triple play builder or are we something more because we felt like a failed municipal and then to what can we do operationally given what we have to work with. That could enable us to start to do something positive rather than just react to negative and so we look at our position versus the competition in the market. And we said how how do we differentiate ourselves? Can we differentiate ourselves against this huge giant? And then again listening to HBC and just natural inclinations it was pretty obvious we had something on the internet that could be and bandwidth that could be pretty special but our equipment limited 20 to 25 Mbps symmetrical at the time and clearly customer service was a problem and I've got a long history of working with businesses that have differentiated themselves through customer service. That became an obvious area
for me: local business, poor customer service doesn't work. So focus focus focus on customer service and then focus on trying to upgrade our equipment so that we could differentiate our offering in the marketplace.
Christopher Mitchell: When you talk about customer service does that mean giving a pep talk to the CSR customer service representatives? Does it mean getting rid of certain people in hiring new people what do you do?
Stephen Barraclough: It's all of that and more. So we had to reorganize the business three times I think because unfortunately some of the people that we had simply didn't have the right skills for how we needed to operate going forward. And whereas we talk about customer service, I believe customer service to be effective has be part of the DNA of a business. It's not something you can talk about. It's not something you just teach something that's inherent in you and you believe it's a reason for your being or it never really works.
Christopher Mitchell: Right it's not an act. It comes from. It comes from within. [Cross-talk] Right.
Stephen Barraclough: That was quite a long long term process but it's something that now is part of BT's DNA and the minute we began focusing on customer service we actually started to see results quite quickly in that there were some things that were just easy fixes low hanging fruit that had an impact and our subscribers stabilized or bottomed out in January 2012 and since then every year I said net subscriber numbers have gone up every single year and at increasing rate say that was first point. Second part was once we stabilize once we reduce costs enough we were able to start investing in replacing some obsolete infrastructure which caused the system to be unstable. And so the next several years were spent on replacing that obsolete infrastructure and also tackling our cost of goods. We were we were a fiber island in the middle of a sea with no connection to the mainland and the only way we could buy broadband was from our competitors and I charge a lot of money and when I got there in 2010 we were we were into three contracts one of which was sixty four dollars and make a month.
Stephen Barraclough: And the other was 60 125 of make a month. So even though we had this incredible infrastructure you know just the internet run over it was was so high that we couldn't afford to use it for what we now have our own transport to both Boston and New York with several redundant routes and we we buy as everybody else buys as well as having Google and Akamai and others peer with Netflix peer with us in Burlington's we have a completely different cast of goods now completely different operating costs.
Christopher Mitchell: And one of the things I find really interesting is that you didn't quite double the number of subscribers from your trough to current day but you came close and you have fewer staff now than you did when you came on.
Stephen Barraclough: Yes, some of them would tell you they work way too hard. But we do we we try to say there are a number of things we tried to do we didn't just want to be a recovered local broadband. If we were going to do anything we wanted to try and become as good as we could be and amongst the best in the U.S.. And that meant we had to get our cost base right. We had to have a reason for being which was the drive of the customer service the the DNA to try to be exceptional. We then embraced the bigger picture which is economic development and USC ignites and we're in a state that young people are leaving in a city that young people are leaving and you know people like me are coming more and more and we have to turn that corner and hey we have this incredible infrastructure that we're not really utilizing and that we need to spread more widely to drive that economic growth.
Christopher Mitchell: One of the things that you did at a time in which I'm sure it was difficult was you had a low income program so that households that had low incomes and qualified would be able to pay to ten dollars a month for I think at the time what was an incredibly fast connection. Trying to fight back right now in which no one was doing this is a time in which Comcast as a result of the NBC merger had just started its 10 megabit by 1 megabit ten dollar per month program. So you came in with at the time the most generous high speed ten dollar a month program. How did that work given your limited resources at that time.
Stephen Barraclough: I think we're very well for us. We were in the process of swapping out Jeep on equipment for twenty five make Sumantra call to get symmetrical and say we had a surplus jeep on equipment so we could hook up a low income family. We had the labor in-house IT costs as little or nothing. And this points to another major differentiator that we've we've tried to do. Not only is customer service critical but I think it's absolutely possible to be a really outstanding business citizen and have a profitable business. You've got to have a profitable business because as you know we're an infrastructure business and if we don't make money we can't invest in expanding the infrastructure. But I've seen no conflict at all between outstanding customer service outstanding business centers and communities that isn't making a profit in fact they all work together really well. And another of our hallmarks is being to try knowing that BT was eventually going to be sold to try to institutionalize those values that we would hope would attract to buyer that would have similar values and that would show to a broader audience that you can be a great corporate citizen and and run like a private business.
Christopher Mitchell: One question that I have. I feel like people never appreciate time in that. There are people who will say brilliant telecoms a failure as though I think you would even say that it felt like a failure. Back in 2010 2012 time period. Would you describe it as a failure today.
Stephen Barraclough: The interesting thing to me is I've been there almost eight years and I actually see more opportunity for Burlington Telecom now than at any time during those eight years. The future is very rosy. We had to go through some hard times. I do believe that the amount that was invested in the system originally would have made it hard for it to be able to continue. Had some pain not be taken remember the city of Burlington still has 17 million invested in this that wasn't supposed to be. Citibank had to take a settlement that was meaningfully below what they lent to the city of Burlington. But what we have now is an amazing infrastructure that's Hajduk cash flow positive highly profitable and has very significant growth potential within Burlington itself. We're now at around 45 percent market share and growing our addressable market will grow by 30 percent through 2023 because we're actually out of our own cash flow building out the rest of Burlington and we'll have that by the end of 2018 or mid 2019. And we have plans to spread much broadly much more widely into it encounter in a model that we believe can work. And we'll work from that broader expansion say really exciting times really exciting journey and opportunity for what was once regarded as a failure and toxic.
Christopher Mitchell: Is there anything else that people should know about Burlington Telecom before we were able to write the next chapter?
Stephen Barraclough: It's in the fairly early chapters of a novel. It's not anywhere near the end/ its best days are in front of it and I'm really hopeful that the values that have gotten it to where it is today and form part of its current DNA continue. We have great customer service we try hard to be ready good communities cities. And as you know our residential broadband pricing we have the $70 Gig and we have 150 Mbps for $55. So we've also tried to position pricing wise positioning ourselves as being competitive as anyone in the US.
Christopher Mitchell: Well I think you're succeeding on that measure. Thank you for coming. I know a lot of people have been interested in what's happened over the years embroiled in telecom. So I really appreciate you taking the time to give us a perspective.
Stephen Barraclough: And thank you for giving me the opportunity.
Lisa Gonzalez: That was Christopher with Stephen Barraclough from Burlington Telecom. Remember to review our BT coverage at MuniNetworks.org. We will continue to cover this network as developments arrive. We have transcripts from this and other podcasts avail that MuniNetworks.org/broadbandbits. Email us at podcast@MuniNetworks.org with your ideas for the show. Follow Chris on Twitter his handler is @CommunityNets. Follow MuniNetworks.org stories on Twitter where its handle is @MuniNetworks. Subscribe to this podcast and all the other
ILSR podcasts: Building Local power and the Local Energy Rules Podcast. You can access them on Apple podcasts stitcher or wherever else you get your podcast. Never miss out on original research. Subscribe to our monthly newsletter at LSR.org. Thanks to Arne Huseby for the song "Warm Duck Shuffle" licensed through Creative Commons. And thanks for listening to episode 283 of the Community Broadband Bits Podcast.