Tag: "Vermont"

Posted January 31, 2011 by Christopher Mitchell

Update: We have covered the second round of financing from ECFiber here.

The East Central Vermont Fiber Network, connecting some 23 rural towns, announced back in July that they would self finance a pilot project as a preliminary step to securing the full funding for the project.

Right around Thanksgiving, last year, David Brown updated the community on progress via an article in the Vermont Standard:

It would have been terrific to get the $50million needed to build out all 35,000 telephone and electric poles with 1,500 miles of fiber optic cable. Along the way, we learned an important lesson. We noticed that government money went to existing telephone companies to expand existing networks rather than funding start-ups like ours. That’s when the ECFibernauts decided on a change in strategy: build a small network, get a few real customers, and deliver rock-solid ultra-fast Internet to them as a proof of concept – all using our own money. Then, when all the critical components are up and running, go to the commercial markets for funding needed to expand out to all 23 towns.

The ECFiber Governing Board and our technology partners ValleyNet, Inc. are fortunate to have several experienced financiers within our ranks. Working with our attorneys (to keep everything legal) ECFiber is reaching out to the community with a private offering of tax-exempt promissory notes. As of this writing, we have raised more than three-quarters of what is needed to complete Phase I of our project. The ECFiber hub is now under construction on Waterman Road in Royalton and an initial pole attachment application for 500 poles is being processed. Phase I will bring ECFiber service to selected businesses, schools, town facilities and residents in Bethel, Barnard, Stockbridge and Royalton.

This is a commitment that few other communities have made -- self-financing a start up portion. It is actually quite inspiring, though one quickly grasps the huge need from the stories EC Fiber has collected. Any community hoping...

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Posted January 25, 2011 by Christopher Mitchell

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...

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Posted January 18, 2011 by Christopher Mitchell

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...

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Posted December 21, 2010 by Christopher Mitchell

There is so much to say about Burlington Telecom and its struggles that it cannot be covered in a single post. This is one of several posts that will discuss pieces of the situation. One of the questions that has been raised by the Larkin "audit" of BT is whether BT was losing money on the broadband it provided to City Departments.

Though the report prepared by Larkin for the State revealed a number of disturbing practices by Burlington Telecom, a number of them have been strongly disputed. The report clearly has a number of weaknesses, from an apparently lack of expertise on somewhat basic telecom economics to the fact that the "auditors" do not appear to have attempted to talk to anyone who knew anything about how BT operated.

That said, something surely went dramatically wrong with BT and the Larkin report may help shed light on it.

But when one reads articles in the local press about it, it is quickly evident that the writers have practically no understanding of what they write and harbor a strong hostility against Burlington Telecom. Consider this passage from the Burlington Free Press:

Auditors observed as well that the city, a prime user of BT services, was charged “below market rates” and “below BT’s cost of service. The low rates charged by BT ... to the city could be viewed as a form of cross-subsidization,” which, the audit notes, is a violation of a provision of BT’s state license. The building of the system in general, auditors said, was marked by a “lack of timely and accurate accounting information.”

While the quote does come from the Larkin report, it offers no foundation for the claim and later hedges against it (two paragraphs later -- all from page 26):

The fact that BT is providing services to various City departments at below- market rates that may be below BT’s cost of service, which could be viewed as a form of cross-subsidization, is a problem.

After stating without referencing any evidence that BT is providing services to Departments below the cost of provisioning, the conclusion two paragraphs below states BT may be providing services to departments at...

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Posted December 20, 2010 by Christopher Mitchell

While the bad news about Burlington Telecom (BT) has traveled far and wide, it has been marked with errors, misinformation, and inaccurate comparisons to other projects. MuniNetworks.org will weigh in on this issue with a series of posts to explain what happened, what did not happen, and what lessons we can learn from it.

But today, we are publishing a commentary from Tim Nulty, the General Manager who started BT and is now working with the folks in East Central Vermont to build a rural FTTH network. In this commentary he discusses his experiences with Burlington Telecom and what lessons it has for the EC Fiber project. In short, they differ in important ways.

Business Plans of Burlington Telecom and ECFiber

Numerous loose allegations have recently appeared in the press regarding the business plans of Burlington Telecom and ECFiber. DPS Commissioner David O’Brien and John Briggs of the Burlington Free Press are examples but others have also chimed in. These statements are inaccurate, misinformed and unfounded. Since they affect organizations that are important to thousands of Vermonters they need to be corrected.

BT’s business plan was based on those of similar Fiber-to-the-Home (FTTH) networks already running and successful at the time…including Reedsburg, WI; Bristol, VA, Kutztown, PA; Dalton, GA and Winona, Minn. Experts from these projects were consulted in developing BT’s plan. Several came to Burlington to assist with and vet BT’s planning and BT staff visited them to in turn. All of these networks were built in towns, which like Burlington, had established broadband incumbents already in place so their experience was highly relevant. By their fifth year all these networks had achieved penetration rates over 55% and most over 65%. A study by survey firm RVA, in 2007 and updated in 2009 identified 57 municipal FTTH networks operating in the USA and calculated that the average penetration, including new start-ups, was 54%. BT’s business plan was constructed so that it would become profitable with 4800 - 5000 customers of the 19,500 potential—a more conservative take rate than comparable networks had actually achieved in practice. This provided BT with a substantial “safety cushion”.

All capital-intensive investments-- power stations, airports, steel mills--take some time to become profitable. This is also true of telecoms. Criticizing any FTTH network (...

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Posted December 17, 2010 by Christopher Mitchell

Vermont's Department of Public Service has released its audit of Burlington Telecom. The audit is highly flawed and a disappointment in terms of actually illuminating what went wrong with Burlington.

We have been awaiting this audit in the hopes that it would actually explain how the network could have gone into such great debt so quickly. The few answers provided from this audit are entirely unsatisfactory, due in large part to its overall sloppiness. We will soon put up a more substantial post about Burlington and lessons learned, but we wanted to post this information now as readers are undoubtedly wondering.

The audit should be read by any community running or considering a network because it describes a number of bad practices that should not be duplicated. That said, it isn't yet clear how accurate the audit is (they did not even attempt to interview key people), as explained by Tim Nulty in his response to it (linked below). Perhaps the biggest disappointment is that the audit simply did not explain where the money went. Steve Ross examined this question more than a year ago, but we appear no closer to an answer. A longer explanation on this, next week.

Finally, Andrew Cohill's thoughts about lessons learned from BT is well worth a read as well. Regardless of whether BT really did make all those errors, Cohill's post should serve as an educational item to any community considering such an important investment.

Posted December 7, 2010 by Christopher Mitchell

The AP says Burlington Telecom may be a cautionary tale for cities around the the country that contemplate building their own networks.

It is fascinating that this article appears now, as we wait for the audit of Burlington to be published, where we hope to finally discover exactly what went wrong in the network. The Mayor used to allege that Tim Nulty (General Manager who built it) left it in ruin when he resigned.

However, it looked good (not great, but good) at that point. And after the transition, the Mayor's Administration ceased Nulty's policies of transparency, so we would have to take their word for it rather than any proof. For instance, BT ceased to work with citizen oversight committees. This is the same Administration that hid supposed transfers to the network from the City Council and the people.

The very fact that such secrecy was possible is troubling. These networks are intended to behave somewhat transparently and should be independently audited to ensure problems (which may be corrected when found) are not hidden for political reasons. Burlington had a unique structure that allowed the Mayor too much opaque control over the network - something rarely found in the structure of most community networks. (Some things, such as prices paid for content, should remain secret for competitive reasons, but that should not allow the Mayor to hide key metrics regarding the health of the network.)

There are reasons to believe the Mayor improperly accounted money to BT, which is why we await an audit from the state that we hope will clear up exactly how Burlington Telecom went from being a good example to the worst example of public ownership (something paid shills from telco and cableco groups critics love to point out).

Author Dave Gram has an odd passage regarding this situation:

In September 2009, BT notified the Vermont Public Service Board that it had used $17 million in city funds in violation of its state license. State officials have been mum about the details of their investigation, and an FBI spokesman, through an assistant, would not confirm or deny a Burlington Free Press report that that agency had stepped in. It's widely believed that apparent license...

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Posted November 29, 2010 by Christopher Mitchell

Vermonters are asking some hard questions about the federal broadband stimulus decision to throw money at a wireless network for Vermont rather than loaning money to an organization dedicated to delivering real broadband.

Senator Bernie Sanders convened a meeting to discuss the awards toward the end of October.

Senator Bernie Sanders led off his “broadband town meeting” Saturday morning at Vermont Technical College with a ringing affirmation of the need for better broadband coverage in Vermont and the nation.

However, nobody in the crowd of nearly 300 people needed to be convinced of that. What they wanted to know was whether a huge new federal grant to a private company was the right way to do it.

VTel, a small private telephone company, received a $116 million grant to build a FTTH network to serve their existing 18,000 footprint as well as a wireless network that is intended to serve the entire state.

In contrast, the East Central Vermont Fiber Network (which we have covered previously), applied for a loan to build a FTTH network to everyone in the 24 communities that have joined together to form the network. The ECFiber network would be run by a nonprofit and would repay the loan from revenue generated by selling triple-play services on the network.

Vermonters have a strong fiscal conservatism streak, which has shown up strongly in the discussions around this situation, something noted in a story leading up to the Sanders meeting:

He will get plenty of both from representatives of ECFiber, the consortium of 23 towns that has been planning a network of fiber-optic broadband to virtually every home in the White River Valley and beyond.

The organization was stung recently when its own request for a loan was not funded by RUS, which instead awarded a much larger outright grant to VTel, which is located in Springfield.

Our position at MuniNetworks, is quite similar to that of the these Vermonters: loans would be better policy than grants for broadband infrastructure.

Supporters of the wireless network, including VTel's CEO, Michel Guite, have suggested the $116 million...

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Posted July 26, 2010 by Christopher Mitchell

The East Central Vermont Fiber Network is launching a pilot project to start connecting rural customers with a FTTH network. EC Fiber has long labored to find funding -- it was one of many projects to see funding avenues disappear with the economic collapse following the fall of Lehman Brothers. The Feds also failed to fund them (instead opting to fund middle mile after middle mile of projects that were less offensive to powerful incumbent companies.

But they have returned to the private markets and feel sufficiently confident about financing options to build this pilot project.

The pilot project will provide a solid foundation for the capital lease used to build out the rest of the network, providing 100% coverage in 23 towns in East Central Vermont. While the intent of the project is to prove that the larger project is viable, according to Nulty, “it will be able to stand on its own if we don’t raise another dime of capital.”

The project is expected to cost some $80 million in total to cover the 23 participating towns. ECFiber has already obtained the necessary permissions from the State to offer video and telecommunications services. The Pilot Project targets the town of Bethel, where the central hub for the entire network is located.

ECFiber is one of many groups that are using a nonprofit ownership model to build the network. The towns work together to create a nonprofit that will finance, own, and operate the network to ensure community needs are put before profits -- now and in the future.

Update: The pilot project will only offer broadband and phone services due to the high fixed cost of trying to offer video services for such a small population.

Posted February 19, 2010 by Christopher Mitchell

Tim Nulty describes the "most rural" FTTH project in America - a large multi-community build in Vermont, the state with the largest percentage of people living outside metropolitan statistical areas. This is more of a technical article, explaining why the network is necessary, who they have contracted with, and the topology of the network.

Beginning in early 2008, ECFiber developed a project to bring fiber to every single premises in its area: “universal service -- no exceptions, no excuses” without any assistance from the State. This project was completely self-sustaining from the revenues of subscribers alone. A public offering of $90 million of Certificates of Participation, fully compliant with SEC requirements, was prepared by Oppenheimer Company and was on the verge of closing when Lehman Brothers collapsed and with it the entire municipal debt market.

ECFiber had to start again from scratch. Fortunately, the Stimulus Bill passed about this time and ECFiber redirected its financing efforts to that source. It was not a difficult matter to recast its Public Offering documents into an application for a BIP loan. No grants are needed by the ECFiber project and none are asked for. Vermonters generally don’t approve of free taxpayer handouts except in extreme circumstances. ECFiber is completely viable and requesting grants would be, in our view, unnecessary and, hence, improper.

We continue hoping the RUS will stop wasting time with lesser projects and direct a loan to these folks in Vermont.

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