Telecompetitor - May 25, 2017

Municipal broadband networks do not have a strong financial track record, according to an analysis conducted by the University of Pennsylvania’s Center for Technology, Innovation and Competition. The municipal broadband financial analysis, which looked at 20 municipal fiber projects, found that only nine were cash-flow positive and that of those, seven would need more than 60 years to break even.

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An Opposing View

Municipal network advocate Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, pointed to several flaws in the Penn Law municipal broadband financial analysis.

He noted, for example that a substantial portion of the 20 networks studied were “early in the process and very small.” He also argued that the 2010-2014 study period may have biased the results, as that period included a recession and subscribership for some of the networks has increased substantially since 2014. He noted, for example, that EPB’s broadband network in Chattanooga had about 50,000 to 55,000 subscribers in 2014 but has now hit the 90,000 mark.

The Penn Law authors’ approach was “not the proper way to measure these networks,” said Mitchell in a phone call with Telecompetitor. The analysis “doesn’t take into account jobs created or the impact on the municipal budget,” he said.

He argued, for example, that a municipality that previously paid $1 million annually for connectivity might instead pay itself $500,000 for connectivity on the municipal network.

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Read the full story here.

This is the transcript for Episode 251 of the Community Broadband Bits podcast. Carole Monroe and Irv Thomae discuss connectivity in East Central Vermont and the future of the ECFiber Network. Listen to this episode here.

Carole Monroe: What we see, in this area, is that most of the customers coming to ECFiber are customers that are coming from FairPoint.

Lisa Gonzalez: This is episode 251 of the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. ECFiber is a consortium of 24 member towns in East Central Vermont that banded together in 2008, on a mission to bring high quality connectivity to their small, rural towns. The project began with funds from many local investors. Since then, the network has expanded, and a new structure will allow ECFiber to continue to grow. In this interview, we learn about ECFiber's past, present, and future plans. Christopher's guests, Carole Monroe and Irv Thomae, describe what it was like getting the community network going. Now, here's Christopher with Carole Monroe and Irv Thomae, talking about ECFiber in Vermont.

Christopher Mitchell: Welcome to another edition of the Community Broadband Bits Podcast. I'm Chris Mitchell, and I'm enthusiastic today, to be talking with Carole Monroe, once more. Carole is now the CEO of ValleyNet. Welcome back to the show.

Carole Monroe: Thank you. Glad to be here.

Christopher Mitchell: And we also have Irv Thomae on, who is the district chairman of the governing board for the East Central Vermont Fiber Network-

Irv Thomae: Telecommunications district.

Christopher Mitchell: Right. We're going to explain for a second, how that used to be ECFiber, and now has a different name because it has a new, exciting approach. So welcome to the show, Irv.

Irv Thomae: Thank you.

Christopher Mitchell: Maybe that's actually just a really good place to start, quickly. Irv, can you just remind me how ECFiber is now structured?

We haven’t reported on East Central Fiber (ECFiber) in almost a year and, boy, are things hopping in Vermont. The community network has obtained funding to expand in east-central Vermont and have a plan to bring high-quality connectivity to more towns during the next two years. In the mean time, FairPoint Communications is using federal funding to overbuild inferior DSL in many of the areas already served by ECFiber. No, this is not an April Fool's Joke.

First, The Good News: ECFiber Is Growing

We recently touched base with Carole Monroe, Stan Williams, and Irv Thomae from ECFiber in Vermont to get caught up on what's happening with the publicly owned network comprised of 24 member towns. 

The last time we shared an update, they had just announced plans to expand the Fiber-to-the-Home (FTTH) network. The organization of 24 member towns received an infusion of $9 million in revenue bonds, which allowed ECFiber to pay down existing debt and add more fiber miles to the network.

Prior to obtaining the new funding source, ECFiber had always used the crowd funding approach, which limited growth to small and steady deployments. In 2015, the state legislature enacted a state law that created “communications union districts.” A Union District can consist of municipalities that join forces to invest in Internet infrastructure; the new model made it easier for ECFiber to obtain funding for larger deployments.

This February, ECFiber announced that the network would now bring service to parts of Royalton, Strafford, Pittsfield, and Randolph, with more growth on the way:

Not everyone’s American dream involves owning a single-family home but most of us DO want high-quality Internet access in our household. In major metropolitan areas, apartment renters are more likely to have cable and some are lucky enough to have Fiber-to-the-Home (FTTH). It’s only been recently, however, that owners of multiple dwelling unit buildings (MDUs) have really started to appreciate how fiber-optic connectivity, especially the gigabit kind, can add value to their investment. Now, a pair of MDU developers in Vermont will be the first to offer gigabit connectivity in the state to their renters and they’re choosing Burlington Telecom (BT) to provide the service.

The Gold Standard

“Fiber optic networks are fast becoming the gold standard both at work and at home, so it was important for us to have Burlington Telecom for this project.” says Jacqueline Dagesse [one of the developers], “Including Gig internet as an amenity offers our tenants instant access to the fastest, most reliable connectivity available without the hassles of signing up for service, waiting for an installer or committing to long-term contracts.”

The 27-apartment building is located in downtown Winooski, a town that borders the city of Burlington. The exercise facility in the building will also be a Wi-Fi hotspot. In addition to offering gigabit connectivity, the developers wanted to include various energy efficient amenities that would promote sustainability. The building will open this summer.

It Adds Up

MDUs with FTTH bring higher rents and a higher purchase prices for condos or units that are owned by residents. According to research by RVA, LLC, and reproduced in a neat graphic by the FTTH Council, almost 30 percent of people in the U.S. live in MDUs and FTTH connectivity can increase renters net income by 11 percent. This may be the first gigabit access apartment building in Vermont, but it won't be the last.

Last spring, the BT Advisory Board (BTAB) released a report that recommended the city of Burlington, Vermont, try to find a buyer with local ties to purchase its network with the troubled past. As the deadline draws near and the city seeks out the right entity to take the reigns, the community holds on to that goal. Keep BT Local!, the local organization that has been working since 2012 to turn the network into a cooperative, has announced that it will make an offer on the network.

According to Seven Days:

Alan Matson, vice chair of Keep BT Local, said the local co-op will put forward an offer for the utility. The member-funded effort likely won’t put forward as substantial an offer as a private tech company would, Matson acknowledged. Still, he said, “We hope to be one of the finalists in July.”

Matt Cropp, a member of Keep BT Local, said the co-op model would “build broad-based community wealth” and urged Burlingtonians to pitch in. He said he was willing to commit a portion of his retirement savings to the cause. 

Matson and Cropp were among a group of citizens who attended a public meeting with Advisory Board members to discuss options and offer advice on choosing a buyer. As expected, many of the attendees described the network as a valuable public asset and expressed concern that it not fall into the hands of a large, absentee telecommunications conglomerate such as Comcast. 

Choosing Finalists

Burlington Telecom has popped up on our radar before as one of those munis that goes the extra mile for the community. They’re at it again this holiday season as they pledge to help support local charities.

According to VTDigger:

From now until the end of the year, Burlington Telecom will donate $100 to a Burlington based non-profit for each new customer subscribing to BT Internet, television, or phone services.

Customers will have the choice to direct BT’s donation to one of five organizations: Committee on Temporary Shelter, Community Health Centers of Burlington, Howard Center, Spectrum Youth & Family Services, and Steps to End Domestic Violence.

As a bonus, an additional $25 will be donated for any current Burlington Telecom customer who uses BT’s Refer-a-Friend Program.

Record Of Care

We’ve covered their past decision to launch a computer repair service so customers had somewhere local to get hardware advice. In 2011, BT announced a partnership with a local nonprofit to provide affordable computers to local families. Recently, BT began offering free Wi-Fi in the city’s transit center so travelers could stay connected.

Locals Want Local Interest

Keep BT Local! is a cooperative started by Burlington residents and businesses that are raising capital to purchase the network from Blue Water LLC, the company that currently owns the assets. When CitiBank sued the city for $33 million, the settlement agreement required that a third party (eventually Blue Water) take temporary ownership and the city lease the network until they could agree on a permanent buyer. 

Burlington Telecom is teaming with Green Mountain Transit to provide free high-speed Wi-Fi to commuters and GMT employees at the new transit center, reports Vermont Business magazine. The bus transit center opened on Oct. 13.

The magazine noted:

“A reliable high speed Wi-Fi connection on the Downtown Transit Center platform will improve the customer experience, allowing passengers to use their wait time more effectively as they work, connect with friends, or download an e-book to enjoy on the ride.”  

Burlington Telecom general manager Stephen Barraclough told Vermont Business:

 “The opening of the new Downtown Transit Center is a much needed development for the many who commute to and from Burlington daily, and provides an exciting opportunity to highlight Burlington’s powerful gigabit infrastructure as an accelerator for economic, educational and community benefit.” 

Burlington Telecom joins a growing list of U.S. communities that are making free high-speed Internet connectivity available at public transit stations and airports. 

Free Wi-Fi At The City Gateway

In April 2015, we noted that LUS Fiber began sharing its municipal Gigabit network with travelers at the Lafayette Regional Airport in Louisiana. Free Wi-Fi is available at the airport supported by LUS Fiber, allowing guests to check email, post to social media, and browse the Internet.

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.

As Burlington, Vermont, searches for a buyer for Burlington Telecom, the local residents and business owners continue to remain engaged in the future of their beloved Fiber-to-the-Home (FTTH) network. Most recently, they made it clear that their first priority is finding a local company to own and operate the fiber network.

VT Digger reported that, according to a survey conducted by the BT Board of Advisors:

Several residents have said they would like to see Burlington Telecom sold to a locally owned co-operative and that their greatest concern is the utility being sold to one of its larger competitors such as Comcast, AT&T or FairPoint.

From the report:

Though the City is precluded by the terms of its settlement Agreement with Citibank from continuing to own the Asset, a carried equity interest is permitted. It is important that all ownership options be explored and considered in light of the legal requirements and the City’s goals for BT. However, the BTAB [Burlington Telecom Advisory Board] agrees with the vast majority of interested participants in this process that the sale of BT to one of its existing, national competitors would likely not be in the overall best interests of the City. 

At a recent meeting, David Provost, chair of the advisory board said, “The best option from our perspective is finding a buyer with ties to the local community that will allow the city to have a minority stake in Burlington Telecom."

A Troubled Past, An Uncertain Future

After years of cover-ups by the city's past leadership, CitiBank eventually sued Burlington for $33 million. The parties settled and, as part of the settlement, Burlington transferred ownership to Blue Water LLC, a company formed by Burlington businessman Trey Pecor. In exchange, Blue Water provided $6 million in bridge financing to allow the city to settle the lawsuit with Citibank. The city is still leasing the network temporarily but the ultimate goal is to find a partner to purchase the network.