At the Institute for Local Self-Reliance, we have been watching the latest developments with Burlington Telecom from afar but with extreme curiosity. We have watched a wonderful local movement grow to Keep Burlington Telecom Local and that fits entirely with our values. 

Because of the challenges from BT's prior mismanagement and court settlement, Burlington's options are limited. The benefits of local ownership are tremendous - from being directly accountable for services to keeping more money in the community. But also the ability to correct problems as they arise. No management is perfect, but local ownership provides the most opportunity to ensure that the network will continue to serve the community, rather than a situation in which the community serves the network. We see the latter far too often in communities stuck with cable monopolies. 

We salute those that have made Keep Burlington Telecom Local a viable option and we continue to hope that BT indeed remain local. But we are concerned that BT may not remain locally controlled. 

In the event that the City Council decides to pick a non-local bidder, we want to offer some observations. We are an organization that shares localism as a strong value and has more than a decade of experience working on broadband policy to best benefit communities. 

We have a long history with Ting (though no financial relationship) but less experience with Schurz Communications. Not only have we extensively documented Ting's partnership with Westminster, Maryland, to build a citywide fiber network, but many of us have been customers of Ting's parent Tucows in various ways. 

In our experience, absentee ownership of broadband networks is concerning, in part, because of a tendency for such a company to cut back on customer service and network investments. Such actions can be financially lucrative in the short term but inconvenient when the owner of the company shops, worships, and/or mingles with those who bear the brunt of such disinvestment. Network owners from afar don't have to worry as much about upsetting their customers from declining standards.

The people of Burlington have proven beyond a doubt that they believe in publicly owned Internet networks. They’ve fought harder than any other community we’ve seen to maintain a voice in the future of their much loved publicly owned fiber optic network, Burlington Telecom (BT). Now after months of ruminating, debating, and examining their options, the future of BT is still uncertain.

The Back Story

We’ve covered BT extensively and dived into both the numerous benefits the community has enjoyed as well as the problems caused by former Mayor Bob Kiss and his administration. Bad choices and a lack of transparency snowballed, leaving the city to contend with sizable debt. Through all the difficulties, residential and business subscribers have consistently praised their hometown publicly owned network and expressed an appreciation for accountability, good service, and BT’s local ownership.

In order to fend off a lawsuit from Citibank, the city of Burlington had to agree to find a buyer for the network. To maximize the funds the city will receive from the transaction, a sale needs to be finalized by early January.

On November 6th, the City Council was scheduled to vote on which entity would be allowed to purchase the network, but that would have been a dull ending to a story filled with drama and, as the fates would have it, that isn’t what happened. At all.

The Kiss Of Debt

The Kiss administration’s choice to hide cost overruns from the public and the City Council led to a $33 million obligation to CitiBank. In 2014, the two reached a settlement after CitiBank decided to sue in 2011 and the parties had haggled in court for three years. As part of the settlement, the community committed to selling BT. In order to obtain the largest share possible of the proceeds from the sale - 50 percent - Burlington must reach an agreement with a buyer by January 2nd, 2018. The longer it takes to find a buyer, the less of the net proceeds the city will retain.

In August, East Central Vermont Telecommunications District (ECFiber) released their 2018 construction plans to expand fiber optic network to the towns of Braintree, Brookfield, Granville, Hancock, Rochester, and Stockbridge in east-central Vermont. 

Homegrown And Community Owned

According to Irv Thomae, the District Chairman:

“Our mission is to build and operate a universal, open access, fiber-to-the premises network, ensuring state-of-the art connectivity to every home, business and civic institution in all of our member towns. We are pleased that thanks to our recent financing we can at last provide near-universal coverage to six more towns.” 

As of October, ECFiber has built over 420 miles of fiber optic cable and connected over 2,000 active customers in parts or all of their 24 member towns. They plan to complete another 170 miles of the network by the end of 2017 and another 250 miles in 2018. “We plan to continue this process of filling out towns until the entire District is covered,” says Thomae.

ECFiber is a consortium of 24 Vermont towns organized as a Communications Union District under Vermont law (30 V.S.A. § 3052). ValleyNet, a nonprofit organization based in Royalton, operates the community owned fiber optic network. The Fiber-to-the-Home (FTTH) infrastructure provides symmetrical speeds from 17 to 700 Megabits per second (Mbps) with no data caps. Top speeds will increase to gigabit connectivity later this year.

And then there were three. After months of review and vetting, the field of bidders to purchase Burlington, Vermont’s, treasured municipal network is now a manageable number. On September 20th, city officials announced which entities were still in the running and released details of their proposals.

Ting

Toronto company Ting, which is owned by Tucows, submitted a bid to purchase the network. The company is already providing services in Charlottesville, Virginia; Holly Springs, North Carolina; and in Westminster, Maryland, where the public-private partnership has received several awards. The company is also planning construction in Sandpoint, Idaho, and Centennial, Colorado, where they will also be partnering with the municipalities to use publicly owned fiber.

They describe the key points of their offer as $27.5 million in cash and they will pay the city an additional $500,000 if BT earns $4.25 million earnings before interest, tax, depreciation, and amortization (EBITDA) during the 2018 fiscal year. Ting is offering the city a minority interest in the network that they can later divest if they choose.

Ting will also relocate BT’s equipment, currently housed in the city’s Memorial Auditorium. The move is estimated to cost $800,000. As part of the deal, the company will also donate $250,000 toward the city’s Burlington Ignite and other programs to encourage entrepreneurship and closing the digital divide.

In their offer, Ting guarantees expansion within the city and beyond the city limits. Like the other bidders, Ting plans to keep the current operational team in place. They also guarantee customer rates for 30 months.

Review the details of the Ting/Tucows offer here.

Schurz

As fall sets in, the Burlington Telecom Advisory Board (BTAB) is still working on choosing a buyer for the Vermont city’s municipal network. The review of the four semi-finalists continues, concerned people express their opinions and BT’s work benefits the community.

High-Speed For Low-Income

In August, BT officials announced that they would be the first ISP in the state of Vermont to offer high-speed Internet to low-income residents through the federal Lifeline program. Lifeline provides a $9.25 monthly credit for qualifying households; BT will be offering symmetrical 25 Megabit per second (Mbps) service for $9.95 per month, leaving the balance for subscribers.

According to BT General Manager Stephen Barraclough, BT is able to participate in the program due to previous upgrades to the infrastructure:

“Because we have a gigabit network, because over the past three, four, five years we’ve essentially swapped out the majority of equipment that’ll allow a thousand meg to go to every home we have lots and lots of equipment that we’ve actually taken off the side of homes that is more than capable of delivering more than 25 meg symmetrical.  We have lots and lots of routers that can still be used. So if you look at it from a marginal cost perspective, how can we afford to do this, really there’s very little incremental out-of-pocket cost over and above what we already have.”  

Surpassing Goals

August was also an exceptional month for subscriber numbers at BT. In addition to reaching a new height for the number of subscribers added in one month, BT eclipsed their original goal of 7,000 total subscribers. As of the end of August, the network served 7,136 members of the Burlington community.

On their website, BT celebrated with this message for the community:

The clock is ticking as the city of Burlington examines bids from entities to buy or partner to operate Burlington Telecom. The community has narrowed down what sort of characteristics they want in a buyer, but there is also some debate about the process as city officials move toward the final process.

On To The Next Step

The community received eight bids, none coming from large national telecommunications companies. Early in July, the Burlington Telecom Advisory Board (BTAB) reported that the highest bid was two and a half times the lowest, but they did not make dollar amounts public. They’ve eliminated some of the bids and on July 31st, the finalists are scheduled to make presentations to the City Council in an executive session. 

While price is a factor that the city and the BTAB are considering, it isn’t the only criterion that matters. Last year, the BTAB released a report based on community input, recommending the city first look for a locally based entity. Many people in Burlington like BT as a locally controlled asset and fear it may eventually be swallowed up by one of the large, distant carriers. 

Keep BT Local formed when city residents banded together to create a cooperative. They started in 2012 and have recruited members committed to keeping BT in the hands of local residents. Keep BT Local was one of the entities that submitted a bid.

How Much Public Input?

Keep BT Local is the only bidder that has publicly acknowledged its decision to bid on the network and city officials are still undecided about how much information to release to the public about bidders. Mayor Miro Weinberger has indicated he would prefer the bidders and their bibs remain confidential until after city officials make a final decision.

In true publicly owned network fashion, ECFiber in Vermont has increased speeds without raising rates. This is the third such speed increase in four years that did not come with a price increase. Even better, ECFiber plans to do it again next year.

The break down of the changes are:

Basic: Increases from 10 Megabits per second (Mbps) to 17 Mbps

Standard: Increases from 25 Mbps to 40 Mbps

Ultra: Doubles from 100 Mbps to 200 Mbps

Wicked: Goes from 500 Mbps to 700 Mbps

All speeds from ECFiber are symmetrical, so upload and download speeds are the same. Later this year, the organization plans to increase speeds again and the organization will offer a gigabit plan.

Publicly Owned Networks Are Doing It

Municipal networks and regional networks make it a habit to increase speeds with modest or no price increases. We’ve noticed the behavior in several places, but gathered data for eight publicly owned networks in the state of Tennessee to highlight this characteristic.

Check out our Municipal Networks: Speed Increases & Affordable Prices fact sheet.

Expanding While Saving Public Dollars

As we reported in March, the town-owned Communications Union District is expanding and building out in remaining member towns. They are also serving community facilities, such as schools, libraries, and town halls with the fastest speeds available for only $74 per month. Incumbents charge $2,000 per month for the same level of service. In a school, that comes to about $23,000 each year to free up for educational programs, rather than telecommunications costs.

Listen our recent conversation with Carole Monroe and Irv Thomae about the network in episode 251 of the Community Broadband Bits podcast.

For the second week in row, our staff has felt compelled to address a misleading report about municipal networks. In order to correct the errors and incorrect assumptions in yet another anti-muni publication, we’ve worked with Next Century Cities to publish Correcting Community Fiber Fallacies: Yoo Discredits U Penn, Not Municipal Networks.

Skewed Data = Skewed Results

Professor Christopher S. Yoo and Timothy Pfenninger from the Center for Technology, Innovation and Competition (CTIC) at the University of Pennsylvania Law School recently released "Municipal Fiber in the United States: An Empirical Assessment of Financial Performance." The report attempts to analyze the financial future of several citywide Fiber-to-the-Home (FTTH) municipal networks in the U.S. by applying a Net Present Value (NPV) calculation approach. They applied their method to some well-known networks, including Chattanooga's EPB Fiber Optics; Greenlight in Wilson, North Carolina; and Lafayette, Louisiana's LUS Fiber. Unfortunately, their initial data was flawed and incomplete, which yielded a report fraught with credibility issues.

So Many Problems 

In addition to compromising data validity, the authors of the study didn’t consider the wider context of municipal networks, which goes beyond the purpose of NPV, which is determining the promise of a financial investment.

Some of the more expansive problems with this report (from our Executive Summary):

S&P Global Market Intelligence - May 26, 2017

Hard Data on Municipal Broadband Networks

Written by Sarah Barry James

There is a dearth of good data around municipal broadband networks, and the data that is available raises some tough questions.

A new study from University of Pennsylvania Law School Professor Christopher Yoo and co-author Timothy Pfenninger, a law student, identified 88 municipal fiber projects across the country, 20 of which report the financial results of their broadband operations separately from the results of their electric power operations. Municipal broadband networks are owned and operated by localities, often in connection with the local utility.

...

Yet Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, argued that Yoo's study did not present an entirely accurate or up-to-date picture of U.S. municipal networks.

"When I looked at the 20 communities that he studied — and his methodology for picking those is totally reasonable and he did not cherry pick them — I was not surprised at his results because many of those networks are either in very small communities … and the others were often in the early years of a buildout during a period of deep recession," Mitchell said.

As an example, Mitchell pointed to Electric Power Board's municipal broadband network in Chattanooga, Tenn. — one of the five networks Yoo identified as having positive cash flow but at such a low level that it would take more than 100 years to recover project costs.

...

In fact, without the revenue generated by the fiber-optics business, EPB estimated it would have had to raise electric rates by 7% this year.

According to Mitchell, Yoo's study captured the Chattanooga network when it was still "small and growing," but misses "what's going to happen for the rest of the life of the network, which I think is the more important part."

...

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.