BVU OptiNet Update: Deal Coming Together

A little over a year ago, we first shared the news about Bristol’s decision to privatize its FTTH network, OptiNet. Virginia based Sunset Digital Communications offered to purchase the network for $50 million. The network has saved Bristol millions of dollars, stimulated economic development, and cut telecommunications costs for local residents and businesses. Nevertheless, after several corrupt officials drove the network into a dark period of scandal, all those advancements paled and Bristol was ready to sell the network.

After months of negotiations with BVU’s partner in the Cumberland Plateau area service area, the details for the sale are coming together.

When There's A Partner

One of the last steps to completing the sale required approval from the Cumberland Plateau Company (CPC), which operates as a partner with BVU to bring connectivity to four additional counties in Virginia. As a partner with OptiNet in those areas, CPC owns approximately 50 percent of the assets.

When Sunset Digital offered $50 million for the BVU assets, CPC obtained the right of first refusal for the assets in the four counties where BVU and CPC work together as partners according to their contract.

Back in the fall of 2016, CPC was concerned about the legality and the details of the proposed transaction; they decided to wait for federal and state review before granting approval. Because the NTIA, the Economic Development Administration (EDA), and the Virginia Tobacco Commission provided grant funding to the CPC region for the deployment, the agencies needed to review and approve the proposal. The agencies approved the sale, but required that a large amount of BVU debt be paid. One of the claims that they required be paid was a claim for $8 million from CPC.

Approving The Offer

As part of the offer, Sunset promises to invest $6.5 million to connect more homes and businesses in the CPC region. They estimate CPC will gain about $21 million in revenue over 13 years while Sunset operates the network. CPC will retain ownership of its assets in the CPC service area and Sunset will transfer ownership of equipment in the CPC area to CPC.

After several rounds of negotiations since January, CPC approved the transaction on April 20th. CPC Board member Steve Breeding addressed the deal in a Herald Courier article; he described the situation for the CPC board as “faced with two realities.”

First, finding a way to continue connecting more residents and businesses in the CPC area is a challenge. It was the lack of investment from large private providers that sparked public investment in the first place.

“We really don’t know if there is anyone else that would invest this kind of money in our system and be able to do those things,” [Board Member Seth] White said. “Because we weren’t given that opportunity."

White’s statement echoes other sentiments from CPC board members. Negotiations between CPC and Sunset didn’t start until January 2017 and have been challenging as CPC questioned Sunset's commitment.

According to Stacy, the other reality facing the board is the contract CPC has with BVU, which they don’t consider favorable. CPC weighed the possibility of litigation against BVU when considering the Sunset offer. Rather than spend funds on a costly lawsuit with no guaranteed outcome, the board chose to approve an agreement that ensures what the BVU contract failed to deliver.

“From our perspective, saying yes to this deal is hands-down, absolutely, 100 percent the right decision for this region,” [Virginia Tobacco Commission Executive Director Evan] Fineman said. “It’s not a perfect deal. It’s one that folks can live with. It’s one that gets us moving forward, and it’s one that brings in really significant new revenue to the region.”

The board approved the contract 20 - 8.