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.

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.

1. It has not passed the entire city within the timeline to which it agreed in receiving its Certificate of Public Good (CPG)
2. BT has, apparently, borrowed $17 million from the city's pool (used generally for short-term financing of projects) in contravention of its CPG which states that any money borrowed from the City must be paid back within 60 days. This CPG condition makes running a network more difficult for BT than it would for a company like Comcast - who can readily self-finance short-term borrowing. Across the U.S., communities have to deal with laws and regulations that benefit private companies over public networks. When the economy fell apart, BT was unable to refinance its debt to continue its expansion and chose to borrow from the City to continue connecting new customers. This was the right decision - the CPG did not anticipate such conditions and the terms for outside financing in late 2008 were wretched.

As the FCC continues to formulate a National Broadband Plan, the Institute for Local Self-Reliance has submitted comments [pdf] about publicly owned networks in response to the Request for Comments #7: "Comment Sought on the Contribution of Federal, State, Tribal, and Local Government to Broadband." In our comments, we highlight the importance of publicly owned broadband networks by noting many success stories and offering details on networks from Chattanooga, Burlington, Monticello, and Powell, Wyoming. We also offer some comments about middle-mile networks and networks that connect core anchor institutions, like libraries and schools.