Another Telecom Too Far

Yet another “community based” telecom is rapidly sinking under the weight of its own diminished expectations.  ECFiber, a non-profit municipal entity (meaning it’s publicly funded, even when including subscriber revenues), is having trouble finding customers that it just knew wanted to pay for

Is the BT on the left, and ECFiber on the right?  Kinda hard to tell which one's which.

Is the BT on the left, and ECFiber on the right? Kinda hard to tell which one’s which.

its services 5 years ago.  But let’s let ECFiber makes its own case, shall we?  The following are listed under “Community Ownership” on ECFiber’s website:

ECFiber isn’t owned by some out-of-state mega-corporation. We’re a non-profit municipal entity determined to do what the big telecom companies could not do: connect every residence, institution, and business to a high-speed fiber-optic network.

This concept of community ownership has a number of benefits:

1) It keeps you (sic) money in Vermont. When you pay your monthly ECFiber bill, you know that your money is being kept right here in Vermont to create jobs and reinvest in the infrastructure we need to sustain the social and economic fabric of our community.

Funny how the social and economic fabric of our “community” suddenly needs to be sustained, and ECFiber will be the vehicle to do just that.  Yep.  So now I can watch “Dancing With The Stars” and smile contentedly at the shiny box, perhaps with some trace of salivary discharge around the corners of my mouth, secure in the knowledge that me paying some municipal entity for TV and Internet access (both of which are available already) is worlds better than paying someone else (at the same or cheaper rates) for TV and Internet access.  Oh, and as a bonus, my local municipal and property taxes will also help pay for this wonderful service.

Drink It.  Drink The Kool.

Drink It. Drink The Kool.

I can see where ECFiber’s offering is just inherently better.  The difference is stark and clear.

2) ECFiber is committed to using the revenue it receives to expand our network in Vermont, using Vermont labor, and where possible, using Vermont-purchased materials.

What difference does it make where the labor and materials come from?  This is a municipal entity offering a service at a price the market will or will not bear.  There’s a reason why so much of what’s constructed in VT is made from materials and labor outside of VT – because the state’s economic and fiscal policies have made costs so high that businesses move elsewhere, or else their products become too expensive, and therefore less competitive.  If ECFiber’s goal is to use VT materials and labor (where it can, of course, to be determined by ECFiber), then it’s very likely that its cost structure will make it less competitive with other firms.  A quick peek at its price catalog confirms this assumption.
3) Most of the investors in ECFiber are our friends and neighbors. They receive interest at cometitive (sic) rates, most of which stays in Vermont. Going forward, subscriber revenue will be used to repay the investors.

Most of the investors use spellcheck, too.  Capital is fungible, it has no address.  That some Vermonters have chosen to invest in ECFiber does not change one thing about the service being sold, other than the potential costs and the service’s sell price.

4) When network construction is complete, and the investors have been repaid, excess cash generated by subscribers to ECFiber will be returned to the networks’ owners — its 23 member towns.

Which I’m sure will be used to offset each town’s property tax burden.  But the larger question is:  When is the payback period for the investors?  What rate are they getting?  Why wouldn’t “excess” cash be used as an investment fund by ECFiber to build out its own network to other towns?

But the larger problem with what amount to state-run or municipally-run entities is that they are inevitably supported with public dollars.  Taxes help with start-up and expansion costs, either through loans, grants, or federal “investments”, which are just a really nice way of saying “tax re-distribution”.

If Burlington Telecom, an entity that had an enormous density advantage over the area ECFiber wants to serve, still couldn’t build out its own network and garner enough subscribers to cover its costs, even with a $17 million dollar unsecured loan, why would anyone think that ECFiber could do it better?

Well, as it turns out, ECFiber can’t.  Burlington Telecom customers (and Burlington taxpayers), try to pick your jaws up off the floor.  It seems like ECFiber has only been able to connect a few hundred customers, in five years.

Five years ago at Town Meeting, about two dozen towns from Montpelier to White River Junction voted to join ECFiber, a community based organization that promised to deliver high speed fiber optic broadband service to every household.

Today ECFiber has been able to connect just a few hundred customers, and in the five years that have passed, its had to dramatically change its business model.

In March of 2008 on the heels of the town meeting votes, Tim Nulty, ECFiber’s project director, outlined an ambitious timeline for the network to be up and running.

“We hope to turn on the first customers at the end of 2009, and there would be a cable down every road, every street in this area around 2010.” Nulty said.

It hasn’t worked out that way. Today ECFiber has connected roughly 300 of 25,000 potential subscribers in the 23 towns that now make up its service area. It has about 50 miles of active cable out of 1,600 miles of roads in its service area.

Clever readers may remember Tim Nulty, of Burlington Telecom fame, who managed to leave the mess behind him before BT requested, and received, $17 million from Burlington taxpayers without anyone knowing about it, except then-Mayor Bob Kiss, and the city’s chief financial officer, Jonathan Leopold.  Nulty fails to mention his complicity in pitching the original idea, and his driving BT underwater, which required the bailout from Burlington.

No taxpayer subsidies here.  Nope. No sir.

No taxpayer subsidies here. Nope. No sir.

In other words, Nulty’s selling, again, the idea of public entities masquerading as telecom providers, providers that inevitably fail to meet the grand promises made in the past, and are inevitably required to rely on public funding to survive in the future.  The results of these failed enterprises has been increased taxes in Burlington, an ongoing lawsuit with Citi Capital, and at least some Vermonters wondering why cities feel they have both an interest in, and an obligation, to provide telecom services that are already being provided by the private sector.

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