Burlington Telecom the new "proof" that community broadband does not work

More information about the financial problems of the city-owned Burlington Telecom (Burlington, Vermont) venture are emerging. Opponents of community broadband will be eager to hold this up as the latest "proof" that community-owned telecom does not work.

What is odd about arguing that communities should stay out of telecom is that the alternative being proposed is basically, "Stick with the 20th century business models that have failed utterly to meet broadband needs in the U.S." So some pioneer community broadband projects have had problems. Anyone remember Adelphia? Anyone remember the hundreds of other cable companies that have failed or been bought up because they were struggling financially?

The opponents of community broadband have nothing, nothing to offer except "stick with what we know has failed." As opposed to, "Let's try some new models and learn what works." It is a very feeble argument.

Projects like Burlington Telecom and Utopia (which is now back on track and so not mentioned so much anymore) are providing valuable best practice information for other community projects. What can be learned from the BT effort?

  • The financial records need to be open and transparent. The community should be receiving regular financial reports on revenue, expenses, income, and debt.
  • One reason to create authorities, coops, and other arms-length ownership and governance entities is to keep elected officials out of day to day decision-making. Some cities, like Danville, Virginia; Jackson, Mississippi; Powell, Wyoming, and others are very successfully managing the networks as a city department, but there is always the possibility that political opportunism gets in the way of good fiscal management.
  • We are seeing that community networks need well-run marketing and public awareness campaigns that are ongoing. Projects that are having trouble meeting financial targets are almost all lacking good marketing--for open access business models, it means that you can't rely solely on your service providers to meet your take rate projections.
  • It is risky to build too much infrastructure in advance of having customers. This keeps popping up as an issue in early projects that borrowed heavily and burned through the loan funds too quickly without having the customer base to justify the capital expenditures.
  • Similarly, it is clear that some of these early projects hired too many staff too quickly--again in advance of having the revenue to justify a big staff. Especially in the first year or two, projects have to run very lean in staffing and operational expenditures.
  • It is critical to hire highly qualified staff with a strong background in business and a proven track record managing large enterprises.

The BT auditors have said they don't see how BT can repay its debts, but they probably only did an analysis using the existing customer base. We run the numbers on community broadband ventures all the time, and modest increases in the customer base can make a big difference in paying off debt over ten or fifteen years. Auditors are not usually going to engage in speculative analysis, but it is incorrect to read too much into the audit conclusions. BT can overcome their problems with good, open management and a sharp focus on increasing their customer base.

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BT will not be able to survive unless the local elected officals are completely removed from direct contact with the business.

In order to even begin to pay back the overwelming debt of 50M$ they would also need to increase their customer base by a factor of 3x. This would be approx every household in the City.

The only way this business is going to survive is

1) Its Debt is significantly reduced or restructured

2) Strong business/marketing management

3) More transparancy with its operation


I agree that BT probably needs debt restructuring as part of its recovery plan. Unless Citibank wants to go into the broadband business, I would have to think they will eventually relent and make some adjustments to the loan. But Citi may be playing hardball to force the City to get more focus on proper business management and a strong marketing plan.