Burlington Telecom offices in Burlington, Vt.

Citibank has sued the city of Burlington, Vt., and the city’s legal firm demanding municipal-provider Burlington Telecom hand back their fiber-to-the-home network and pay damages in excess of $33.5 million dollars.

Citicapital, which owns the equipment that operates Burlington’s community network, says Burlington Telecom has defaulted on their lease payments, and has demanded the city “de-install and return” the fiber network — everything from set-top boxes and in-home wiring to ripping fiber cables directly out of underground vaults and off telephone poles.  Citi also wants BT’s vehicle fleet turned over to them.

Burlington Telecom has been a poster child of poorly-planned and implemented city-owned broadband, and a series of financial and operational scandals led state investigators to consider criminal charges for misappropriating taxpayer funds to sustain the network.  While prosecutors ultimately declined to file charges, the resulting scandal in the mayor’s office has left the city with a network it stopped paying for, and the potential much of it could be auctioned off to the highest bidder, which could turn out to be Comcast or FairPoint Communications.

Citicapital claims the city has not made a direct lease payment since November, 2009.  The bank had been drawing down funds deposited in a special escrow account the city was required to open as part of the lease-to-purchase transaction.  That account has also run dry, and the bank claims it has received no payments since May of 2010.

Citibank’s attorneys filed suit:

“BT continues to use Citibank’s equipment and vehicles unlawfully and without its permission and continues to depreciate the value of Citibank’s assets in order to generate revenue for itself,” the bank’s attorneys charged.

Citibank wants a judge to award punitive damages in excess of its remaining loan balance “because Burlington’s intentional breach of the agreement amounts to a reckless or wanton disregard of Citibank’s clear contractual rights.”

“It’s ironic that a bank that received a taxpayer-financed multi-hundred-billion-dollar bailout now wants taxpayers in Burlington to pay them excessive damages,” shares Stop the Cap! reader and Burlington resident Joe, who shared the story with us.  “I think we should be calling it even after three years of big bank bailouts.”

The lawsuit has city residents worried because attorney fees, and any resulting damages or settlement agreement with the bank, will likely run well into the millions of dollars.  Every month the city remains in arrears, Citibank’s agreement calls for at least $235,000 in missed payment fees and interest.  Taxpayers will likely cover most, if not all of that amount.

“I don’t think anybody should be surprised,” City Councilor Paul Decelles, R-Ward 7 told the Burlington Free-Press. “I always believed this day was going to come. Now we have enormous mess on our hands.”

Citibank wants their fiber back.

Christopher Mitchell from Community Broadband Networks notes Burlington Telecom was an aberration in a country with many successful community-owned broadband networks.

“We have watched in dismay as Burlington Telecom transitioned over the past four years from a model community network to the worst case scenario,” Mitchell wrote on the group’s blog. “This situation proves only that community networks can suffer from bad management in some of the many ways private telecom companies can suffer from bad management (resulting in anything from bankruptcy to prison).”

“Communities can learn lessons from Burlington’s situation — chief among them that transparency is important,” Mitchell observed. “As with other public enterprise funds, the operation should be regularly audited and oversight must be in place to catch errors early, when corrections are easier and less costly.”

Among Burlington Telecom’s problems included overpriced, uncompetitive broadband service that never took full advantage of fiber’s speed and versatility.  Earlier news accounts included speculation BT had trouble securing sufficient connectivity with a backbone provider to sustain faster speeds, but it left the company at a competitive disadvantage against incumbent cable operator Comcast.  Burlington Telecom also failed repeatedly to build community support to establish a firewall against frequent political shots fired at the network as it became a partisan hot potato.

The city promises a “vigorous defense” against the lawsuit, and observers suspect a judge will not order the city to shut the network down, because it would cease the only revenue stream the company generates that could be used to pay a negotiated settlement with the bank.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WCAX Burlington Citibank Sues BT 9-20-11.mp4[/flv]

WCAX in Burlington explores how much of a case Citibank has in its lawsuit against the city and its attorneys over Burlington Telecom.  (4 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/EPB Fiber Optics Testimonials 9-11.flv[/flv]

Consumers and businesses across Chattanooga, Tenn. are saying goodbye to Internet Overcharging from AT&T and Comcast, making the switch to EPB Fiber Optics.  While Big Telecom companies claim community-owned broadband is a business failure, see why so many businesses and consumers in southeast Tennessee reject that claim and have made the switch.  Speed that blows Comcast away, prices that deliver a much better value than AT&T, service and support that is fast and reliable, and a community-owned provider that keeps its earnings right at home working for the people of greater Chattanooga.  EPB is one of Stop the Cap!’s most highly-recommended broadband providers.  If you are lucky enough to live or work in their service area, we can’t say enough about EPB, and that’s an unsolicited testimonial from us!  You can call them at (423) 648-1372.

Watch these testimonials from actual customers, sign up, and spread the word.  (10 minutes)

Five years ago, municipal Wi-Fi projects were enjoying a small boom.  The concept of providing low-cost or free Internet access seemed like a winner because it could provide service to those who could not afford traditional broadband, would stimulate economic development downtown, and possibly attract business as shoppers stopped in cafes or stores to use their wireless devices.  In some communities, just the spectacle of a city-wide high technology wireless network delivered worthwhile bragging rights that adjacent communities didn’t have.

For most city or town officials pondering investment in a Wi-Fi network, the idea germinates from a perceived lack of service from private providers.  If private companies were delivering the service, few communities would spend the time, effort, and money duplicating it.

In the community of Marshalltown, public Wi-Fi in 2005 was a service only found in a small selection of stores and cafes in the central business district.  The Marshalltown Economic Development Impact Committee sought to change that, promoting a plan to construct a free-to-use Wi-Fi network covering a 20-block radius centered on the Marshall County Courthouse.  The community of 27,000 got a three month trial of the downtown Wi-Fi network in 1995, with the city and county sharing 50 percent of its cost, with the remaining 50 percent paid for by private donations.

Mediacom, the cable company serving Marshalltown, was incensed by the notion of a community-owned broadband provider delivering improved (and free) Internet access across the city.  Even worse in their eyes, local government officials were pondering creating a public broadband utility.

Marshalltown (Marshall County), Iowa

It wasn’t long before new, shadowy groups with names like “Project Taxpayer Protection” showed up in town attacking the concept of municipal Internet access.  After a blizzard of brochures and exaggerated claims about “government broadband,” the network became a point of controversy among the locals.

Only later would the community learn the group (whose status as a non-profit was later revoked by the Internet Revenue Service for failure to file timely reports on its funding and activities) was actually funded mostly by Mediacom itself, with the full support of the Iowa Cable Association.

The astroturf campaign against public involvement in Wi-Fi, which could threaten Mediacom’s broadband service profits, was effectively an investment against competition.  It was an effort that paid dividends by late 2005, when the city and Mediacom suddenly announced a new “public-private partnership” to administer and expand the Wi-Fi network.  There were a few important changes, however:

1. Mediacom’s concept of “free” was markedly different than the designers’ original vision.  The cable company had other ideas, placing restrictions on how much “free use” was allowed;
2. Customers who used the newly-announced “free service” got it at speeds not much better than dial-up and definitely slower than 3G;
3. Residential Mediacom broadband customers could get unlimited time on the formerly-free network, if they paid $19.95 a month for 256kbps access;
4. To make the network seem business-friendly, business customers were told they could get up to 10Mbps service for $59.95 a month.

The goal of the partnership, according to Mike Miller, chairman of the Marshalltown Economic Development Impact Committee, was to see low-cost broadband Internet access citywide by the end of 2006.

Oh, and Mediacom insisted on something else: no more talk of a city-created municipal telecommunications provider, at least for a year anyway.

“We commend you on the foresight and vision to do this,” Bill Peard, Mediacom’s government affairs manager, told city officials at the time the deal was announced.

Friends until the community-owned...

Once Mediacom got its hands on the formerly community-owned network, it was the beginning of the end.

Business customers could not get Mediacom to sell them access at the promised price because representatives could not find the offer.

It was much worse for residential users.

Free Wi-Fi access soon became limited to one hour a day, up to 10 hours per month for non-Mediacom customers.  After that, you paid if you wanted more.

City and company officials spent most of their time wrangling over the costs of the service and its future potential.  What city officials were not planning for was the network’s virtual demise at the hands of the cable company.

...free Wi-Fi network is at an end.

Today, free access is a distant memory, as Mediacom pulled the plug claiming there was “limited interest.”

Effectively, Mediacom’s idea of a public-private partnership was the systematic decommissioning of a community’s public Internet alternative, all to protect its own broadband business.

That’s a lesson of caution for any community seeking to team up with private broadband providers.  Marshalltown allowed that partnership to first and foremost serve Mediacom’s business interests, not the public.  Now that network is effectively gone and largely-forgotten.

That suits Mediacom just fine.

In the fall of 2009, South Carolina’s Budget and Control Board approved a fire-sale deal that leased out 95 percent of the state’s public wireless broadband spectrum to two private companies in a 30-year contract valued at $143 million, with the promise South Carolina would enjoy better broadband as a result.

Two years later, South Carolina’s broadband standing has been called “a Corridor of Shame” according to one provider that is trying to expand service while Clearwire and DigitalBridge — the contract winners, sit on their respective hands.

Both companies secured access to the statewide Educational Broadband Service spectrum they get to control with near-exclusivity for less than $5 million annually — around $1 a year for every South Carolinian that could eventually be served with improved broadband.  But nobody is getting service from either provider, indefinitely.

Columbia’s Free-Times notes neither company has concrete plans to bring broadband to anyone in South Carolina.  Clearwire, now in financial trouble, provides no service in the state and DigitalBridge refused to comment for the newspaper’s story.  Free-Times reporter Corey Hutchins could not find anyone able to provide any definitive information about either company’s short or long-term plans to hold up their end of the bargain.

Khush Tata, chief information officer for the S.C. Technical College System suspects one might not even exist.  So long as these two companies maintain a lock on the spectrum, nobody else can deliver the wireless service either.

“I haven’t seen any big cohesive strategy since [the leasing] at all,” Tata told the newspaper. “I think that it’s still based on market and business viability for each provider so they’re sort of on their own. Each provider, they invest based on their return on investment, which is good for their business, but as a state there isn’t any overall planning or approach — and I think the leasing of spectrum provided the largest overall strategy opportunity, which is a pity that it hasn’t panned out yet.”

Don’t tell that to industry-connected Connected Nation, whose South Carolina chapter claims the state is doing better than most providing broadband service.  The group has published maps, based entirely on data provided by the state’s phone and cable companies, that suggest most residents not only get the service, but have a choice in providers.

“That’s just plain bull,” says Stop the Cap! reader Jeff Lodge, who lives outside of Columbia.  Not only does the local cable company pass him by, but there is no DSL either.  He relies on an unlimited wireless data plan from AT&T and does most of his web browsing during breaks at work.

No Plans

“I live in a community of 22,000 people and only those along the main streets in this community have access to broadband,” he says. “The cable company doesn’t go far off the beaten path, and the here-and-there DSL some get is dreadful.”

Even Connect South Carolina acknowledges broadband speeds in the state are often woefully behind others in the region.  Many well-populated census tracts have no wired broadband at all.

With the pervasive lack of broadband, incumbent providers have been heavily lobbying the state to keep others off their spartan turf — pushing for the same type of legislation effectively banning community broadband networks that North Carolina passed earlier this year.

“It’s Time Warner Cable and AT&T… again, that are behind most of this effort, and those two companies treat South Carolina like a forgotten bastard child now,” Lodge says. “Can you imagine the arrogance of big cable and phone companies to keep competition away even when they, themselves, won’t compete?”

No Comment

One company trying to make a difference: GlobalCo and their partner On-Time-Communications.  A review of the under-developed website of the latter suggests neither entity is well-positioned or backed to deliver broadband without significant financial assistance.  But at least they recognize the problem.

“In South Carolina there’s 10 counties that made [the FCC’s report on broadband unavailability] and the majority of them come out of what’s commonly referred to as the ‘Corridor of Shame’,” Ronnie Wyche, GlobalCo’s vice president of sales told Free-Times.

None of this comes as a surprise to Brett Bursey, director of the South Carolina Progressive Network, who opposed the spectrum sell-off.

“The bargain basement lease of the nation’s only statewide broadband system was a theft from, and insult to, the taxpayers who built and own the system,” Bursey told the paper. “The system is not being developed by the companies who won the lease and the Legislature is ideologically opposed to public ownership.”

For the past two years, we’ve watched a lot of expansive fiber broadband projects get promoted by local media as broadband nirvana for individual homes and businesses that are either stuck with molasses-slow DSL or no broadband at all. Now, we’ve found another, sold by Springfield, Mass. media as salvation from Verizon’s ‘Don’t Care’ DSL for western Massachusetts.  But will the 1,300 miles of fiber actually reach the homes that need a broadband boost?

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WSHM Springfield Broadband in Berkshires 7-26-11.mp4[/flv]

WSHM-TV in Springfield covered the start of MassBroadband 123’s fiber optic project as the solution to rural broadband woes in western Massachusetts.  But most residents won’t actually get to use the new network, at least initially.  (2 minutes)

Last month, Gov. Duval Patrick joined public officials and firefighters at the Sandisfield Fire Department to kick-off construction of the MassBroadband 123 fiber-optic network project to expand broadband access to more than 120 communities in western and north central Massachusetts.

MassBroadband 123 Service Area (click to enlarge)

“For too long, families and businesses in western Massachusetts have lived without reliable and affordable high-speed Internet access,” said Governor Patrick. “Today, as we commence the installation of more than 1,000 miles of fiber-optic cable across the region, we start the critical final step in delivering broadband access to everyone. The digital divide in Massachusetts is about to close.”

Don’t hold your breath.

Don’t get me wrong.  The Massachusetts Broadband Institute means well.  Judith Dumont, the group’s director, is well-aware of the challenges rural Massachusetts has getting 21st century broadband.  She’s helping to oversee the construction of an enormous middle-mile, fiber backbone network that will eventually reach those ten dozen communities.  But much of the funding for the project precludes the possibility of directly wiring that fiber to the people who actually need it.  The incumbent providers’ lobbyists have seen to that, broadly warning it would represent ISP Socialism to allow government money to deliver service to homes and businesses — customers they themselves claim to be committed to serve.  But ask any resident in Sandisfield how well they manage that.

Gov. Patrick splices fiber cable at inauguration ceremony for fiber expansion project. (Courtesy: MBI)

A good part of upgraded broadband on the way in the Berkshires will be provided to government institutions like local government, public safety, schools, and libraries.  There is nothing wrong with that either, but when local media blurs this distinction into belief fiber-fast Internet access is on the way to Mr. & Mrs. Jones living on Maple Street, they do a real disservice to the cause for better broadband.

Dumont optimistically believes that opening the state’s fiber network to incumbent providers on a wholesale basis will dramatically help the pervasive problem of reaching rural customers.  Unfortunately, this has simply not been our observed experience watching these projects develop.  The “last mile” problem doesn’t get solved with the existence of a middle mile network, because providers are rarely willing to invest in the construction costs to wire the unwired.  Political and business matters too often get in the way.

Cable companies frequently boycott participation in these networks, and phone companies like Verizon Wireless -may- utilize them for backhaul connectivity to their cell towers, but don’t expect to see lightning-fast Verizon FiOS fiber to the home service springing up anytime soon in western Massachusetts, even if fiber connectivity is provided just a mile or so up the street.  If they didn’t build it themselves, many providers just are not interested.

“Last mile” is often the most expensive component in a broadband network.  It’s the part of the project that requires digging up streets and yards, stringing cables across phone poles, and literally wiring the inside and outside of individual homes and businesses.  Verizon FiOS works in densely populated areas where large numbers of potential customers are likely to deliver a quick return on investment in the network.  But Wall Street has always disagreed, declaring the capital costs too high to make sense.  AT&T won’t even match Verizon’s commitment, relying instead on fiber-to-the-neighborhood networks that deliver access over a more modern type of DSL, delivered on fiber to copper wire phone lines already in place.  That’s their way of not spending money rebuilding their own last mile network.

Wireless ISPs are expected to take advantage of the state's new middle-mile network.

If any part of the broadband network in rural America needed subsidies, the “last mile” is it.  But Washington routinely delivers the bulk of federal assistance to the construction of middle mile networks and institutional broadband that doesn’t deliver a single connection to a homeowner or business.  That suits incumbent providers just fine, judging from their lack of interest in applying for broadband subsidy funding made available two years ago and their hard lobbying against community broadband networks, or anything else smacking of “competition.”

Thus far, the limited grants that are available for “last mile” projects require substantial matching funds and are often limited to $50,000 — a ridiculously low amount to solve the “last mile” challenge.  Those trying are primarily fixed wireless providers valiantly attempting to serve the areas DSL and cable forgot, but deliver woefully slow speeds at incredibly high prices.  WiSpring, one such Wireless ISP, wants to expand coverage with the help of the new fiber network.  But their top advertised wireless speed for residential customers is 1.5Mbps, and that will set you back $100 a month after a $500 installation charge.  Oh, and their customer agreement limits use to 25GB per month with a $10/GB overlimit fee.  That’s hardly the kind of broadband solution a multi-million dollar fiber network should bring to individual consumers.  It’s as frustrating as filling a pool, one cup of water at a time, with an eye-dropper.

Now imagine if a quarter of the state’s $40 million investment in broadband — $10 million, was spent physically wiring individual homes with fiber broadband.  Would that make a bigger splash in the lives of ordinary consumers than a middle mile network they cannot directly access?  Is construction of a state-of-the-art fiber network a good investment when many of the providers scheduled to use it are Wireless ISPs delivering bandwidth suitable for e-mail and basic web browsing only?

In West Virginia, we learned last month the state is swimming in middle mile stimulus grant money it can’t spend fast enough on behalf of institutions — many who either already have super fast service or can’t afford the Cadillac pricing that represents the ongoing service charges not paid for by grant funds.  Is this a good way to spend tax dollars?

Communities large and small need to think big when it comes to broadband.  Building a middle mile network does not by itself solve the access problem.  It’s a fine start, but absolutely requires a follow-up commitment to solve the last mile problem.  Here are our recommendations:

1. Demand the federal government eliminate restrictions on the kinds of network projects that can built with stimulus funds, especially those that prohibit investment in last-mile networks;
2. Don’t believe for a moment large cable and telephone companies will bring better broadband to consumers just because you have a middle mile network.  Historically, they have lobbied hard against last-mile projects they do not own or control, and fund conservative political groups to oppose your community’s right to develop and govern your own broadband future;
3. If incumbent providers won’t provide the service your community needs, consider exploring the possibility of doing it yourself.  Just as MBI contracts the wholesale part of its service out to a third party to administer, nobody says the village clerk has to be a billing agent for a community broadband service that directly serves your residents;
4. Involve local citizens in rallying for better broadband instead of sitting around and waiting for the local phone or cable company to provide it.  They won’t.  It’s a simple matter of economics for them – will they get a sufficient return on their investment within five years? If not, you are not getting improved broadband.  That works for them but doesn’t work for your community, and providers have made it clear most of the networks they intend to build are already built.  That leaves a lot of communities behind.
5. While wireless may be an answer for the most rural or difficult-to-reach homes, it is not a realistic solution for 21st century broadband inside village or town limits.  Wireless networks often lack the capacity to sustain the growing demand for multimedia, high-bandwidth content that is becoming more important for today’s online experience.  When a provider limits usage to 25GB a month, that’s a big problem for any community that will soon find itself stuck in a broadband swamp while the rest of the country passes it by.
6. The biggest financial challenges seem to come to those who think small about broadband projects.  Don’t rely on yesterday’s technologies for tomorrow’s networks.  Fiber-based broadband will deliver the best bang for the buck and is infinitely upgradable.  That’s why rural phone companies and cooperative telecom providers are constructing fiber networks themselves.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WGBY Springfield The State Were In Judith Dumont 7-11.mp4[/flv]

WGBY-TV in Springfield talked with Judith Dumont about western Massachusetts’ broadband future.  (19 minutes)