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Burlington Telecom Needs to Create New Innovative Services Comcast Doesn’t Provide, Telecom Consultant Says

Steven Shepard, president of Shepard Communications Group

Steven Shepard, president of Shepard Communications Group

Burlington Telecom, the municipally owned fiber to the home cable and broadband provider still reeling from a late fall financial scandal, must think outside of the box if it is to survive and grow its business in Vermont’s largest city.  That’s the assessment of Steven Shepard, president of Shepard Communications Group, a consulting firm based in Williston.

It comes as both city and state officials continue an investigation into a $17 million loan from city coffers to cushion the provider from substantial losses incurred over the past three years of operations.

Burlington Telecom has been criticized for underestimating the costs of wiring Burlington with fiber optics, something Shepard doesn’t think is unusual.

“I haven’t found one yet that has come it at budget, or even under budget,” Shepard told WCAX-TV news.

Burlington Telecom director, Chris Burns, says the company needed the additional money to cover capital expenses as it works to build its all-fiber network in every part of the city. He says the initial investment of $33 million dollars was not enough. “Some of the early estimates weren’t based on firm engineering quotes,” says Burns. “They were rough order magnitude estimates.”

Chris Burns, Burlington Telecom

Chris Burns, Burlington Telecom

Burns feels Burlington Telecom needs to expand its service area to bring in additional customers to help keep the provider up and running.  Some customers recognize Burlington Telecom is a unique, municipally-owned asset that can potentially provide services that Comcast, the dominant cable provider in the area, cannot.  Comcast operates a traditional hybrid fiber-coaxial cable network with more limited bandwidth than Burlington Telecom’s direct fiber optic connection to the home can provide.

But Shepard believes most consumers don’t know or care how service reaches them, and believes fiber optic networks alone do not bring instant success to providers.

Unless Burlington Telecom creates services that would be difficult for Comcast to deliver, they are just another telecommunications company, Shepard believes.

One suggestion from Shepard: an automatic file backup service.  Fiber optics can provide upstream speeds equivalent to downstream speeds, something Comcast cannot easily deliver.  Such a service would automatically send a copy of every file to a secured, encrypted off-site backup system.  If a customer needed the file restored, or an entire hard drive, Burlington Telecom could transmit the files on request.  Assuming privacy is protected, such a service would give consumers a potential reason to switch providers.

For broadband customers, providing upstream and downstream speeds faster and cheaper than Comcast will go a long way towards motivating consumers to switch.

[flv width=”368″ height=”228″]http://www.phillipdampier.com/video/WCAX Burlington Can Burlington Telecom Survive 11-05-2009.flv[/flv]

WCAX-TV Burlington interviews Steven Shepard about the ongoing viability of Burlington Telecom. (November 5, 2009 – 4 minutes)

For some Burlington Telecom customers, improving customer service is an important first step, as WCAX found:

“A few weeks ago, the whole BT was down for half hour, phone and cable. And probably internet but I don’t have that,” says Beth Cane, who lives in the city’s south end. Cane says getting through to customer service is “like trying to get into Fort Knox.”

She is not the only one complaining. Rob Lyman says he is “not happy” with Burlington Telecom’s service. “I watched a trailer for an on-Demand movie and the whole system froze up and required a reboot of BT’s box. When I called the help desk they said they’ve known about this problem for six months and didn’t know when it would be fixed,” he says.

burlington losses - from WCAXIn mid-November, a possible solution to the funding issues came from Piper Jaffray, a Minneapolis-based investment firm.  The company offered Burlington Telecom a $61.6 million dollar refinancing package that would help keep the company viable and return taxpayer funds caught up in the controversy to the city.

The proposal was met with political wrangling from the Burlington city council, which spent the last month and a half doing damage control.

“Once TelecomGate went radioactive in October, it was everyone for themselves on the city council as the finger pointing started,” Stop the Cap! reader Dwayne writes from Burlington. “The progressives are blaming the former Bush Administration’s economic catastrophe for wrecking the credit and financing markets BT needed to access, the Democrats are trying to play the role of moderates, and the Republicans are questioning why the city should compete with Comcast in the first place.  Demagoguery is universal,” he shares.

The rhetoric has grown so heated, it has stalled the city council’s approval of the loan package, to the disappointment of Mayor Bob Kiss.

[flv width=”368″ height=”228″]http://www.phillipdampier.com/video/WCAX Burlington Burlington Telecom Gets New Backing 11-13-2009.flv[/flv]

WCAX reports Burlington Telecom has the potential to secure new funding to refinance operations.  (November 13, 2009 – 3 minutes)

The Burlington Free Press has documented some of the language now a part of the debate:

“I do not believe that keeping Burlington Telecom alive during the absolute failure of our capitalist system was the wrong thing for any of us to do. We can’t afford to sit around. We have an interest payment (for BT’s current $33.5 million outside debt) that is due in February.” — Marrisa Caldwell, P-Ward 3, a Progressive Party member characterized as a fierce supporter of Burlington Telecom, is upset the city council delayed the approval of the loan package.

“The same forces that want to preserve the private insurance monopoly in health care by opposing the “public option” are now out to preserve the private corporate monopoly in Vermont telecommunications. The [Governor Jim Douglas (R)] administration is hell-bent on putting Burlington Telecom — which provides public sector competition to for-profit corporations such as Comcast and FairPoint — out of business, no matter what the consequences.” — John Franco, Vermont Progressive Party

“[Vermont Public Service Commissioner David O’Brien] is a political hack appointed by Douglas. They only want private-sector telecom in the state. He is out to get rid of the competition for the private companies. That’s very clear.” — Marrisa Caldwell

“I’m not going to engage in this kind of dialogue. It serves no purpose. We’re going to proceed with the investigation and work to resolve this situation.” — Deputy Public Service Commissioner Steve Wark, asked to comment on Caldwell’s remarks.

Caldwell also charged that the Free Press coverage of the BT issues has been influenced by advertising revenue from cable provider Comcast. She called the council’s vote to delay action on the new BT loan “disingenuous at best. It’s completely dysfunctional government,” she said. “They just tied the administration’s hands and hamstrung BT.”

“[On the city council’s lack of resolve and action] it’s erroneous and not well-founded. I never heard anyone say why they wouldn’t move forward (on the BT loan). It wasn’t leadership and (was) a lack of ability to collectively try to solve the problem.” Sharon Bushor, I-Ward 1, who generally supports Burlington Telecom.

“It seems only rational to do our homework on this (loan). I don’t think one of us is saying it isn’t feasible. All we’re saying is slow down and learn more.”  Councilman Paul Decelles, a Republican, called Caldwell’s remarks “destructive. I would challenge her to find one councilor who has thrown out the word ‘partisan,'” he said. “That word is coming from the administration and from the three Progressive councilors. We’re trying to do what is best for Burlington. This is the residents’ telecom. If acting in a slow, methodical way is unacceptable to some, so be it. It’s irresponsible of them to expect us to rubber-stamp this.” — Paul Decelles, R-Ward 7

“I am shocked and shocked again every time someone raises the partisan flag. This could have been a Republican or a Democratic blunder. The Progressives have been in office a long time. That’s just a fact. When we disagree, apparently, we’re being partisan, (but) it’s not personal, and it’s just not partisan.” — Nancy Kaplan, D-Ward 4

“No one is interested in destroying BT and the administration. Jonathan Leopold said Monday that (the council’s position on BT) was an attempt to destroy the administration. From my own perspective, that’s not the case at all. The first order is to take care of BT, but there have been missteps by the administration.” Mary Kehoe (D-Ward 6) said she has concerns about the loan proposal from Piper Jaffray, particularly the language that indicates the loan repayment will come from Burlington Telecom revenues in the form of city budget appropriations.  “If (BT is) short, what then?  How do we know BT is going to have the capacity?”  She said she voted to delay a decision on the loan, “because we want information. We’ve not been getting the information, and they want us to sign off. That’s not going to happen anymore.” — Mary Kehoe, D-Ward 6

“This is ridiculous. Burlington is starting to look more and more like Washington, with the level of partisan wrangling reaching an intensity that I’ve never seen before in my 15 years of living in Vermont.” — One resident commenting on the coverage and the back and forth.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WPTZ Plattsburgh Burlington Telecom Editorial Oct 28 2009.flv[/flv]

WPTZ in Plattsburgh, which is part of the Burlington television market, ran a station editorial on the Burlington Telecom matter on October 28th.  (1 minute)

Charter Cable Wants To Emerge From Bankruptcy And Overcharge Customers: Rate Hikes & Limits Under Consideration

Phillip Dampier November 19, 2009 Charter Spectrum, Data Caps, Editorial & Site News 1 Comment

charterYour company has been in bankruptcy since late March.  Investors wiped out, debtors in court fighting settlements, you try and hang on by keeping customers from fleeing for the limited alternatives.  You also overpay your management to make sure they don’t flee with annoyed customers.  Charter CEO Neil Smit, who waltzed Charter into bankruptcy under his leadership, effectively doubled his salary, becoming St. Louis’ top paid executive, negotiating a $6 million dollar bonus if he helped waltz the company out of bankruptcy.  If he agrees to do his job after that, he gets another bonus.  How nice.

Now that Charter is looking for the bankruptcy exit door, it’s time for someone to pay.  It won’t be Smit.  It will be Charter’s customers.

In addition to across the board price increases, Charter is also considering slapping Internet Overcharging schemes on their broadband customers with “consumption-based billing” sometime next year, Smit told Bloomberg News.

Charter’s failure didn’t come about because their broadband users are using their service too much.  It came from bad management decisions that have plagued the company since it went public in 1999.  Charter has never had a single year since when it did not report a loss, eventually accumulating an enormous $21 billion in debt through mergers and acquisitions and efforts to keep its position as the nation’s fourth largest cable operator.

Now, that same bad management team will be making all-new bad decisions to further alienate Charter’s remaining 5.3 million customers.  Many of them will be hearing from AT&T to switch to U-verse soon enough.

Perhaps instead of punishing customers, Charter should consider replacing the people that put the company where it is today.  If Charter needs money to upgrade their network, why not start with the ridiculous salaries paid to reward the people that failed the company and its customers in the first place.

Tell Charter Cable if they bring consumption billing to your area, you’ll waltz your business to the other provider in town.

Frontier DSL: “Slow, Low Quality, and Priced Significantly Higher Than Verizon” Says Expert Hired By WV Consumer Advocate

One of the promised benefits of permitting the Verizon-Frontier spinoff is that Frontier will bring more and better broadband service to areas Verizon has ignored for years.  The company has been running television ads in West Virginia promoting Frontier’s promised “next generation” of broadband.  But what does that mean?

[flv]http://www.phillipdampier.com/video/Frontier Verizon Deal Advertisement West Virginia.flv[/flv]

Frontier Communications is running this advertisement in West Virginia.

The West Virginia Consumer Advocate Division of the Public Service Commission brought in Trevor R. Roycroft, PhD., former Associate Professor at the J. Warren McClure School of Communication Systems Management, Ohio University, to examine the details behind the marketing and public relations push to promote the deal.

He was not impressed.

After an extensive review of confidential and public documents from Frontier, his conclusion was that Frontier’s DSL service is just plain bad, and for plenty of West Virginians who may only have one choice for broadband in the foreseeable future, being stuck with Frontier’s idea of broadband is particularly bad.

Indeed, Frontier’s idea of what defines “next generation broadband” would be true, if this was the year 1992.

“Frontier has made no commitment regarding improved broadband deployment in West Virginia. Frontier, while achieving higher levels of DSL availability in West Virginia, generally offers its broadband services at higher prices and provides lower quality than those associated with Verizon’s DSL. Frontier’s ability to increase broadband deployment in West Virginia will depend on the condition of the outside plant that it has acquired, which may negatively impact Frontier’s costs of deployment. Furthermore, Frontier must upgrade substantial numbers of customer locations outside of West Virginia, and West Virginia will be competing with this larger priority,” Roycroft writes in his testimony to the West Virginia Public Service Commission.

The infrastructure Frontier utilizes to deliver its broadband service is revealing even to those Frontier customers not directly impacted by this transaction.  Some of the documents Roycroft reviewed laid bare the nonsense the company has used to defend its Acceptable Use Policy language defining an “acceptable amount” of monthly broadband usage at just five gigabytes.  Company officials have said for more than a year that they were concerned about the growth of usage on their network, and its potential to slow service for other customers.  But company documents, included within the scope of Roycroft’s testimony, tell a very different story:

Frontier plans to increase its core backbone from its current level of 10 Gbps to a capacity of 20 Gbps (should the spinoff be approved). With regard to the capacity of its existing backbone, Frontier states:

Frontier expanded the backbone from OC 48 to 10 Gigabit Ethernet during the first half of 2009. Because of this network expansion we do not have peak usage for the past 12 months. No backbone link has peaked above 2.8 Gigabit/second or 28% of the capacity of a link since the augment was completed in 2009.

Thus, Frontier’s current backbone configuration appears to have excess capacity. With the expansion of its backbone network to 20 Gbps, the company’s current data traffic load results in about 14% of capacity being utilized at peak.

Potentially limiting customers to just five gigabytes of usage is so unjustified, in Roycroft’s analysis, its potential imposition on West Virginian customers should be a deal-breaker.

Roycroft ponders whether Frontier will invest enough resources to make sure capacity is not an issue. The only way Frontier’s network will show signs of strain is if the company makes a conscious decision not to sufficiently upgrade their network as they take on millions of new Verizon customers, or they dramatically underestimate the average Verizon customer’s usage.

Roycroft was also asked to evaluate whether Frontier’s claims of 90% broadband availability in its overall service area and 92% in its West Virginia territory rang true.

Roycroft writes that Frontier’s numbers don’t tell the whole story.  In five states, Frontier admits the percentages are notably lower, so no guarantee can be inferred for West Virginia based on Frontier’s talking points.

Frontier’s “Advanced” Broadband Network Is Hardly Advanced and Barely Qualifies As Broadband

Heavy criticism was leveled at Frontier for its “advanced” broadband service.  Roycroft compared Frontier DSL with several other providers and was unimpressed with the company’s broadband speeds.

Roycroft's table illustrates what's on offer from the competition

Roycroft's table illustrates what's on offer from the competition

“Frontier’s advertised DSL speeds are generally much lower than those available from Verizon and other carriers. Based on a location-based search of Frontier DSL service offerings, it appears that Frontier’s most prevalent DSL speeds are 3 Mbps and 768 kbps (for download),” Roycroft said.

Frontier's DSL Speeds in Selected Cities

Frontier's DSL Speeds in Selected Cities

Although the expressed upload speed for Rochester should be listed at a higher rate (I managed around 512kbps myself), Roycroft is correct when he says, “it can be seen that outside of Rochester, NY, the DSL speeds associated with Frontier offerings cannot be considered ‘cutting edge.'”

Even while noting Rochester’s potential DSL speeds, real-world speeds are another matter entirely.

[flv width=”640″ height=”405″]http://www.phillipdampier.com/video/Real World Frontier vs Road Runner Speeds.flv[/flv]

One New York customer provided real world evidence of the significant differences in speed offered by Road Runner from Time Warner Cable and Frontier’s DSL (courtesy: 1ComputerSavvyGuy) (1 minute)

Frontier’s DSL offerings in West Virginia are of even lower quality. Frontier indicates that it offers three grades of DSL service in West Virginia:

Up to 256 kbps download/128 kbps upload;
Up to 1 Mbps download/200 kbps upload;
Up to 3 Mbps download/200 kbps upload.

These data transmission speeds, especially upload speeds, are at the very low end of commercial offerings that I have observed.

Comparing Verizon DSL vs. Frontier DSL Pricing & Gotchas, Contracts, and Internet Overcharging Schemes

Roycroft’s study found Frontier’s pricing significantly higher than Verizon for DSL service.

Frontier’s DSL prices, either with telephone service, or on a stand-alone basis, are significantly higher than are Verizon’s. For example, the entry-level Frontier plan has a nominal price that is 100% higher than Verizon’s.

However, when considering the per Mbps price, Frontier’s price is 160% higher. It is also notable that Frontier’s upload speeds are also low when compared to Verizon’s.  Consumers are increasingly relying on upload capabilities to share large files, such as videos. Overall, Frontier’s DSL products are low quality.

Comparing Prices

Comparing Prices

Roycroft also gave special attention to Frontier’s infamous 5GB Acceptable Use Policy, which he suggested was a major negative for West Virginia’s online experience.

Frontier indicates that it monitors network usage if “it receives a complaint of slow service or if it discovers that network bandwidth utilization is unusually high in a particular area.

Frontier was asked to identify any action taken against a customer associated with its acceptable use policy and, in response, the company stated that it has not “terminated a customer’s service based on exceeding the 5 GB threshold identified in the AUP.” However, the restriction on usage further raises the relative cost of Frontier’s service. Frontier indicates that consumers may face action by the company if they exceed the usage cap, thus indicating that the prices reflect both speed and volume. Verizon’s DSL service does not include a similar limit.

Frontier’s DSL pricing policies and usage restrictions will represent a significant negative impact on West Virginia consumers, should these policies be implemented in Verizon’s service area in West Virginia.

Even more importantly, Roycroft considered the argument for imposing such Internet Overcharging schemes as unwarranted.

“While DSL provides dedicated bandwidth to the customer in the last mile, DSL subscribers will share network capacity in the ‘middle mile.’ For example, shared data networks will carry consumer traffic from the telephone company central office to an Internet gateway. I believe that Frontier’s policy is more likely to reflect an unwillingness on Frontier’s part to invest in ‘middle mile’ Internet access facilities that would require capacity additions as customer demand increases, and choose to restrict customer usage instead of investing in the capacity needed to meet customer demand,” Roycroft writes.

“Furthermore, Comcast’s download-cap policy includes limits that are dramatically higher than Frontier’s. Comcast’s acceptable use policy identifies 250 gigabytes as the threshold at which Comcast may take action against a customer, which is fifty times the usage associated with Frontier’s policy,” he added.

Roycroft was also concerned about the many ‘gotchas’ that are part of Frontier’s marketing efforts which bring even higher prices to consumers choosing to have DSL service installed.

“To receive the services of Frontier’s technician, the consumer will incur a $134 fee unless the consumer signs up for a term service contract. Even with the term service contract, the customer must pay a $34 fee for the on-site set-up. Furthermore, the technicians that Frontier dispatches to new broadband customers’ homes are also sales agents. Thus, while it may be that these individuals can help with system set-up and the like, they also are part of Frontier’s overall up-selling strategy,” said Roycroft.

Frontier markets a variety of services to customers as part of their promotions and service offerings.  For instance, recent Dell Netbook promotions required customers to sign multi-year contracts for service, with an early termination fee up to $400 if the consumer chooses to cancel service.  Such promotions do not come out of the goodness of Frontier’s heart.  Indeed, such promotions provide even more revenue potential by pitching customers on its “Peace of Mind” services, which include computer technical support, backups, and inside wire maintenance for an additional monthly fee.

Customers don’t even qualify for many Frontier promotions unless they accept a bundled service package combining broadband with traditional phone service and a multi-year service contract.

Roycroft says West Virginia should demand modifications to Frontier’s proposal before it should even consider accepting it.  Among the changes:

  • Frontier should be required to make broadband services available in 100% of its wire centers, and to 90% of its West Virginia customers by the end of 2013. Frontier should expand broadband availability to 100% of its customers by 2015.
  • Frontier should be required to deploy and promote broadband services in West Virginia so that, by the end of 2013, at least 90% of its customers can achieve download speeds of 3 Mbps; 75% of its customers can achieve download speeds of 6 Mbps; and 50% of customers can achieve download speeds of 10 Mbps.
  • To achieve these broadband objectives, Frontier should be required to exceed Verizon’s baseline level of capital investment by at least $117 million during the period ending December 31, 2013, or by an amount sufficient to meet the broadband objectives.
  • Frontier should be required to offer broadband services at prices that do not exceed those currently offered by Verizon for 1 Mbps and 3 Mbps services, i.e., Frontier should offer services at Verizon’s advertised prices for 1 Mbps and 3 Mbps service (respectively, $19.99 per month and $29.99 per month) for a period of 24 months following the merger.
  • Frontier should be prohibited from imposing its broadband “download cap” in West Virginia.
  • Frontier should be required to provide individual written notice to its customers regarding the merger, and should notify customers of any change in services that result from the merger. Changes in billing format should also be clearly explained to customers, both in writing, and through a web-based tutorial.
  • Frontier should be prohibited from migrating any Verizon customer to a Frontier plan that either increases the customer’s rates, diminishes the level of service, or has a materially adverse impact on any of the terms and conditions of the customer’s service. West Virginia customers should experience a rate freeze for a period of 24 months.
  • Frontier should be required to allow former Verizon customers to take a “fresh look” at their purchases, including those customers who have term contracts with Verizon. All early termination charges should be waived for a period of 90 days following the merger, and the long distance PIC charge should also be waived for Verizon long-distance customers who select a long-distance provider other than Frontier.

Hong Kong Broadband Network Cuts Price in Half – 100Mbps Service for $13 A Month

Phillip Dampier November 2, 2009 Broadband Speed, Competition, Video 9 Comments

Hong Kong Broadband Network, the wholly owned subsidiary of City Telecom, has just slashed the price for its 100Mbps “bb100” fiber optic broadband service.  When a customer finds a friend willing to sign up, both will receive the broadband service for $13 US per month for 24 months, which represents a 50% discount for each customer.

At this price, Hong Kong residents pay just $0.06/megabit-per-second, which includes a speed guarantee that customers will receive at least 80% of advertised speed when surfing domestic websites.

William Yeung, Chief Executive Officer of HKBN noted that at least 32% of Internet users in Hong Kong suffer from broadband speeds below 10Mbps, and the Hong Kong special administrative region of the People’s Republic of China lags behind Korea and Japan in terms of fiber to the home service, something Yeung would like to see changed.

He considers Hong Kong’s broadband development rating “comfortably enjoying today’s applications” to be inadequate, and wants to see Hong Kong have universal access to 100Mbps or greater speed broadband.

“Being the second largest broadband service provider, we have a duty to improve Hong Kong’s global standings,” Yeung said.

HKBN provides speeds up to 1Gbps in Hong Kong over its fiber optic network.  Hong Kong’s broadband ranking is important to the region for economic reasons, attracting new industry and high paying technology jobs with fast, affordable broadband service.

What Hong Kong considers inadequate is still well ahead of the United States, which continues to lag behind several Asian nations in constructing advanced high speed broadband platforms.

Hong Kong’s population density, which poses a challenge for some services, is actually a benefit for telecommunications, because construction costs are lower when wiring densely populated multi-dwelling units and apartments.

The company currently has 391,000 broadband customers, attracted to the company in part by their creative advertising campaigns.

[flv]http://www.phillipdampier.com/video/HKBN Member Get Member Promotion.flv[/flv]

HKBN makes Hong Kong’s population density a net plus for fast, affordable broadband.  William Yeung announces “Member Get Member Promotion” from HKBN and unveils new advertising campaign. (3 minutes)

Several weeks ago, Stop the Cap! included several HKBN ads for your review.  We’ve now obtained English subtitled copies to share, below the jump.

… Continue Reading

TelecomGate: City Up In Arms Over Loan Controversy With Municipally Owned Burlington Telecom

Burlington city officials are mired in controversy over the legality of a recently revealed $17 million dollar unpaid loan given to Burlington Telecom, an apparent violation of the terms of its license issued by the Vermont Public Service board.  While the municipally-owned fiber optic network is permitted to borrow money from the city, it must be repaid within 60 days, because the city charter insists that Burlington Telecom be an independently financed venture that does not become a taxpayer liability.

Dubbed by some as TelecomGate, it has become a major media story in Vermont’s largest city.  Some taxpayers are upset by the perceived “bailout” of Burlington Telecom after the company exhausted its commercial loans of almost $34 million dollars to construct a fiber network serving homes and businesses.  The Burlington Free Press has reported the city began quietly funding Burlington Telecom as early as late 2007, for both capital expenditures and some operating costs.  As of today, Burlington Telecom has an accumulated debt of $50 million dollars, $17 million of which is owed to the city.

[flv]http://www.phillipdampier.com/video/WCAX Burlington Telecom Controversy 10-16-09.flv[/flv]

WCAX-TV in Burlington breaks the story about the funding controversy on October 16th. (3 minutes)

Burlington officials admit they underestimated construction costs, in part because they failed to complete a comprehensive engineering study prior to construction.  Installing underground fiber cabling has literally hit a rock ledge, part of the geological character of underground Burlington, that will require an additional $10 million to cope with.

The fact the public is just finding out about it now is a major reason for the controversy.  Jonathan Leopold, the city’s chief administrative officer, said he learned that the financing violated the company’s license terms last November.  The Free Press reports he only informed the city council responsible for overseeing the operation in May of this year, six months later.  The city council itself waited four months until late September before it notified Vermont state officials about the apparent violation, which led to the matter finally going public.

State officials publicly criticized the Burlington city government for the apparent transgression and for what some have called a cover-up, and State Auditor Thomas Salmon called on Burlington Telecom to have greater openness and transparency.  State Public Service Commissioner David O’Brien called the funding irregularity a potential violation of law and that Burlington Telecom was “in debt beyond their ability to recover,” a charge which brought a hot response from Burlington mayor Bob Kiss:

“Commissioner O’Brien’s statements as quoted in today’s Burlington Free Press are inaccurate, inflammatory and totally inappropriate given there is a present proceeding before the Vermont Public Service Board in which his Department is supposed to be representing the public interest. Commissioner O’Brien knew or should have known of the City’s use of pooled cash to fund BT’s capital expenses and start up costs for almost a year. His comments only serve to undermine the confidence of BT’s customers, the interests of whom his Department is charged by statute to protect.”

O’Brien responded that Kiss was “shooting the messenger.”

[flv]http://www.phillipdampier.com/video/WCAX Burlington Burlington Telecom Scandal 10-20-09.flv[/flv]

WCAX-TV reports Burlington city council members had tough words for Jonathan Leopold at a meeting on October 20th, but Burlington mayor Bob Kiss is standing by Leopold. (3 minutes)

City council members have scurried for cover after the local press revealed they approved Burlington Telecom’s funding 13-1 at a city council meeting held October 5th.  That may serve to back up Leopold’s position that he never hid any details about the loan arrangements — city officials and lawyers were well aware of these transactions, he says.  Several public venting sessions were rapidly scheduled to allow constituents to express their concerns.

The Burlington Free-Press editorialized that the city can no longer keep information about city-owned Burlington Telecom’s problems and violations from residents by saying the secrets are necessary for business reasons and is calling for an independent investigation and audit.

State and local politics have also become deeply ingrained into the debate, with accusations flying between political parties that the flap has now become more about undermining the current administration than ferreting out and resolving issues with Burlington Telecom.

[flv]http://www.phillipdampier.com/video/WPTZ Plattsburgh – Taxpayers Give City Council Piece Of Their Mind 10-22-09.flv[/flv]

WPTZ-TV in Plattsburgh covered the public venting session on October 22 set up by the city council to allow residents to speak their minds.  (2 minutes)

Leopold, whose administration duties involve Burlington Telecom, and who has been the most visible figure in the middle of the dispute, called attacks on him by some local politicians part of a scapegoating witch hunt.

City council voted 8-6 at 1:30am this morning approving a resolution to ask for the suspension of Jonathan Leopold anyway.  So far Mayor Kiss won’t hear of it.  At a press conference he reiterated his full support for Leopold, saying his suspension is “not warranted by the facts and is not in the best interests of the city. As mayor, I will not suspend the CAO from his service to the city.”

Caught in the middle is Burlington Telecom and its 4,600 subscribers.  The provider is in apparent violation of its license for its loan arrangements, needs additional money to complete its buildout, and will likely also be cited for not completing that buildout on the schedule it committed to as part of its license to operate.

Commentary: Our Take

Too often municipal broadband projects end up as political footballs kicked all over town, especially when controversy erupts.

[flv]http://www.phillipdampier.com/video/WPTZ Plattsburgh State Demands Repayment 10-20-09.flv[/flv]

WPTZ-TV covers the political repercussions and damage control operations in full force after news of the controversy erupted. (10/20/2009 – 2 minutes)

Burlington Telecom made a crucial mistake when it failed to undertake a detailed engineering study to determine the true costs of wiring Burlington with fiber optics, something incumbents Comcast and FairPoint have not been willing to undertake.  A true picture of the start-up costs would have resulted in a better understanding of initial construction costs and the financing required to pay for it.

City officials also erred in how they began funding some of the costs to administer the system after initial financing ran out.  Good intentions or not, the fact there is a perceived cover-up makes things much more attractive to a media that often ignores or buries telecommunications stories on the business pages.

A frank and open discussion explaining the challenges and resolutions to them might have brought about temporary city loans with the consent of the community, without melodramatic political theater.  Residents have a unique buy-in with Burlington Telecom because it’s municipally-owned.  Many would be more than willing to see that and some additional investments pay off instead of collapsing with a complete shutdown.

[flv]http://www.phillipdampier.com/video/WCAX Burlington Mayor Defends Administration Over Telecom Issue 10-26-09.flv[/flv]

WCAX-TV covers Burlington mayor Bob Kiss who held a press conference yesterday to defend his administration’s role in Burlington Telecom (3 minutes)

When the story broke, the usual and very predictable campaign of finger-pointing, ducking for cover, and scapegoating began.  This time-honored political damage control method is voter approved, if you stick your finger to the wind and see where voter sentiment seems to be blowing.  That’s precisely what state Commissioner O’Brien did, only he overplayed his populist hand.  This is, after all, the same commissioner who initially made excuses on behalf of FairPoint and seemed all too willing to give that company the benefit of the doubt, right up until it became politically untenable.  You cannot be a credible torch-bearer in a populist mob if you helped build the castle you now seek to burn to the ground.

Mayor Kiss was correct in calling O’Brien out, not just for his convenient criticism, but for trying to win the Self-fulfilling Prophecy Award by predicting Burlington Telecom’s demise.  Vermont residents should ask him where his clairvoyance was when he was publicly stating FairPoint was doing “pretty well” a year ago.  O’Brien needs to be part of the solution for a change, not part of the problem.

Leopold appears to be a classic scapegoat.  As he struggled to keep Burlington Telecom afloat, it is inconceivable he was cutting loan deals without the knowledge and consent of others in the city administration.  The same city council now demanding his suspension seemed all too willing to go along just a few weeks ago when it voted almost unanimously with going forward.  That speaks volumes.  But when the media lights fire up, and angry residents start writing and calling, the complete turnaround is a site to behold.  A series of self-serving, concern trolling speeches followed, along with complaints they were never given enough information or were confused by what they heard.  If that is the kind of leadership Burlington has, perhaps residents need to consider making some changes.

[flv]http://www.phillipdampier.com/video/WCAX Burlington City Council Undecided About Burlington Telecom 10-26-09.flv[/flv]

Late last night, WCAX reported city council was still undecided about what to do about the Burlington Telecom controversy.  (3 minutes)

The public has a right to be upset, but are all too often satisfied with the political theater designed to quickly “resolve” the problem by expelling the designated scapegoat from their midst.  Mayor Kiss has remarkably withstood the usual pattern very well thus far.

While the politicians play “not my fault,” Burlington Telecom customers need answers to know if their provider is endangered.  An independent audit and review, free of political know-nothings would be a start.  How about bringing in those with actual expertise in deploying municipal networks.  How about excluding involved, self-interest-protecting elected officials, especially those who had any hand in the FairPoint debacle.

It’s also time to fund that engineering study for the unwired portions of Burlington to get a true cost analysis.  A review as to why Burlington Telecom is not attracting a larger segment of the market is also needed.

In broadband, at least, that’s a no-brainer.  Burlington Telecom’s speeds on the download side are too slow and too expensive.  Comcast offers faster downstream service at lower prices, so why would anyone want to switch?  Burlington Telecom is trying to market their synchronous speed network (your downstream speed and upstream speed is the same), which would normally be appealing to a segment of Internet customers frustrated with cable and DSL shortchanging them on upload speeds.  But the customers who understand and appreciate the difference will not accept a broadband service that tops out at 8Mbps for an enormous $71.80 a month.  That’s far too slow and too expensive when Comcast is offering 12Mbps/2Mbps (upload speed with PowerBoost) for $42.95 per month.  Service for 16Mbps/2Mbps is $10 more, still twenty dollars less than Burlington Telecom is charging for half the speed.  Burlington Telecom can attract a larger base of broadband customers by accelerating speeds on their network beyond what Comcast provides.

Municipal broadband projects can be successful, but should be based on a true and honest appraisal of the costs, a complete understanding of the competitive landscape, a flexibility to respond to changing markets, and a good reason why they should exist in the first place.  Fulfilling the needs residents want, but incumbent providers will not provide is always the best answer.  Customers don’t want anemic broadband at high prices.  Provide that and a municipal broadband project will fail, even without political grandstanding and finger-pointing.

[flv]http://www.phillipdampier.com/video/WPTZ Plattsburgh Kiss Refuses To Punish Leopold Over Telecom Flap 10-27-09.flv[/flv]

This morning Burlington residents learned Burlington mayor Bob Kiss was still standing behind Jonathan Leopold, despite their calls for Leopold to be suspended. (WPTZ) (2 minutes)

Below the jump, find a one hour video interview between The Burlington Free Press and city officials on the Burlington Telecom matter.

… Continue Reading

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