The fate of taxpayer-owned Burlington Telecom will be decided in the coming weeks as city officials negotiate with finalists in what has been a long, secretive bidding process.
When the municipal telecommunications utility was first on the drawing board of city progressives during the 1990s, it was envisioned as a state-of-the-art, fiber-optic based network providing city residents with television, telephone and Internet services. But once the company started delivering services in the early 2000s, it quickly turned into a costly and controversial boondoggle.
Taxpayer-owned versus commercially-owned telecom firms have been caught up in left-right politics. The case of Burlington Telecom is no different.
Advocates on the left argue that publically-owned broadband is faster, less expensive and superior in content. Many voices on the right argue that “free market policies provide the best answer … (and) government needs to get out of the way and let the market be free to provide demanded services.”
Regardless, in 2016 a 6th U.S. Circuit Court of Appeals decision may have put the nail in the coffin of taxpayer-supported municipal cable and broadband.
“The FCC, arguing that the public interest was served by more competition in the broadband market, had tried to overturn state laws in Tennessee and North Carolina blocking the creation or expansion of municipal systems. A three-judge appellate panel rejected the commission’s argument that federal law preempted the states’ ability to place limits on public broadband.
Controversy, financial woes
In 2008, Burlington Telecom found itself in the center of the left-right fight when it dropped the Qatar-owned anti-American and anti-Israeli Aljazeera English television network from its cable-TV offerings at the urging of local Jews — but over the howls of leftists. The network eventually was reinstated by Burlington Telecom and offered in some cable packages, after becoming an international lightning rod.
However, the real unraveling began when the company was unable to pay $1.5 million of interest on its bonds in 2010. Coupled with owing the city $17 million in borrowed funds OK’d by former Mayor Bob Kiss to keep the utility from going belly-up, plus a $33 million lawsuit by Citibank that ultimately precipitated the sale now underway, such sloppy goings on led to Moody’s downgrading the financial rating of the city and the international airport in 2010.
Ultimately ordered by the Vermont Public Service Board to offload the company and shed itself of multi-million dollar debt, the city issued a request for proposals for interested telecom suitors, but with one unusual stipulation: Telecom giants with deep pockets, such as Verizon and Comcast, need not apply.
Process closed to the public
Fast forward to last week.
City officials have now narrowed down their original list of eight bidders to four finalists. However, they are still taking heat for keeping the bidding process “mum” with all its key deliberations going on behind closed doors.
Burlington Mayor Miro Weinberger justified the secretive bidding process as the best way to secure strong proposals and keep the city in the catbird seat for negotiating a deal.
Earlier this month, in an executive closed-door meeting, four suitors presented their plans to take over Burlington Telecom. While state law allows for such closed-door dealings, it didn’t sit well with some Burlington residents who have footed the tab for the company’s missteps.
“It’s hard for the public to have confidence,” Norman Williams, an attorney with the Burlington-based law firm Gravel & Shea, told True North last week. “… So, basically, the city got $50 million — $33 million from Citibank and $17 million from the taxpayers — for, I dare say, a company that was marginal at best, and losing money at its worst.”
Offloading Burlington Telecom
The rocky road to the city finally shedding Burlington Telecom has taken nearly a decade.
“This process began in December 2009 when a blue-ribbon committee was formed, said Burlington Telecom Advisory Board (BTAB) Chair David Provost in June. “That was appointed by the City Council to access the viability of Burlington Telecom and consider new proposed finance options. … There was a $33.5 million debt owed to CitiBank and almost $17 million from a pool of cash and at the time the city was contemplating taking that $51 million and refinancing it to $61 million.”
But the elite group of city officials have dug in their heels to prevent a large corporation with deep pockets from taking over the organization. Big telecom firms just don’t suit the likes of the board members and the mayor.
“We weren’t going to sell this to national telecom company,” BTAB’s Provost said. “Matter of fact, we had people stand up on camera and say ‘you cannot sell this to C company or (any) other companies.’ Of the (original) 8 LOIs (letters of intent) none of the names (of the nation’s top 10 telecom companies) are among the LOIs.”
Provost has said on several occasions that the public will eventually learn the identities of the four LOI finalists.
“The city council will have a public part of the process so the public can see who the finalists are,” according to Provost. “LOIs have been strict in requesting silence on their identities.”
Yet one suitor, Keep BT Local, a cooperative created by six city residents to assume the operation of Burlington Telecom, is the only LOI to have revealed its involvement.
In June, Keep BT Local Chairman Alan Matson said, “We can’t talk a lot publically because, obviously, with … competitors, we really don’t (want) that much of what we are doing to be public.”
Despite public pronouncements, Mayor Weinberger appears reluctant to let go complete control of Burlington Telecom.
While saying, on the one hand, that he wants the city to do the best for the taxpayer, on the other hand, he talks like an executive unwilling to completely show his cards or even let go of the money losing operation entirely.
“(It) gives us real leverage and get(s) a strong outcome … where the city, if it chooses to, can still have an equity position in the entity going forward,” Weinberger told Burlington Free Press.
Lou Varricchio is a freelance reporter for True North Reports. Send him news tips at email@example.com.