May 2020: A Memo to Vermont’s DC Delegation

This letter was dispatched by Vermont’s CUDs in early May 2020, prior to the establishment of several more CUDs and later the formal creation of VCUDA.

Dear Senator Leahy, Senator Sanders, and Representative Welch:

We represent Vermont’s Communications Union Districts, Vermont’s real solution to bringing true broadband — fiber-to-the-premises (FTTP) — to unserved and underserved areas of the state. These municipalities, akin to water districts, are Vermont’s home-grown, grassroots solution to the free market’s inability to deliver useful internet infrastructure to our state’s small towns, villages, and rural farmlands. Federal grants could help us complete our work by 2024 instead of 2028 or even later.

As you know only too well, Vermont has been casting about for a way to provide genuine broadband service throughout the state, most especially in the rural towns that are not resort hotspots or traditional manufacturing centers. The search has been underway for more than a decade. Persuasion with phone and cable companies during takeovers, sales, and bankruptcies failed. Backing a significant RUS grant to VTel to build out an LTE-based wireless service in Vermont’s hilly geography failed. In a state with only about 240,000 residential properties, over 60,000 do not have access to minimal 25/3 internet. Vermont simply does not have the population density, or the geology, to justify investment by for-profit providers.

You also know about a bright spot in this regard: the success of ECFiber. Having raised over $40 million privately, and with over 4,500 customers in the more than 60% of its planned network that has been completed, ECFiber has demonstrated that regional telecommunication municipalities are the best way forward in Vermont.

The Vermont legislature and executive branches have recognized this, and last year enacted legislation to assist in the formation of additional communications union districts (CUDs), namely, by providing grants and loan guarantees to help any newly formed CUD get started.

ECFiber led the lobbying to support this effort, making it clear to the legislature that it took ECFiber seven years, $7 million of private investment, $2 million in government assistance, and a change in state law to get to the point where it could access the municipal bond market for the tens of millions of dollars it is using to build the network. To date, ECFiber has borrowed about 40 of the anticipated 50 million or so it will need, and expects to finish building 22 of its 23 active member towns this year.

But Vermont’s legislation only takes care of the initial $4 million, assuming that the CUDs will grow organically from there. What’s really needed now is a guarantee of the entire sum necessary for CUDs to staff up, design, construct and begin operations and achieve profitability sufficient to access the municipal revenue bond market. There is no time to wait for a few years of audited financials. There is no time for one team of two engineers to make leisurely surveys of poles. There is no time to wait for network designers to finish work for one CUD before starting on the next.

No, what is needed now is an all-hands-on-deck approach. The new CUDs need to put dozens of teams of engineers out doing the data collection needed for network design and pole licensing. The new CUDs need to be setting up offices, setting up work flows, doing prospective customer contact work, and reporting progress to their governing bodies (members of which are all volunteers).

Because the model works, we know that at the end of the day, once the buildouts are done and customers have signed up, and a few years have passed and it has all become routine, the revenues will be more than sufficient to cover traditional municipal bonds, the monies we are asking for would eventually be returned to the Treasury, if that’s the way you want to structure it -- perhaps as a lump sum deposited with the Vermont Bond Bank to be accessed only by Vermont CUDs.

With 5 CUDs in existence but only 1 operational, the entire cost of completing the buildout for all 5 is on the order of $200 million, $40 million of which has already been developed by ECFiber, and another $16 million accounted for by Vermont’s planned support for new CUDs. Federal grants on the order of about $80 million would greatly simplify executing the buildout of new CUDs.