UPDATE: S.78 will be taken up by the Senate Finance Committee this week.
Last month, Peter Drescher, the Education Technology Coordinator for the Vermont Department of Education, sent an email to the three companies which had expressed interest in providing Internet service for Vermont’s public schools.
All three companies, Drescher said, had been eager to get word on the department’s decision. But in his email, he told them he was going to “hold up” on announcing the decision because “there has been a new and very interesting development in the state concerning broadband that is being led by the Vermont Telecommunications Authority (VTA).”
To Drescher (who did not name the companies, either in his email or in subsequent conversations), his email was not the least bit controversial. The DOE does not pay the companies that provide Internet service to the schools. The schools do; the department just coordinates the arrangement. VTA’s idea –which, Drescher said, never advanced beyond the idea stage – was to centralize the process.
VTA at the time was interested in “putting forth legislation on broadband payment for the schools,” he wrote. In his email, he said VTA has “requested that in lieu of this new development which is focused on aggregating broadband for all schools,” we delay “announcing or moving forward on our decision. We, the VTDOE and VTA, are working diligently together over the next 10 days to try to bring something to fruition with our current legislative session. It is an exciting time for educational broadband in the State of Vermont!”
Not everyone shared Drescher’s enthusiasm. Some folks, in fact, smelled a rat.
“Somewhere the bid process got changed,” said Michael Smith, the Vermont State President of FairPoint Communications, one of the three companies. “All of a sudden there’s this new opportunity coming through the back door. If you’ve got (a bidding process) everybody should be following it the same way.”
Whether there in fact is a rat to smell (and if there is it certainly is not Peter Drescher) is open to debate and interpretation. A failure of telecommunication experts to communicate seems to be part of the problem here. Then there is the complication of the sudden availability of millions of Federal dollars. Everybody wanted some. Those who didn’t get any – or as much as they thought they deserved – were miffed.
What is undeniable is that there is a great deal of suspicion hanging over Vermont’s telecommunications world these days, most of it directed at VTA and Sovernet Communications, and at what some critics consider an improper alliance between them.
Christopher Campbell, VTA’s executive director, said there really was no alliance. Campbell said that in one important matter VTA had judged Sovernet’s proposal for a large federal grant better than the offerings of two other companies – FairPoint and Houston-based Level 3 Communications.
Based on that judgment, Campbell said, the VTA board voted to grant $2 million to Sovernet. Along with $12 million of Sovernet’s own money, the grant helped engineer a $33.4 million grant of American Reinvestment and Recovery Act (ARRA, commonly called stimulus) money from the U.S. Commerce Department to Vermont FiberConnect, a partnership created by VTA and Sovernet, to connect over 340 community anchor institutions in the project area, encompassing seven of Vermont’s 14 counties.
VTA made no public announcement of the grant, fueling speculation that it was being devious. But Campbell insisted that, contrary to several news reports (one of them here) the VTA Board voted on this grant in formal meetings open to the public. There were two separate votes, he said, first on Dec. 14, and then (after Sovernet had agreed to put up its share), on Jan. 18. In both cases, he said, VTA board members cast what seemed to be unanimous voice votes.
In making the grant, Campbell said, VTA was doing what the Legislature had told it to do – use its limited resources (about $4.5 million in Fiscal Year 2011 plus some bonding authority) to “leverage,” as the financial world likes to put it, larger investments from either public or private sources.
But because the VTA is “a quasi-public agency,” in Campbell’s words, it was perhaps inevitable that some telecommunication executives whose companies were not getting big stimulus grants, began to suspect that VTA – not exactly “the state,” but not exactly not the state, either – was picking winners in the fast-growing world of high-tech communications.
“Where I think (VTA) made a critical mistake was to partner with Sovernet,” said Fair Point’s Smith, who, as Secretary of Administration to former Gov. Jim Douglas had helped establish VTA. “They lost credibility as a neutral partner and became a competitor.”
Those suspicions were reinforced after the resolution of a conflict between that Sovernet/VTA project and another, even bigger, internet project that got even more federal money, an $81.66 million grant and $35.16 million loan to Vermont Telephone Company (VTel) to provide wireless broadband coverage.
The conflict was that there was some overlap between the VTel and Sovernet projects, and after the two sides failed to negotiate an agreement, the U.S. Commerce Department settled the dispute, and settled it in Sovernet’s favor. VTel had to drop the overlapping segments.
This did not please VTel boss Michel Guité, a major contributor to political candidates of both parties, and someone who, according to more than one well-informed source who for obvious reasons did not want to be identified, does not always take defeat gracefully.
Guité did not respond to two telephone messages seeking comment.
By the beginning of February, then, much of the Vermont telecom world was grumbling that VTA was in Sovernet’s hip pocket. The announcement that the Education Department was delaying a contract decision at VTA’s request seemed to reinforce that suspicion.
But DOE’s Drescher said he sent the same email to Sovernet as to FairPoint and Nashville-based ENA, the third company in the running for the school contracts. And Campbell said any suspicion that “we wanted (DOE) to hold up so we could get them to buy from Sovernet, that’s not true. We have always taken the position Sovernet has to win that business by providing the schools the best offer.”
Furthermore, the dealings between VTA and Sovernet seemed not always to be sweetness and light. Campbell would not confirm this, but another well-placed telecom official said at one point Sovernet walked away from negotiations with VTA over exactly how much each entity would throw into the joint pot.
Campbell acknowledged that it might have been difficult if not impossible for VTA to award grants to one company without angering the others.
“Whenever you have the ability to offer financial assistance and you have to make choices about who to fund and who not to fund, some people will be unhappy about that,” he said. “You can try to mitigate it, but you can’t always make everybody happy.”
Such controversy could also be the inevitable result of the kind of public-private dealings that are necessary if high-speed Internet and reliable cell phone service are to become available statewide. For the most part, telecommunications is a function of private enterprise. But private companies do what is most profitable, and extending service down sparsely populated country roads is not profitable. The alternatives are: (1) Don’t serve those customers; (2) public ownership (not a success in Burlington, though better done in many places); (3) public subsidies to the private firms to make it worth their while. For the most part, Vermont has chosen the third option, and perhaps the problems that come along with it.
By week’s end, there were signs that the various combatants were calming down. Sen. Vincent Illuzzi, the Orleans-Essex Republican who earlier called VTA a “rogue” agency which should be abolished, now calls for preserving it and acknowledged that its motivations were probably honorable.
“The road to hell is paved with the best intentions,” Illuzzi said.
And VTA announced two more grants this week. They were small, but their recipients were, perhaps significantly, VTel ($2.065 million) and FairPoint ($779,000).
Not that the agency is trouble-free. A bill before the Legislature would substantially diminish its scope and authority. Many in Vermont’s telecommunications community still distrust it. But it survives, and if the state is serious about providing high-quality high-tech to everyone, it may be necessary.
