For internet-access activists in the Northeast Kingdom, the easy part is over.
Twenty-seven towns in the region voted on Town Meeting Day to form a communications union district, a type of governance body that helps member towns build broadband infrastructure without financial risk to taxpayers.
But “that’s when the hard work begins,” said Clay Purvis, who heads the Department of Public Service telecommunications division.
Created by a 2015 statute, communications union districts are a relatively new method for Vermonters looking to improve access to high-speed internet. Only two CUDs existed in the state before Town Meeting Day 2020, and only one of those districts — ECFiber, in east-central Vermont — offers service right now.
The district in the Kingdom — which includes some of the worst-served counties in the state — is likely to face an uphill climb toward its goal. And as its advocates have said over the past few months, the project will be a multi-year effort.
Funding a challenge, but options abound
So, how might that all play out?
“The funding is going to remain the biggest challenge for the CUDs moving forward,” Purvis said.
The first step for a new district is to put together a feasibility study and a business plan, he said.
The state can fund that work, at least in part, through a grant fund established in last year’s broadband bill. The Department of Public Service’s Broadband Innovation Grant program can provide up to $60,000 per applicant for those analyses.
“It may not cover everything, but it should get them started,” Purvis said. “But once you get to that point, it becomes a question of money [for providing service or partnering with a provider.]”
According to the NEK group’s timeline, regional advocates want to produce a feasibility plan by May, with fundraising ramping up in 2021 for a potential building phase over the following two years.
Last year’s broadband bill also created a loan program within the Vermont Economic Development Authority that communications union districts can use to fund infrastructure construction, expansion and installation.
Applicants can get a loan up to $4 million to fund up to 90% of project costs.
Federal opportunities for districts also exist. Take Craftsbury, which won a $212,000 grant from the Northern Borders Regional Commission in 2016 to deploy fiber-optic cable in the community. That same year, the town received almost $100,000 in grant money from the U.S. Department of Agriculture for the same task.
Craftsbury’s broadband project is operated by a group called Kingdom Fiber, and state officials are looking to it and ECFiber as models for success.
Models for success offer some guidance
Another model is CVFiber, a district formed in 2018 made up of 18 towns in Central Vermont. It has yet to start building infrastructure.
“One of the things that can be a challenge is that when you first start, nobody kind of knows how anything works,” said Jeremy Hansen, a computer science professor at Norwich University who chairs CVFiber’s board.
What helped his group organize early on was that several members had been on municipal boards previously and knew the expectations. That kind of expertise is important, he said.
Funding has been the greater obstacle.
In its first year, CVFiber received $8,000 or $9,000 in donations, Hansen said.
Then in 2019 came a $12,500 grant from the Agency of Commerce and Community Development; a $25,000 grant from USDA; and a $60,000 grant from the then-new state broadband grant program.
“That doesn’t get us super, super far,” Hansen said. “That kind of gets us through the end of the business-planning process.”
He expects that process to finish in May, and then the district wants to seek a full $4 million loan from VEDA, from the program established in legislation last year.
But that loan requires a 10% match — if all goes as planned, $400,000 — and the district doesn’t have all that money lined up.
Board members have decided to start advertising to try to encourage investors and donors to chip in.
“Judging from the conversations that I’ve had with people … I’m not terribly worried,” Hansen said. “I think there’s enough people out there that want to see us succeed, [and] I think we’ll have people willing to invest or willing to donate.”
He added: “Up in the Kingdom, I think that appetite is there, too.”
‘This is going to be really hard work’
Purvis, from the Department of Public Services, believes the formation of a communications union district itself can help better secure funds.
ECFiber, which started in 2011, was relatively unknown when its members began pushing for the 2015 bill to establish the municipal districts, Purvis said. The group’s leaders found trouble getting funding early on because private investors didn’t understand what ECFiber was, he said.
“The CUD law created a structure that would be recognized by lending institutions,” Purvis said.
It’d look like any other municipal district — such as for waste or water. And the organizational structure allows advocates to be better prepared and appear more polished to potential backers.
“It makes these kind of rag-tag groups of towns into something that is more sophisticated,” Purvis said, explaining that district personnel develop expertise in broadband deployment and business planning.
“So when the time comes to seek funding, whether it’s in the private market or from the state of Vermont or the federal government, they look much more sophisticated,” he said.
That translates into lender confidence.
Hansen put it this way: “It sort of makes it a much more gentle on-ramp than the struggle that ECFiber had.”
Statute prohibits member municipalities from pledging resources from their tax bases to districts, and districts aren’t allowed to receive funding from towns’ taxable assets.
Apart from grants and loans, revenue bonds are a district’s biggest tool. Those would be repaid through money a district gets from its customers.
“At best, the business case is marginal,” Purvis said. “There’s no slam dunk. This is going to be really hard work, and it will entail risk.”
But since a communications union district has never failed in Vermont, he isn’t sure what a fallout would look like. The closest example he could think of is what happened with Burlington Telecom, the formerly city-run internet provider that crumbled under bank debt and was plagued by scandal.
“That incident was a bit of a setback for municipal telecom,” Purvis said. “Both in state and nationally, it was pointed to as a cautionary tale.”
But Burlington Telecom is still a far cry from what communications union districts want to — or can — do. The city’s program was kept afloat by taxpayer dollars, unlike the districts, in theory.
Purvis doesn’t think the wariness around revenue-based funding will deter efforts with the new districts, though.
“Broadband is so important that I think a lot of communities are looking at that risk and weighing it against the consequences of not having good broadband,” he said.
Robert Fish is the Department of Public Services rural broadband tech assistant specialist, a role created in the 2019 broadband bill. He said his plan for the next few months involves “a lot of hand-holding, a lot of cheerleading, a lot of just being the connector.”
Fish named two concrete goals for this year: to publish a resource guide for new districts and to bring potential funders together to talk about the efforts.
“You know it’s going to take all hands on deck for this to happen in the state,” he said.
And Hansen agreed. He highlighted how crucial volunteer work and pro-bono help has been in getting CVFiber going. That goes for keeping the people he hopes to serve informed about the process, too.
“It’s really about making sure the board is pulling the right direction, and then making sure the communities are being kept in the loop as much as possible,” he said. “Somebody has to respond to the Facebook queries. Somebody has to return those phone calls that land in the voicemail box.”
