This commentary is by Tim and Leslie Nulty, who were senior managers at ValleyNet and played leading roles in organizing and developing ECFiber. Tim created and built the original Burlington Telecom. They now own and manage Mansfield Community Fiber Inc. in rural northwest Vermont.
A tsunami of broadband funding is about to hit Vermont. Let’s not repeat past mistakes and waste the opportunity.
The Senate is considering two different bills intended to guide use of the expected funds: H.360 from the House and S.118 from a multi-party group of senators. Each has strengths and weaknesses. The intentions of both are good, but, as written, neither is likely to achieve the desired results.
H.360 envisions $160 million in funding from the federal American Rescue Plan Act, of which only $10 million is for loans. This is a big mistake. Loans have major advantages over grants. A loan fund is replenished as loans are paid back, so funding does not require annual appropriations.
Loans force recipients to “get serious” about their projects by choosing the best technologies and executing their projects with maximum frugality and care. Grants, by contrast, invite both donors and recipients to be careless about costs and long-run viability. Grants are “free” to their recipients, but they are not free to society. On the contrary, their invitation to carelessness and waste imposes substantial societal damage when real resources and time are thrown away on nonfeasible or excessively costly projects. Vermont has already seen far too much of both.
Requiring recipients to pay their financing back, with interest, is the best way to ensure that recipients undertake only projects that they, themselves, believe are viable.
A number of companies are currently deploying REAL broadband — that is, fiber-to-the-home (FTTH) networks — in rural Vermont, targeted to unserved and underserved communities. These include ECFiber, Franklin Telephone, Waitsfield Telephone, MCFiber and others. All of them have used little to no grant financing, relying instead on loans and their own equity. Their success proves beyond reasonable doubt that it is perfectly realistic to build successful FTTH anywhere in Vermont with finance on commercial terms.
Of the two current bills, S.118 provides much more scope for loans, relies less on giveaways and opens those loans to anyone with the demonstrated capacity to use them.
In contrast, H.360 funnels almost all the potential hundreds of millions exclusively to newly created communications union districts and/or individual towns that were not CUD members prior to December 2020. It excludes all other forms of business organizations from access to the available financing unless they succeed in negotiating a contract with a CUD.
Many of these 11 CUDs are less than one year old, have little or no technical or administrative capacity or prior experience developing broadband, and little or no equity of their own to support loan finance. While they should be supported for their commitment to their communities, we should not put all our eggs in that one basket.
It makes absolutely no sense to deny financing to local entities that are already doing successful work. The sensible, pragmatic thing to do is to support and accelerate the progress that is already being made — not derail it by predetermining fund eligibility based solely on the form of business organization.
The bills also differ in their definition of “broadband.” H.360 uses 100 Mbps symmetrical service (“100/100”) as the standard to qualify for the proposed funds. That is widely considered appropriate for today’s Internet use. S.118 sticks to a now-obsolete definition, 25mbps down/3mbps up (“25/3”).
The FCC, under pressure from the large telephone companies, adopted 25/3 six years ago when broadband was defined as 4/1. 25/3 is now outdated; no one supports it except big telcos who want taxpayer-funded grants to extend their outdated legacy infrastructure.
New FCC members will soon be appointed and “25/3” is very likely to be upgraded. 25/3 cannot support remote work, remote schooling or telemedicine. These all require robust upload capacity, are in great demand now, and likely to accelerate into the future. Vermonters cannot prosper with substandard service — and that is what 25/3 really is.
Unfortunately, both bills re-create the Vermont Telecom Authority, which was rightly disbanded in 2014 after five years of egregious nonperformance. Since then, both the Public Service Department and the Vermont Economic Development Authority have developed considerable knowledge and experience overseeing broadband projects. Together these agencies are now far more capable than the old telecom authority ever was. We should build on these foundations, rather than “re-create the wheel” — especially a “wheel” that was so dysfunctional the first time around.
It’s easy to improve these proposals:
- Funding should strongly emphasize loans over grants.
- Disinterring the Vermont Telecom Authority should be abandoned and, instead, the Public Service Department and Vermont Economic Development Authority should be strengthened to administer programs for which they are already best suited.
- Broadband should be defined as a minimum of 100/100.
- Unfair, irrational discrimination in funding should be deleted. Access to funds should be open to anyone with the proven ability to deliver and who is willing to pay them back.
Let’s not waste this unprecedented opportunity to do broadband right for Vermonters.