October 22, 2009

The Burlington Telecom Fiasco

Just a quick comment on this morning's Mark Johnson show which featured Jonathan Leopold, Chief Administrative Officer of the City of Burlington, discussing the Burlington Telecom financial mess.

[First, my bias: Capital intensive competitive services for general public consumption should be provided by the private sector, not by taxpayer funded entities, like cities and towns]

In the discussion this morning, Mr. Leopold made several references to how the City of Burlington routinely advances funds to the Burlington Electric Department (BED) and the Burlington School Department from the city's pooled cash funds. By making the comparison with the city's actions in loaning funds to BED, a regulated monopoly and a department of the city, to BT, an investor-funded standalone entity that is under construction in a lease-purchase deal with private bankers, is nothing more than obfuscation precisely because BT is not a city entity like BED. Mark missed this point in his questioning of Mr. Leopold.

BT customers are not captive like those of BED. They have choices for phone, TV and Internet access. Unlike BED, no 'captive' revenue stream exists for BT because they are in a competitive business. To put Burlington taxpayers on the hook for BT's operational and financial failures when the city does not, in fact, fully own the assets is wrong and those responsible should be held to account.

The question becomes what to do with this mess. The huge investment to place fiber optic facilities in the 'last mile' by an entity without deep financial resources was not a wise municipal decision, IMHO. I have been opposed to it from the beginning as a municipal venture. We have seen failures of municipal WiFi all around the country, but BT is extraordinarily capital intensive and the build out to serve all of Burlington apparently will require several millions more.

When Verizon and AT&T deploy their wireless 4G technology in a couple of years, BT will be in even worse shape as more and more customers move to mobile broadband which will provide essentially the same services as BT. The city will soon find that a serious mistake was made by believing they can or should compete with the private telecom sector.

Here's a very well done recounting of the latest BT events. However, I find the site overall is generally biased toward municipal systems and against the private sector broadband providers. There are tinges of it in the BT reporting, but overall its a very good summary of recent events.
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