Monday, January 25, 2010

Rural broadband network in Vermont is ambitious, but some question its financial viability

A $75 million proposal to bring broadband to rural central Vermont is moving forward, but some are questioning its viability. Managers of the proposed East Central Vermont Community Fiber Network, which serves 46,500 people in 22 towns in four counties, say it will pay off its debt with its subscription revenue, but some industry analysts worry "the project is too costly and the market too competitive," John Briggs of the Burlington Free Press reports.

The network is also in the running for a $69 million federal stimulus loan from the Department of Agriculture’s Rural Utilities Service. Tim Nulty works for Valley Net, the non-profit managing the project, and will serve as ECF project manager. Nulty worked from 2001 until November 2007 with Burlington Telecom, which promised to be profitable by 2008, but failed to expand its subscriber base and is being audited by the state Public Service Department after violating its state license by "surreptitiously used $17 million of city money to sustain its operations," Briggs reports.

"We’re not experts enough to say if a financial model works," a spokesman for Vermont Democratic Sen. Patrick Leahy told Briggs. "We just don’t know. We can’t endorse ECF, (although) we’re supportive of the goal and supportive of them getting consideration for RUS funding." Terry McGarty, a researcher at Massachusetts Institute of Technology, told Briggs fiber-to-the-home systems must hold start-up costs to $2,500 to $3,000 for each customer to break even, but Nulty anticipates ECF’s total “acquisition” cost for each subscriber to be about $6,000. (Read more)

The Vermont network is an example of a larger question as to whether "community-owned broadband systems work — and pay for themselves — in rural parts of the country," says the Daily Yonder writes. It terms Briggs' story as a "very good dissection of a community-owned project, and the problems these system face in very rural places." (Read more)

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