A Public Process for the Sale of Burlington Telecom

Last night the City Council in Burlington, Vermont voted to sell its municipally-controlled gigabit fiber-optic network to Schurz Communications. The outcome is disappointing to say the least, but the absence of transparency and breakdown of process around the decision was even more exasperating.

In April of 2014, shortly after the Citibank settlement, Jason Pelletier and I outlined an open, rigorous, and transparent public process for the sale of Burlington Telecom in a letter to Mayor Miro Weinberger. The Mayor declined to follow our proposal. We chose not to make the letter public at the time (though it is technically a matter of public record), but we’re choosing to share it today.

I moved out of Burlington two years ago, but I still follow the Burlington Telecom issue closely. Before I left Burlington and after the Burlington Telecom Advisory Committee on which I served was disbanded, I continued to push for transparency around the future of Burlington Telecom. Jason and I attended many City Council meetings and Burlington Telecom Advisory Board meetings (the Burlington Telecom Advisory Board is the successor to the Blue Ribbon Committee and the Burlington Telecom Advisory Committee), advocating for a participatory, democratic approach to deciding the future of Burlington Telecom.

Given the lack of transparency and breakdown of the sale process witnessed at last night’s City Council meeting, it seems an appropriate time to share this letter and consider how things could have been done differently. Here is the letter in full:

April 17, 2014
Mayor’s Office
City Hall
149 Church Street
Burlington, Vermont 05401
Dear Mayor Weinberger:
The recently announced settlement with Citibank in regards to Burlington Telecom provides the City of Burlington with an opportunity to take a new, more open and transparent approach towards its governance of Burlington Telecom. If the City will be selecting a partner or purchaser for Burlington Telecom, we believe that an open, public process is the best path forward for doing so, given what is at stake. While we strongly disagree with the decision to sell Burlington Telecom, we do not seek to stop the settlement process. Instead, we seek to directly involve the public in this process in a way that has yet to be done. By engaging and collaborating with its citizens, the City can uncover a multitude of creative options for the future of Burlington Telecom.
Burlington Telecom’s gigabit fiber-optic network represents the biggest potential engine of community and economic development that Burlington has seen in 100 years. The accumulated public benefit of this infrastructure over the next 30 years represents the best possible option for the City to recoup any financial losses in Burlington Telecom. How do we ensure that the City can continue to reap the benefits of this infrastructure? What guarantees do we have that a private entity will operate Burlington Telecom as a public utility that maximizes public benefit? The City has made a significant investment in Burlington Telecom (regardless of how the City ended up in this position). A sale to a private entity risks forfeiting this investment.
A private entity will have a short-sighted economic incentive to artificially limit the capacity of Burlington Telecom, even though the technical capacity exists to provide abundant last mile bandwidth to its subscribers. Bandwidth is considered by telecoms to be, in economic terms, a rival resource. However, the unique nature of Burlington Telecom’s technology and topology means that last mile bandwidth is an abundant, non-rival resource. In this scenario, the business model of a traditional telecom would likely lead it to introduce artificial scarcity so as to monetize this non-rival resource as if it were a rival resource.
This artificial scarcity could take many different forms, some more obvious than others. It could mean offering a 100Mbps plan for the price of a gigabit plan. It could mean declining to offer gigabit service altogether, or declining to offer gigabit service to businesses (as is the case with Google Fiber). It could mean not upgrading to a 10 gigabit network when the equipment for this becomes financially feasible (the fiber-optic network itself is currently capable of speeds far faster than 10 gigabit). It could mean not respecting the principle of network neutrality. These artificial limitations would significantly curtail the community and economic development benefits of Burlington Telecom.
We propose that the City follow an open, rigorous, transparent and efficient process for choosing a partner or purchaser for Burlington Telecom. The approach taken in the Waterfront and Downtown Public Investment Action Plan (PIAP) was impressive in its commitment to participatory democracy. We suggest that a similar model be employed for deciding the future of Burlington Telecom. A sale of Burlington Telecom should not simply be a financial transaction, but rather a partnership that ensures the continued community and economic development benefits of Burlington Telecom.
As with the PIAP process, a team should be assembled to evaluate proposals. In addition to finance experience, the team should possess telecom experience, community and economic development experience, and an understanding of the impact next-generation networks will have on our society. Deliberations should be warned and open to the public with opportunity for public comment.
Public participation in the process should be encouraged. This will have the added benefit of educating the public on the capabilities of Burlington Telecom. Concepts should be accessible online and in public places for review and comment. Relevant groups and stakeholders should be briefed at regular intervals as the process unfolds.
The criteria for evaluating concepts should be made public. The criteria should weigh not just the financial aspects of the proposals, but also the value to the local community and economy. A plethora of concepts should be solicited. Concepts should be vetted at multiple stages of the process. After the initial submissions, proposers of similar concepts should be encouraged to work together on a combined proposal.
Some might argue that a public process is not possible. Perhaps the issue is too complex or the nature of the telecom industry requires secrecy in order to maintain a competitive advantage. We disagree. Burlington Telecom does not, in fact, have any competition for its most important service, symmetrical gigabit Internet. There is little or no knowledge that a competitor or potential partner could not derive from what is already available to the public. The fundamental economics of Burlington Telecom, and its relation to the City, are relatively simple to understand and it is unlikely that proposers would require access to financial and operational details that are not already publicly available.
Perhaps there are proposers who would not like their concepts to be made available to the public. However, does the City want to enter into a partnership with an entity that wishes to keep its plans hidden from the public? If the City decides that a public process is not feasible, then a clear and compelling reason for keeping the decision-making process private should be presented to the public.
The process by which the City decided to sell Burlington Telecom lacked transparency and adequate opportunity for public engagement. The decision to sell Burlington Telecom was made behind closed doors without a robust and meaningful public discussion. While some of the recommendations of the Blue Ribbon Committee were made public, there was also a private version of their report that was not made available to the public. In the seven meetings held by the Blue Ribbon Committee before issuing their report, they met with consultants, Burlington Telecom staff and other stakeholders. However, they never met with the public as stakeholders to the process.
Most of the discussions leading to the decision to sell Burlington Telecom were held in executive sessions. Often the reason given for these executive sessions was that it would put Burlington Telecom at a “competitive disadvantage.” This reasoning implied that the City intended to continue to operate Burlington Telecom, not to sell Burlington Telecom. Meetings of the Blue Ribbon Committee and the subsequent Burlington Telecom Advisory Board were often not adequately warned. These meetings were held at locations not conducive to public dialogue. The public deserves an account of the events and conversations that ultimately lead to the decision to sell Burlington Telecom.
Moving forward, the public should be fully engaged in the decision-making process. There is no shortage of residents who care about Burlington and its future. The creativity and ingenuity of Burlingtonians should not be discounted. Why not give the people of Burlington a chance to directly participate in designing the future of Burlington Telecom? If operated as a public utility accountable to the local community, Burlington Telecom can continue to pay dividends in public benefits for decades to come. This can only happen through a partnership that embodies openness and transparency and respects the community and economic development goals of the City.
Bradley Holt
Jason Pelletier