Access Testimony to the PSB on Docket #7044 Affecting the Future of Burlington Telecom

The City of Burlington is requesting permission from the Vermont Public Service Board to transfer ownership of Burlington Telecom (BT) to private hands and relief on key conditions of its Certificate of Public Good. The PSB is collecting testimony from the public at an open hearing slated for Tuesday, July 8 at 7 p.m. in City Hall's Contois Auditorium in Burlington.

Vermont Community Access Media (VCAM), Regional Educational Television Network (RETN), Channel 17/ Town Meeting Television, and CCTV Center for Media & Democracy are working together to represent the broad interests of community media makers and consumers for the current review process.  Acting as a party to the proceeding, these organizations are requesting that a public process be put in place to ensure that decisions concerning BT be made with maximum transparency and public involvement.

What follows is the testimony presented to the Vermont Public Service Board on behalf of Burlington's Access Management organizations.

 

STATE OF VERMONT

PUBLIC SERVICE BOARD

 

In Re: Petition of Cit of Burlington, d/b/a )

Burlington Telecom to Effectuate Settlement and ) Docket No. 7044

Resolve Outstanding CPG Violations, and Request )

for Associated Approvals )

 

PREFILED TESTIMONY OF LAUREN-GLENN DAVITIAN

 

Q1. Please state your name, occupation and describe your qualifications to speak on behalf of the Burlington Access Management Organizations in this Docket?

A1. My name is Lauren-Glenn Davitian. I am the Executive Director of CCTV Center for Media & Democracy, based in Burlington Vermont. Since 1990 we have managed Channel 17/ Town Meeting Television, a regional government access channel which serves Burlington, South Burlington, Essex, Essex Junction, Winooski, Williston, Colchester and St. George (“CCTV”). CCTV airs 100 hours of public meetings, election coverage and community events each month on Comcast (Channel 17), Burlington Telecom (Channels 17 and 317), and www.ch17.tv. CCTV just celebrated its 30^th anniversary. For the past 30 years I have been pioneering and working in the field of community media including helping to start Vermont's first public access TV channels.

 

I am also a member of the Burlington Access Management Organizations (BAMOs) which has concerns about the City of Burlington's agreement with CitiBank and SPE/Pecor (“Pecor”) which includes a provision to sell Burlington Telecom to a private third party within the next three years.

 

I am also a member of the Vermont Access Network (“VAN”), an association of twenty-six (26) access management organizations throughout the State which addresses issues common to access organizations including, but not limited to, PEG Access contracts with operators (such as Comcast and Charter), changes and adoption of new technologies, access to commercial features of the cable systems offered by cable operators, management issues, and other issues access organizations face vis-à-vis their associated operator. In this capacity I routinely communicate with other access organizations in connection with their access contracts, technology issues and access to commercial features of the network.

 

Q2. In general terms, what is the purpose of your prefiled testimony?

A2. In this testimony, I will outline the position of Burlington Access Management Organizations about BT’s support of public, educational and government access, the value of BT as a locally controlled driver for economic and community development, and our recommendations for ensuring that City residents, tax payers and rate payers have input into whether and how we continue to realize the unique benefits of BT into the future.

 

BT’s status as a publicly-owned entity combined with its advanced operating system has allowed BAMOs to gain access to commercial features of the operating system that other cable operators have been unwilling to provide. While the BAMOs are interested in preserving access to these features, this docket is really about the proposed change of ownership from a public entity to a private one.

 

Our fundamental concerns are, first, that the deal struck between the City, Pecor and Citibank has not properly engaged the public—i.e., subscribers, tax payers and the community at large which benefits from BT’s public ownership—and the privatization of a public asset should be properly vetted with the public. My testimony, therefore, will also address the importance of engaging the public in the decision to sell BT and our recommendations regarding how to properly accomplish this.

 

Second, the sale will result in a private owner whose fundamental model—profits in favor of shareholders—is significantly different than the public benefit component inherent in public ownership. As I will discuss below, the change in business model impacts subscribers, taxpayers and the community in terms of services they will receive and the cost for those services. It will also likely impact the BAMOs in terms of the cable operator’s ongoing commitment to providing access to commercial features of the network in a non-adversarial manner.

 

It is the BAMOs’ position, therefore, that the transfer of ownership of BT from the City to Pecor is contrary to the public good, as required under 30 V.S.A. § 515(a), absent the addition of certain conditions that ensure a public process with sufficient public input to determine the ultimate owner of BT, and that preserve within the business model of the ultimate owner, the longstanding commitment to public good that has come with municipal ownership of BT.

 

Q3. You said that you work with the Burlington Access Management Organizations. Can you describe these organizations?

A3. Burlington's Access Management Organizations (also referred to as the “BAMOs”) include VCAM (which provides the “Public” component of “PEG” Access), RETN (which provides the Educational component of “PEG” access) and Channel 17/ Town Meeting Television. Each BAMO has an agreement with BT to provide our component of PEG Access to BT subscribers. In operation since 1984, our AMOs are nationally recognized as innovative and effective centers for community media. We are noted for our work as community organizers, media trainers, programmers of five cable channels, and internet hubs--serving nearly 30,000 cabled households and 200,000 unique internet viewers each year.

 

The Burlington AMOs “open the door” to local government, advance community education, and provide free speech platform for anyone in the community with a story to tell. In this capacity, collectively we employ over 48 persons, serve hundreds of volunteer community producers, and air at least 2000 hours of new programming each year.

 

Q4. Since the Certificate of Public Good was issued for Burlington Telecom, what has been the BAMOs relationship with the company?

A4. The BAMOs and PEG access has benefited uniquely from its relationship with Burlington Telecom since its inception in 2005. Each generation of BT leadership has complied with our contracts and Rule 8.000, which is a condition of the Certificate of Public Good issued as a result of Docket 7044.

 

BT has always considered community programming to be an asset—a positive addition to its channel line-up and service offerings. As a result, BT's management has always been willing to explore new ways to provide public access to commercial features of the network.

 

Evidence of this: Channel 317 (dedicated to the airing of Burlington municipal programming), community drops as needed in various public locations beyond that which is required under its CPG, a new HD channel now managed by VCAM, and ongoing discussions destined to activate “on demand” local programming. Burlington Telecom’s recent partnership with the Civic Cloud Collaborative-- to connect its gigabit network with publicly controlled servers used for community applications--is another example of BT’s willingness to use its capacity to achieve larger social objectives.

 

For additional information on the Civic Cloud Collaborative and advantages it offers, see: http://www.cctv.org/watch-tv/programs/burlington-leads-way-innovative-community-internet-applications-civic-cloud-pc

 

We believe that BT's responsiveness and willingness to explore and activate community uses of its network is due principally to its corporate structure as a locally and publicly owned telecommunications enterprise. Furthermore we believe that inherent in public ownership is an underlying commitment to utilizing BT's robust network for public good. From expanded public access to commercial features of the network, to BT's success connecting schools and city owned locations and devices, including free wi-fi hotspots around Burlington, BT has proven to see great value in leveraging our high-speed fiber infrastructure to benefit the city as a whole, including customers, residents and communities. Our first hand experience is that BT's business practices as a locally owned entity are in sharp contrast to the manner in which privately owned telecom providers manage access to their own networks. We believe that much of the value of Burlington Telecom is beyond the balance sheet and fear that the business practices that BT has employed to benefit the public good will be viewed as liabilities by a private owner, particularly if BT were to ultimately end up in the hands of a large national company whose mission is to shareholders rather than the public which owns it.

 

Q5. What makes BT a unique telecom provider for the City?

A5. BT offers larger community and economic benefits to the customers of BT and residents and business of the City than other operators. We believe that Burlington Telecom is able to offer unique services to City residents and ratepayer because of its:

 

- State of the art fiber plant, which, based on public discussions with BT’s managing partner Stephen Barraclough, will shortly provide gigabit speeds to all homes and businesses in the City. See Pages 6-7 of the Prefiled Testimony of Stephen Barraclough addressing Economic Development and US Ignite issues.

- Corporate structure that enables decisions not solely based on bottom line profits but on the best rates and services to the residents.

 

As a result, BT is able to offer unique and important services to City institutions and the community at large, including:

 

- Innovative PEG access applications such as HD Channels, Burlington City Channel (317), and shortly, Video on Demand.

- Extremely competitive rates and next generation broadband access for City owned institutions and anchor facilities, (e.g., Burlington School District, Champlain College) and private businesses.

 

 

In short, BT offers larger community and economic benefits to the customers of BT and residents and business of the City. Moreover, based on the examples identified above as well as my experience with other cable operators and discussions with VAN members, it is the BAMOs strong consensus that BT views PEG as an asset to its channel and service offerings.

 

Q6. What is your observation of the consolidation of the Telecom market over the past 30 years?

A6. When PEG was started in 1984, there were 50 cable operators serving Vermont. During the late 1980s and 1990s Adelphia Cable purchased many of the state’s smaller systems (including Lake Champlain Cable owned by Ray Pecor), and consolidated the headends. Today, there are two (2) principal cable operators in Vermont—Comcast and Charter. (There is a handful of small cable systems in Vermont which are also subject to the Board’s jurisdiction.) Comcast has the vast majority of subscribers. I note that Comcast and Charter recently filed a Joint Petition seeking approval of the transfer of all Charter’s Vermont-based assets to Comcast, which would effectively leave a single primary operator in Vermont.

Given the pattern of cable consolidation over the past 30 years and the advanced nature of BT’s fiber optic network, it is very likely that if BT falls outside of local control, the system will ultimately be acquired by a national multi-system operator or a company, such as Google or Comcast, seeking national influence over internet communications. It is self-evident that any such company will have a business model quite different from BT as it stands today, and BT’s existing and evolving next generation broadband infrastructure will be squandered in favor of company profits based on a fiber scarcity model that large telecommunications companies use to keep subscriber prices high and speed and service low throughout the country. That sort of traditional, current large, commercial telecommunications model will not serve well the future development of Burlington’s business sector, educational environment, or community activities. For statistics on Global Broadband subscription price ranges per megabit per second of advertised speed please see Exhibit LG-3..

 

 

Q7. Do you support Burlington Telecom's involvement with the US Ignite initiative?

A7. Burlington is one of twelve cities in the United States that is a US Ignite Partner. See the following site: http://us-ignite.org/next-gen-networks/. The mission of US Ignite is to foster the creation of next-generation internet applications geared to providing a public benefit principally in one or more areas of national priority including education and workforce, energy, health, public safety, transportation, and advanced manufacturing. To qualify, a municipality must have an advanced internet infrastructure and be willing to support issues of public benefit.

 

BT's current and enthusiastic involvement with the US Ignite initiative further indicates its interest in capitalizing on its advanced features to benefit the community and as an economic development driver. BT's management and Burlington's City leadership has explicitly stated that the network provides opportunities for community growth and economic development. They are clear that this potential can be further leveraged by BT's involvement with US Ignite. See Pages 6-7 of the Prefiled Testimony of Stephen Barraclough here.

 

Q8. How have other forward-thinking communities around the U.S. been successful at realizing the community and economic development potential of their publicly owned fiber networks?

A8. It is important to note that many other publicly owned fiber optic networks around the country are currently successful in fulfilling their public benefit mission while remaining profitable. Muninetworks.org, a leading organization in providing resources for those joining the movement to build broadband networks that are accountable to the communities they serve, reports that nationally there are currently 89 communities with a publicly owned Fiber to the Home (FTTH) network reaching most or all of the community, 74 communities with a publicly owned cable network reaching most or all of the community, over 180 communities with some publicly owned fiber service available to parts of the community, and over 40 communities in 13 states with a publicly owned network offering at least 1 Gigabit services. These figures are attached as Exhibit LG-2 and can also be found online at http://www.muninetworks.org/communitymap.

 

There are many cities nationwide including Chattanooga, TN, Lafayette, LA and Wilson, NC that are seen as leaders in the field of public broadband infrastructure and are running highly successful Fiber to the Premises (FTTP) networks. Wilson, North Carolina is a town of roughly 50,000 residents and the home of Green Light Community Broadband (http://greenlightnc.com/). The town of Wilson has built 350 miles of fiber plant and has been operating since 2008. Green Light Community Broadband currently has around 7000 external customers including residential, small offices, anchor institutions, and major employers. They have also built a Gigabit backbone ring that connects the school system and supports the hospital and libraries. In addition, the town of Wilson has around 5000 city-owned facilities and devices connected to the network. They include utility infrastructure, surveillance cameras, and mobile emergency command centers for public safety departments. Wilson, NC’s statistics were presented in Washington, DC by GLCB’s Operations Manager Will Aycock on May 28, 2014, and can be viewed online at: http://oti.newamerica.net/events/2014/localism_over_consolidation/. During his presentation Mr. Aycock expresses that all of Wilson’s city-owned connections and devices would simply not be there if the city didn’t own the network (Embedded video: 47:33). He also states that the building of Wilson’s public broadband infrastructure was built because of a mandate they were given by their elected officials to “support the economic health of our community, help enhance the quality of life for our citizens and improve the delivery of city services” (Embedded Video: 25:36). The majority of Mr. Aycock’s presentation can be viewed in the embedded video in three parts at 21:34, 46:34 and 50:07.

 

All of the US cities that are now operating successful public broadband networks have faced legislative and regulatory challenges as well as market and competitive risks. (Exhibit LG-1, pages 40-41). Therefore, it is important to note that the City of Burlington has already overcome two of the greatest obstacles to establishing next-generation broadband access – challenging an incumbent telecom provider and investing in the infrastructure.

 

Moving forward, we feel it is critical that when BT and the City are assessing the value of our public broadband infrastructure that they look beyond Burlington’s city limits to other cities around the country who are operating highly successful public broadband networks. We feel strongly that this perspective, and therefore BT’s added value as a publicly owned network, is not being accounted for. For more information about how local governments and communities in the U.S. have taken the lead in building next generation broadband infrastructure please see Exhibit LG-1.

 

 

Q9. What are your concerns about the City of Burlington's proposed settlement agreement with Citibank?

A9. The BAMOs are concerned about the City's decision to ultimately sell Burlington Telecom to a private entity as a condition of its settlement agreement with Citibank and Pecor.

 

While there is wisdom in reducing the debt load with Citibank, the contract results in a second, “arms length sale” of BT from Pecor “to a private entity.” Not only do the City taxpayers receive pennies on the dollar for what they are owed, they stand to lose complete interest in what is now a publicly owned asset. Loss of this asset means that the City will have limited opportunity to recover the funds owed. It also means that ratepayers will then be subject to market rates that must recover profit for its new owners. And finally, at this time, there is nothing in the record to suggest that prospective owners will be willing to structure its offerings so that the City can realize the community and economic development potential of the network--including community media innovation—currently provided by BT.

 

We think that the City must be clear with the public about its expectations for BT's future. Is BT a fungible asset? Or is BT a future-proof lifeline to a prosperous and resilient economy? If the City believes (as it states in testimony and on the public record, see 6/4/14 meeting below) that BT can provide present and future services critical to our community and economic well-being, then we must establish a process for selecting a new owner that will engage as a true partner, that shares values with the City of Burlington.

 

To be clear, while there are many aspects of the second sale to object to, what BAMO is most concerned about is that the process to privatize a public asset be properly vetted by, through and with the public.

 

Ultimately, the City’s deal with Citibank and Pecor results in a de facto transfer of ownership and gives Pecor the authority to direct the terms of BT’s sale. It is necessary for the PSB to require that the City exercise additional conditions to assure that the City retains the benefits of BT’s unique offerings now and in the future. The Board can require the City to ensure that the taxpayers/ residents/ rate payers continue to realize the benefits of BT as the city contemplates an “arms length sale”.

 

Q10. Can you point to examples of how the City of Burlington has handled the disposition of public assets in the past?

A10. Over the past 25 years, Burlington has faced comparable decisions about the disposition of its assets. The Burlington Waterfront, the downtown supermarket, and, most recently, the Moran Plant—a legacy from an earlier economic era. In each case, the City has crafted an open, public process to determine the terms and conditions for the next chapter of each of these community resources. Most recently, Burlington City voters approved the purchase of Winooski Hydro One project, for which the City negotiated a “right of first refusal”, enabling ratepayers to realize long-term benefits from affordable, renewable, and local energy source. The important point is that the City has the history and capacity to involve the public in crafting appropriate conditions for the “sale” of BT.

 

Q11. What outcomes do you seek in this Docket?

A11. It is critical in this Docket that the City is able to realize the unique benefits of BT post-Citibank deal. This requires, first, that the ratepayers, taxpayers and community, i.e., the stakeholders, have a proper say in determining the ultimate destiny of BT. The public should be made aware of the benefits and consequences of privatization and be permitted input into whether the ultimate sale of BT to a private entity or retaining a public interest component is in Burlington’s best interest. Second, BT’s firm commitment to public good that has come with public ownership has provided a great benefit to the City and the BAMOs and therefore to Burlington residents, particularly in terms of access to commercial features of the fiber-optic network. It is critical that these benefits be preserved with any future owner.

 

This Docket is the right time to influence the process of how the City selects the next owner and whether the business model, services provided, access to commercial features, etcetera, offered by the next owner are compatible with the interests of the stakeholders. Waiting for the next docket to make critical decisions related to the second change of ownership from Pecor to a private entity is too late for several reasons: the purchaser has been selected by then; there is no guarantee that the public has been properly informed of or allowed to participate in the selection of the second purchaser; and the EMCO and other criteria do not provide an adequate basis to assess whether the purchaser’s business model is compatible with the public benefit model of a municipal owner, whether the City and its taxpayers are receiving a proper return on their investment, or to fairly evaluate whether the new purchaser will continue to support PEG access in a similar manner as BT.

 

In sum, in order for BT to continue to provide promised benefits of the system (public access, affordable rates, community and economic development) the PSB should adopt a public process and criteria to inform the transfer of BT to next owner.

 

Q12. What conditions does BAMO propose be incorporated in this Docket?

A12. The following conditions are required:

 

1. Establish a decision-making entity best positioned to ensure the best possible outcome. This involves designating a qualified team to evaluate proposals that includes financial, telecom, community and economic development experience, along with an understanding of the impact of the next-generation network.

 

The City has identified the Burlington Telecom Advisory Board (“BTAB”) to carry out this work but it is not clear that they are supposed to take the BT discussion to the next level. It is also not clear that the current composition includes the necessary experience to evaluate a new owner. The composition of the BTAB includes City Council members along with business and community members, but does not clearly contemplate any evolution of the BTAB or its role in this next phase of BT’s development. The original City Council resolution from October 2012 is attached as Exhibit LG-4.

 

If the City decides to keep the BTAB in place for this purpose, their membership should be expanded to achieve a fully qualified team including representatives with current telecom knowledge and community and economic development experience.

 

2. Open deliberations to the public, with ample and clear opportunities for citizen participation—including on-line access to proposals, briefings of relevant groups and stakeholders at regular intervals as the process unfolds, and public presentation of final proposals. It is important that public input be considered and the recommendations of this decision-making group not be undermined by preconceived positions or political considerations, as was the case with the Waterfront PIAP Process.

 

3. Identify the criteria necessary for a partner that will cooperate with the City to preserve and promote access to key features of the BT network for anchor institutions, community organizations and local businesses, and realize the full economic and community development potential of BT. These criteria should weigh both the financial and the value of the network to the community and the regional economy and be transparent to the public.

 

3. First right and option to purchase - The City should retain the right of first refusal if/when the next owner (after Pecor) decides to sell BT.

 

Q13. Have you made progress discussing your position with BT and the City?

A13. The BAMOs and other interest groups met with BTAB on June 4, 2014 and all parties indicated an interest in continuing these discussions. Individual BTAB members have reached out to the BAMOs to discuss and craft draft public process and criteria for a future sale. These have not been agreed upon to date. The BAMOs intend to continue this process as well as reach out to other City Councilors.

 

Q14. What findings do you propose?

A14. The BAMOs propose the following findings:

 

1. PEG has benefited uniquely from its relationship with BT due to BT’s technical capabilities and ownership structure/business model which is informed as a local/publicly owned company.
 

2. Historically, BT offers greater community and economic benefits to its customers, and residents and businesses of the City, which is consistent with BT’s business model and local/public ownership.

 

3. Given the pattern of cable consolidation over the past 30 years, the future owner of BT is likely to be a larger non-Vermont centric company acquisition. This would be catastrophic to the benefits beyond the balance sheet that promote the public good.

 

4. To ensure that the sale of BT from the City to Pecor is not contrary to the public good, the Board can require the City to ensure that the taxpayers/ residents/ rate payers continue to realize all of the benefits of BT as the city contemplates “arms length sale”.

 

5. That the agreement to sell BT to Pecor will be in the public good if the following conditions are imposed on the sale:

 

1. A decision-making entity comprised of persons with financial, telecom, community and economic development experience, along with an understanding of the impact of the next-generation network, and including public officials, will be established by the City and Pecor within four (4) months of the issuance of the CPG. The duties of the decisionmaking entity shall be to determine suitable next-generation ownership of BT contemplated by the sale of BT from the City to Pecor.

 

2. Open deliberations to the public, with ample and clear opportunities for citizen participation—including on-line access to proposals, briefings of relevant groups and stakeholders at regular intervals as the process unfolds, and public presentation of final proposals.

 

3. Through the public participation process, identify the criteria necessary for identifying a partner that will cooperate with the City to preserve and promote access to key features of the BT network for anchor institutions, community organizations and local businesses, and realize the full economic and community development potential of BT. These criteria should weigh both the financial and the value of the network to the community and the regional economy.

 

The agreement between the City, Pecor and the next-generation owner shall incorporate a right of first refusal permitting the City to re-acquire BT from the next-generation owner.

 

Q15. Do you have final comments?

A15. The BAMOs have always been encouraged by the wisdom of the City's voters to pursue a publicly and locally owned telecommunications network. Our experience and research convinces us that BT's value will only increase as the years go on. It is shortsighted to lose complete local control of this most valuable asset. From the point of view of community access--and the larger interests of community and economic development--it is necessary for us to forge a new partnership that will truly serve the interests of our city, now and in the future.

 

The Citibank Settlement combined with the Pecor buyout gives the City an opportunity to restore its credit rating and to re-build the financial position of BT. However, additional steps must be taken to ensure that the City is able to preserve a stake in the asset, in order to:

- recover additional revenue to City tax payers

- maintain reasonable rates and access to triple pay and high speed services

- realize the economic and community development benefits of local access to a high speed, state-of-the-art telecom system.

 

Q16. Does this conclude your testimony?

A16. Yes it does. Thank you for the opportunity to present the concerns of the Burlington Access Management Organizations.