The financial and legal woes with Burlington Telecom’s municipal fiber deployment is typical when only one individual is holding the plan together. Municipal broadband deployments have many working parts that require support from several individuals throughout the city government and community to make them successful. In the case of BT, one man was driving the project and support: Dr. Timothy Nulty. When Dr. Nulty left to head up ECFiber, the city of Burlington failed failed to provide the long-term support to BT required to make the project successful.
Burlington Telecom under the direction of Dr. Nulty thoroughly planned and implemented their business plan, and by all indications they were on track compared to other successful deployments. As Dr. Nulty indicated in his open letter, municipal FTTH networks typically take approximately 5 years before reaching a positive ROI. BT was a bit more conservative in their estimates to account for any potential cost increases that BT may incur. Under his leadership, they were well on their way to meeting their business case objectives.
When Dr. Nulty left to take his current position heading up ECFiber, most of the experience, leadership, and drive left with him. Support in City Hall was weak which left no champion of the project to hold it all together. It is this lack of leadership and support that drove the Marketing Director to resign. Without a strong sales and marketing drive to keep signing up new customers, the network was is doomed because it could not keep up with its debt payments and operating expenses.
The economics in the business case were solid as validated by many consultants and participants in the project. What plagued BT was the loss of experience and leadership to continue to execute on the plan once Dr. Nulty left BT. The city of Burlington failed to hire an adequate replacement to carry forth the project to successful completion. This is the problem with most municipal deployments. The project requires support from all stakeholders to ensure success. Politicians, city managers, and other employees come and go. Without the continuity of support from multiple stakeholders, the project will fail.
Most municipalities do not have the expertise to manage and sell communication services. The sales and marketing challenges could have been mitigated by making the network open-access that would have shifted the sales and marketing burden to the service providers. BT’s responsibilities would have shifted to that of an infrastructure builder and maintainer which is something that cities have some experience. Another option would have been to outsource the network to a capable company. BT had a great track record up to the point of their defaulting on the bonds. The city of Burlington’s weak support will probably lead to a fire sale to private investors led by Dr. Nulty. His biggest challenge with be finding financing in this economic environment.
By Dan D’Ambrosio, Free Press Staff Writer
Former Burlington Telecom manager Timothy Nulty sent an e-mail Monday to several state legislators decrying “inaccurate, misinformed and unfounded” statements concerning Burlington Telecom’s financial situation made by Public Service Commissioner David O’Brien and in Burlington Free Press stories.
Burlington Telecom ran into troubles only after Nulty left the operation, Nulty said, blaming subsequent problems on Burlington’s failure to market the municipally run utility properly.
In his e-mail to state Sen. Vince Illuzzi, R-Essex/Orleans, and others, Nulty wrote that when he resigned in October 2007, BT had connected 2,200 customers — “very good performance by industry standards” — and had “crossed the threshold where revenues were covering all operating costs but not yet debt service, taxes or new capital expenditure.” Nulty wrote that if a “vigorous marketing campaign” that was under way at the time had continued, the 4,800 customers needed for profitability would have been “achieved by early 2009.”
After he left, Nulty wrote, BT’s marketing program was suspended by City Hall and never fully restarted, leading to the resignation of the marketing director. Nulty wrote that a blue ribbon committee formed by the City Council in December 2009 to assess the long-term viability of BT found inadequate marketing “as the single biggest failing by BT management after I left.”
The chairman of the blue ribbon committee, David Provost, senior vice-president for finance and administration at Champlain College, said Tuesday that the committee did not find inadequate marketing to be BT’s single biggest failing.
“As far as the single most mismanaged item, it was the level of the debt,” Provost said. “They could have had the best marketing in the world, but the fact was they borrowed $51 million. We never saw documentation that made us comfortable that BT could survive with that level of debt. If Tim believes that was what the report said, that marketing was the single greatest issue, that was not the case. We clearly stated the greatest problem was the debt load.”
- Vt. city stumbles in effort to do telecom itself (seattletimes.nwsource.com)
- State audit of Burlington telecom due out Thursday (seattletimes.nwsource.com)