Vermont Creates $40 Million Telecom Authority

Published July 1, 2007

As president of the state Senate, Vermont’s lieutenant governor cast a tie-breaking vote in May to pass, 16 votes to 15, a controversial bill establishing a telecommunications authority in the state. The new entity will finance and build broadband communications and Internet access infrastructure, mostly wireless, for purportedly neglected or underserved rural areas.

Lt. Gov. Brian Dubie (R) settled the Senate standoff on creating the Vermont Telecommunications Authority and its $40 million-plus bonding finance process–a pet project and apparent legislative priority of Gov. James H. Douglas (R) dating back at least to 2004.

Detractors have maintained rural telephone companies can attract adequate private capital as well as federal loan, grant, and universal service funding to handle the work without state spending.

Debate Was Intense

The 32-page bill sparked intense political clashes, not only over the propriety of starting such a telecom authority, but also because the measure demanded that state regulators scrutinize Verizon Corp.’s proposed $2.72 billion sale of its landline and Internet service businesses in Vermont to FairPoint Communications, a much smaller telco holding company headquartered in North Carolina.

The Senate’s final action on H. 248 followed the late March passage by a 132-2 vote in the state House, where the bill originated.

At press time, a conference committee was being formed to work out differences between the two versions of the bill. Douglas is expected to sign the measure.

Unions Back Intervention

The International Brotherhood of Electrical Workers (IBEW) and Communication Workers of America (CWA) supported the measure’s demand for close scrutiny of FairPoint’s capital structure in the would-be Verizon deal. The unions fear possible job losses if the deal is permitted to take place. Verizon had roughly 550 employees in Vermont as of January 2007.

The transaction would involve about 325,000 local access lines in Vermont and another 1.2 million lines in Maine and New Hampshire. It excludes Verizon Wireless, the company’s cellular subsidiary.

After discussions with IBEW and CWA leaders, Dubie told local media he was concerned about FairPoint’s ability to meet the goal of making Vermont a more telecom technology-ready state.

“When I hear union leaders speaking of businesses’ cases–of a company’s prospects of success–that’s a good thing,” Dubie said.

What’s the ‘Big Idea?’

What has become known as the “Big Idea” from Douglas aims to make Vermont a world-class leader in electronic communication–an “E-state.” The 272-page, three-year-old plan was among the initiatives singled out by Douglas during his January inaugural address.

John McClaughry, a high-profile state political figure and president of the Ethan Allen Institute, a Vermont-based free-market think tank, is skeptical of the plan.

McClaughry pointed out that part of the governor’s proposal calls for streamlining the telecom permitting processes, especially with respect to tower siting, and giving quick approval for the use of state-controlled buildings and rights-of-way. “One wonders whether providing state-controlled sites and ending permit process cost and constipation would not by itself spur private companies to expand broadband service throughout the state, without creating a new authority,” McClaughry said.

“There is always an urge among politicians to find reasons to create new authorities to cope with issues that the private sector is alleged to be unable to handle,” McClaughry added

Nevertheless, McClaughry maintains Douglas is unquestionably right in claiming Vermont’s inadequate telecom service puts the state–and especially its rural areas–at a serious competitive disadvantage. “Correcting this situation does require bold action, and the governor deserves credit for dramatically presenting the Big Idea,” he said.

Other Pressure

Effective lobbying for the telecom authority plan was conducted by the “Internet for ALL, NOW!” committee, which describes itself as an informal, nonpartisan association of several Vermonters with backgrounds in marketing and communications.

The committee’s effort included a petition drive, legislative visits, letter writing, and favorable testimonials on the bill from state business leaders, including Tim Nulty, manager of Burlington Telecom.

Among the committee’s members are Mary and Tom Evslin, who in 1997 co-founded the New Jersey-based worldwide wholesale VoIP carrier ITXC Corp. The two sold the business to Canada’s Teleglobe in 2003.

Earlier this year, Tom Evslin testified before the Vermont House Commerce Committee to voice his support for the bill, as did state Treasurer Jeb Spaulding, state Chief Information Officer Tom Murray, and David Hallquist, chief executive of Vermont Electric Coop.

In March, Spaulding issued a memorandum to Vermont’s Speaker of the House, the House Ways and Means Committee, and the House Commerce Committee to address a number of questions on bonding aspects of the bill.

Frank Barbetta ([email protected]) writes from Little Falls, New Jersey.