The plan to create the nation’s first “e-state”
By Shay Totten | Vermont Guardian
Posted January 19, 2007
During his inaugural address, Gov. Jim Douglas called on Vermont to become the nation’s first “e-state” by 2010.
It’s a pledge that governors in Maine, Michigan, Kentucky, and New York have made in recent years, but that none have yet to achieve. Certainly, each of the states have expanded access to broadband and cellular coverage, but not in the way that Gov. Douglas and his administrative team see the future.
In fact, during his speech, Douglas held up a mobile phone stating, “In my hand there is wireless mobility, complete access, and clear connections. In my hand is fairness and equity for all Vermonters. In my hand is both freedom and unity.”
That freedom and that unity he described as “when you turn on your laptop, you’re connected. When you hit the send button on your cell phone, the call goes through.”
That may not exactly be what Ethan and Ira Allen had in mind when the state motto of “freedom and unity” was hatched. At that time, Vermonters were fighting to create a border and be recognized as a state, rather than as land attached to other states.
Today, rural states are still trying to compete with their larger counterparts to attract companies to their states, and to help companies in state start and expand.
Expanding wireless and broadband Internet access have been called today’s rural electrification, or the expansion of federal and state highway systems.
And, while most studies show that quality of life and a talented workforce are the reasons that companies relocate, providing greater access to cellular phone coverage and broadband Internet access are seen as logical infrastructure needs of an information-based economy that could help lure people to Vermont, and keep others, especially younger Vermonters, here.
While Vermont hopes to be the first across the finish line, it has plenty of competition.
In Maine, Gov. John Baldacci called for his state to expand wireless coverage into every community by 2008, and broadband into every Maine home and business by 2010.
In New York, Gov. Eliot Spitzer, too, recently called for the creation of a Universal Broadband Initiative in his state.
Likewise, Georgia, Kentucky, Michigan, and North Carolina officials are hatching ideas to expand these services into rural areas.
“The authority is seen as a bridge builder to essentially aggregate what’s left of our unserved areas of Vermont, because today while we’re making progress we’re fragmenting the unserved even more, and essentially saying that we are looking for provider or providers to cover all of that area or region,” said Tom Murray, the state’s commissioner of the Department of Innovation and Information.
As the state’s chief information officer, Murray is also one of about six key people in the administration who have been working on the e-state proposal.
With agreement to serve the currently unserved parts of the state, the Vermont Telecommunications Authority, as proposed by Douglas, would offer “expedited access to rights of way, state buildings and state towers, and provide bond financing for components of it,” Murray said.
And, while it would look for public and private sector partners to provide the service, it may be necessary for the state to build, and own, parts of the fiber optic network needed to bring the next generation of broadband throughout Vermont.
Murray sees the e-state taking shape in two ways: expanding today’s definition of broadband, which can mean speeds just slightly higher than dial-up service, to all parts of the state through a mix of the existing copper lines, as well as wireless and satellite providers.
“At the same time we need to be doing all the right stuff that sets us up for the next generation, and that’s the really tough part,” said Murray.
It’s not only tough, but in a small market like Vermont’s it may be hard to find the right mix of public and private investors, and service providers, to make it happen.
It can cost about $1,000 per passed house to lay out fiber optic cable in rural parts of the state, compared to $250 per passed house in urban areas, according to Tim Nulty, the director of Burlington Telecom, a public utility providing cable TV, phone, and Internet service in Burlington.
The utility will need to borrow close to $25 million to get up and running, and is in the process of ramping up services to more and more people each day. It has about 10 employees.
“The second part is the real story of the governor’s proposal — the rebuilding, or building of a completely new telecom infrastructure than the one we’ve got, and the one most people have today is obsolete,” said Nulty. “The age of copper is over, and in the next 10 to 15 years these networks will be mostly rewired with fiber optics. And, that’s a much different job than the noisy fanfare of providing wall-to-wall broadband and cellular coverage.”
Nulty, who likes the governor’s proposal, said the Legislature will have to hold the administration’s feet to the fire to make sure the it’s done right, but is confidant that Murray, and others working on the proposal, have the vision and skills to make it happen.
Michele Guité, the founder of VermontTel in Springfield, is concerned that the state could help to bring about a swift end to independent providers, rather than allow them to expand, or bolster, existing coverage areas. VermonTel covers towns throughout the state’s four southern counties.
Guité said Vermont already enjoys some of the highest DSL penetration in the world, but agrees that the future lies in expanding fiber optic lines and wireless services.
Last year, VermonTel invested in a fiber optic route that crosses Lake Champlain and heads to New York city. In addition, the company bought up space on the wireless spectrum from the Federal Communications Commission.
“Vermont is trying to say what telecom infrastructure is needed, and we want to work with the governor,” said Guité. “It fits very much into our concept.”
Whether Verizon, and Fairpoint Communications, the company it hopes to sell its landline poles and wires to in Maine, New Hampshire, and Vermont for more than $2 billion, will play a role remains to be seen.
State officials remain hopeful, and point out that while they are looking to the future, they still need to make sure today’s network is up to par. And, in many cases, it’s not.
“In our present situation, we’re in the unacceptable position of having a system for the good-old fashioned customers being below par and we spend a considerable time chasing down problems that just shouldn’t be happening in this day and age in terms of down time and customer service,” said David O’Brien, commissioner of the Department of Public Service. “So, this whole notion of having a utility coming in and saying they see Vermont a big part of their life, and a big part of their own success, makes me cautiously optimistic.”
Under separate regulatory agreements in the past two years, Verizon has agreed to invest millions of dollars into expanding broadband along its copper lines, and to strengthen its fiber-optic network to ensure better reliability, said O’Brien. That money represents penalties and overcharges that the state was willing to forgive if network improvements were made.
He doesn’t see that commitment changing with new owners.
“The dollars valued they owed back to ratepayers has helped underwrite the work they are doing and there is still more work to be done for their network to be strong and resilient,” said O’Brien.
With larger companies mostly giving up on more rural parts of the state, Nulty sees plenty of opportunity for smaller providers in the governor’s plan.
“There are a couple of very good things about the plan,” said Nulty. “It gives the state government an important role in being an active promoter to expand existing services, and will make them go out and help them get this done and it would give them some money-raising power. But, it matters immensely how its executed.”
Nulty believes that Douglas’ sales pitch during his inaugural address fell short of fully describing the plan, which he said rightly raised concerns that this was a “recipe for doling out money to the existing carriers.”
While that concern may be valid, he admits that, if crafted properly, the authority can avoid putting a lot of effort into building a public infrastructure only to have it taken over by the private sector.
“I don’t think Comcast or Verizon, or any of the large carriers, are going to be interested in being investor partners,” said Nulty. “This isn’t free money from the government. This $40 million in moral obligation bonds means there will be bondholders involved and those lenders are going to take a much harder look and do their due diligence in a way that a government lender might not.”
The plan, as Nulty understands it from being briefed on it ahead of time, is not likely to interest the larger carriers, but it might help smaller, independent carriers, or even new start-ups, to expand universal access to wireless and broadband services.
“And, that’s not a bad thing,” he said.
He points to the success of companies like VermonTel and Waitsfield Champlain Valley Telecom in Waitsfield as two independent carriers who could potentially benefit from a state-financed expansion, and ownership, of a high-speed fiber optic network.
Aside from them, Nulty said Burlington Telecom is one of the few players in the state with enough capacity built into its current system that it could handle more customers, and is really only limited by the will of city officials and residents, and how far beyond the Queen City’s borders it wants to provide repair service.
“The city of Burlington is going to have to think about this,” said Nulty, who has discussed the idea with Mayor Bob Kiss and others. “It is perfectly feasible, if the City Council wanted to do it, for Burlington Telecom to become a serious major telecom provider in the northern part of the state of Vermont, if not the whole state.”
Nulty said the city would have no qualms with providing universal coverage and maintaining open access to any other provider who wants to share in the fiber optic cable.
Currently, Burlington Telecom has invested enough money into its existing network to serve 100,000 homes, or roughly 250,000 people. In Burlington, there are only about 10,000 homes and 45,000 people.
The $5 million that Burlington Telecom spent on the central nervous system of the network is what any new provider would have to install — switches, routers, etc. And, the utility already has the people in place to provide the customer service people will want — and they’re based in Vermont, not India.
“We’ve already made the investment, and we have the capacity to serve more people,” he said.
The first stop for Douglas’ plan is the Senate Economic Development Committee, chaired by Sen. Vince Illuzzi, R-Orleans/Essex.
Illuzzi said Douglas’ proposal sounds good rhetorically, but he has yet to see any details and is concerned that the administration is merely setting up a program that is designed to “put money into the pockets of the private sector” rather than help communities get better wireless and broadband coverage.
“This is a complete change in policy direction for this administration,” said Illuzzi. “In the past four years, this administration has consistently said to leave it to the private sector, and that there was no role for government to play.”
Illuzzi points to what he calls a lost opportunity to buy the network of hydroelectric dams along the Connecticut River. Illuzzi believes the power authority that was set up to investigate the public purchase of the dams was destined to fail because the governor stated several times that he did not believe in public power.
The dams went up for sale in 2003, just as Douglas was elected into office. After a months-long process, a public panel established by the Legislature and the Douglas administration, though largely controlled by the governor, failed to make a solid bid on the dams.
Illuzzi said the administration in recent years has also stood in the way of helping rural communities receive grants through a program devised by himself and Sen. Matt Dunne, D-Windsor. Under the program, communities could receive up to $50,000 in grants to provide broadband coverage.
In Norton, town officials were moving forward with a local wireless Internet service provider from Island Pond to provide just such a service to most, if not all, of Norton. However, a caveat in the grant proposal states that the money can’t be given out to a community if a private provider is offering services. In this case, on the night of a public meeting in Norton on the proposal, Verizon stepped in and said it would be extending DSL service to the town.
“The problem with DSL is that it’s only good about three miles from the nearest switching station, so it’s not going to cover a lot of the town, especially in Norton’s case,” said Illuzzi.
That said, Illuzzi is willing to hear out the administration and work out the details on how a telecom authority should be set up.
According to a 2005 report from the Pew Internet & American Life Project, 53 percent of Internet users now have a high-speed connection at home, up from 21 percent of Internet users in 2002.
Not surprisingly, the groups who were initially most likely to lag in adopting the Internet now lag in access speeds, the report found. Those with less education, those with lower household incomes, and people age 65 and older are less likely to embrace broadband than those who are younger and have higher socio-economic status.
In 2002, the Pew Internet & American Life Project reported that Internet experience — the number of years a person had been online — was a major predictor of both the frequency of Internet use and the activities pursued online. Now that a majority of the Internet’s heaviest users have upgraded from dial-up to high-speed access at home, broadband access is becoming a stronger predictor of online behavior than a user’s level of experience.
In looking at the new digital divide, the project split Internet access in the U.S. into three tiers — the truly offline (22 percent of U.S. adults); those with relatively more modest connections, such as dial-up users, intermittent users, and non-users who live with an Internet user (40 percent); and the highly-wired broadband elite (33 percent).
In the past month, two other governors in the region have expressed a desire to boost access to wireless and broadband services among residents. Here are excerpts from two such speeches:
Gov. John Baldacci, Maine (September 2006)
“Last year I came to you with a bold proposal to ‘Connect Maine’ — to serve 100 percent of Maine communities with cell phone coverage by 2008, and 90 percent of Maine homes and businesses with broadband by 2010.
“We’re ahead of schedule on both and will meet the broadband goal later this year. We’ve made a lot of progress, but there is more to do.
“Later this month, I will submit ‘Connect Maine’ legislation to further expand the availability and quality of broadband and wireless phone service throughout the state. “
Gov. Eliot Spitzer, New York (January 2007)
“We must also recognize that access to affordable, high-speed broadband is just as important in today’s economy as access to a paved road, to a telephone line, or to reliable electricity. But here in New York, we face a digital divide. If you’re a child growing up in South Korea, your Internet is 10 times faster at half the price than if you’re a child growing up in the Southern Tier or the South Bronx. New Yorkers on the wrong side of the divide simply cannot compete in today’s economy.
“To close the divide, we must implement a Universal Broadband Initiative to ensure that every New Yorker has access to affordable, high-speed broadband.”