Thursday, November 25, 2010

Failure of Muni Broadband

Almost a year ago we wrote about Burlington Telecom and as we sit here on the other side of the Connecticut River, no I can't see Burlington from my home in New Hampshire, I see that it is having its property repossessed.

A recent news note states:

Wednesday, Kiss announced CitiCapital plans to repossess Telecom equipment to recoup its $33 million debt from the city. Ward 4 councilor Kurt Wright says the administration failed to notify other city leaders of how severe the BT problems were in time for them to avoid this.

"I think it's tough, actually, to put a good spin on this," said Wright, R-Burlington City Council. "This is not the desired result we were hoping for out of these negotiations. And I think it's an unfortunate day for Burlington and Burlington Telecom and, I think, somewhat of an embarrassment for the city."

Wright expects the Vermont Public Service Board will protect BT customers from having their service yanked while the financial problems are being resolved.

The Burlington Free Press states:

CitiCapital demanded that BT make minimum monthly payments of $311,000 for the continued use of leased telecommunications equipment — money BT doesn’t have and can’t legally raise from non-BT sources, according to a letter from Burlington to the Vermont Public Service Board requesting a status conference on the situation.

“We’re saying that that’s an unreasonable amount,” Mayor Bob Kiss said. “There probably is an amount that we would pay, but it would be more like $40,000.”

So what now?

Ö Kiss said the collapse of negotiations will not lead to any significant changes in service to BT’s thousands of customers in the near future. CitiCapital cannot simply pull out the system hardware immediately, he said. Burlington will “obtain replacement equipment either through a partnership or other means,” a city news release said.

Simply they are financially defunct and their operating equipment is gone. We anticipated this long ago. This is another demonstration in our opinion that broadband is really difficult and that newcomers will face great problems which they are all too often not capable of solving.

This will raise the question of the Broadband gifts from RUS and NTIA. As we have said for years they will most likely be wasted. Hopefully the new Congress will find ways to redirect the funds away from any expenditure of any kind.

These programs were just another example of the poor thinking of macro economists who have no idea of real business. Stay tuned.