Neither a Borrower…
They’re out to get us.
Such, it seems, is the reaction by advocates of public telecommunications service to the furor over the City of Burlington’s semi- sub-rosa loan to Burlington Telcom, the city owned Internet, phone, and cable company.
“The same forces that want to preserve the private insurance monopoly in health care…are now out to preserve the private corporate monopoly in Vermont telecommunications,” claimed John Franco, once chairman of the Burlington Electric Commission, and now co-chair of the Burlington Progressive Party.
That’s the party of Mayor Bob Kiss and his chief Administrative Officer, Jonathan Leopold. Those are the officials who decided to lend Burlington Telcom $17 million. Even without approval of the City Council or the Board of Finance. the loan might have been entirely proper had it been paid back within 60 days.
It was not, a fact which, at the very least, Kiss and Leopold did not go out of their way to inform the rest of the world, or even the rest of city government.
That’s why they’re in a political pickle.
Which does not disprove their contention that state officials, doing the bidding of Comcast, BT’s private, for-profit, competitor, are trying to use this pickle to discredit publicly-owned telecommunications systems in general. Last week, citing BT’s troubles, Public Service Commissioner David O’Brien tried to discourage officials of the Rutland Redevelopment Authority from proceeding with plans to set up a public fiber optic broadband system in their area.
Then there’s the timing. O’Brien’s blast at Telcom for being ”a business that is losing money, has no immediate promise of making money and is in debt beyond their ability to recover,” was certainly ungrammatical and may have been incorrect (see below), but it did divert attention from the embarrassment (to him) of the news that Fair Point, which he once said could be “a wonderful change for Vermont” was declaring bankruptcy.
Not to mention making it even less likely that BT, whose license (Certificate of Public Good) authorizes it to provide telephone service statewide, might take over the state’s land line phone service if Fair Point loses its own right to operate in Vermont. O’Brien may have been firing a shot across that bow, too.
But even if the Progressives are right, they’re violating a basic rule of governing: If you know certain forces are out to get you, don’t give them ammunition.
And, in this case, continue to give it. The Mayor proclaimed his devotion to “an independent audit” of Burlington Telcom in the same sentence in which he endorsed a less-than-independent audit, in that its parameters would be set by the Board of Finance, a five-member body on which sit Kiss, Leopold, and a Progressive Party member of the Council.
Haven’t any of these folks read about Watergate, and learned the old line about the cover-up being worse than the crime?
In fairness to Kiss and Leopold, they seem to have committed no actual crime (unlike Richard Nixon, whose crimes were in fact far worse than the cover-up). Perhaps all they are covering up is a cover-up, an understandable it ultimately foolish effort to keep anyone from finding out about the loan until Kiss got re-elected last March.
Either way, they seem unaware of a salient element of this incident. Whether it ever rises (sinks?) to the level of scandal, it threatens two Vermont institutions: publicly owned telecommunications and the Progressive Party.
Back to that in a moment. But first, a reality check.
As any sentient Vermonter knows, there are three words which prove that incompetence and chicanery are not unknown in the private, for-profit, telecommunications world. Two of those words are “Fair Point.” The other is “Adelphia,” once Burlington’s dominant cable company, now defunct because its top officials were guilty of stock fraud. Two of them, at last report, remained ensconced in the federal correctional system.
Nor do BT’s troubles prove that publicly owned telecommunications is a bad idea. According to Joanne Hovis, president-elect of the National Association of Telecommunications Officers and Advisors, there are 54 municipally owned Fiber-To-The-home (FTTH) systems in the country, many of them effective, solvent, and instrumental in attracting businesses to their cities. A report by the Municipal FTTH Systems organizations lists 15 cities or counties where publicly-owned high-speed Internet connections have helped attract companies such as Louisville Slugger, Colgate Palmolive, and Yahoo to open facilities.
Furthermore, all this outrage from O’Brien, some City Council members and assorted commentators that Burlington taxpayers may end up on the hook for the loan should be put in context. All telecommunications are tax-subsidized one way or another, from the telephone universal service charge to the Reverse Morris Trust used when Fair Point bought Verizon’s northern New England land lines, costing the taxpayers at least $600 million.
But the cost of those subsidies was diffused all around the country, which would not be the case were BT to fold or be sold still owing the $17 million. That’s almost $450 a Burlingtonian.
On the other hand, predicting such a calamity for BT might be quite premature. The company surely has its problems. It doesn’t cover the whole city, and serves only about 30 percent of the 85 percent it does cover. But most private companies don’t cover their whole cities, either; they cover the profitable parts. And according to Christopher Mitchell of the Institute for Local Self-Reliance in Minneapolis, most municipal telecommunications companies lose money in their first three years, which is all BT has been operating.
“The need to refinance doesn’t necessarily suggest (BT is) in a position of weakness,” Mitchell said. “What’s happening is more or less par for the course. The first five years are marked by losses and opponents seize on (them) and say it’s never going to work.”
Mitchell said BT might very well thrive. But he, too, wondered where that $17 million went.
That should illustrate the Progressives political predicament. Even supporters of public providers have questions about the loan. The argument that Kiss and Leopold did tell the Council, but that the members just didn’t take it all in, is believable only if one assumes that all the city council members are denser even than most city council members tend to be.
The reason this is a perilous position for Progressives is that whatever success they have had rests on their reputation for purity. Unlike the Democrats, they claim, they do not compromise. Unlike Democrats or Republicans, they seem less likely to cut political corners, to parse language to try to weasel out of trouble.
Now their leading public official in the city of their greatest strength seems to be doing just that. The Progs could be in at least as much trouble as Burlington Telcom.
(Note One: The tax story alluded to Wednesday will run next week)
(Note Two: For what it is worth, the News Guy will be on” Vermont This Week,” on Vermont Public TV Friday at 7:30 PM, re-shown Sunday at 11:30 AM)
October 30th, 2009 at 8:27 am
Thanks for reminding folks what constitutes good journalism.
Obviously, there are many, many lessons that can be drawn from the Burlington Telecom saga: One is the proper role of boards. In both the public and private sectors, too many individual board members go through the motions of providing responsible policy oversight while all the while giving great deference to the organization’s staff.
I don’t know if that is the case in Burlington, given its free-for-all culture, but I think the City Council and the city bureaucracy, led by the Mayor, should go back and read the history of Johnson and Johnson’s Tylenol episode, when tainted pills killed people. In case Burlingtonians need a refresher on crisis management, they can follow this link: http://iml.jou.ufl.edu/projects/Fall02/Susi/tylenol.htm. I hope Burlington can have a non-vitriolic, open examination of this issue. Municipal telecommunications systems, as you write, can, and do indeed, work, and the public can certainly use alternatives to the corporate behemoths that seem to have exercised regulatory capture over too many of their supposed governmental overseers.
With that in mind, as far as David O’Brien is concerned, his reputation will be forever tainted by encouraging Vermont to swallow Verizon’s poisoned pill regarding its landline sale to FairPoint — but he has plenty of accomplices. The deal had its toxic air from the beginning, and there were several “dead canaries in the cage” to suggest that the state should have been highly suspicious of the corporate spin.