The shaky position of Burlington’s city-owned telecommunications company, Burlington Telecom, has been publicly apparent for quite some time now, but recent events have powerfully highlighted its uncertain future. It’s been in negotiations with its creditor, Citi Capital, to restructure its debt load for months, but, according to Seven Days, those talks have recently broken down and Citi Capital is demanding the either the repossession of BT’s infrastructure or the repayment of the lease from Burlington’s general fund. As a BT customer, this definitely has me concerned since I have little desire to find myself suddenly sans Internet as a result of the crisis.
As such, it is vitally important to find a just resolution to this problem, but I’ve been unimpressed by the ideas that have been floated thus far. A straight-up bailout from a City or State funding source seems to be (and should be) off the table since it would be profoundly unjust to the taxpayers who don’t utilize BT’s services. Similarly, selling the service to a private company with the cash on hand to quickly resolve the debt issue is equally problematic. Substantial public resources have gone into building Burlington Telecom, and to turn over the value embedded in that investment to a private concern while in a state of crisis (and thus likely not receiving a fair-market price) would be equally irresponsible and as much a theft from the taxpayers as a bailout. Finally, simply letting it fail due to what is essentially an artificial scarcity of capital would again be a disservice to the taxpayers and citizens of Burlington.
However, I believe there’s another route out of the BT crisis that has not been sufficiently explored: mutualization. By selling the service to its users in the form of a consumer co-operative (similar to Vermont Electric Co-op), BT could continue serving them while, at the same time, it would eliminate the risk and burden placed on non-BT subscribing taxpayers. Furthermore, selling Burlington Telecom to the “Burlington Telecom Co-op” would open new sources of capital to BT that would allow it to lessen its dependence on out-of-state financing.
The first source of capital would be member equity; each subscriber would be required to hold an ownership stake in BT and, depending on the number of subscribers, this could easily put several million dollars into its coffers right off the bat to get itself back on track with Citi and retire some of its out-of-state debt. Second, it could sell bonds to its members. Paying a greater rate of interest than most individuals can find for their savings while still keeping them lower than those paid to Citi, such bonds would create three benefits. First, they would allow BT supporters to put their money where their mouths are and pony up the capital necessary to support BT’s solvency and success. Second, they would allow for the retirement of a substantial portion of BT’s outstanding debt with debt at a lower interest rate, thus reducing the financial pressure on the company. Finally, such bonds would mean that the interest payments would accrue to BT’s stakeholders in Burlington and be fed back into our local economy rather than feeding an out-of-state banking conglomerate that has sucked up billions in Federal bailout money.
Additionally, the new co-op could also potentially obtain capital from a wide variety of sources that exist specifically to assist co-operatives. Indeed, one of seven guiding principles of the co-operative movement is “cooperation among co-operatives.” The mutualization of Burlington Telecom would be an excellent opportunity for Vermont’s co-operative movement to publicly honor that principle by purchasing BT bonds. Our state has more food co-ops per capita than anywhere else in the country, many of Vermont’s credit unions have assets in the hundreds of millions, and utility co-ops are omnipresent. If those institutions act according to their principles and step forward to invest in a fellow fledgling co-operative institution, the benefits would accrue to both their institutions and the people of Burlington. While the details of such a plan must still be worked out, I sincerely believe BT’s mutualization is the only just path forward; it deserves serious public consideration before the taxpayers are ripped off, one way or the other, in a corrupt and/or exploitative resolution of the Burlington Telecom crisis.