Troubled Burlington Telecom In Search Of New Investors

12/08/10 5:50PM By John Dillon
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(Host) Financially troubled Burlington Telecom hopes to find new investors in order to remain in business.

But first, the telecommunications network has to figure out how to return equipment - including 186 miles of fiber optic cable - to its lenders.

VPR's John Dillon has more:

(Dillon) Burlington's attempt to provide a publicly owned, state-of-the-art telecommunications network is now mired in debt and legal troubles.

Burlington lawyer William Ellis gave a status report to the Public Service Board. Ellis said the current challenge is figuring out how to return equipment now that a $33 million lease has been terminated.

The lease is held by CitiCapital, and Ellis told the board the finance company wants to repossess equipment because Burlington failed to make payments.

(Ellis) "CitiCapital has informed the city that it will be contacting the city about arranging an initial inventory assessment of the equipment and to provide instructions concerning the return of the equipment."

(Dillon) The finance company now owns 186 miles of cable around Burlington, and wants it back. But Ellis said he believed CitiCapital would take an equivalent amount of cable in payment, rather than digging up the fiber network cable that's already installed. But Ellis told the board that CitiCapital has not yet agreed to those terms.

The lawyer said the breakdown in negotiations came when CitiCapital wanted Burlington Telecom to use other city revenues to make the lease payments. But that's prohibited under both the terms of the city charter and the state license for Burlington Telecom.

(Ellis) "They just couldn't understand that we were limited to BT revenues and we could not use non-BT revenues to make the payments. And for whatever reason they thought that - I think they believed the money would come from somewhere if they pushed, and there's no place for the money to come from."

(Dillon) But Public Service Board member John Burke reminded Ellis that Burlington Telecom had already used $17 million in city funds for its operations, in violation of a board order. Burke warned that the board would demand openness in the city's future financial arrangements.

(Burke) "Here you got $17 million of taxpayers' money that's tied up and the threshold is going to be awfully high here, you should be aware of that."

(Dillon) The $17 million in city funds used to shore up Burlington telecom is also an issue for the Douglas Administration.

David O'Brien is the commissioner of Public Service, and he represents ratepayers in utility issues.

(O'Brien) "If this was just about a $33 million lease between CitiCapital and the city of Burlington, it would be much less of an event. It's the fact that you know that people had $17 million of their hard-earned money stolen from them in broad daylight. That's what wrong.

(Dillon) But O'Brien said a state audit of Burlington Telecom did not uncover illegal activity, just financial sloppiness. And Burlington lawyer William Ellis told the board that the ultimate goal is to repay that money.

Ellis said the city is looking for new financial partners in order to buy new equipment and continue phone, Internet and cable TV service to subscribers. He predicted that service would be interrupted for several hours over several days during the switchover.

For VPR News, I'm John Dillon in Montpelier.



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