The state set up Communications Union Districts, or CUDs, to build out broadband where commercial companies would never go.
The plan was put together before federal COVID-19 relief money, as well as infrastructure grants, were distributed to Vermont — and that federal money has gone a long way to help the state reach its goal of connecting every address with high-speed internet service.
But as one federal program ends, and a new one ramps up, some CUDs are running into financial challenges.
Deerfield Valley Fiber, which serves 24 towns in southeastern Vermont, asked the Vermont Community Broadband Board(VCBB) this week to approve changes to its business plan due to “unforeseen budgetary overages,” according to a financial report presented to the VCBB.
Deerfield Valley Fiber said it’s been more expensive than anticipated connecting fiber to the poles.
They also reported a “accidental omission of labor items,” which forced the CUD to ask the board to allow it to scale back on the broadband buildout that was originally approved using $21.9 million in American Rescue Plan Act, or ARPA, funding.
“We, and all CUDs, have learned a lot in the two years since our initial business model was written in June 2022,” Gabby Ciuffreda, Deerfield Valley Fiber executive director, wrote in an email. “That model included several cost assumptions based on the best information available at that time. When revising our business model, we realized that we did not capture all costs as completely as we could have. The new model includes more accurate labor costs for the installation of certain equipment to connect to customer locations.”
"When revising our business model, we realized that we did not capture all costs as completely as we could have. The new model includes more accurate labor costs for the installation of certain equipment to connect to customer locations.”Gabby Ciuffreda - Deerfield Valley Fiber executive director
The CUD is also experiencing some competition from commercial companies that are now starting to extend their own fiber systems into the region.
Deerfield Valley Fiber said it wanted to reduce the number of miles of broadband fiber it would install by about 65% under the current phased buildout.
The Vermont Community Broadband Board, which oversees the distribution of federal funding and helps the largely volunteer-run CUDs, met in executive session for more than an hour with Deerfield Valley officials Monday, but failed to come up with an alternative plan.
“DVFiber remains committed to universal service to all on-grid addresses in our District. We will work toward that goal as fast as our funding resources enable us to proceed,” Ciuffreda wrote. “This requested grant amendment is intended to impact the timing and funding used to construct certain phases of the project. Thus we are adjusting our business strategy to respond to the competitive environment and the working realities we are experiencing.”
Deerfield Valley’s financial challenges come as their ARPA money is running out and a new federal program, the Broadband Equity Access and Deployment, or BEAD program, begins.
Deerfield Valley Fiber is seeking about $18 million in BEAD funding.
"I think you can expect to see this," said VCBB Executive Director Christine Hallquist. "We're the only state in the union that's decided to take this challenge on. Don't be surprised that this is a difficult challenge. We've set the bar high in Vermont, really high. And it's our job to make it happen. Other states have considered this impossible"
Vermont is getting about $229 million in BEAD money, but that funding will be extremely competitive, as CUDs, along with for-profit broadband companies, can all apply for the money.
In the Deerfield Valley Fiber financial analysis that was presented to the VCBB this week, the infrastructure expert wrote that if Deerfield does not get its BEAD funding, “it will have to make significant revisions to the business plan —potentially jeopardizing the plan’s financial viability.”
“These are risky business cases. That’s why they exist,” Alexei Monsarrat, VCBB rural broadband technical assistance specialist, said about the challenges facing CUDs. “The private sector would not do it. And the CUDs are always working to manage the risk involved in trying to serve locations that don’t have the kind of density that make an easy commercial case.”
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