A municipally owned Central Vermont internet provider has marked a milestone by repaying the nearly 500 local investors who funded its start-up.
ECFiber says it’s paid back the investors using money from more than $23 million dollars in lower-interest, longer-term revenue bonds. The company is also using that bond money to expand its fiber-to-home network, including internet and telephone services.
The money will enable ECFiber to complete work in six towns this year and plan further expansion in 2018.
This month the rural provider is scheduled to begin installing lines along 250 miles of roads in Pittsfield, Barnard, Pomfret, West Windsor, Thetford and Strafford.
ECFiber Governing Board Chairman Irv Thomae say in all, four phases of bonding are planned, with the first two complete. In addition to $9 million in financing received last year, the company secured another $14.5 million this spring.
The remaining two phases are planned over the next two years.
“It’s more economical to do it this way,” says Thomae of the phased approach. “If we borrowed all the money at once, we’d be paying interest on money that wasn’t working for us.”
ECFiber was created when 24 communities voted to form it on Town Meeting Day in 2008. At the time the municipalities created what was known as an ‘inter-local contract’. The initial plan was to go to the bond market for needed capital.
However, the 2009 recession made that impossible and ECFiber turned to local investors in what Thomae calls a 'bootstrap' fundraising model.
The effort raised more than $6 million from nearly 500 mostly small investors who were issued promissory notes at relatively high interest rates.
ECFiber bought back the last of those notes last week. Thomae says a significant number of the original investors chose to reinvest their money in the bonds.
The provider currently has 1,700 customers in the towns it serves.
"We’ve already got enough customers connected to cover our monthly debt service requirements under the new bonds,” says Thomae.
He says future bonding will enable ECFiber to fully serve 21 of its 24 member-towns by 2019.
2018 expansion plans will be based on which towns’ residents show the highest level of interest by signing up online for a no-obligation subscription.
The last three communities, Montpelier, Hartford and Woodstock, will require a different approach because their residents already have internet service from cable companies.
Thomae says ECFiber is fully committed to serving the three towns, “But we have to develop a different business model for those areas.”
He says there is no projected date for completing service to all 24 towns.
In 2015, at the urging of Thomae and others, the legislature allowed the formation of Communications Union Districts, made up of two or more towns. The districts are not permitted to use taxpayer money.
ECFiber transitioned to a communications union district after the legislation became law. So far, it is the only such district in Vermont.
Thomae says that’s partly because of the financial challenge of getting started.
“The big initial nut to crack is seed money. We were extremely fortunate…that a small number of people had the money to invest and they basically bet that it would work,” he says. “I think the state has yet to come to terms fully with how badly this is needed in rural parts of the state.”
In the past, Thomae has questioned why the state and federal governments have dedicated money to DSL and other internet technologies, instead of focusing on the significantly faster upload and download speeds that fiber-to-home technology can provide.
“The rural economy is not sustainable without modern, high-speed connectivity,” Thomae says.
