Vermont Business Magazine State Auditor Doug Hofer released a new report today that highlights potential risks to Vermont’s unique strategy to achieve universal broadband access.
The Vermont Community Broadband Board is pursuing nearly $350 million to extend high-speed Internet to every unserved address in the state. At the local level, ten Communications Union Districts (CUDs), a group of Vermont cities, are receiving the money and partnering with private telecommunications companies to deliver and service fiber to residential and business addresses.
“This effort represents one of the largest infrastructure projects in Vermont’s history,” Hofer said. “Without the massive federal funding that Vermont has received, we’re looking at incremental growth, not a comprehensive plan. It’s a once-in-a-lifetime amount of money that we really can’t afford to make a mistake with.
The report identifies 10 risks that VCBB must mitigate to increase the likelihood that every Vermonter will receive 100/100 Mbps service. The risks range from supply chain issues, to federal spending limits, contracting and management control concerns.
The Ten Dangers:
- Some CUDs face a construction funding gap in the 2024 calendar year that could halt construction midway if additional funds are not identified.
- CUDs may have difficulty obtaining necessary building materials.
- A shortage of skilled construction workers can slow down construction.
- The tension between the VCBB supporting CUDs and ensuring that any weaknesses in CUD business plans are risks that could continue and strengthen
- Relying on CUDs with varying levels of expertise and capacity could delay broadband access for some Vermonters, lead to higher costs, and create inequitable policies and access.
- Earlier, with the exception of VCBB fiber procurement, CUDs did not have partnerships for procurement of goods and services, resulting in high costs and low results.
- Statutory confidentiality provisions shield some CUD decisions from the VCBB, policymakers and member municipality residents, costing tens of millions in public funds.
- Lack of pricing definitions and requirements threatens to reduce service connections, disrupt CUD business plans and create regional inequities.
- VCBB, the firm it hires to review CUD’s business plans, has consulted for CUD and does not appear to be prohibited from consulting others, creating a conflict of interest.
- The original federal funding program’s irrevocable loan requirement was not designed for new and small telecommunications entities such as CUDs.
“I know many people, including hundreds of unpaid local volunteers, are working hard to fill broadband gaps created by large corporate telecom companies,” Hofer added. They had to create new firms, develop business plans and hire short-term contractors. Our report is intended to support their work, and that of state officials, by identifying barriers to success. It is best to address these concerns. before The next $250 million was spent on regretting unforced errors after the fact.
Background
Concluding that broadband service providers were unable to provide comprehensive, reliable, and high-quality service, the Legislature sought to expand coverage in other ways. In the year In 2015, it allowed the creation of multi-municipal Communication Union Districts (CUDs). CUDs are intended to develop, coordinate, and implement broadband expansion in their jurisdictions, especially when existing providers do not provide adequate service (or any service) to meet the needs of residents and businesses.
CUDs encourage cities to join and mobilize demand for broadband infrastructure to create economies of scale, with each member municipality demonstrating an element of public accountability due to representation on the CUD Board of Directors. There are now 10 CUDs at various stages of development, together representing 214 municipalities.
State funding to bolster CUDs’ efforts began with the advent of Covid and massive federal funding that flooded state coffers. In June 2020, $800,000 from the CARES Act was awarded to CUDs for planning activities. Separately, $12 million has been allocated to existing Internet service providers to provide broadband services to unserved and underserved areas. An additional $2 million has been provided to help some Vermonters pay to connect their homes to nearby fiber optic lines. As a result of these investments, approximately 10,000 addresses have access to high-speed broadband.
A year later, with funds from the federal Save America Plan (ARPA), the Legislature appropriated $150 million to support CUDs’ construction efforts. At the same time, they passed Act 71, which created the Vermont Community Broadband Board (VCBB) to coordinate, facilitate and accelerate implementation of the state’s universal broadband goals. VCBB has been entrusted with providing the first $150 million to CUDs.
First, CUDs were to receive pre-construction grants from the VCBB to support comprehensive studies of the infrastructure needed to create universal service in their geographic areas and develop business plans using private partnerships with Internet Service Provider (ISP) operating partners. With ongoing construction grants, CUDs will be responsible for building broadband infrastructure over the next several years according to their plans approved by the VCBB. To future-proof the investments, only networks with a capacity of at least 100 synchronous Mbps (100/100) will be funded (currently only fiberoptic lines can reliably achieve that standard).
In the year In 2022, the Legislature provided an additional $95 million to the VCBB to support Act 71 broadband goals. At least an additional $100 million and up to $250 million are expected to be provided through the Infrastructure Investment and Jobs Act (IIJA), signed into law by President Biden in November 2021. This represents an investment of more than $350 million. Among the largest infrastructure projects in Vermont history, rival rural electrification and interstate highways.
Since its inception, VCBB has provided $114.41 million in pre-construction and construction assistance to CUDs and spent an additional $9.85 million on bulk material procurement to avoid supply chain issues and reduce overall project costs. Six CUDs have started construction in their respective states.
Investigative Reporting: Investigative reporting is a tool used to inform citizens, policy makers, and government agencies about issues that deserve their attention. It is not an audit and is not conducted in accordance with generally accepted government auditing standards. Unlike audits, which contain formal recommendations, investigative reports include information relevant to the subject matter of the inquiry and potential mitigation strategies.
The full report is available here. over here.
3.21.2023 MONTPELIER, VT – State Auditor