 Well, good evening. My name is Charles Simpson and this is Toward a Livable City. And I want to welcome Alan Mattson, who's board chair of Keep Burlington Telecom, and Megan Eplowood, who is on the board. And we're going to be talking about the future of Burlington Telecom. This is a very auspicious moment in the evolution of Burlington Telecom. It's going to be voted on by the City Council tonight. And they will be voting between two applicants. One is a multinational corporation based in Toronto, Canada. That's Ting Tukau's. And the other is a local cooperative effort called Keep Burlington Telecom Local, comprised of local members of a sort of a rump board which is waiting to take over if indeed the Council accepts their bid. So I wanted to kind of start off a little bit by noting the broader context of where cooperatives fit into the economy. And it's my position that they occur with has been market failure. So markets can fail because they don't see a profit in a certain area of business. For example, rural electrification or rural telecommunications. And it was actually quite recently that rural areas got electrification and got telephone contacts. And it really took an effort of the federal government, particularly during the New Deal, to bring electricity and to bring telephones to rural areas because they simply weren't a profitable market for private industry. The other big area is of course where markets fail. We know this in Burlington because the food retailers abandoned the city of Burlington. Fortunately there was waiting in the wings, the Onion River Co-op, which had been addressing such needs as treating workers well, offering organic food, offering food at a reasonable price. And so that co-op model was able to be expanded to move into the center of the city of Burlington from the old north end and has been thriving ever since. Of course just about to open a second branch down in the south end of Burlington and perhaps another branch up in the north end as well. So co-ops then come where the market has failed and we know markets do fail. They become monopolized, they're not subject to competitive pressures and so they don't respond to their constituents, to their clients. Just a couple of quick numbers here, there's over 30,000 co-ops. The USDA did a study along with the University of Wisconsin and found that they have more than three trillion in assets and half a trillion, half a trillion in annual revenue. And they pay over 25 million in wages. And if we add up revenue, wages and benefits, they generate $133.5 billion in value added to their communities. So this is as American as apple pie. And it's a tried and true way of addressing economic need. Now that doesn't mean that Keep Burlington Telecom is the best option but it certainly does mean that the co-op model is very American, it's very tried, it's very tested, it's been very successful. So to begin with, I'll ask our guests how they would define, what are the defining criteria of a cooperative as opposed to an equity entity? Sure. Megan, do you want to start or should I wait a little bit here at the start? I mean, I think that I'm going to begin by saying I think also there are opportunities for cooperatives often when you have a group of like-minded folk in business in different forms who may want to come in and not always in a pure failure. For example, Vermont State Employees Credit Union. The credit union world are also cooperatives. And there we had, I think, a large group of employees who realized that not only was it necessarily a failure but they could also bring their resources together to benefit their own group as opposed to working with an outside party and they see opportunities with that. And I think that producer co-ops like Cabot, very similar as well. I think there's, you know, buyers co-ops, some of the hardware stores, for example, have come together. And I think that what defines them all together, which was, I think your question, one becomes it's really a democratic control or democratic, one member, one vote, usually creating a board of directors who then hires the management to manage it. And that creates a governance level, which again is at a local or within the group sort of mentality. And I don't know, Megan, if you think about, have some other thoughts as to where you go. Why? Well, that's maintaining the equity within the community. You know, a private corporation is formed around private ownership in order to, at a local level, you know, you could keep it local, but once it grows and starts to make a lot of profits, you know, generally there's a natural evolution where ownership is sold to other ownership and then ultimately, if it goes public, of course, which is what we have with two cows, we have shareholders that are investing in it essentially for a rate of return. So the co-op is the ultimate model of keeping equity local. And I don't imagine that you can look forward to golden parachutes as if you ever leave the board, if you take over, why is that? Yeah, we have a volunteer board. Volunteer board. And as a result, and we have an elected board, as Alan mentioned. And so, in the case of Keep BT Local right now, as you said, we have an acquisition board. We are a small board. And we've kept it that way for a lot of reasons. It's been an effective board with some great skill represented by the different members of the board. But when we hopefully acquire Brilliant telecom, we would change the board through elections to add more skills. So the fact that you're not paid and you are volunteers would suggest that you're motivated by a vision of community and you're not taking money off the table that could go to build a company and could go to consumer benefits, one more thing. I know several of you, or board members, have had a... Line one. Line one? Okay, well, we are taking calls. Our number is 862-3966, but we'll take our first call. Hello, you're on the air. Just one question. I have nothing against the telecom concept. And you mentioned... Or not telecom concept, I'm sorry. The co-op concept. You mentioned city market and how successful it was. But you also failed to mention that the city of Burlington propped up city market at the beginning. And a lot of those facts and details are hidden. We don't know if taxpayer money was used to prop up city market. Nobody has that information. That's all hidden somewhere. We never found that out. But the only way that city market made it was by Burlington propping it up. Well, the same thing has to happen if the co-op people take over Burlington telecom. Well, thank you. Let's play with that question. So, you know, to respond to, I think, the caller's initial concern about city market, I certainly can't speak. I mean, I have been on the board of city market. I came in after the store went downtown. But I really don't know exactly where the propping up would have been. There was an open process about what, you know, the city would expect back in return from city market. And what I've understood over the years is actually that city market has returned to the city beyond what the original agreement was. You know, and I think that, so I can't get too deep. I don't know really what to say more about that. But I think something key in what we're doing here is that if we succeed, this will be a cooperative that is not owned by the city government. There won't be additional taxpayer liability at all for what we're doing. We will be literally a cooperative, which is a type of corporation that is separate from the city. And we will have no arrangement other than the city has the option whether or not they want to keep an equity stake in our enterprise. But other than that, we will have no further, the city will have no further potential claim or no further obligation once they close the sale. And of course you're not a non-profit. So it's interesting, cooperatives are really managed in a fashion such that the, let's call it the profit or the excess, instead of being returned to shareholders is within the cooperative either, you know, mostly in our case will be reinvested in additional capital. Basically updating equipment, making sure that we build out the rest of Burlington as a key focus as well as have the potential if the business case makes sense to extend the service range for Burlington, you know, Burlington Telecom beyond the borders and become much more than just Burlington Telecom but really become a more regional player. But that needs to of course pass, you know, business hurdles. And the, you know, the idea that we are not for profit, we do reinvest everything or the potential could be for patronage refunds in our situation that would be down the road because it's important that we invest first at this point. But it does, you know, it does not mean that we're not a highly competitive, you know, industry, business in a highly competitive industry. And that's the way we work. We're not out there, you know, simply, you know, just to tread water. We are there to really extend the service and build the tech economy within Burlington in the area. Yeah, absolutely. I think that we feel very strongly that a cooperative can be a highly competitive business. It can be an innovative business. And one of the interesting strengths of our particular community is how many innovators we have. I think it's one of the most innovative communities that I have ever lived in. I've been here 17 years and I'm continually amazed at the number of people that have talent and innovation to bring to the table. So I don't believe we need to outsource that, right? It's better to keep our ideas local, use local governance, invest our own ideas, bring together tech leaders, for example, which was what we've been working on in order to get them behind not only how we manage and run it, but also how we may ultimately invest in the tech economy. So all of those things come together in a great innovative package. I think everybody, including the city government, agree that the future of Burlington is based on small entrepreneurship, on innovation, on new corporations often tied to broadband access, cheap, efficient telecommunications. And I know that this has been an objective of Burlington telecom as long as it's been municipally owned. And I read from your perspective that that will be, you'll continue to do that. Is there any way you can differentiate your investment or your mission in terms of growing a local economy from that of Ting to cows? Yeah, I've been researching that because what we see, of course, is that investment can come in different forms. It can be in kind. It can be giving advertising to nonprofits. This is good. But what we see is that we can work with our local leadership to actually devise how we invest. Just because we are local, we know who the local players are. For example, the Burlington Tech Center. This is where we need to train youth for the future of our tech economy. You always need a lot of new people. Every tech business in this community needs well-trained workers. And so our cooperative is not just about making sure everyone's connected. It's also about making sure that we can invest in youth, for example, the Tech Center and innovative business. So we're hardwired into this community. We're not just coming in with a few small investments. Now a number of people have brought up the sort of the issue of the city already having put $16.9 million into what appeared at that point to be a black hole that the Burlington Telecom was struggling. And perhaps this relates to the caller's question, which is what's the appropriate role of city government in terms of supporting a broad effort at stimulating the local economy? Well, it turns out that that stimulation did pay off. Now Burlington Telecom is very successful. I heard the leader of that organization say that they have increased their number of subscribers by 37% over one year. So this is a phenomenal growth rate. So I guess my question is we know that private equity entities want to continue to grow to increase their cash flow, but how would you reach every subscriber or how would you make every taxpayer a potential subscriber in the city of Burlington? Because I think that's what they want the option for in return for the tax money that they realize has already been invested. Yeah, I think we couldn't agree more. The city right now is approximately 80% passed by Burlington Telecom up until the point that they ran into default with Citibank, they had been building out and at that point I think they had to scale back and step back from that. The first thing I'd say is that for the 80% of folks who are passed by Burlington Telecom within that group everyone has the opportunity if we end up being successful to become a member owner and to use the service. We think with the fiber being what is what's passing the residents and the businesses in town that it provides a superior service to the alternatives and I think that we should be really working to provide the level of service and product that people are looking for so that more people again would begin to take that option. Again within that 80% even if folks don't take the option of a competitive service from Burlington Telecom they should be benefitting from the fact that the competition has been financed by the citizens of Burlington through the prices that they're paying with some of the other providers. And then with the other 20% that aren't currently passed I think that we have that as a strategic goal that is at the highest level for us to pass those other 20% and I think that Burlington Telecom as it exists right now has that same set of goals. They have a strategic plan that hits almost all the rest of the city with fiber within the next three to five years. A build out plan that is well thought out and has been developed at a time when they've had this growth that you mentioned Charles so that they're now in a position where they can fund that kind of investment and as that builds out the rest of the city will have that opportunity and I think that given the local control and the local management, I mean so the local hiring and local governance I think that that will continue to be a strategic goal of keeping all of the revenue that can be reinvested being reinvested into the community in particular and going further beyond Burlington after that but I think that's how we get to reaching everybody and that's what some of the benefits are from people either opting to use Burlington Telecom or certainly having it as a competitive provider. Yeah, just to say BT's goals now are to reach 16,000 subscribers. That's a lot of subscribers. It's a pretty large percentage. It would be more than double where they are now just about 72 to 7,500. We certainly hope to achieve that if we were owners and that would help to alleviate some of the concerns that not a majority of the city would be part of this. So we can't look at it just at where we are now in this discussion. That's at 7,000 subscribers roughly now. We have to project out and take a look at what that would look like in the future and if we achieve 16,000 subscribers we would be covering a great majority of the city and benefiting them as a result. And of course you are now servicing the municipality itself and the school district. So those are major assuming that the rates are attractive to those entities. That's a benefit that goes to every taxpayer. Yeah, I think right now every municipality or city have to make some form of competitive bidding for their services and that's required on a regular basis and they can't just say we're going to go with Burlington Telecom because they're in town and local. But I know the schools just went through a bidding process and took on all the services that they can provide to the schools so they are already providing competitive pricing for the schools. And I think the city has certainly a contract with Burlington Telecom and is looking to extend that right now. We expect that that would be part of the overall transaction and I think that my understanding is that Burlington Telecom and the city are really looking to create a contract that looks like a partnership between the two and so that will be for anyone who comes in but it's going to be something that is a focus for the telecom because the city government, my guess is probably the largest client for Burlington Telecom. How about the hospitals? At this point UVM Medical Center is not a client of Burlington Telecom from what I understand. I think that would be a great opportunity I think that I've seen that the city has really worked closely in discussions with the hospitals but I don't know that they've gotten really to the point of having any service and again, the university itself is interesting. They're almost their own cable and not cable but ISP so their own internet and fiber provider because they host a part of the internet called Internet2 which provides academic services so the universities, while probably the university itself will probably not end up being served by Burlington Telecom in too many scenarios, they could really partner well because they have their students distributed across the city and I think if there was a good partnership in the fiber backbone for the students and perhaps some satellite offices, both the university and the hospitals could are real potential clients to come in. I've seen certainly ads that BT has put in the paper to attract students to get them to sign up. We're in a public television studio here and public television is supported by cable companies and how would BT give us support if I could do some special pleading here? That's fine. We have been following that closely for years of course. I come from a family that supports this kind of work on a daily basis and the understanding is that if we were to acquire Burlington Telecom that we would continue to support all of the public educational and governmental access groups and help perhaps, I mean again these would come down to the decisions of new boards but the idea would be as cable continues to decline that would mean that facilities just like this would be potentially having to fight more and more for their revenue and as a board we see that that's something we don't want to see happen and that we want to support these vital facilities for our community. We have a phone call so let's take that. Hello, you're in the air. Yes, thanks for taking my second call. I've got away from the feedback on the TV now and maybe I can actually hear what I'm trying to say. My second question is what is the status of the loan that the keep BTL local people will need? Is it 8% now? Is it 14%? Is it 12%? And where have we landed at this point for the final proposal? The final loan is going to be the same loan that we've had in place through our entire proposal period. We had worked and we had gotten to an understanding that we thought we could put in place a loan that had a lower fixed rate of 8% and then had incentive payments based on the value of Burlington Telecom going forward. But as we worked on that transaction with Maine Fiber, our strategic financing partner, we really only got to a situation where while it was sort of structured like that, it really was going to be a 14% loan in almost all circumstances and our approach is we're trying to make our proposal as straightforward as possible and unfortunately we weren't able to achieve that and so we have the same proposal we've had all summer which is in our, we have the commitment letters and the letters of understanding and letter of agreement and term sheets and everything in place. We just said, you know, this proposal is really the same as what's already in existence, we shouldn't change it. So that's where we are. You talked about it as a bridge loan in some of your literature. So what that would mean is we structured it while it's a 10-year payback loan. We structured it with Maine Fiber. We said, you know, we're an acquisition group. You're pricing us like an acquisition group, not necessarily, you know, it's like a homeowner and a car owner, you pay different rates for different types of purchases that you make and acquisition financing is, you know, at best difficult to come across and work with and finding a strategic partner who was putting up capital for us was very powerful but we also have said to them, you know, we understand this expense and if we have a couple years of operating experience behind us, our interest rate should, you know, fall off a cliff at that point and we want to refinance. And so we have the ability, after year three, to prepay the loan and, you know, that's if we are, you know, not even getting close, Megan, to the 16,000, you know, line that would take us there but just if we're really, you know, managing the company and maintaining the business in Burlington, we would have the ability to refinance a loan basically at year three and Main Fiber, while they would like to be invested in this for 10 years, understand our position and have agreed to that. So that's where the term bridge comes in. So without penalties or? Yeah, at that point it would be, you know, straight 14% payoff and, you know, we would, for three years and we would move on and they might move on as well, although one thing about Main Fiber is that we had a lot of expertise in building out Fiber networks and that's another reason that we have them as a strategic partner. I think they well understand how to build out Fiber and that expansion expertise, along with understanding the value of expansion was going to, and we'll make them a true valued partner as we go deeper into Burlington as well as beyond for expertise and financing. That's a color for that question. Let me ask one more hard question, taking the role of Mayor Weinberger, who at his October 10th press conference indicated that your proposal, should it be accepted, would not get through the Public Utilities Board and that it just would not measure up. Can you respond to that? Well, we've carefully investigated all aspects of that concern as part of the Vice Chair's part. Andy Matrol, our Vice Chair, is a very expert telecom lawyer. We've also spoken to other experts who work very closely with PUC and the criteria for PUC really would not in any way exclude our bid, especially if we were to become owners of an act, which we would be in this case, a telecom, which is a highly valued asset in our community that is operating very well at this point. So under the criteria of ownership and responsibility for an existing entity, it's our understanding that this would not be a problem. And I think there's two key variables that I think the Mayor touched upon at that point. One was potential management, how would they look at management, and the second one I think was related to financing with the modeling and the pro forma work we've done, which is far more conservative than even the strategic plan put forward by Burlington Telecom, our financing works at these levels and we think that would be a fairly straightforward discussion to have with the PUC. And on the management front, I think one thing that some folks need to, or have maybe not been putting quite the correct understanding on, and Megan touched upon, this is an operating entity that has a strong management team that has recently received its additional certificates of public good in the past year, and so it's well understood, the business is well understood by the PUC, and our view is that we want to keep as much of the existing management place in place as possible, and we've built that into our modeling to do that. It's a good closer. I've just been indicated that we have run out of time. We could talk a lot more, but this is wonderful and I hope our... Charles, thank you. Thank our guests, thank our caller, and hope you all come to the City Council meeting tonight. I think we're off. Thank you, Charles. Thank you. Bye. Hey, thank you.