VTel and its $116 million Vt. promise: five years on, wireless push leaves many unconnected

In November 2010, Cavendish Town Manager Richard Svec sent a letter of “enthusiastic support” on behalf of VTel Wireless to Washington. The letter backed VTel’s application for federal stimulus money to build a fiber-optic telecommunications system in Springfield and a wireless broadband system throughout the state.
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VTel and Its $116 Million Vt. Promise: Five Years on, Wireless Push Leaves Many Unconnected VTel vice-president Diane Guite speaks at a ribbon-cutting ceremony in Hardwick. Her father (from right), VTel president Michel Guite, Rep. Peter Welch, D-Vt., Gov. Peter Shumlin and Sen. Patrick Leahy, D-Vt., look on. VTDigger -- Hilary NilesVTel president Michel Guite, right, testifies before the Vermont House Commerce Committee in January 2013. VTDigger — Nat RudarakanchanaVTel president Michel Guite addresses a roundtable of telecommunications executives and press assembled by Gov. Peter Shumlin in Montpelier in November 2013. VTDigger -- Hilary NilesSen. Bernie Sanders, right, talks to an audiece at Vermont Technical College; Jonathan Adelstein is seated in the center; Michel Guite is seated on the right. VTDigger -- Anne Galloway By John Lippman Valle y News Business Writer Sunday, August 2, 2015 (Published in print: Sunday, August 2, 2015) Email Print Springfield, Vt. — In November 2010, Cavendish Town Manager Richard Svec sent a letter of “enthusiastic support” on behalf of VTel Wireless to Washington. The letter backed VTel’s application for federal stimulus money to build a fiber-optic telecommunications system in Springfield and a wireless broadband system throughout the state. Svec was excited about the prospect of his Windsor County town’s 1,367 residents, many of whom still relied upon dial-up service, finally being able to get high-speed Internet connections that would enable them to work from home, watch movies and TV shows, download music and enjoy easy and fast online access. Five years later, Svec is still waiting. He said he hasn’t heard from anyone at VTel, whose offices are only 11 miles away, since a company engineer came to town several years ago to inspect locations to erect an antenna. “We fully supported it because there was a need in our town,” said Svec, who backed the project to the National Telecommunications and Information Agency after he was solicited for support by VTel officials. “I’m a little bit disappointed.” So is Margo Caulfield, who runs Cavendish Connects, a community news website that last fall surveyed residents about the availability and reliability of telecommunications services in the area. Of the 97 responses, six reported using VTel’s wireless broadband service, which received mixed reviews on reliability. Caulfield said a handful of Cavendish homes have been able to receive wireless broadband service from a VTel tower on Mount Ascutney, but it provides spotty coverage. The company recently informed her that another transmission site would be activated in nearby Ludlow. Caulfield also noticed that a pole with VTel transmission equipment recently has been erected at the intersection of Cavendish Gulf Road and Whites Hill Road, although it’s not clear whether it has been activated. “It barely clears the treetops,” Caulfield said. 265 Wireless Customers In interviews with residents and officials in more than a dozen towns across the state — places where VTel, on its website, says its wireless broadband service is available to “select homes and businesses” — all reported that they are unaware of anyone using it. The appearance of few users is confirmed by recent VTel state regulatory filings reporting subscriber numbers for its wireless broadband service. VTel was awarded more than $116 million in federal financing in 2010 made possible by the American Recovery and Reinvestment Act. It took shape in the form of an $81.7 million broadband stimulus grant and a $35.2 million government-backed loan to build a fiber-optic-to-the-home broadband network in the Springfield area and a wireless broadband system to reach Vermont’s 33,165 unserved households. While VTel has built the fiber-optic network in its core service area, n early five years later the company reported a total of only 265 wireless users statewide for the year ended Dec. 31, 2014, according to a June 29, 2015, filing with Vermont’s Department of Public Service. Jim Porter, director of the department’s Telecommunications Division, said that as of June 2, VTel informed him it had five remaining transmitter sites to be permitted, of which three are being contested by towns. The Department of Public Service has little regulatory authority over VTel’s wireless broadband project — the certificates of public good are issued by the quasi-judicial Public Service Board — although people regularly contact the department to complain about the lack of Internet service in their community, according to Porter. “I’ve heard from some, less than a handful, who are subscribers to the service and love it,” Porter said in an interview shortly before VTel filed its annual report disclosing its wireless broadband service subscribers figures. “I hear from two a day saying: ‘When is it coming to my town?’ ” Porter called VTel “a small operation,” and said, “I do believe they are working insanely around the clock to get it finished” before the federal money stops flowing in September. Nonetheless, despite being touted as bringing high-speed Internet service to every household and business in Vermont, VTel’s wireless broadband project has gotten little traction operationally. “In wireless nothing is easy,” Michel Guite, president of VTel, said in an email when asked about his company’s wireless broadband project in Vermont. “Several sites remain a challenge,” he wrote in reference to locations around the state where VTel has been installing antenna equipment to transmit and receive wireless broadband signals through a network of telecommunications towers across the state. “We are turning up new sites each week,” he wrote. “Will complete by Sept. 2015.” Later, when queried via email for an update on the number of users, Guite said the 265 users are “beta testers,” even though users interviewed by the Valley News said they are paying for the service and, Guite added, “we’ll probably begin service in early 2016.” Guite, formerly a top-ranked telecommunications analyst on Wall Street who lives in Greenwich, Conn., bought the Springfield telephone company in 1994. He did not respond to requests for an interview and did not reply in detail to a list of questions emailed to him about the company’s wireless broadband project. Guite, however, told Vermont Public Radio last month that VTel’s wireless broadband project would be completed by the Sept. 30 funding cutoff deadline under the terms of the federal government’s Rural Utilities Service stimulus award. He said the network would cover 97 percent of the state, although Guite acknowledged long-standing criticisms that the network’s previously claimed reach was overstated. “It doesn’t go as far as expectations were some years ago. The signals simply don’t carry through foliage like people thought they might. The signals simply don’t go around buildings like we thought they might,” Guite told VPR. In an email to th e Valley News last week, Guite said that, with the exception of the outstanding tower sites, the components of VTel’s plan to bring high-speed Internet access to the state are virtually complete, including : ■ A 1,700-mile project, financed by the National Telecommunications and Information Administration, to build a fiber-optic network connecting schools, colleges, public safety facilities, health care facilities and telecommunications providers (“performing ahead of expectations,” Guite said). ■ A n Internet “lifeline” project targeted at serving low-income households with basic service (“on time, on budget”). ■ T he fiber-to-the-home project to VTel’s telephone customers in southern Vermont (“pretty much exactly as specified”). ■ A new data center. Guite wrote that the statewide wireless broadband project is “in final construction days, on time and on budget.” He called it a “great honor” for VTel to have received the federal financing “for these integrated technologies” and expressed hope that when the government reviews its program to pay for building broadband infrastructure in rural communities, “our Vermont projects will be considered a success.” Lofty Goals Vermont’s topography presents a challenge to the Information Age. The state’s small towns and dispersed homes, tucked in valleys and along back roads that wind through hilly terrain, have made deploying the infrastructure economically unattractive to the telephone and cable companies that typically provide high-speed Internet service. That’s because the cost to do so is seen as prohibitive. State telecommunications officials told lawmakers in hearings last year that it could cost $1 billion to bring fiber optics to all of the state’s 295,000 resident and business addresses. About 71 percent of those addresses have access to the Internet through their provider for 20 megabits per second of download speed and 3 Mbps for upload speed, while 29 percent have access to speeds that are no faster than 4 Mbps of download, according to the Department of Public Service. The Federal Communications Commission, citing the fact that rural parts of the country are not keeping up with consumer demand and Internet technology, earlier this year upgraded its benchmark speeds to 25 Mbps for downloading and 3 Mbps for uploading. Vermont fore sees a future calling for even higher benchmarks: A 2014 law passed in Montpelier calls for bringing Internet service speeds of 100 Mbps up and down to every address in the state by 2024, although it didn’t detail how that mandate would be accomplished or how it would be paid for. “This goal will require aggressive fiber deployment to much of the state. … The main obstacle Vermont faces in reaching this goal is cost. The cost of bringing service to rural areas may outpace the revenues providers can expect to receive from selling broadband service,” according to the Vermont Telecommunications Plan crafted by the Department of Public Service in 2014. A solution to Vermont’s Internet access problem — at least in the near to middle term — appeared to be at hand at the turn of the decade. In response to the Great Recession, the federal government planned to pump money back into the economy and create jobs through an economic stimulus program that would fund “shovel-ready” infrastructure projects around the country. The American Recovery and Reinvestment Act of 2009 provided $787 billion — later increased to $831 billion — toward infrastructure, energy, health and education projects. Of that amount, $2.5 billion was allocated to the U.S. Department of Agriculture’s Rural Utilities Service Broadband Initiatives Program to expand broadband access in rural parts of the country. The RUS then awarded the money, leveraging the amount with $1.19 billion in loans on top of the grants, to 320 projects totaling more than $3.5 billion. Of those 320 projects, 297 were for telecommunications infrastructure. Not all broadband projects came to fruition. Either by failing to meet RUS oversight provisions, or realizing themselves that they were incapable of meeting the goals outlined in their applications for stimulus funds, 42 awards totaling nearly $325 million were rescinded, the RUS says on its website. An agency spokeswoman said none of the rescinded projects were in New England. Initially the RUS plan envisioned a rapid rollout of the broadband projects within three years, but the reality of building the infrastructure over widespread rural areas quickly became apparent, and the deadline for recipients to show that their projects were substantially completed was extended two years to the summer of 2015. The deadline for recipients to submit invoices for stimulus expenditures was June 30, and the RUS spokeswoman said it will have the remaining funds “out the door” by Sept. 30. Any remaining money will be returned to the U.S. Treasury. As of March 30, the most recent update, the RUS reports that 68 of the 255 active broadband projects representing $637.7 million in funding were “fully operational and complete,” while 180 projects representing $2.4 billion in funding were “partially operational,” meaning the recipient “is providing service to some of its proposed service territory.” One of those 180 projects was VTel’s. The Plan The application for stimulus funds that VTel submitted to the Rural Utilities Service outlined an ambitious two-part plan to bring high-speed Internet access to Vermont’s every nook and cranny. The backbone would be what VTel dubbed Wireless Open World, or WOW, utilizing wireless licenses covering the state. The company said in its funding application it had spent $13 million acquiring the licenses since the 1990s through Federal Communications Commission and private spectrum auctions and in bankruptcy proceedings. VTel said the licenses were for radio spectrum that would cover homes in “all of the 33,165 unserved households in Vermont” that together represented 114,110 people, or about 18 percent of Vermont’s population. Another proposed element would cover 714 “community anchors,” such as schools, hospitals and municipal offices, with a “middle-mile” fiber-optic line, VTel said. The wireless broadband part of the plan called for what is called “fourth generation/long-term evolution mobile broadband technology,” or 4G/LTE for short, over a network of 119 towers around the state to reach locations that either had poor Internet service or no service at all. VTel said the 4G/LTE network is capable of delivering a download speed of 10-15 Mbps and has a theoretical maximum of 100 Mbps — the goal the state has set to reach by 2024. “Our 700 MHz wireless licenses, in combination with our other FCC licenses, are unusually cost-effective, enabling WOW to reach every unserved home, business and community anchor, including the rolling timberlands of Vermont’s Northeast Kingdom, and in the notoriously unserved contiguous rural towns and villages with some 18,000 homes from Brookfield to Bernard and Windsor,” VTel said in its application for federal stimulus funding. The speed of the Internet service, VTel added, “to many rural customers should be significantly higher than those experienced by customers in most urban markets.” Securing the Money In 2009, the first time VTel applied for federal stimulus dollars, the company, along with eight of nine proposals from Vermont, lost out on any award. VTel’s initial plan requested about $56.6 million, principally to finance a $70 million project to extend fiber-optic line to the telephone company’s existing customers in the Springfield area. It also sought to build a smaller-scale wireless broadband system for the southern portion of Vermont. Undeterred, VTel tried again. In the second round of stimulus awards, VTel supersized its plan and sought more than $116 million in stimulus funding to build the fiber-to-the-home system in the Springfield area and the wireless broadband system around the state. As part of the wireless broadband project, VTel would contribute spectrum licenses, which it valued at $30 million in equity. Over a 10-year period , VTel paid a total of $13 million for spectrum licenses, according to its stimulus funding application, but it’s not clear whether that constituted the entire contribution. In addition, it was working with Green Mountain Power for the utility to use VTel’s planned cell network to transmit back to GMP data from its base of “smart meters” it was installing among its customers. That deal would pay $6 million to VTel, eventually bringing the total value of the project to $152 million in financing and assets. The application was submitted on March 29, 2010, and its approval was announced less than five months later on Aug. 4, 2010, by the Vermont congressional delegation of U.S. Sens. Patrick Leahy and Bernie Sanders and U.S. Rep. Peter Welch, who proclaimed in a joint news release that the stimulus funding would bring high-speed Internet access to “every one of Vermont’s 114,000 unserved residents, making Vermont the first state in America with universal Internet to everyone.” Guite himself told the Valley News that the stimulus award, granted five years ago this week, would mean Vermont will be “the first state in America where absolutely everybody gets coverage.” The Rollout There was concern from the start that VTel’s wireless broadband proposal was an overly ambitious undertaking for a company with only 57 employees and no experience in executing large infrastructure projects. The company prides itself on its friendly customer service: Calls to its Springfield headquarters are answered by a live receptionist after the first ring. It wasn’t until April 2014 that VTel announced its first 23 wireless sites had been “on-air” since the previous January and undergoing testing for commercial launch in the coming spring. The sites included not only transmission towers but other structures capable of being fitted with antenna equipment, such as church steeples and farm silos. The company said 40 other sites were under construction and would be ready for activation by June 30, 2014, and that by “mid-2015, VTel Wireless expects to cover 95 percent of Vermont with 180 sites.” As of this June, Vermont’s Public Service Board had issued 126 certificates of public good for VTel to operate transmitter sites around the state, although that may not represent VTel’s complete list of sites. At some locations, a certificate of public good is not required if, for example, VTel places its antenna on a pre-existing cell tower. VTel has reported shifting information over time about the number of transmission sites, ranging from 119 to more than 200. In a July 28 email, Guite said the company has 135 towers in place. Cavendish’s experience of waiting for VTel is similar to that reported by people in Marlboro, 60 miles south. “They are making promises but nothing has happened yet. They actually sent out glossy fliers in March. I’m asked almost daily, ‘When are we going to get it?’ ” said Forrest Holzapfel, town manager of Marlboro, population of 1,078. Officials in several towns expressed surprise when informed that VTel lists its service as available in their area. “I haven’t seen (VTel) anywhere,” said Bob Butler, an information technology consultant who helps Waterbury, a town of 5,000 off Interstate 89, with its IT needs. “This is something I would know about if there was even a modicum of advertising.” Butler’s comments were echoed by town officials and residents in Barnet, Grand Isle, Jacksonville, Jericho, North Hero, Rockingham, Bellow Falls, Waltham, Williston, Swanton, Westminster and Colchester. When asked about VTel, Steve Gutowksi, chairman of the Selectboard in Ferrisburgh, a town of 2,775 in Addison County, said, “I have no clue what this is.” He then paused before asking, “VTel. Is that Verizon?” Tightening Oversight Oversight of the federal Broadband Initiative Program has been buffeted by turnover in administrators at the Rural Utilities Service, according to observers. Since the money was awarded five years ago, there have been four different administrators, with some more focused than others in holding funding recipients’ feet to the fire in adhering to the project as outlined in their plans. There was some concern that VTel, during the first few years of its project, had veered from its plan by putting the fiber-to-the-home project in Springfield ahead of the wireless broadband project. And Vermont’s congressional delegation, which strongly supported VTel’s application for stimulus funding from the RUS, has signaled that it is concerned about the slow rollout of wireless broadband project. “The aspects of the VTel project that are complete, such as the fiber-optic service to homes and businesses in 14 towns in the Springfield area, are a tremendous asset. While we are pleased that VTel has started offering wireless Internet service in some areas of the state, the extension and operation of this service have not occurred fast enough. We are concerned that as we approach the September project deadline, VTel has not yet completed the entire wireless part of the project, and we expect the company to provide broadband access to virtually all unserved Vermonters in the project area, as promised in its application to the Rural Utilities Service,” Leahy, Sanders and Welch said in a jointly prepared statement last month. “As we have done for the past five years since the award was made, we continue to urge RUS to do everything in its power to make sure that happens,” they added. VTel, like other recipients of stimulus funding, did not receive its stimulus funds in a single lump sum. The Rural Utilities Service disburses funding in installments after it receives and reviews invoices associated with project spending, a spokeswoman for the agency said. Brandon McBride, the current administrator of the Rural Utilities Service, addressing the agency’s policy in general and not referring to any recipient in particular, said in an email statement that the agency’s field staff “closely monitors” Recovery Act recipients through on-site inspections to ensure projects comply with the terms of the award. The disbursement of stimulus funds may be suspended until any project delays are addressed and recipient must submit a final report of the project upon implementation, he said. “Rural areas have already and will continue to benefit from projects that are partially completed” by Sept. 30, McBride said. “Each project not completed will be reviewed by RUS to determine the best course of action. … (I)t is possible that projects not completed may be required to return funds.” Springfield Fiber Optics One portion of VTel’s broadband project has been completed: A few months ago, the company finished building out 1,700 miles of fiber-optic lines among 17,500 telephone customers for its core Springfield-area system, encompassing 14 towns and villages in parts of Windsor, Windham, Rutland and Bennington counties. The system is capable of providing state-of-the-art Internet, cable TV and phone service similar to the bundled, all-in-one packages offered by media giants such as Comcast and Time Warner. Customers in VTel’s core telephone service area get 1 gigabyte per second (Gbps) of Internet service speed for $35 a month; the company in June announced it would offer 10 Gbps for $400 a month, a business-grade package that typically sells for thousands of dollars more for an equivalent amount of data. Guite, in an affidavit accompanying a May filing to the FCC in an unrelated matter, said VTel provides Internet service to 80 percent of its telephone customers. Gary Trachier, a retired IT specialist and electronics specialist for the Cold Regions Research and Engineering Laboratory in Hanover and now a freelance photographer residing in Hartland, has been hooked up to VTel’s fiber-optics-to-the-home system for more than a year and described the service as overall “pretty reliable.” Trachier said he can spend up to 10 hours a day online at work doing research and uploading photographs to websites. But Trachier, who opposed Guite’s efforts to relocate a cemetery on the Hartland property where the telecommunications executive plans to build a home, pointed out one drawback of the fiber-optic system: If his home loses power, the telephone that is part of the bundled VTel system also would go out after its battery backup is drained — something that did not happen with traditional copper phone lines. However, a similar problem affects customers of other providers using cable Internet or fiber-optic lines. “That’s a big step backward that hasn’t been talked about,” he said. Still Waiting Those who are subscribers to VTel’s wireless broadband service report that, while the system has some glitches, it nonetheless is faster than DSL and is especially welcome after not being able to access any service previously. Paul Fixx, a computer and IT consultant who lives in Hardwick and was a beta tester for the service, said he had to locate the antenna “up near the ceiling on the north wall of my house to get the signal” because his house sits in a low spot. He said the speed of service slows down on Saturday evenings, when more people are typically using it to watch movies and TV shows online — like DSL, VTel’s 4G/LTE can be affected by how many users within a service cell are accessing it at the same time. “I rarely have any trouble with streaming that is attributable to the wireless,” Fixx said. Laura Spittle, of Reading, who also was a beta tester of VTel’s wireless broadband system and subsequently became a subscriber, describes the service as “not bad, a little unstable, but they are still working on the system.” She lives on the top of Reading Hill and said she picks up VTel’s signal from its transmitter on Mount Ascutney. “Compared to nothing, it’s fantastic. Compared to Comcast, it’s a bit slow.,” she said. Because VTel’s wireless broadband service tends to “drop out” at times, Spittle relies on Comcast’s cable Internet service at work for her business, tack supplier Vermont Horse Country Store on Route 106 in South Woodstock. But she praises VTel’s efforts at working to improve the service. “Once they get this thing up and running (statewide), it’s going to be awesome,” she said. “I thought I was going to be able to work from home in six months. It takes time to get these things done.” Indeed, that point about expectations taking longer than expected is not lost on Vermont’s telecom chief. Porter, of Vermont’s Department of Public Service, said he recently received a flier announcing that VTel’s wireless broadband service now was available in his Montpelier neighborhood, and even though he gets high-speed Internet service through Comcast, he signed up to become a customer. Porter said VTel told him that he would be contacted about setting up an appointment. Porter said he’s still waiting. “I haven’t heard a thing,” he said.