Telecom big-shot Timothy Nulty wants to make phone, broadband, and cable TV public utilities in Burlington
It hardly seems possible, but by the end of 2007, all Burlington residents will be able to pay just one bill each month for their home phone service, broadband Internet connection and cable television channels. And they won't be making the check out to Verizon, or Adelphia -- they'll be paying the City of Burlington, via Burlington Telecom.
At least, that's the city's plan. Set in motion in the late 1990s -- and twice approved at the polls -- the project is finally nearing completion. A test of 2400 homes in the city's South End is expected to begin service by the end of 2005. But there's still at least one obstacle in the way -- Adelphia Communications. The cable company has intervened in the city's bid for a Certificate of Public Good to provide cable service; the city's newest utility already has clearance to deliver everything else.
A March public hearing in Burlington's City Hall drew more than 100 people, most of whom complained vigorously about Adelphia. This week, the Public Service Board is holding formal hearings at the Fletcher Free Library during which Adelphia, working with industry group The New England Cable and Telecommunications Association, will present its case. The company would like the city to stay out of the cable biz, and warns that Burlington taxpayers could end up paying big bucks if their municipally owned venture fails.
Timothy Nulty disagrees. When it comes to telecom, the 63-year-old Jericho economist is something of an expert. He's worked on telecom policy issues since 1975. As chief economist for the U.S. Senate Commerce Committee, he helped write the legislation that still regulates the industry today. Then, as senior economist and project manager at the World Bank from 1985 to 1995, Nulty handled a billion dollars of telecommunication investments in developing nations such as Poland and Slovakia. After leaving the Bank, he founded a venture capital firm in Hungary, and spent four years funding telecom start-ups in Eastern Europe.
In 1999, Nulty began a two-year stint as a senior policy advisor at the U.S. Department of Energy -- his boss, former Energy Department CFO Mike Telson, calls him "one of the smartest people I know." In 2001, Nulty retired to Vermont, and built a house in Jericho. Now one of Burlington Telecom's biggest proponents, he's walking the talk as the project's director.
Nulty says he took the BT job -- despite receiving "a silver handshake" when he left his Hungarian firm -- because he wants to leave a legacy. Nulty has strong ties to the Green Mountain State. He was born in New York, but his parents retired here when he was 17, and it's been his homebase ever since.
"I plan to live here for the rest of my life," he says. "And I want to be known in this community as a person who built something solid and valuable. Not as a kook who wasted a lot of money and screwed things up."
Some people definitely consider BT's plan kooky. At the public meeting in March, one skeptical commenter linked the municipally owned telecom network to other Progressive-backed initiatives, such as City Market and the YMCA-Moran plant move.
But Nulty says this project has nothing to do with politics or "lefty ideological stuff." He considers a high-speed fiber network as essential to 21st-century life as water, electricity and roads. And he claims BT's brand-new, all-fiber network trumps any fiber/copper cable combo Adelphia or anybody else has to offer. "The difference in carrying capacity is like the difference between a rowboat with an outboard motor and a 50,000-ton container ship," he boasts. "That's the actual mathematical ratio."
Comments from General Dynamics seem to bolster Nulty's assertion that the city needs better connections; company spokesman John Suttle reports that BT's network "certainly wouldn't hurt" the city's chances for keeping the GD plant in town. According to Suttle, IT resources are important to the weapons manufacturer, which uses its own, separate data-transmission system in Burlington, but might potentially switch to a network as powerful as the city's.
Nulty argues that if Burlingtonians wait for private companies to build that network, they'll be waiting for decades. "Sometime in the next 10 years, this kind of network will be built in Denver and Atlanta by Verizon or its equivalent -- but they're not coming here for 20 years," Nulty warns. "And we can't tolerate that."
Despite his dealings with presidents, prime ministers and CEOs, Nulty -- with his weathered face and neat gray beard -- resembles a salty sea captain more than a slick financier. He earned his PhD in Economics from Cambridge University in England, where he taught before becoming chief economist for the United Auto Workers in 1973. Nulty's family background is blue-collar; he comes from a line of firefighters and cops. A self-proclaimed "penny-pincher," he's more comfortable grabbing coffee at the Champlain Farms gas station on Main Street than mixing with the latte crowd at Muddy Waters.
Both establishments are within a block of BT's windowless basement office, in the Memorial Auditorium Annex -- ironically, across the street from Verizon. Nulty doesn't even have his own cubicle, much less his own room; he uses a desk in the corner of a space the size of a locker room that he shares with his staff.
An adjacent area houses machines that run those parts of BT's network that are already up and running; Nulty and his staff provide Burlington's schools, city offices and a handful of local businesses with phone and Internet service.
The switchover to the city-owned network happened without much fanfare. "Its lack of prominence in the spotlight is not an accident," Nulty notes. Before he came on board, the city had planned to form a partnership with a for-profit company, and the project became "extremely politicized," he says. The city eventually scrapped its original plan and decided to build the network itself.
"A lot of heat and light in the public spotlight is just a distraction," says Nulty. "Let's get something done. Let's actually do stuff and not talk about it. And after we've got things working, and it's real, then the conversation becomes more serious, and less just fluff and ideology."
That's happening, but slowly. The project has already taken much longer than expected, which has fueled some skepticism among city residents. Nulty is unapologetic.
"It's like building a house," he says. "You can build a house by hiring an expensive architect, hiring a big-time builder to be your prime contractor. You give 'em the whole job, you stand back, and you'll get a nice product, which for sure will cost a lot of money."
But, he says, there's another way to do it. "I call it building the barn you can afford. Like the Vermont farmer. You build a little barn, you put five cows in it, you make a little money, it's working OK. You take that money; you build an addition to the barn. You build slowly, so you're not exposing your capital, you're not taking big risks ... It's much more modest. It results in a product that looks a little different from the artist's rendition. But it's also vastly safer."
Nulty concedes that it will take six to nine years from when he started the project to see the city fully wired. "The original thing was going to do the whole project in 18 months, two years," he says. "But they were going to go out and borrow 40 million bucks. We'll build the whole thing for 17, 18."
Though voters in 2000 approved a resolution to raise the money by creating bonds, Nulty has so far avoided that step. BT has financed the project through an arrangement with Koch Financial, in Scottsdale, Arizona. They put up the money, and ultimately own the network. The city pays a lease fee to use it. Some of the money comes from the city, and some from businesses that use the city's network. Nulty is adamant that none of the money will come from Burlington taxpayers.
Once the city starts offering residential service, more revenue will be generated from individual customers, and from businesses selling their own services over BT wires. The city is offering open access to its network -- anyone who wants to sell cable TV, Internet connectivity, or other information products will be able to use it, for a fee. Adelphia and Verizon don't allow that kind of access.
What kinds of "other products" might travel over the wires? Nulty gives examples such as distance learning, interactive doctor's visits for shut-ins and security services. "You can have a couple of webcams in your house," he explains, "so a single mom can check whether the kids are actually home doing their homework."
He admits that he can't predict what else might be available in the future. "As long as the only road to your house is a single mud track," he explains, "you can't talk about delivery services that require a truck ... The capacity of this network is so spectacular that a lot of innovative services that can make use of it haven't really been developed anywhere because the road system hasn't been available."
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Once the roads are built, however, providers like Adelphia may opt not to use them. Nulty says Burlington residents will be able to choose to continue getting service from their old providers over the new network, but it's unclear whether Adelphia will pay BT's lease fees to gain access.
Adelphia spokeswoman Lisa Birmingham says her company has invested heavily in its own network, and may not be ready to give that up, even though in some places they're transmitting signals over copper cable rather than the much faster fiber optics. "We haven't gotten to that decision yet," she says.
That means that anyone who wants to get phone, Internet and cable TV -- if BT is allowed to offer it -- will have to get them from the city, at least until competing businesses sign on.
Building the network is one thing; offering content over it is a slightly different business. Sharon Gillett, a research associate at Massachusetts Institute of Technology's Communications Futures Program, has written several papers on the expansion of municipal telecom networks. She points out that most communities that offer wholesale services -- a network for providers to use -- choose not to offer the retail services themselves. She sounds like an Adelphia rep when she admits that "retail works better in the private sector."
Nulty doesn't necessarily disagree. He points out that the city will have certain advantages over private companies: they'll hire customer-service reps in Burlington, they'll be able to spread the cost over three revenue streams rather than one, they'll be able to invest profits back into the network rather than funneling them to wealthy owners, or to a less profitable part of the company. But ultimately, he's prepared for the city to stay out of selling retail services.
He says he wouldn't mind at all if some other provider came along offering better service at competitive rates, as long as the network itself is intact. "I'm not anti-privatization," he says. "If the retail goes bust, it goes bust. We can survive that. The wholesale part of the business pays for itself."
Gillett, who recently completed a review of Burlington Telecom's plans, thinks he's right. "It's not without risk," she says, "But it's a risk that, if it doesn't work out, it almost doesn't matter."
And she seems to think it's a risk worth taking. "Burlington could 'leave it to the private sector'" she writes in an email, "and maybe if they're lucky they'll get a few more channels of TV in a few years. But look at what BT has already done for the city. It has made fat pipes -- high data transmission speeds -- available to the local government and businesses, at reasonable prices, that simply weren't available at any price before that. The model BT is proposing is just a way to extend that type of investment and capability to Burlington residents in the here and now."
Gillett says Nulty is "the perfect guy" to implement it. "You couldn't hire better," she says.
But BT still has a tough row to hoe. They have to win their CPG -- a decision is expected in mid-July. If they don't get it, they'll have to alter their plans, and maybe launch without cable service. And if they do get it, they'll have to provide better service than Adelphia or face the wrath of their subscribers. Either way, BT's vision of a locally owned telecommunications network is coming into focus. When it becomes a reality, Timothy Nulty will take either a lot of the credit or a lot of the blame.