ECFiber Plans 250 More Fiber-Optic Miles This Year

Valley News Staff Writer
Published: 5/13/2017 11:34:31 PM
Modified: 5/13/2017 11:34:32 PM

Royalton — Internet provider ECFiber has finished paying off its original group of investors and this year will begin adding 250 more miles of fiber-optic lines in six Upper Valley towns, thanks to a recently completed bond sale that raised $14.5 million in new financing.

The bond sale brings the nonprofit internet and telephone service provider closer to its goal of offering high-speed broadband access to a consortium of 24 towns over a 1,400-mile network in East Central Vermont. ECFiber hooked up its first subscribers in Barnard during the summer of 2011 and now has about 1,700 customers.

“This is the second step in a four-step financing process that began in 2016,” said Norwich resident Irv Thomae, chairman of ECFiber, in a news release. “Our plan is to raise additional capital in 2018 and 2019 to fully cover 21 of our 24 towns by 2019.”

ECFiber’s first bond sale in 2016 raised $9.2 million, of which about half went to pay off original investors and half went to preliminary engineering and “pole work” to prepare for the stringing of fiber-optic lines in this year’s construction phase. The six towns where broadband coverage will be expanded are Pittsfield, West Windsor, Pomfret, Barnard, Strafford and Thetford.

ECFiber converted from a limited liability corporation to a communications union district following the Vermont Legislature’s authorization in 2015 that established the new municipal entities. Municipalities tend to have an easier time tapping the public debt markets for financing. An earlier plan by ECFiber to raise $90 million to build a 1,900-mile network collapsed in the wake of the 2008 financial crisis.

But now that ECFiber has a six-year track record, financing is easier to come by.

“All the financials (of ECFiber) have been pretty stable for two to three years,” said Stan Williams, chief financial officer of ValleyNet Inc., the nonprofit organization that operates the ECFiber network. “That’s what attracted the bond market.”

Thomae said proceeds from the current $14.5 million bond sale will go toward paying off the final $4.5 million tranche of note holders. The remaining $10 million will go toward this year’s 250-mile construction project and preliminary work on building 350 more miles of fiber-optic lines in 2018.

ECFiber raised most of its original financing from about 500 individuals, most of them Upper Valley residents who did not have access to high-speed broadband and were willing to invest directly into the nonprofit in order to bring the service to their doorstep.

Williams said the original ECFiber noteholders who put up their own money — which included 44 people who contributed $2.7 million and are current or former district board members or ValleyNet staff, according to the bond offering memorandum — did well on their investment.

“They all made a very nice return of 6 percent to 7 percent,” Williams said. “This was a good deal for investors.”

The first bond financing helped ECFiber to reach roads and homes that were not part of the original priority routes, based upon the preference that was given to original local investors. But that strategy has proved slow in reaching homes in outlying areas away from population clusters.

“Until now, with our bootstrap financing, we built to where people largely invested,” Thomae said, but the proceeds from the second bond sale will allow ECFiber to “fill-in” the remaining areas within the six towns.

ECFiber also has received a total of $745,000 through three separate Vermont state grants to finance the extension of high-speed internet service to specified locations.

The towns and routes where ECFiber builds in the future depend, in part, on the concentration of addresses that pre-register on ECFiber’s website, Thomae pointed out, and he urged people interested in getting service to make their wishes known by pre-registering. “We try to gauge where the demand is highest,” Thomae said. “That’s how we chose the six towns we build this year and how we will chose the towns next year.”

ECFiber estimates that, in addition to the approximately $23.5 million so far raised through two bond sales, it will need to raise about $17 million more in two additional bond sales expected to occur in 2018 and 2019 to complete its rollout. ECFiber estimates there are about 10,000 potential customers within its service territory.

The bond sales are being handled through the Denver office of Texas-based Municipal Capital Markets Inc., a firm that specializes in selling bonds to finance municipal infrastructure projects. The buyers of the bonds tend to be banks and other financial institutions, according to Thomae.

ValleyNet, in the news release, said ECFiber should eventually attract more than $40 million in private investment to the East Central Vermont region. And by the time the building phase is completed in 2020, ValleyNet said, it expects to have 25 full-time employees and to have spent more than $20 million on local contractors and “utility activity.”

According to ECFiber’s 2016 financial report, the nonprofit reported revenue of nearly $2 million for the year ended Dec. 31, 2016, and operating income of $528,000. But it reported a year-end deficit of about $2.8 million, much of it the result of bond financing costs and interest expense on debt.

Bond investors, however, generally focus on the ability of a business to generate operating income and cash flow, which indicates its ability to meet debt and interest payments, and are less focused on the bottom line profit or loss.

“The accumulated losses from the first six years of operations are characteristic of the early years of capital-intensive undertakings of this sort and are consistent with the long-term business model,” ECFiber said in the report.

ECFiber said it averaged revenue of $101 per subscriber in 2016 and that 80 percent of its customers also sign up for telephone service as part of their package, which costs an additional $20 per month.

At the current rate of signing up about five households per mile, Williams said, ECFiber should have about 7,000 subscribers by the time it completes its 1,400-mile network.

“We’d like to make it higher but that’s realistic,” he said.

But it won’t end there.

After that goal is reached, Williams said, ValleyNet will begin looking at the ECFiber consortium model to other towns and communities around the state.

John Lippman can be reached at

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