ECFiber Secures Money to Expand

Valley News Staff Writer
Published: 4/15/2016 11:56:14 PM
Modified: 4/18/2016 1:59:24 PM

Royalton — ECFiber, the consortium of 24 rural towns formed to bring high-speed Internet service to east central Vermont, said it reached an agreement to secure $9 million in long-term debt financing to extend its network by 250 miles in 2017.

The move is the first time that ECFiber has been able to tap the capital markets for financing since its original ambitious 1,900-mile network, $90 million financing plan collapsed in the wake of the 2008 financial crisis.

“This new financing will for the first time allow us to to serve areas that desperately need us but lack the capacity to raise funds,” said ECFiber Chairman Irv Thomae, of Norwich.

Following the turmoil in the capital markets, ECFiber, in order to build out its network, reverted to soliciting direct investments from Upper Valley residents to bring broadband Internet service to their roads. That strategy, while so far raising $7 million from 479 customers and investors, nonetheless has proved slow in reaching many unserved homes in rural communities.

ECFiber has also received about $600,000 in funding from the state of Vermont to assist in the rollout of its network. 

Royalton-based ECFiber currently serves about 1,200 customers and by the end of this year expects to have about 300 miles of network that reach parts of Royalton, Tunbridge, Chelsea, Vershire, Strafford, Thetford, Sharon, Norwich, Pomfret, Barnard, Bethel, West Windsor and Randolph. Plans are in the works to add service this year to parts of Brookfield, Braintree, Stockbridge, Rochester and Pittsfield, Thomae said.

The new debt financing was made possible by ECFiber recently passing several hurdles, according to ECFiber Treasurer John Roy, of Vershire.

“We were told there were three things we needed to have done in order to be able to do this,” Roy said. “One was a minimum of three years of audited financial statements, another was reaching the point of positive cash flow, and another was that our structure beforehand was unusual.”

All three of those hindrances have been overcome, Roy pointed out, and the consortium now has the financial track record to give investors confidence that debt obligations can be met. “We've been positive cash flow since the end of 2014 and all of 2015,” he noted.

To facilitate its ability to borrow money, ECFiber last year became Vermont's first “communications union district” — an entity similar to the state’s solid waste districts — a municipal-like body chartered by the state that makes it easier to attract financing. As a group of towns previously organized under a so-called inter-local agreement, ECFiber faced difficulty in making the structure understood by potential investors.

“It was an important thing,” Roy said. “It would have been much more difficult to borrow by going to investors and financiers (as an inter-local agreement entity) and they would say, ‘Huh, what?’ But if you say you’re a ‘union district,’ that is a recognized ‘body corporate and politic’ and they understand that.”

ECFiber arranged its debt financing through the Dallas office of Municipal Capital Markets Group, Roy said, which in turn will sell the bonds to investors. The new loan will have a 28-year maturity; about half of the proceeds will go toward paying down ECFiber’s current $7 million debt, thereby exchanging a higher-interest, shorter-term tranche with lower-interest, longer-term debt.

As a result, the refinancing will increase ECFiber’s cash flow, Roy said. He likened it to “when you're in the early stages of starting a family and a 30-year mortgage requires a lot less than a 15-year mortgage.”

The debt financing closing is expected later this month, Roy said.

To determine where to focus on building out the next phase of its Internet network, ECFiber in March launched a “pre-subscription” contest that allows first-time customers who register on ECFiber’s website to get discounted installation and one-year of a free upgrade to the next higher-level service. Those towns that generate the highest percentage of sign-ups by wanna-be customers will be targeted for wiring first via the new financing, Thomae said. 

The winning towns will be announced at the end of April.

Last month, ECFiber announced it planned to activate 110 miles of network in 2016 before building the additional 250 miles of network in 2017. The 250 miles could “completely” cover between four and eight towns, ECFiber said, depending on which towns generated the highest percentage of registrants in the contest.

Thomae said at the time that returning to the capital markets to fund expansion would be necessary because ECFiber doesn’t foresee being able to raise enough money to cover the $30,000-per-mile cost of stringing fiber optics along phone poles in towns and neighborhoods it wanted to serve.

ECFiber estimates there are currently about 10,000 people within its consortium.

ECFiber has said it plans to complete 1,400 miles of network needed to reach all “underserved locations” among its 24 member towns by 2019, although that will require raising additional financing from the capital markets.

John Lippman can be reached at or at 603-727-3219.

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