Maine firm takes over ValleyNet operations – VTDigger

This story written by John Lippman was first published in the Valley News on Jan. 30.

ROYALTON — Internet service in east central Vermont is now being run from southeast Maine.

A Maine company has taken over ValleyNet’s contract to operate internet service provider ECFiber, which pioneered the municipality-owned model of rural high-speed internet service that is being widely adopted around the state, ending the career of a name that has shaped the development of the internet in the Upper Valley since the days of dial-up telephones and “You Got Mail.”

Biddeford Internet Corp., also known as GWI, has been transferred ValleyNet’s operating agreement to manage ECFiber, assuming responsibility for ValleyNet’s obligations and 27 employees based at its Royalton offices, the parties announced.

The time had come to hand off the operating agreement to a bigger organization that has the resources to run ECFiber smoothly, according to the person who has been one of the main drivers of ValleyNet’s transformation into a mini telecom.

“We’ve been a small, scrappy nonprofit ISP (internet service provider) which has had a big impact on Vermont telecommunications but there are also challenges with that in terms of recruiting and just getting enough scale to be efficient,” said Stan Williams, ValleyNet CFO and a co-founder of ECFiber. “But ECFiber is much more financially stable than it was in the early days and it really needs a different level of expertise to get to the point where it is operating like a utility, which is kind of how people view us now.”

ValleyNet, registered as a Vermont nonprofit, operates ECFiber, a designated municipality known as Communications Union District (CUD) which provides high-speed internet and landline phone service to more than 8,000 customers in 31 towns belonging to the East Central VT Telecommunications District.

Although principally known among its customers under the ECFiber name, all employees technically work for ValleyNet, which also operates LymeFiber, which provides internet service to about 500 homes in Lyme.

Launched in 1994 and formerly based in White River Junction, ValleyNet initially set out to introduce Upper Valley households to a then-novel thing called “the Web,” utilizing phone modems donated by Dartmouth College so users could dial into AOL or Compuserve and access online community bulletin boards.

Then as dial-up went the way of the Dodo bird with the advent of broadband networks and cell phones, ValleyNet sold off its dial-up service and administration of the town listservs were taken over by Vital Communities. Seeing the opportunity to provide high-speed internet service through fiber optic lines to unserved rural households, ValleyNet pivoted and morphed into a broadband ISP.

An initial attempt to raise debt from the capital markets was torpedoed by the Great Recession of 2007-2009 but ValleyNet managed to scrape together $7 million from 450 local investors, many of them in Norwich who wanted high-speed internet on their roads.

By 2016, with more than 1,500 customers signed up, ValleyNet, via the recently created East Central VT Telecommunications District, was able to turn to the municipal bond markets to raise $14.5 million to roll out expansion into dozens of more towns.

Since then the telecommunications district has returned to the municipal bond market multiple times and so far has borrowed a total of about $63 million — and will likely be seeking to raise at least another $8 million this year, Williams said in an interview on Friday.

ValleyNet has never been able to pay typical telecom industry salaries — “until last two years ago no one here made more than six figures,” Williams said — and the nonprofit, with less than three dozen employees, did not have the staff and resources to keep up with its rapid growth, according to F.X. Flinn, chair of East Central VT Telecommunications District, the board of 31 delegates appointed by the selectboards of member towns to oversee ECFiber.

“GWI is a big organization. They can bring more to the table than ValleyNet ever could do,” said Flinn, who pointed to functions such as human resources and marketing for which ValleyNet could not dedicate adequate staff.

The seat-of-the-pants style of ValleyNet became painfully and embarrassingly evident last summer when the company revealed that a former contract accountant had embezzled $561,000 from ValleyNet’s bank accounts, with ValleyNet acknowledging it did not have adequate financial controls in place to prevent such abuse.

A Vermont state court judge last week awarded ValleyNet a total of $2 million in damages suffered from the losses, although a lawyer for ValleyNet said it is unclear how much money will be recoverable from the malefactor’s assets.

GWI’s shouldering of ValleyNet’s operating contract of ECFiber is the outcome of a relationship that began two years ago when GWI became the vendor for ECFiber’s landline telephone service. That relationship deepened last June when ValleyNet announced a “restructuring” that GWI — which will go by the name GWI Vermont locally — would assume day-to-day direction of ValleyNet’s operations, including designing and building ECFiber’s networks.

Both ValleyNet and GWI are pitching the combination as uniting two organizations with similar mindsets and principles, philosophies they say that reflect the communities in which they operate.

GWI boasts its status as a “Certified B Corp.,” a voluntary commitment to a set of business guidelines promoted as aligning positive social welfare with corporate profits (other Upper Valley B Corp. signatories include Mascoma Bank, King Arthur Baking Co. and Boloco).

Fletcher Kittredge, founder and chief executive of GWI, said he first met Williams more than a decade ago at a conference and they developed a rapport over a shared vision of how to develop rural internet service. Kittredge also served on ValleyNet’s board for several years before stepping off before last year’s partnership agreement.

“Nothing’s going to change. Just as ValleyNet was an agent for ECFiber, GWI is going to be an agent for ECFiber,” Kittredge said on Friday.

GWI serves about 6,000 customers and has 54 employees and revenue of about $14 million, Kittredge said.

The company recently entered into a similar operating agreement with Deerfield Valley Communications Union, District, or DVFiber, to build a fiber-to-the-home network in the Brattleboro area.

ECFiber, which has 27 employees, had $8.8 million in revenue in 2021 and is approaching $10 million in revenue this year, according to Williams.

Kittredge said that the name of ECFiber will not change and employees will remain in Vermont and customers will continue to hear the company identified as “ECFiber” when they call the office and pay their monthly bills. Tom Cecere, who was named chief executive of ValleyNet in 2021, becomes general manager of GWI Vermont.

“Maine is not all that different from Vermont,” Kittredge said. “The employees are the same. The building is the same. We’re not moving out of Vermont. Our motto is, ‘just don’t break anything.’”

Whether all of the 31 town selectboards that elected to joined East Central VT Telecommunications District will be happy with ECFiber now under the management of an out-of-state entity is unknown.

The fact that ECFiber was a locally launched-and-grown initiative to address the paucity of internet service in rural Vermont communities has been central to its identity and pitch to original investors — and enthusiastically embraced by state officials as the solution to wiring underserved communities that the big telecom companies see no profit in.

But Flinn, chair of the CUD board, said the delegates appointed by the selectboard are under a fiduciary duty to the organization they serve and their vote cannot be dictated by the selectboard of the member town they represent — although a selectboard can decide not to re-appoint their delegate and vote to withdraw from the district.

Flinn affirmed the board gave “strong support” behind the agreement to transfer ValleyNet’s operating contract for ECFiber to GWI and “worked really hard on this.”

Asked if the vote was unanimous, Flinn answered “to the best of my recollection, yes,” explaining that the reason he was hedging his reply was because “there were several different votes along the way and it’s possible in the beginning there were some ‘no’ votes. But in the end there was unanimity.”