Media Truth

Fiber Optic at Bristol Virginia Utilities in 2007

Update February 2012: The scores of new jobs promised in the region for the $120 million spent by the Virginia Tobacco Commission for fiber optic lines has never materialized. The region's economy is if anything even worse than 2000 when this began. Sorry but call centers we got before and that all we still get. This page stands simply as historical record. L. Loflin

2007 has been an eventful year for Bristol Virginia Utilities. According to their last quarterly report I got form BVU CEO Wes Rosenbalm. They only lost about $50,000. This is a long ways from the millions in losses they claimed to have planned for in earlier quarters. My congratulations to Wes and his staff. We should note this came after several massive rate increases and spending millions in economic development grants, that have so far produced no economic benefit to the average Bristol resident. But over all they seem to know what they are doing.

In 2008 it looks like more big electric rate increases, but that has little to do with BVU. It's general inflation in the entire electric industry and energy in general.

The bad news is not a single promised new job for the general public has been created. The only jobs created was at BVU itself that pay far above the local private sector and even that is clouded by accusations of nepotism in the first months of 2008 by the local press. In addition, a student scholarship program is under fire as accusations of a rigged system that favors the kids of much higher paid City employees over other lower income candidates with better academic scores. The program is presently costing $24,000 and is paid for by all rate payers.

Residents in unserved areas of Washington County while being forced to pay for the massive debt incurred by the Utility over its foray into fiber optic, might be getting those services in 2008. The system is already straddled with over $50 million in debt and BVU is looking at millions more for 2008. This new debt is supposed to extend service to those that have been promised it for years that BVU has never delivered on. Here is a rundown of the events for 2007:

BVU wants to believe other communities will pay for its telecommunications experience. Bristol Virginia Utilities board of directors approved a new business unit to offer telecommunication consulting and operating services to similar city-owned systems. "This will be a real plus for Bristol. It will mean more money, jobs and it won't have any negative impact on service to our customers," BVU President Wes Rosenbalm is quoted saying.

In 2002, Bristol Virginia Utilities became the nation's first municipal utility to offer Internet, cable television and telephone services over a fiber-optic network. "Right now, we have seven or eight communities that have contacted us at different levels," Rosenbalm said. "We decided last year this could be an opportunity for a new revenue stream." Ref. Times-News 4-24. They failed to mention the underwriting of this venture has cost millions in government subsidies. Let Wes explain the $60 million in debt the Utility is stuck with. They have never turned a profit.

A new business at Bristol Virginia Utilities?

"Contract puts Bristol Virginia Utilities in a new line of business" screams local headlines. After racking up $60 in debt and squandering millions in economic development grants at BVU, they want to start another business. Never mind their present business has created nothing but higher electric bills.

It's called BVU FOCUS, a so-called "business unit offering advanced IT consulting, operations and management services to municipal entities globally." It's to be a division of OptiNet and stands for "Finding Opportunities for Communities Throughout the United States." This must pertain to how to misuse economic development grants and the taxpayers to offer cheaper cable to TV to those already getting it from the private sector. As of February 2008, the promised services to unserved areas in their electric system have not been forthcoming as promised.

To quote the press, "BVU's FOCUS already has its first customer - MI-Connection, a cable and Internet company located north of Charlotte, N.C. The network is locally owned by the towns of Mooresville and Davidson, with additional subscribers from the nearby town of Cornelius also contributing to the customer base." They got a five-year contract. "This is an exciting and busy period in the history of BVU," said company President and CEO Wes Rosenbalm.

"We are proud to have developed the expertise in the area of fiber-optic broadband technology and all the operational processes that come with it during the past several years as we have ramped up our OptiNet division. Wes earns over $120,000 in a community with a per-capita income of $17,000 and has failed to produce a penny in profit at BVU.

To quote, "The idea of establishing a consulting division of OptiNet was introduced to the BVU board of directors earlier this year... "We began thinking how we could benefit the city of Bristol, as well as strengthen America's broadband capabilities globally by simply helping other communities find workable solutions for deploying telecommunications and information services," said Jim Rector, Bristol, Va., mayor who once chaired the BVU board. (Note his son got a job at BVU, something the general public never got a chance for.)

BVU currently serves 7,793 fiber-to-the-user customers through its OptiNet division and provides electric power to approximately 16,258 consumers in a 125-square-mile service area in Bristol, Va., and portions of Washington and Scott counties in Virginia and Sullivan County, Tenn. BVU has eight substations and approximately 577 miles of distribution lines and 29 miles of transmission lines.

To quote the City website August 16, 2007:

Created as a division of BVU OptiNet, FOCUS stands for Finding Opportunities for Communities Throughout the United States. At its Aug. 16 meeting, the BVU Board of Directors voted to accept BVU FOCUS' first customer, MI-Connection, a cable and Internet company located north of Charlotte, N.C. The network is locally owned by the towns of Mooresville and Davidson, with additional subscribers from the nearby town of Cornelius also contributing to the customer base.

Members of town boards for Davidson, Mooresville and an unincorporated section of Mecklenburg County voted earlier this week to approve a five-year contract with BVU FOCUS to manage the cable and Internet system for the towns. The MI-Connection service area is the second region in the state of North Carolina to have a government-owned telecommunications system.

This deal in North Carolina is supposed to bring in $11 million. They have not specified the cost to North Carolina taxpayers for this newest government based venture.

Ref. 08/17/2007 Kingsport Times-News. To quote Jerry Brown, our over-paid director of economic development in Bristol; "Proactively preparing for the future is the key to economic growth, and therefore, the key to community cohesiveness.

Rarely are there opportunities that offer a platform for community leaders and citizens to join together in a way that has such extraordinary impact."
Jerry has recently commented he has been trying to recruit jobs and industry for Bristol with BVU's fiber optic business, and has failed for five consecutive years. Can we see a list of those jobs Mr. Brown? He earns a whopping $85,437.00 a year in a community where private sector jobs pay $7 and hour.

More debt and more promises at Bristol Virginia Utilities

"BVU looks to expand telecom services to Abingdon, Scott County with grants, loans," so says the press. The head of BVU wants to spend another $16 million to expand the telecommunications service area. Wes Rosenbalm plans to extend the fiber-optic cable TV, telephone and Internet services called OptiNet into Abingdon, and farther into Washington and Scott counties.

He promised this years ago. To pay for the promised expansion, BVU officials hope to get as much as $12 million in grants from the Virginia Tobacco Indemnification and Community Revitalization Commission (in addition to the $10 million or more they already spent) and borrow another $4.5 million. $4 million is for serving customers and a half-million is for a new product, which turned out to be

Rosenbalm claims, "We'll pass 5,000 [homes and businesses] and estimate we'll sign up 3,500." The $4 million is based on that 3,500 new customers (costs about $1,300) and he claims if they get less customers, they would need less money.

On August 29 the City Council approved the new money for BVU, but residents were having no part of it: "We're in debt over our eyeballs. This debt won't be paid for years," screamed city resident Nancy Marney. She also urged the council to sell off the OptiNet business. City resident Katherine Jewell demanded to know why Washington County wasn't paying for this. (We already are through inflated electric bill due to BVU debt.)

BVU's has nearly $50 million in revenue bond debt, about half of which is tied to OptiNet, as the press reports. They failed to note the other $25 million was incurred because the OptiNet division borrowed $16 million from the electric company side, who then borrowed outside bond debt to cover their expansions. The new $10 million building to house OptiNet and other City offices was payed for by electric customers, many non Bristol Virginia residents. Katherine called the plan "ridiculous."

Now they claim the grants are only $6 million. "This [expansion] will not help me as a citizen of Bristol Virginia. And your job is to help us," resident Guy Odum told the council. Ref. Bristol Herald Courier Aug 29, 2007 and Kingsport Times-News 8-21-07.

BVU CEO testifies before congressional subcommittee about utility's role in providing broadband services to Southwest Virginia

A congressional subcommittee heard Tuesday about the role Bristol Virginia Utilities has had in providing broadband services to Southwest Virginia Wes Rosenbalm, chief executive officer of BVU, testified before the Subcommittee on Telecommunications and the Internet, of the Committee on Energy and Commerce. The hearing focused on the future of telecommunications competition, according to information provided by the subcommittee. Testimony was also heard on issues related to special access rules, municipally-owned broadband service and the federal government's role in that competition.

The hearings are tied to the Community Broadband Act of 2007, introduced in August by U.S. Rep. Rick Boucher, of Virginia's 9th District. The proposed legislation would simplify the process for communities to establish their own broadband systems. Ref. Kingsport Times-News 2007-08-28. The City of Bristol approved this, but this service had been promised before to unserved residents being force to pay the massive debts incurred by their fiber optic fiasco. Ref. Kingsport Times-News 2007-10-03

A new bill the State is planning would:

The panel of witnesses also included executives from major telecommunications providers AT&T, Embarq, Time Warner and Verizon, while citizen groups opposing the actions of BVU were barred from the hearings.

BVU plans $500,000 marketing campaign for its OptiNet, again promising jobs.

After five years and the promise of thousands of new jobs, Bristol Virginia Utilities (BVU) plans a new marketing scam they hope will deliver those jobs. Piling up $60 million in debt and wasting as much as $10 million in various economic development grants, they are hoping to have better luck. To quote, "OptiNet is a great asset to the city of Bristol," said Jerry Brown, the city's director of economic development. "With this new economic development strategy, we will attempt to attract high-tech businesses like data centers, software development firms and others that need this type of broadband technology...We had to get the network up and running. Then make sure it was robust enough and strong enough - with no glitches or problems - before we began to actively market it." Well Jerry, it's been up for some time, when are you going to deliver?

State officials such as Patrick Gottschalk (Virginia secretary of commerce and trade) says about this region (he doesn't live here by the way), "We've already seen companies like CGI and Northrup-Gruman [Russell County] taking advantage of what we have. Now we need to recruit more jobs to Bristol Virginia...This area already has the quality of life. Now, we have the most robust broadband in the state, so hopefully, that will open the door to other things." Patrick fails to mention CGI and Northrup-Gruman are state contractors being used to fire other workers across the state and displace the jobs to lower wage Russell County. There is also no proof most of the jobs won't be outsourced to India, etc. Ref. Bristol Herald Courier Sep 06, 2007. One of the reasons for going "private" was block independent oversight under the Virginia Freedom of Information Act, which doesn't apply to private contractors.

On the web:

Bristol Virginia Utilities keeps things legal because public, press are watching

Printed Bristol Herald Courier

Feb 13, 2005

I'm joining the Herald Courier to express my deep concerns with Bristol Virginia Utilities being exempted in any form from the (Virginia) Freedom of Information Act.

At the invitation of Bristol Virginia Mayor Paul Hurley, I've been attending BVU board meetings and wish to commend Wes Rosenbalm and his staff. They go to great lengths to make sure everything is done within the law. I don't believe they're doing anything illegal. Also notable is the BVU program to help needy people with electric bills. BVU will match any donations.

BVU is an operating division of the city of Bristol and the board consists mainly of local politicians. Some also operate the economic development department housed within BVU's building. Funds are borrowed/loaned between BVU and the city government. BVU gives away assets under board direction (Red Lobster, Trainstation, library, etc.), and BVU can't be separated from city politics. Sprint doesn't borrow from the electric company or use the city attorney to handle legal fights.

OptiNet borrows from the electric company to cover losses/costs. The Optinet financial statement for May 31, 2004, shows another loss of $2.3 million and total liabilities of more than $41 million. Heavy borrowing from the electric company by Optinet (and for other costly projects around Exit 7) has led to massive borrowing by the whole utility. External debt alone is $50 million and is a factor in recent spiraling utility rates. OptiNet won't even start paying on those loans from BVU until 2005. They recently lowered credit requirements for customers (29 percent rejection rate) to up cash flow.

Sprint doesn't get economic development funds, but BVU does - receiving $3 million to $5 million in tobacco/EDA funds for fiber optic alone. They don't have a single private sector job or new business to show for it that anyone will name.

I brought this grant issue up with Sen. William Wampler and I'm dismayed we get more secrecy bills. Two earlier secrecy bills (SB280 and SB282) didn't pass. Passing this bill will block citizens, the press, etc. from getting information and must be opposed.

They keep things legal because they know they are being watched. Otherwise, OptiNet must be barred from any further loans from the electric company, BVU barred from any more tobacco/EDA grants, and have economic development completely severed from BVU and removed from their building. This will prevent corporate welfare (incentives) and asset giveaways being shifted onto utility bills. That will level the playing field for everyone.

Lewis Loflin
Bristol, Va.