A Financial Model of Tucows (TCX) and Ting
by Hugh Pickens
Article begun November 13, 2014
I am long term investor who owns stock in Tucows. The purpose of this web site is to provide a comprehensive overview of Tucows (TCX) that documents and explains the company's business strategy and monitors the execution of that strategy with particular emphasis on Tucows' MVNO, Ting. Information about Tucows has been compiled in this report from news releases, earnings reports, earnings conferences calls, and independent reporting on Tucows and Ting.
A financial model shows Ting's past performance and predicts how Ting will perform in the future under different growth scenarios.
Contents of This Report
- Introduction and Overview
- Tucows Business Analysis
- Ting Financial Model
- Risk Factors
- Latest News about Ting and Tucows
- Ting Towns Get Fiber
- What Analysts Say About Ting and Tucows
- Insider Activity at Tucows
- Financial Statements and External Links
- About the Author
Overview of Tucows and Ting
Financial Analysis of Tucows and a Financial Model of Ting
by Hugh Pickens
Article begun November 13, 2014
The purpose of this web site is to provide a comprehensive overview of Tucows (TCX) that documents and explains the company's business strategy and monitors the execution of that strategy with particular emphasis on Tucows' MVNO, Ting Mobile, and Tucows' fiber initiative, Ting Internet. Information about Tucows has been compiled in this report from news releases, earnings reports, earnings conferences calls, and independent reporting on Tucows and Ting.
A financial model shows Ting's past performance and predicts how Ting will perform in the future under different growth scenarios.
Contents of This Report
- Introduction and Overview
- Tucows Business Analysis
- Ting Financial Model
- Risk Factors
- Latest News about Ting and Tucows
- Ting Towns Get Fiber
- What Analysts Say About Ting and Tucows
- Insider Activity at Tucows
- Financial Statements and External Links
- About the Author
Purpose of This Report
The purpose of this report is to:
- Explain the rise in Tucows stock price and Ting's contribution to the increase
- Model the contribution that Ting makes to Tucows bottom line
I am long term investor who owns stock in Tucows. The purpose of this web site is to monitor Tucows so I can understand how my investment is performing. I compile information about Tucows from news releases, earnings reports, earnings conferences calls, press releases, and independent reporting on Tucows and Ting. I have built a financial earnings model to monitor Ting's past performance and to make predictions on how Ting will perform in the future under different growth scenarios. One of that attractions of reporting on Tucows is that Ting's business strategy is relatively straightforward and easy to model with a limited number of inputs. For another example of a company I own stock in and follow closely, go to my report on Phillips 66 (PSX), a much larger and more complex company.
There are three reasons I am making this information available publicly. First, I find I am more careful in my work and systematic in my approach to stock valuations when I know other people are looking at my work. Second, I would like readers of this article to send their comments, appraisals, and criticisms of my work to hughpickens at gmaildotcom so I can incorporate their ideas into my approach and improve my financial model. Third, Tucows is a small cap with a market cap of just over $300 million that is thinly traded and only being followed by three analysts. I would like the stock to become better known because I think Tucows' value will rise in a more efficient and liquid market.
This web site is not affiliated in any way with Tucows. This web site is operated by a private investor who owns stock in the company and uses this web site to follow the company. All information on this web site comes from publicly available sources. Nothing in this report is to be taken as a recommendation to buy or to sell stock in Tucows.
Tucows Business Analysis
Other sections of this report on Tucows include:
- Introduction and Overview
- Tucows Business Analysis
- Ting Financial Model
- Risk Factors
- Latest News about Ting and Tucows
- Ting Towns Get Fiber
- What Analysts Say About Ting and Tucows
- Insider Activity at Tucows
- Financial Statements and External Links
- About the Author
Tucows Inc. is an Internet services and telecommunications company, headquartered in Toronto, Ontario. The company is one of the largest domain registrars and operates Hover, a webhosting service, and OpenSRS, a platform for domain resellers. The company was formed in Flint, Michigan, in 1993 to provide users with downloads of freeware and trial versions of shareware. The name originally was an acronym for "The Ultimate Collection Of Winsock Software". The Tucows logo is two cow heads, a play on the homophone "two cows."
In February 2012, Tucows launched Ting, a mobile virtual network operator (MVNO). An MVNO is a wireless communications services provider that does not own the wireless network infrastructure over which the MVNO provides services to its customers. The MVNO enters into a business agreement with a mobile network operator to obtain bulk access to network services at wholesale rates, then sets retail prices independently. In Tucows case, the wireless service provider is Sprint. While Sprint provides the wireless network, Ting provides customer service, billing support systems, marketing, and sales personnel. Consumer Reports reported in November, 2014 that Ting is the highest rated small mobile service provider with the best customer service of any MVNO. According to Glenn Derene, the Electronics Editor for Consumer Reports, “Smaller providers like Ting, Consumer Cellular, and Republic have excellent satisfaction ratings because they’re designing innovative strategies to keep plan costs down for their customers and simplify their service options.”
Ting's launch coincided with a rise in Tucows (TCX) stock price and since Ting's launch, Tucows (TCX) stock price has more than quintupled.
The most important single fact about Tucows is that the company operates two different business segments:
- A predictable, steady, low growth, low margin wholesale domain name registrar business (Tucows is the third largest ICANN-accredited registrar in the world and the company is the largest publicly traded registrar) and
- A high margin, high growth mobile telco business that is attempting to disrupt a huge industry with large, entrenched incumbents.
The first business is as a wholesale reseller of domain names with over 8 million domain names under management. The domain service business segment of Tucows has a large volume but modest profit margins. The domain name business is a mature business with low margins, large cash flow, steady profits and slow growth.. The business is extraordinarily "sticky." Once someone buys a domain name from the retail side of Tucows or from one of Tucows' resellers, they almost never change providers because it is a lot of trouble to transfer a domain name to a new domain name company.
The MVNO side of the business is very different from the domain name side. The MVNO business generates high profits with gross margins of 45 percent. The MVNO business is also high growth with a customer base that increases by 10 to 15 percent every quarter. Although Tucows MVNO business is only in their third year of operation, it is already a significant contributor to the company's bottom line. There are many competitors but no single company dominates the MVNO business space. MVNOs are experimenting to find the best way to target customers, advertise their plans, acquire new business, provide customer service, and bill customers to become a profitable enterprise.
One thing that Ting has in common with Tucows' domain services business segment is that both segments provide world class telephone based customer service. Tucows has been able to transfer their experience in telephone based customer service from the domain name business segment to their MVNO business where customer service has become Tucows' prime differentiator from its competitors.
Consumer Reports reported in November, 2014 that Ting is the best small mobile service provider with the best customer service of any MVNO. According to Glenn Derene, the Electronics Editor for Consumer Reports, “Smaller providers like Ting, Consumer Cellular, and Republic have excellent satisfaction ratings because they’re designing innovative strategies to keep plan costs down for their customers and simplify their service options.”
Incremental Contributions From Tucows Domain Services and Ting
The following is historical data taken from Tucows financial reports since Q1 in 2013 when Tucows began breaking out financial results from Ting. The spreadsheet shows the incremental contributions from Tucows' Domain Services and Ting.
|Spreadsheet 1: 08-08-2016||2013: Q1||2013: Q2||2013: Q3||2013:Q4||2014: Q1||2014: Q2||2014: Q3||2014: Q4||2015: Q1||2015: Q2||2015: Q3||2015: Q4||2016: Q1||2016: Q2|
|Net Revenue All Domain Services||$27,637,000||$27,439,000||$30,919,000||$33,139,000||$27,690,000||$27,328,000||$29,125,000||$27,636,000||$27,541,000||$27,471,000||$28,011,000||$27,738,000||$27,771,000||$28,468,000|
|Cost of Revenue All Domain Services||$19,968,000||$20,068,000||$20,672,000||$24,901,000||$20,035,000||$19,696,000||$20,192,000||$20,067,000||$19,464,000||$19,752,000||$19,569,000||$20,050,000||$19,861,000||$19,940,000|
|Incremental Contribution from Tucows Domain Services (Before Taxes and Other Expenses)||$7,669,000||$7,371,000||$10,247,000||$8,238,000||$7,655,000||$7,632,000||$8,933,000||$7,569,000||$8,077,000||$7,719,000||$8,442,000||$7,688,000||$7,910,000||$8,528,000|
|Net Revenue Ting||$2,348,000||$3,734,000||$4,718,000||$5,729,000||$6,712,000||$8,260,000||$9,749,000||$11,166,000||$12,927,000||$15,418,000||$16,541,000||$17,292,000||$17,839,000||$18,999,000|
|Cost of Revenue Ting||$2,110,000||$2,940,000||$3,597,000||$3,975,000||$4,281,000||$5,040,000||$5,794,000||$6,755,000||$7,345,000||$8,499,000||$9,211,000||$9,188,000||$8,989,000||$9,910,000|
|Incremental Contribution from Ting (Before Taxes and Other Expenses)||$238,000||$794,000||$1,121,000||$1,754,000||$2,431,000||$3,220,000||$3,955,000||$4,411,000||$5,582,000||$6,919,000||$7,330,000||$8,104,000||$8,850,000||$9,089,000|
|Incremental Contribution from Ting and Domain Services||$7,907,000||$8,165,000||$11,368,000||$8,238,000||$10,086,000||$10,852,000||$12,888,000||$11,980,000||$13,659,000||$14,638,000||$15,772,000||$15,792,000||$16,760,000||$17,617,000|
|Net Income per Share||0.04||0.12||0.24||0.16||0.25||0.21||0.29||0.29||0.42||0.39|
|Closing Share Price the Day After Earnings Report||14.23||16.30||16.35||18.43||18.85||23.91||27.42||19.96||24.16||27.62|
Note 1: Incremental earnings reflect the contribution of the business segment before taxes and other expenses.
Note 2: Tucows began using Adjusted EDITDA as a financial metric beginning Q1 2014. Tucows has not yet provided the Adjusted EDITDA figures for Q4 2014.
Note 3: All information in this table compiled from the following Tucows' earnings results:
- Tucows' (TCX) Q3 2015 Results November 5, 2015
- Tucows' (TCX) Q2 2015 Results August 6, 2015
- Tucows' (TCX) Q1 2015 Results May 7, 2015
- Tucows' (TCX) Q4 2014 Results February 11, 2015
- Tucows' (TCX) Q3 2014 Results November 12, 2014
- Tucows' (TCX) Q2 2014 Results August 12, 2014
- Tucows' (TCX) Q1 2014 Results May 14, 2014
- Tucows' (TCX) Q4 2013 Results February 12, 2014
- Tucows' (TCX) Q3 2013 Results November 13, 2013
- Tucows' (TCX) Q2 2013 Results August 8, 2013
- Tucows' (TCX) Q1 2013 Results May 15, 2013
Tucows Foreign Exchange Strategy
Tucows is a Canadian company that earns most of its revenue in U.S. dollars, while most of their operating expenses including labor costs, rent, and utilities are in Canadian dollars. Up until the end of 2014 the Canadian Dollar was strong against the US Dollar so the company engaged in foreign exchange hedging to provide certainty around future costs. Tucows CEO Elliot Noss said on November 20, 2014 during the 2014 Q3 conference call that with the strengthening of the US Dollar, Tucows foreign exchange strategy will change and Tucows will go unhedged starting in 2015 to take advantage of the favorable exchange rates. "The appreciation of the Canadian dollar has been a bit of a headwind really over the last decade or so, as our expenses were that much higher relative to our revenues. You see that reflective in our 2014 numbers and our guidance. However, with the recent weakening of the Canadian dollar, we now have a bit of a tailwind. We have typically hedged out 18 months or so, but are now only hedged through the end of 2014. Thus, if the foreign exchange rate stays more or less in its current range, EBITDA could benefit by as much as $1 million to $1.5 million in 2015 relative to this year."
Max Lukenbach reported on January 18, 2015 in a comment to an article about Tucows in Seeking Alpha that since Noss' announcement, the Canadian Dollar has weakened further and that this will be even more beneficial for Tucows and could "add $2,000,000 to EBITDA" during 2015.
Tony Redondo wrote in Exchange Rates' on January 3, 2015 that "the majority of analysts are predicting further US Dollar strength in 2015 on the back of the strong recovery in the US economy and the monetary tightening policy embarked upon by the US Federal Reserve.
Ting Financial Model
Other sections of this report on Tucows include:
- Introduction and Overview
- Tucows Business Analysis
- Ting Financial Model
- Risk Factors
- Latest News about Ting and Tucows
- Ting Towns Get Fiber
- What Analysts Say About Ting and Tucows
- Insider Activity at Tucows
- Financial Statements and External Links
- About the Author
Example of Model of Tucows' Profitability
Following is an example of a model of Tucows' profitability through Q2:2016:
|Spreadsheet 2: 08-08-2016||2013: Q1||2013: Q2||2013: Q3||2013:Q4||2014: Q1||2014: Q2||2014: Q3||2014: Q4||2015: Q1||2015: Q2||2015: Q3||2015: Q4||2016: Q1||2016: Q2|
|Number of Customers at End of This Quarter||12,000||24,000||36,000||48,000||61,000||73,000||82,000||94,000||103,000||113,000||122,000||128,000||140,000||144,000|
|Customers Net Additions This Quarter to Arrive at Total Customers (Net Adds)||10,000||13,000||12,000||11,000||12,000||11,000||10,000||9,000||6,000||12,000||4,000|
|Quarterly Churn Rate||7.50%||7.50%||7.50%||7.50%||7.50%||7.50%||7.50%||7.50%||8.20%||7.17%||7.20%|
|Average Customer Phone Bill per Quarter||$105||$105||$105||$105||$105||$105||$105||$105||$105||$105||$105|
|Acquisition Costs per New Customer (Gross Adds)||$100||$100||$100||$100||$100||$100||$100||$100||$100||$100||$100|
|Gross Income in This Quarter||$5,040,000||$5,482,313||$6,747,563||$7,919,625||$8,869,875||$10,041,938||$10,895,063||$11,857,125||$12,573,960||$13,543,005||$14,365,680|
|Cost of Goods Sold in This Quarter||$2,772,000||$3,015,272||$3,711,159||$4,355,794||$4,878,431||$5,523,066||$5,992,284||$6,521,419||$6,915,678||$7,448,653||$7,901,124|
|Cost to Acquire New Customers||$1,360,000||$1,757,500||$1,747,500||$1,715,000||$1,905,000||$1,872,500||$1,847,500||$1,815,000||$1,649,600||$2,203,800||$1,436,800|
|Incremental Contribution from Ting (Before Taxes and Other Expenses)||$908,000||$2,467,041||$3,036,403||$3,563,831||$3,991,444||$4,518,872||$4,902,778||$5,335,706||$5,658,282||$6,094,352||$6,464,556|
|Incremental Contribution from Ting per Share (Before Taxes and Other Expenses)||$0.08||$0.22||$0.27||$0.31||$0.35||$0.40||$0.43||$0.47||$0.50||$0.54||$0.57|
|Delta in Incremental per share Contribution from Ting from Previous Quarter||$0.14||$0.05||$0.05||$0.04||$0.05||$0.03||$0.04||$0.03||$0.04||$0.03|
Notes and Assumptions
Note 1: Ting started in February 2012. The model goes back to Q3 in 2013. Prior to the earnings report Q3 in 2013 Tucows did not break out the number of customers or devices.
Note 2: There is a discrepancy of 2,000 customers in the number of customers added for 2014:Q3 due to an new method that Ting used for counting customers. "This is the result of a one-time change in how we measure active accounts."
Note 3: The number of churned customers is calculated by multiplying the monthly churn rate (2.5%) times three months per quarter times the number of customers at the end of the previous quarter. Noss said in the 2014:Q2 earnings conference that "It is also worth mentioning that after 30 days of service when customers tend to determine whether they are getting sufficient network coverage, our churn rate drops comfortably below 2% per month."
Note 4: Elliot Noss stated in the November, 2014 conference call that Ting had 82,000 customers at the end of Q3 and in the February, 2015 call that Ting had 94,000 customers at the end of Q4 for an increase of 12,000. Noss also stated they had added 11,000 net customers. The discrepancy is a rounding error.
Note 5: The "Gross Income" is calculated by multiplying the "Average Customer Phone per Quarter" times the number of customers in the previous quarter plus one half the new customers gained minus one half the lost (chruned) in the present quarter. The factor of one-half is used because it is assumed that customers are added in a steady stream so that on average the new customers added will contribute to the gross income only one half of the quarter.
Note 6: The "Cost of Goods Sold" is calculated by taking the "Gross Income" and subtracting from it the "Gross Income" times the "Gross Margin".
Note 7: The "Cost to Acquire New Customers" is calculated by mulitplying the "New Customers Added During This Quarter to Arrive at Total Customers" plus the "Churned Customers" and multiplying this times the "Acquisition Costs per New Customer".
Note 8: The "Incremental Contribution from Ting (Before Taxes and Other Expenses)" is calculated from the "Gross Income in This Quarter" and subtracting both the "Cost of Goods Sold in This Quarter" and the "Cost to Acquire New Customers".
Note 9: The "Incremental Contribution from Ting (Before Taxes and Other Expenses)" does not include taxes and other expenses which are spread over both the domain services portion to Tucows and the Ting portion of Tucows. This will be factored in at the last step of the process.
Note 10: The "Incremental Contribution from Ting per Share (Before Taxes and Other Expenses)" is calculated by dividing the "Net Income for This Quarter (before Taxes and Other Expenses)" by the 11,321,175 outstanding shares of Tucows.
Note 11: In late January, 2016 PlatinumTel Wireless, also known as PTel, alerted its customers that it will be shutting down the service and included Ting among a few recommended mobile providers. Ting welcomed roughly 7,000 of these customers in Q1 of 2016 as a one-time influx of customers, migrating from another MVNO that closed its doors.
Latest News about Tucows and Ting
Other sections of this report on Tucows include:
- Introduction and Overview
- Tucows Business Analysis
- Ting Financial Model
- Risk Factors
- Latest News about Ting and Tucows
- Ting Towns Get Fiber
- What Analysts Say About Ting and Tucows
- Insider Activity at Tucows
- Financial Statements and External Links
- About the Author
June 7, 2018: Ting Lights Up First Customers in Sandpoint
The Bonner County Daily Bee reported on June 7, 2018 that Ting sent its “crazy fast” fiber intenet to its first two customers on June 6, 2018 marking the culmination of “an incredible amount of work by the Ting team" according to Tucows CEO Elliot Noss. Construction of the fiber network began in early April and the lighting ceremony celebrates the company’s first phase of installation, which includes most of the downtown and central Sandpoint areas. Ting also announced the second phase of its fiber network infrastructure in the south Sandpoint area and the rest of the city may not be far behind. Ting officials anticipate that all of the city will have access to Ting in the next year.
“This is really a game-changer for the city of Sandpoint in terms of an economic driver,” said Sandpoint Mayor Shelby Rognstad. “It really puts Sandpoint on the map and it also raises the bar for quality of life. Quality of life is something we talk a lot about in the community, it’s why people chose to live here and internet, high-speed reliable internet that’s affordable is one of those things that had eluded us for a long time.”
Kate McAlister, Greater Sandpoint Chamber President and CEO, told Noss and the others gathered to celebrate at the lighting ceremony that she remembers that initial meeting from three years ago. As others celebrated, she said she was hesitant, telling Ting officials that the community had been down the road to high-speed internet before only to have it end in frustration. Noss looked at her and said, “we’re going to make it happen.” And, to her delight, she said they have.
June 5, 2018: Ting Announces that Ting TV is Coming soon to Ting Towns
The Ting Blog announced on June 5, 2018 that Ting soon offer Ting TV set-top boxes and DVRs to buy or rent. It will also be viewable in your home on most tablets, smartphones and set-top boxes such as Apple TV and Amazon Fire TV. "With the clear, upfront pricing we’re known for, the best customer support in the game, simple options and smart services that fit into your life, we’re pretty excited for you to get your hands on Ting TV.," wrote Christine Ottoni. "As with everything we do at Ting, Ting TV will be contract-free and feature simple pricing. Your bill will be easy to understand. Where big cable will charge you extra fees for broadcast TV, regional sports and HD channels, all these features are included upfront in Ting TV.
May 28, 2018: Tucows Makes Statement on ICCANN Legal Action
Tucows made the following statement on May 28, 2018 regarding the legal action filed by ICANN against EPAG, a Tucows-owned Registrar based in Bonn, Germany:
Tucows Statement on ICANN Legal Action On Friday the 25th of May, ICANN filed a legal action1 against EPAG, a Tucows-owned Registrar based in Bonn, Germany. This action was taken because of a disagreement between Tucows and ICANN on how the GDPR should be interpreted, with respect to our contracts. While we look forward to defending our position in court, the below is intended to provide some context and insight into the dispute.
The GDPR begins with a statement of its core principle: “The protection of natural persons in relation to the processing of personal data is a fundamental right.” Tucows has long been concerned with privacy and the rights of our customers, and takes the principles enshrined in this law extremely seriously.
In order to have a domain registration system reflective of “data protection by design and default”, we started with the GDPR itself and crafted our procedures and policies around it. We built a new registration system with consent management processes, and a data flow that aligns with the GDPR’s principles. Throughout the registration life-cycle, we considered things like transparency, accountability, storage limitation, and data minimization.
We realized that the domain name registration process, as outlined in ICANN’s 2013 Registrar Accreditation Agreement, not only required us to collect and share information we didn’t need, it also required us to collect and share people’s information where we may not have a legal basis to do so. What’s more, it required us to process personal information belonging to people with whom we may not even have a direct relationship, namely the Admin and Tech contacts.
ICANN’s goal since discussions about the impact of the GDPR on domain registration began has been to preserve as much of the status quo as possible. This has led ICANN to attempt to achieve GDPR-compliant domain registration via ‘process reduction’, as opposed to Tucows’ approach of starting with the GDPR and rebuilding from the ground up. These two approaches have led to significantly different results, and consequently a need to determine whether ICANN’s insistence on the collection of the full thick Whois data and this data’s transfer to gTLD Registries is in compliance with the GDPR. It is this disagreement and need for legal clarity that is at the heart of the lawsuit filed by ICANN.
— On the 17th of May 2018, the ICANN board passed a ‘Temporary Specification2‘, meant to temporarily bring gTLD registration services in line with the GDPR. The goal of the Specification is to serve as a stop-gap while the ICANN community works to resolve and balance issues between privacy law and existing ICANN policy.
With that background in mind, we perceive three core issues with the Temporary Specification that we do not believe are compliant with the GDPR. These issues are the collection, transfer, and public display of the personal information of domain registrants and the other contractually-mandated contacts.
Personal Data Collection Article 5(1)(c) of the GDPR speaks to data minimization: collecting and processing only what personal data is necessary. It is clear to Tucows that we need to continue capturing some information about the domain Registrant—we always want to ensure we have the ability to contact the person legally responsible for the domain. However, in the vast majority of gTLD registrations, the Registrant (Owner), Admin, and Tech contacts are the same. As such, collection of Admin and Tech contacts is meaningless, as the data belongs to the Registrant.
That said, in the less common scenario, the Admin or Tech contact does not match the Registrant. In these cases the mandatory collection of their contact data is problematic because it requires us to store and process personal data belonging to people with whom we have no legal or contractual relationship.
ICANN will need to prove that the minor, marginally incremental benefit of collecting, processing and transferring Admin and Tech contact data at the request of third parties outweighs the principles of data minimization and lawful processing enshrined in the GDPR. We find the argument that duplicative technical contacts are necessary for the security and stability of the DNS implausible. We were not convinced this was the case when we first examined the law, and we remain unconvinced following the release ICANN’s Temporary Specification.
Tucows will continue to ensure that those with legitimate purposes, including law enforcement, intellectual property, and commercial litigation interests will have access to domain registrant information. On a daily basis, we see plenty of important circumstances wherein we find sharing that information to be legally is necessary, and this will not change. We collect a contact for the owner of each domain name sold on our platforms, and have the ability to contact the owner. When necessary, we also share that contact with law enforcement and others with a legitimate interest.
Personal Data Transfer to a Registry ICANN’s continuing requirement that registrars transmit all data collected to the relevant registry is counter the GDPR’s principle of use of data only when a legitimate legal basis applies. There are circumstances where this transfer is necessary and reasonable, for example where a TLD has specific registrants requirements such as geographic restrictions. We are not opposed to these circumstances, but require agreements between ourselves and the registry for the specific collection, processing and transfer of that personal data.
However, as the registrar, we collect data that we need in order to enter into a contractual relationship with and provide requested services to the registrant. Transfer of that data to a registry is unnecessary—this is proven by the decades-old ‘thin model’ that 140 million .com and .net domains follow. We don’t feel that the temporary specification offers a robust legal basis for the transfer of data to registries and therefore presents an unacceptable risk under the GDPR.
Personal Data Display ICANN has also required that we continue to publish the organization, state/province, and country fields in the public Whois. We disagree that the organization should be published because, although it is optional, many people do not realize this and put their own first and last names in the organization field. We do not want to expose the personal data of these registrants because of a misunderstanding, and it will take considerable time to educate registrants and cleanse this data from the field.
Desire for Clarity Fundamentally, ICANN and Tucows disagree on how the GDPR impacts our contract. The facts and the law as we see them do not support ICANN’s broader view of what will impact the security and stability of the internet. Neither do we find the purposes outlined in the temporary specification proportional to the risks and consequences of continuing to collect, process and display unnecessary data. We look forward to, and welcome the clarity that will come from this legal action.
May 25, 2018: ICANN Files Legal Action against Tucows Registrar over GDPR
Domain Name Wire reported on May 25, 2018 that ICANN has filed injunction proceedings against EPAG, a domain name registrar owned by Tucows (NASDAQ:TCX), in a challenge meant to get clarity on the European Union’s General Data Protection Regulation (GDPR). EPAG is a German registrar that Tucows acquired in 2011. EPAG has told ICANN that it will no longer collect administrative and technical contact details because it believes doing so will violate GDPR. ICANN has taken this step to ask the court for assistance in interpreting the European Union's General Data Protection Regulation (GDPR) in order to protect the data collected in WHOIS. ICANN's "one-sided filing" in Bonn, Germany, seeks a court ruling to ensure the continued collection of all WHOIS data, so that such data remains available to parties demonstrating legitimate purpose to access it, consistent with the GDPR.
May 10, 2018: Ting Fiber Announces Expansion to South Sandpoint
The Sandpoint Reader reported on May 10, 2018 that Ting Fiber has announced that they’re expanding their installation plans into south Sandpoint. This expansion is sometimes referred to as “Phase 2.” “Although we are announcing Phase 2 tonight, our goal is to get most, if not all, of the Sandpoint city limits done by the end of the year including west of Division and around the airport,” said Ting’s VP Networks Adam Eisner. “We are also dedicated to lighting up downtown.” Ting announced Phase 2 during a community hall event on May 7, 2018 at the Panida. Along with Eisner, the Sandpoint’s local Ting team was all there. Ting Sandpoint City Manager Kari Saccomanno said every Sandpoint team member is from this area, including herself.
April 30, 2018: Ting Internet to Bring Gigabit Fiber Internet to Fuquay-Varina, NC
Tucows issued a press release on April 30, 2018 reporting that Fuquay-Varina, NC will be the next town to get gigabit fiber Internet from Ting. Ting has an established market in neighboring Holly Springs, NC, so building a network in Fuquay-Varina will leverage the existing operation and enable us to break ground much faster than might otherwise be possible.
"Fuquay-Varina is one of the fastest growing towns in North Carolina. High-speed fiber optic broadband is the key to modern communications, economic growth, and access to a world of opportunities. Having Ting bring 'crazy fast fiber Internet' to Fuquay-Varina is very positive for our fast-growing town. It provides greater choices for citizens to connect to the Internet and helps the town prepare for the future," said Mayor John W. Byrne.
"Over the past 15 months, the Town of Fuquay-Varina has been building a fiber network to ensure that town facilities have sufficient network capacity to meet needs now and in the future," said Town Manager Adam Mitchell. "Taking a proactive approach to planning and investing in fiber infrastructure has made the Town attractive to service providers. We are excited that Ting is coming to Fuquay-Varina."
“I regularly meet residents from Fuquay-Varina at Ting events in Holly Springs. They are frustrated with their existing Internet options and often ask if Ting will expand to serve Fuquay-Varina,” said Todd Rubin, Area Manager for Ting. “Likewise, Fuquay-Varina has everything we love about a town. It’s smart, it’s growing, there’s a progressive, entrepreneurial spirit here. We can’t wait to get started.”
Ting expects to light the first customer on its crazy fast fiber network in Fuquay-Varina before the end of the year. Fuquay-Varina's population has doubled in the past 10 years to over 25,000 citizens making it one of the fastest growing towns in North Carolina!
April 4, 2018: Adding Fiber Optic Conduit in Centennial Increases Property Value by 3%
Villager Publishing reported on April 4, 2018 that as Ting has been installing conduit in Centennial, some residents have been distressed by the digging on the right of way. What residents may not realize is that the conduit that is being laid (six to eight feet underground) likely will result in a 3 percent increase in the value of their property, according to Ting. Ting's City Manager for Centennial, Mark Gotto, concedes that some residents have complained about the digging on the right of way that extends into their yards. He states that Ting tries its best to restore the property at the conclusion of the digging. The rights of way have to do with Ting’s digging in areas that many residents have not realized exist on their property. Generally, for properties inside a city, the municipal entity has a right of way (a license) for use (but not ownership) of the front of the property, for two to four feet. If there is a strip of land at the front of the property, then a sidewalk, then the property, there generally is a right of way inside the sidewalk.
March 20, 2018: Charlottesville Council Member Proposes Low Cost Fiber for Public Housing
The Daily Progress reported on March 20, 2018 that Charlottesville City Councilor Wes Bellamy is proposing that the city consider allocating $150,400 to subsidize installation and hardware costs to residents of Charlottesville’s public housing. If the plan is approved, public-housing residents will pay only $10 a month for the “crazy fast fiber internet” service Ting touts in its promotions. “I think it’s a phenomenal deal, especially when we talk about building equity and closing the digital divide while making sure that everyone has the opportunity to be as successful as possible,” said Bellamy.
If Bellamy’s proposal is approved, the money would be drawn from a contingency fund for capital projects. The contingency fund currently has $8.4 million in it, but the proposed budget for fiscal year 2019 includes a $2.2 million transfer from the fund. Ting already provides free internet service to about a dozen local nonprofits and community organizations. Bellamy, a council representative on the housing authority’s board of directors, said he started speaking with officials from Ting about the idea last summer. “Around November, there was a request from the housing authority on what we can do to provide internet service to our public housing sites,” Bellamy said. “Ting was listening to that conversation, and what we came up with is an offer that, in my personal opinion, is one we can’t refuse.”
While Ting has been operating in the city for about three years, several parts of the community remain unconnected to its fiber-optic network. Webb said the company is planning to finish expanding its service throughout the city in the next year. “We are concurrently expanding into neighborhoods in Albemarle County surrounding Charlottesville where we have a high level of pre-orders for service,” she added.
March 16, 2018: Ting is Making Steady Progress in Centennial
The Ting Blog reported on March 16, 2018 that Ting Fiber is working on Phase 1A in Willow Creek 1 and 2 and Phase 1B in Walnut Hills and Hunters Hill simultaneously.
We began work in Willow Creek 1 and 2 in early January of this year. We’re happy to say we’re on track to start installing customers in these neighborhoods six months from the start of construction, in the summer of this year. In February we began construction in Walnut Hills and Hunters Hill while continuing our work in Willow Creek 1 and 2. We expect to finish construction in Walnut Hills and Hunter Hill this summer. From there we’ll begin lighting individual homes and businesses.
March 1, 2018: Ting Signs 20-Year Lease for Fiber Backbone in Centennial
The Denver Post reported on March 1, 2018 that the city of Centennial has signed a 20-year lease with Ting to use the city’s new fiber backbone. Ting will pay a one-time fee of $302,500 for use of 12 strands of the city’s new 432-strand fiber backbone, which was built to improve communications for emergency workers, businesses and the city. Ting also will pay an annual lease of $4,325, which would increase 3 percent a year for operations and maintenance costs. The fees are “consistent with industry standards,” the city said. Ting is building the “last mile” of internet connecting homes and businesses to the city’s main internet backbone and plans to be “lighting up” customers six months after construction begins. Centennial still is building out a 50-mile fiber backbone that will cover most of the city by the end of the year.
February 15, 2018: Tucows Introduces New Domain Pricing Structure
The Open SRS blog reported on February 15, 2018 that beginning March 19, 2018, Tucows will introduce a new pricing structure for domains that will involve increases in list prices and a move to a tiered, four-plan pricing structure that offers resellers greater discounts by rewarding strong performance and growth. "Instead of offering a single price point for each TLD, we’ll provide discounted pricing based on new domain registration volume and annual domain spend. This change marks a significant departure from our current model and will make our pricing more flexible while maintaining a high-level of transparency. We’ve also taken the opportunity to simplify our TLD classification, reducing it to two categories – generic and geographic."
February 14, 2018: Ting Internet Publishes 2017 Build Scorecard
On February 14, 2018 Ting published their Build Scoreboard for 2017 showing an estimate of how many serviceable addresses Ting has built to so far in each of the five Ting Internet towns and project the total potential build in each town. "We will update this annually to help shareholders easily track both progress and potential," said the post. The scorecard shows 85,000 serviceable addresses, 16,000 serviceable addresses completed, and 4,500 subscribers.
February 14, 2018: Tucows Announces $40 Million Stock Buyback Program
Tucows issued a press release on February 14, 2018 announcing that its Board of Directors has approved a stock buyback program to repurchase, from time to time, up to $40 million of its common stock in the open market. The new $40 million buyback program will commence February 14, 2018 and will terminate on or before February 13, 2019. Purchases for the new $40 million buyback program will be made exclusively through the facilities of the NASDAQ Capital Market. The previously announced $40 million buyback program for the period March 1, 2017 to February 28, 2018 has been terminated. All shares purchased by Tucows under the stock buyback program will be retired and returned to treasury.
The timing and exact number of common shares purchased will be at Tucows’ discretion and will depend on available cash and market conditions. Tucows may suspend or discontinue the repurchases at any time, including in the event Tucows would be deemed to be making an acquisition of its own shares under Rule 13e-3 of the Securities Exchange Act of 1934, as amended. Subject to applicable securities laws and stock exchange rules, all purchases will occur through the open market and may be in large block purchases. Tucows does not intend to purchase its shares from its management team or other insiders. The purchase will be funded from available working capital and existing credit facilities. As of February 13, 2018, Tucows had 10,588,958 common shares outstanding.
February 3, 2018: Ting Official to Speak at Sandpoint Chamber Luncheon
The Bonner County Family Bee reported on February 3, 2018 that Kari Daarstad Saccomanno, the new city manager for Ting will be presenting information regarding Ting Fiber and the construction rollout in Sandpoint. Kari will also introduce the new Ting team members. “I’m excited to be a part of Ting and very excited for what new opportunities it can bring to my hometown with not only fast fiber, but exceptional customer service and sincere community involvement,” said Kari.
February 2, 2018: Ting Fiber Rents Space in Centennial
BusinessDen reported on February 2, 2018 that Ting Fiber leased 7,557 square feet at 6981 S. Quentin St. in Centennial. Brady Alshouse and Tyler Voell represented the tenant.
January 30, 2018: Ting Fiber Begins Construction of Phase 1B in Walnut Hills and Hunters Hill in Centennial
The Ting Blog reported on January 30, 2018 that Ting Fiber is starting construction in Phase 1B of their fiber network build, which is made up of Walnut Hills and Hunters Hill. Construction in Phase 1B will occur while Ting Fiber continues with their work in Phase 1A in Willow Creek 1 and 2. "Ting fiber network construction will start in Walnut Hills and Hunters Hill in early February and we anticipate we’ll be lighting up customers in this area six months from the start of construction," says the blog. "If you’re not in Phase 1A or Phase 1B, don’t worry. We’re still in the early days of the build. We’ll continue to build, neighborhood by neighborhood, bringing fiber to homes and businesses in Centennial. If you’re located in Walnut Hills and Hunters Hill, you’ll see our crews out and about in the coming weeks. We’ll be working in the public right-of-way, which is the 5 to 12 feet on the street side of your home that’s owned by the City and that is reserved for utilities, or in some circumstances in an “easement,” controlled by your HOA. While many utilities work at the back of properties, Ting fiber network construction will be happening in the front. Find out more about the construction process and what to expect when we roll up with our trucks."
January 11, 2018: How Fiber Installation is Going in Centennial
The Ting Blog reported on January 11, 2018 how fiber construction is going in Centennial:
Phase 1 construction has started: Willow Creek 1 and 2 Leading up to the start of construction, our team and the City of Centennial worked together to get all the necessary permits and paperwork together in order for Ting to be able to work in the City right-of-way. We began construction in Willow Creek 1 and 2 in December and have been making steady progress. So far, our construction efforts have been focused on installing conduit in the City right-of-way. Most of this work consists of trenching and digging to install conduit in the ground. Ting’s conduit contains several smaller internal conduits. These smaller internal conduits will eventually hold fiber optic cables which are distributed to each street and customer.
As we install conduit, our teams put in splice domes, which are access points used to join or connect fiber to the network in the field. You may also notice access hatches in the neighborhood. These access hatches are known in industry parlance as flower pots. Flower pots allow workers to access fiber easily and at regular intervals between homes. We’ve also installed fiber cabinets. These cabinets look similar to other utility cabinets but are different in that they house fiber-optic cables, which are run to cabinets to serve specific areas. Customers will be able to connect to these cabinets and to the network at large.
You can read more about what to expect from construction as we continue to work on Phase 1. We’re hard at work wiring Willow Creek and expect to begin lighting up customers in Willow Creek 1 and 2 this summer.
January 9, 2018: Tucows Initiates BTAPPA Transfer, Does Not Believe Namecheap Litigation is a Material Pending Legal Proceeding
Reuters reported on January 9, 2018 on an8-K filing from Tucows that says that pursuant to a court order, Tucows took steps to transfer certain domain names from Enom to the Namecheap Platform:
In an order dated January 4, 2015 and issued January 5, 2018 (the “January 5, 2018 Order”), the court in Namecheap, Inc. v. Tucows, Inc., et al., No 17-2-26522-5-SEA (Wash. King Cty. Sup. Ct.), clarified an injunction order against Tucows, Inc. (the “Company”) pursuant to which the Company has complied by taking steps to transfer certain domain names from the eNom, LLC platform to the Namecheap, Inc. (“Namecheap, Inc.”) platform using a method called a Bulk Transfer After Partial Portfolio Acquisition.
By way of background, on August 30, 2017, Namecheap filed a complaint against the Company, eNom, Inc., and unknown John Does in the United States District Court for the Western District of Washington alleging breach of contract, breach of the implied duty of good faith and fair dealing, and unjust enrichment (the “Namecheap Federal Action”). Namecheap voluntarily dismissed the Namecheap Federal Action without prejudice on October 10, 2017. That same day, Namecheap filed a substantially similar complaint against Tucows Inc., eNom, LLC and unknown John Does alleging breach of contract and breach of the implied duty of good faith and fair dealing in Washington State Court, King County (the “Namecheap State Action”). In the Namecheap State Action, Namecheap sought preliminary and ultimate equitable relief by way of the transfer of approximately 2.7 million domain names from the eNom, LLC platform to the Namecheap platform using BTAPPA. By Order dated November 15, 2017, the Court granted Namecheap’s Motion for Preliminary Injunction and the Company complied therewith in taking steps with Namecheap towards the BTAPPA. The Court ordered Namecheap to post a bond against damages sustained by the Company. The Company sought clarification from the Court on one BTAPPA requirement which the Court provided in the January 5, 2017 Order. The BTAPPA transfer was initiated on January 8, 2018. In addition to the equitable relief it has sought, Namecheap also seeks direct and consequential damages in the Namecheap State Action
The Company believes that the claims lack merit and intends to defend them vigorously. The Company also believes that the November 15, 2017 Preliminary Injunction Order was entered in error, and that Order is subject to appeal. The Company does not believe that this litigation is a material pending legal proceeding.
January 9, 2018: Law Firms Johnson Fistel and Faruqi & Faruqi Announce Investigations of Tucows
PR Newswire reported on January 8, 2018 that the law firm Johnson Fistel, LLP, announced they are investigating potential violations of federal securities laws by Tucows in a press release that asserted the following:
On January 8, 2018, Copperfield Research issued a report stating that Tucows failed to disclose a lawsuit "that should imminently result in the loss of 11% of the Company's revenue producing domains; nine insiders who sold $21 million of stock while hiding the fact its eNom subsidiary was being sued by its largest partner for breach of contract; and a laundry list of accounting shenanigans and financial irregularities." If you have information that could assist in this investigation, including former employees and others, or if you are a Tucows shareholder and are interested in learning more about the investigation or your legal rights and remedies, please contact Jim Baker.
Faruqi & Faruqi, LLP, a self described leading national securities law firm, also announced they are investigating potential claims against Tucows and asked Tucows shareholders to contact their firm.
January 8, 2018: Short Seller Copperfield Research Targets Tucows with Misleading Report
Domain Name Wire reported on January 8, 2018 that short seller Copperfield Research has released a report targetting Tucows titled “Cashing in on Neo-Nazis, Child Porn, & A Hidden Lawsuit as Insiders Dump”. According to Andrew Alleman, the report highlights three major grievances with Tucows:
- All three of its business segments have issues,
- It is helping people operate unsavory websites, and
- It hasn’t disclosed its imminent loss of domains to Namecheap
"The hyperbole-filled report has some valid points," says Alleman, "but I’m the type of person who sees a few misleading statements and then assumes that many of the other statements are wrong." Shares in Tucows are down about 8%. After opening the year around $70 they are now trading for $55.
December 29, 2017: Tucows Stock Closes on Record High, Nearly Doubling in 2017
Tucows stock closed on a record high of 70.05 for 2017 nearly doubling in the past year from a close of 35.20 for 2016. TCX rose 98% in the past year while Amazon rose 53% and the S&P 500 rose 19% over the same period.
December 21, 2017: Court Orders Tucows to Transfer 3.2 million Domains to Namecheap
Domain Name Wire reported on December 21, 2017 that a court has ordered Tucows to transfer 3.2 million .com and .net domain names to Namecheap, and an appeals court has denied (pdf) Tucow’s motion for an emergency stay. Earlier this year, Namecheap requested that Tucows transfer domain names that Tucows acquired when they purchased Enom, and Tucows balked at Namecheap’s request to do the transfer through a “Bulk Transfer After Partial Portfolio Acquisition”, or BTAPPA. Namecheap already has approval from .com/.net registry Verisign to do a BTAPPA transfer of the 3.2 million .com and .net domains. Namecheap believes the deadline for doing the transfer is the end of 2017, so it asked the court for an injunction forcing Tucows to comply in a timely manner. The court agreed and demanded that Tucows comply with the transfer. "Namecheap represents a large portion of Enom’s revenue, historically accounting for about 25% of Enom’s domains under management. While margins on the registrations slim, Enom gets to keep 100% of expired domain revenue and all parking revenue during registrations and during the expiration cycle," writes Andrew Alleman. "This gives Tucows an incentive to delay the transfer as long as possible. At the same time, it risks bad will with reseller customers who will now question how they will be able to transfer off the platform should they want to in the future."
History of the Namecheap Lawsuit
Read more about the history of the Namecheap Lawsuit at:
- September 25, 2017: Tucows Responds to NameCheap Lawsuit
- September 1, 2017: Namecheap Files Suit For Bulk Transfer of 4 Million Domain Names
December 18, 2017: Ting Explains How Fiber Optic Infrastructure Gets Built
The Ting blog published a long post on December 18, 2017 that includes some of the specifics about how Ting builds networks and partners with your community to bring crazy fast Internet to American homes and businesses. Some excerpts:
Identifying a town
There’s no one factor that makes a town or city a candidate for Ting crazy fast fiber Internet. It’s a combination of density, desire and demographics. We’re fortunate to hear from people and municipalities that want the benefits fiber brings. We invite town leadership and citizens to open the conversation. There are things that municipal leadership can do to make their town or city more attractive to a fiber Internet provider like Ting. We’ll leave it to the boss to run through a few of those.
Planning and design
Once we decide to go ahead, we start planning the fiber build. Ting partners with city staff and officials and together we take a look at existing infrastructure. We look for utility paths and explore permitting options in the easement or right-of-way. Permitting is a large part of our planning process and is highly collaborative work between Ting and local officials. We explore the type of fiber construction methods we’ll use. Every town’s needs are different and where one town might be prepared for fiber running through conduit underground, other localities might require aerial installation with the fiber carrier medium strung along utility poles. Ting works with municipal offices to ensure we’re following all construction and contracting best practices and laws. Design is a key part of planning and we carefully map out the route of our fiber network build in phases. You can read a bit more about how demand plays into our design plans below under Pre-order.
When we start planning and designing the network, there’s a good chance you’ll see our Ting Team out and about at some events in your town. We start by hosting town hall meetings where the community can come out and ask questions about Ting fiber. We also attend and sponsor local events like farmer’s markets, pool parties, festivals and more so community members and residents have a chance to say hello and ask us about fiber Internet in general or Ting in particular. We hire locally for most construction, build management and local marketing roles. You’ll also be able to find us easily online on Facebook, Twitter, Instagram and reddit. You can post on our wall, respond to a Tweet or drop us a line whenever you want. We’re always available to talk or answer any questions.
You can pre-order Ting as soon as we announce we’re coming to town. What’s does pre-ordering mean? Aside from securing the best possible discount on installation (up to an including the full cost of installation and then some), a $9 pre-order is a more than just a deposit. It’s a vote for your neighborhood to get fiber first and it puts you and other pre-orders at the top of the list when we start building on your street. There are many factors that go into determining where the fiber build begins in your town. Pre-order density is a deciding factor and something that anyone who’s interested can do easily. We tend to build where there’s the most demand first. It just makes sense. When we announce construction in a particular neighborhood we’ll also let that area know what their deadline is to pre-order. Send us your pre-order by the deadline to get the best possible discount on Ting Internet.
We announce we’re breaking ground on our blog, with an email to everyone that pre-ordered in your town and with dedicated communications for the neighborhoods affected. We’ll let you know what to expect from construction, talk about the construction methods we’ll be using and provide contact information for our local construction team should you have any questions or concerns. We announce our build in phases, leading with a Pilot Phase or Phase 1, and roll out subsequent phases from there. Construction timelines depend on a lot of factors including permitting from municipalities, state transportation departments and even other existing utilities. We split construction into two main stages. We like to call the first dirt and hard work. This is where our teams dig to put conduit in the ground. Conduit carries the super thin glass fibers that will carry information to homes and businesses.
The last step as far as an end user is concerned is getting connected. If you pre-ordered, the Ting Internet valet team will reach out to schedule your installation as soon as possible. It’s worth noting that our installation appointments are appointments, not broad windows. Fiber comes to your home or business in a little white plastic square. In industry parlance, an ONT or “optical network termination.” From there, you can plug in your Ting Internet Box or use your own router. We strongly recommend the Ting Internet Box because it’s built for gigabit speeds and offers super fast Wi-Fi to all your devices, too. Installation can take up to three hours. Most of the work is done outside and the install team only needs to be inside for about an hour. Our install team will bring the fiber cable to your home or business from the main fiber network and will set up your Ting Internet Box so you’re ready to go.
Fiber to the home
So, there you have it. The long story of how fiber goes from hope to reality to your home or business. Connecting cities and towns street by street, business by business, house by house, is a big job. Fiber is the only infrastructure that’s built specifically with the Internet in mind. It replaces aged copper networks to bring fast and, equally important, reliable Internet access. Bringing fiber to town means much more than just better Internet access today. It brings potential for a better tomorrow.
- Watch the video on How a town can make itself more attractive to a fiber ISP
- Watch the video on Building a Fiber Network, part 1
- Watch the video on Building a Fiber Network, part 2
December 15, 2017: Ting Takes Top Honors Again in Consumer Reports’ 2017 Cell-Phone Service Survey
Consumer Reports reported on December 15, 2017 that Consumer Cellular, Project Fi, and Ting took the top spots this year in Consumer Reports’ 2017 Cell-Phone Service Survey, as they did in 2016 and were the only companies to receive the highest rating for customer support. "As a group, prepaid services, where customers pay in advance for packages of voice minutes, text messages, and data, received higher scores for value. Companies such as Project Fi, Ting, and Republic Wireless keep rates low by leaning heavily on WiFi networks, even for making phone calls and sending text messages. And they charge customers only for the data they use rather than a monthly allotment of data they might not need."
December 15, 2017: Tucows Explains Why It Doesn’t Take Down Domains for Website Content Issues
Tucows has a new post on their main web site explaining why it is neither appropriate nor effective to resolve content issues at a Registrar. "We do not see ourselves, or similar infrastructure companies, as the appropriate arbiters of what content belongs on the Internet," writes Tucows. "That power belongs to agencies of justice and should continue to be exercised via due process."
Tucows and its domain-related brands (OpenSRS, Enom, and Hover) are Registrars. It’s important to understand what a Registrar is, and what it can and cannot do. Registrars manage the technical infrastructure, which enables the buying and management of domain names. Domain names are not websites; they are strings of characters (such as ‘example.com’) and act as a human-friendly layer that points to a website. Web-hosting companies, rather than Registrars, provide the services that allow website content to be available online, making that content accessible to Internet users. Tucows cannot exercise control over the content of a website pointed to by a domain registered via our platform. Because we’re not a web-hosting company, we cannot remove specific pages or content on a website. The tools available to a Registrar to address content issues are very blunt; we can only suspend a domain, or force the registrant (owner) to move it elsewhere. We don’t consider forcing a registrant to transfer domains off our platform to be a compelling solution for multiple reasons: 1. It resolves nothing with transgressive website content. Forced transfers only push domains pointing to problematic website content elsewhere, which is both unfair to our competitors and devoid of actual resolution. 2. Multiple domains from multiple registrars may be pointed at a single website, limiting the efficacy of suspending any one single domain. If a domain is suspended, a replacement domain may be registered, pointed, propagated, and socialized in minutes, leading to an endless game of whack-a-mole. To be clear, asking a Registrar to suspend a domain is an ineffective method of resolving content issues. The content can be relabeled, quickly and easily, with a new domain name, or accessed by use of an IP address. Web-hosting companies are in a better position to address content issues. Web-hosts have the ability to provide a much more granular response and almost always have a direct relationship with their users and content.
"While, as an organization, we may vehemently disagree with the values and ideas a given website aims to disseminate, we feel the power to decide what types of content should and should not be online must rest with the people, rather than in the hands of a select group of corporations,"concludes Tucows.
December 15, 2017: Tucows Make Official Statement Lamenting Repeal of Net Neutrality
Tucows posted the following message on the Ting Blog on December 15, 2017 lamenting the repeal of net neutrality:
As it now seems was inevitable, yesterday the FCC overturned “net neutrality” regulations that were put in place to protect an Open Internet. Now, Internet service providers – ISPs – will be allowed to prioritize and deprioritize traffic as they see fit. It’s good news for myopic ISPs and their investors but bad news for Internet innovation in North America and, more importantly, for people without choices of ISPs who put their customers first. Ting’s stance on net neutrality is and will remain unchanged: We will never block, throttle or otherwise interfere with the online activity of our customers. As a company actively working and investing to build and support fiber networks in Ting towns around the US, we can definitively say that net neutrality had no bearing on our decision to help build the next generation of Internet infrastructure North America so sorely needs. The repeal of net neutrality protections won’t change how we continue this important work, and will not change our continued operation of Ting Internet under the principles of net neutrality.
December 15, 2017: Burlington City Council Delays Final Burlington Telecom Vote Until December 27 to Meet December 31 Deadline
Katie Jickling wrote in Seven Days on December 15, 2017 that although councilors were scheduled to approve the $30.8 million sale of Burlington Telecom to Schurz Communications and ZRF Partners on December 18, 2017, councilors will meet in executive session at the December 18 meeting so they can clarify details of the deal, according to council president Jane Knodell (P-Central District). Afterwards, the council will release the purchase and sale agreement, which it now expects to vote on at a December 27 meeting. Knodell would not say what questions remain about the bid, though she did say they'd be made public once the proposal is released. If the sale isn't completed by the end of the year, the city's portion of the net proceeds decreases from 50 to 35 percent. Knodell said she's "not really concerned" about the possibility of additional delays and lost revenues. "I think things are going well and we're working through [remaining issues]," she said.
December 12, 2017: Burlington Council Member Dave Hartnett Apologizes for His Outburst at a Previous City Council Meeting
WAMC reported on December 12, 2017 that at the meeting of the Burlington City Council on December 11, 2017 Councilor Hartnett apologized for his outburst at the council meeting on November 27 when he attacked fellow Councilor Joan Shannon as she posed questions to the head of ZRF about their bid, their inability to answer questions about their secret investors, their plans to flip Burlington Telecom in five to ten years, and the meetings between council memebers and ZRF. "You know I crossed the line," said Hartnett. "There's a code of conduct that a councilor should adhere to and I you know was disrespectful and you know I crossed the line and you have to step up to the plate and just apologize. My actions are reflection on the council so I apologized to the entire Council as well."
A final copy of the agreement to purchase Burlington Telecom is expected to be released by December 15 and the City Council meets again on December 18. A special council meeting could be scheduled on December 27. The city council started and ended its meeting in executive session to discuss the purchase and sales agreement with Schurz Communications to obtain Burlington Telecom. Because the purchase agreement is being reviewed by lawyers, the public deliberative agenda could only include discussion of the company’s Letter of Intent, or LOI, according to Ward 4 Republican Councilor Kurt Wright. “The LOI is already crafted. That's basically done. Whoever won the bid we would have had to spend significant time throughout the month of December with attorneys on both sides working on the final purchase and sales agreement. Because really the LOI we had already seen the LOI from Schurz weeks earlier. And that's what they worked from on the night that we passed it except they added some elements from the ZRF LOI which actually strengthened it. So this was not what's being characterized the way it's being characterized.”
December 12, 2017: Charlotte Dennett writes: Answers Needed About Schurz Communications
Charlotte Dennett wrote an op-ed for vtdigger on December 12, 2017 about the chaos surrounding the last-minute offer by Schurz Communications to buy Burlington Telecom and about how it seems the councilors — and possibly even Mayor Miro Weinberger – had not fully vetted Schurz before choosing them. According to Dennett , since Schurz is privately owned and not publically traded, it is difficult to find information on its business dealings except through news stories and press releases but internet searches do reveal that Schurz is much bigger than a “family-owned business,” and has been flipping properties during the media acquisition craze of the last four years along with right-wing media companies that have come to be called “Trump TV.”
Shay Totten, a former reporter for Seven Days and a proponent of KBTL, has done his own sleuthing into Schurz’s campaign donations and has concluded that Schurz is “a conservative media company from the Midwest whose owner Todd Schurz donates tens of thousands of dollars to some of the most conservative members of Congress who oppose gay marriage, raising the minimum wage (even opposed raising the federal wage to $7.25 an hour), In 2016 alone, the Schurz family gave to such illustrious Koch-brother backed candidates as: Sen. Todd Young, Sen. Mitch McConnell, Sen. Roy Blunt and many more.” Totten claims that he sounded this warning to city councilors, but to no avail.
Dennett says that if the City Council wants to rectify the fiasco of Nov. 27 and regain the trust of Burlington voters, it should at the very least allow another public hearing before it votes on the final agreement with Schurz.
What, for instance, has Schurz been doing with the $430 million it gained from finalizing its 2016 sale to Gray TV other than offering $30 million to buy Burlington Telecom? What are its ties, if any, to Gray TV (which took over Vermont’s largest TV station, WCAX, earlier this year) and Sinclair Communications, and does it share in their Trumpian conservative vision of buying up local and radio TV stations throughout the U.S.? More questions should be asked of Councilor Hartnett, who, methinks (as Shakespeare would say) “protested too much” when Councilor Shannon began to ask questions about the last-minute deal. Did he, and Republican Kurt Wright (whose 2012 campaign for mayor Hartnett ran) know more about Schurz than either of them let on? Why were they, of all the councilors, the only holdouts for Schurz and seemed unconcerned about transparency in order to get the winning bid?
- Read Answers needed about Schurz Communications by Charlotte Dennett December 12, 2017
December 11, 2017: Tucows Moves Auctions for Expired Domain Names Back to GoDaddy from NameJet
Domain Name Wire reported on December 11, 2017 that Tucows has moved its expired domain name inventory back to GoDaddy Auctions after previously moving its inventory to NameJet which Tucows co-owns after acquiring eNom earlier this year. "The only reason I can think for Tucows to move back to GoDaddy is if the performance was indeed significantly higher," wrote Andrew Alleman. "This is a bigger win for GoDaddy than its original pickup of Tucows’ domains. Winning a competitor back from its own platform is a testimonial to GoDaddy’s results."
GoDaddy has some advantages. Its large customer base means there are lots of bidders. It can also promote the domains when someone searches for an expired domain on GoDaddy.com. Also, it lets people bid on domains without placing a backorder, which leads to lots of last-minute interest. When Tucows moved its inventory to NameJet this year, GoDaddy VP Paul Nicks told Domain Name Wire, “…We believe Tucows saw great results and we feel confident that GoDaddy’s performance will speak for itself and that we’ll earn the opportunity to win back that business.” "That was a bold statement to make after a company moved its inventory to a platform it co-owned," concludes Alleman. "But apparently, it was accurate."
December 7, 2017: Ting Begins Phase One Fiber Construction at Willow Creek in Centennial
The Ting Blog reported on December 7 2017 that Ting Fiber announces that they are officially ready to break ground in Centennial and that they will be building the network in phases, starting with Phase 1 Willow Creek. "If you’re not in Willow Creek 1 or 2, don’t worry. Phase 1 is just the start of our build. Once construction begins, we’ll continue to build neighborhood by neighborhood, and will announce our next phases as soon as we can."
If you’re located in Phase 1, you’ll see our crews out and about in your neighborhood. Bear in mind, we may have to take a break for inclement weather as well as the holidays, but we’ll be back to work as soon as possible. We’ll be working in the City right-of-way, two to three feet onto the lawn in front of your house. While many utilities work at the back of properties, Ting fiber network construction will be happening in the front. We expect to light up our first customers in Phase 1 about sixth months from the start of construction. This is our first build in Centennial and there are a few infrastructure necessities we have to put in place to make fiber work on a large scale. While you’re waiting, we’ll be working.
According to the Denver Post Centennial residents voted in 2013 to opt out of Senate Bill 152, a state law that prevents municipalities from offering internet service. As of November, more than 100 cities and counties have voted to abandon the law. Centennial is further along than most of the more than 100 cities and counties that have voted to opt out of the law.
“We anticipate to light up our first customers in spring of 2018,” said Monica Webb, who handles Ting’s government relations. “Since Willow Creek is our first neighborhood, we’ll be a bit slower to light up customers than in subsequent neighborhoods where they’ll be able to sign up for service in just a couple months after construction.” Future neighborhoods are determined by the number of pre-orders, the ease of working with a neighborhood’s homeowners association and the proximity to the city’s internet backbone, which branches out from the city municipal building. Future fiber lines run along East Dry Creek, East Arapahoe and East County Line roads.
Ting is in the final stages of negotiating its connection deal with Centennial and is readying to start construction before year’s end, Webb said. The first of the three city fiber loops has been complete, and the remaining two are expected to be complete within a year. The company expects to announce in the first quarter of 2018 which Centennial neighborhood it will build its network in next, Webb said. Ting is looking at neighborhoods in proximity to where the city has completed its loop work, the ease of working with a neighborhood’s home owners association and the resident’s demand for service, she said.
- Learn more about the Rollout of Fiber in Centennial
The Dispatch Tribunal reported on December 3, 2017 that Tucows Director Allen Karp sold 3,000 Shares of Tucows Inc. (TCX) Stock for 189,930.
November 29, 2017: Elliot Noss Says "We love the community of Burlington but at this point it’s crystal clear that a small but powerful group did not want us there
Tucows CEO Elliot Noss made a post to Reddit on November 29, 2017 thanking Redditors for their support of the Ting initiative in Burlington:
I would like to say first that we really appreciated the BTV Redditors. You’ve been fair, and you’ve pushed us to explain our bid and our positions and asked forthright questions of us. In terms of further actions, there are none. Burlington is behind us. We love the community of Burlington but at this point it’s crystal clear that a small but powerful group did not want us there. It would not have made for a constructive relationship. At some point I imagine we will post something longer, but for now you have all our best wishes. Thank you Burlington!
November 28, 2017: Progressives Dump KBTL, Select Schurz as Buyer for Burlington Telecom
The Burlington Free Press, WCAX, Vermont Public Radio, NBC5, Seven Days, VT Digger, and MSN reported on November 29, 2017 that in a final vote in an 8 hour marathon session that ended at 2 am progressives voted in a Schurz Communications/ZRF partnership beating out co-op Keep BT Local by a vote of 8-2. ZRF and Schurz decided on a joint venture with ZRF as majority stakeholder after they were brought back into the process earlier this month, when the council couldn't decide between Ting Tucows and KBTL. In an 11th hour reversal Schurz became the majority stakeholder in a new joint proposal with ZRF that was presented to the council after it became obvious there were serious questions about ZRF's secret investors, who would make the decisions when ZRF chose to sell the utility after a few years, and whether Citibank would sue if the council chose ZRF's $25 million bid. The decision to go with Schurz followed a 90-minute public forum and hours of debate in which many spoke out in frustration over the process.
Faisal Nisar of ZRF Unable to Answer Questions About Secret Investors
During initial questioning of Faisal Nisar of ZRF, concerns emerged about secrecy around the investors who would be financially contributing to purchasing Burlington Telecom, who would make the decisions when ZRF chose to sell the utility in a few years, and whether Citibank would sue if the council chose ZRF's $25 million bid. Nisar was unable to give satisfactory answers to the questions put to him, prompting observers to conclude that the ZRF/Schurz bid might not prevail if it went to a vote.
Schurz and ZRF Switch Places in Backroom Deal
The City Council began the night with three bids. Keep Burlington Telecom Local, the cooperative that sprung up with the sole goal of buying the utility and Ting, the wireless services and fiber internet arm of Canadian-based internet services company Tucows, Inc. were the two finalists who the council deadlocked over at the beginning of November. Both ZRF and Schurz were eliminated earlier in the process, but were invited back after the council reached an impasse in deliberations between Ting and the co-op. Under a proposal submitted last week, ZRF, a private equity firm, would own and operate Burlington Telecom, with Schurz as a $10 million investor. There were two commercial bidders for Burlington Telecom in the final round: ZRF Partners with financial backing from the formerly independent bidder, Indiana-based Schurz Communications, and Toronto-based Ting. Ting offered $32 million, ZRF $25 million, and KBTL offered $12 million to $16.5 million.
Schurz's eventual winning bid, with ZRF Partners as minority owner, did not exist when Monday's City Council meeting commenced. At the start of the meeting, ZRF Partners was listed as the major bidder with Schurz as a minority partner. The flip came about after Councilor David Hartnett approached Schurz and Nisar in the hallway during a recess and asked them to consider switching who would be the majority owner. He said he believed it was the only way to avoid another deadlock.
During a break at the meeting, ZRF and Schurz decided to flip their bid, making Schurz the primary owner and ZRF an investor in the cable and internet provider. This changed ZRF's $25 million offer to nearly $31 million. The winning offer, a hybrid of previous bids submitted to the city, did not exist when the meeting began on Monday evening, but was worked out in the hallways and backrooms of City Hall while the council was in recess. Some broad strokes of the deal were presented to councilors, such as the dollar amount of the cash offer: $30.8 million, and that Schurz would be the controlling partner while ZRF's promises of community investment would remain. Other details, like ZRF's exact role as a minority partner, were left unfinalized. The new letter of intent will be submitted later on Tuesday, said Ralphine O'Rourke, a lawyer representing the city, during the meeting.
During a recess, city attorneys worked with Faisal Nisar, founder of ZRF, and Todd Schurz, of Schurz Communications, to mark up a previously released proposal. It was posted online at 1:40 a.m. Tuesday.
The selection of the Schurz bid came as a surprise – especially since the bid that the council considered at the start of the meeting wasn’t the same bid that they ultimately voted on. At the start of the night, ZRF was offering $25 million, with $10 million coming from Schurz, who would be a minority partner. But after councilors raised concerns, ZRF and Schurz renegotiated their proposal in the halls of Contois Auditorium and presented a new proposal to the council. While Todd Schurz, CEO and President of Schurz, admitted that since the new deal had been worked out in about 15 minutes, there are still some details to nail down. But essentially, he said his company would make the same offer they had originally made to buy Burlington Telecom. “What we’re proposing is taking elements out of Schurz’s last LOI [Letter of Intent] and melding them with the LOI that you received from us Monday of last week and the updated one today," Schurz said. “So it would be the old Schurz price of $30.8 million… and all the elements of the ZRF bid.”
"I had to do the right thing," Nisar said after he decided to essentially "step aside" and give up his own bid to allow the city to reach consensus. Councilor David Hartnett said he approached Nisar and Schurz with the idea because he was concerned about the council reaching an impasse over Ting and Keep Burlington Telecom — again. "I'm okay with giving up transparency knowing we can get a better operator," Hartnett said about the last minute change. When the councilors reconvened, they made a final decision with no public input on the winning bid.
But some councilors did not agree with Hartnett's assessment. "I feel incredibly uncomfortable with this," said Councilor Max Tracy, speaking about the 11th-hour switch. "It’s just a slap in the face to the public process that’s happened here."
Ranked Choice Voting System Favored Schurz
Shortly before 2 a.m., the council voted twice. In the first round, councilors could cast two votes using a ranked choice voting system where the lowest vote-getter would be eliminated. The top two vote-getters moved on to the second round. The first round ended with 8 votes for Schurz, 7 votes for Keep Burlington Telecom Local, and 5 votes for Ting. "It was the ranked choice voting system," wrote poster on Reddit. "The Schurz voters on the Council had a bullet proof strategy provided that the ranked choice voting system remained intact. That's why two of the other Councilors abstained...they didn't think it was a fair method at that stage and they knew Schurz was already the winner. It sucks. It was more about spite than anything, as evidenced by Hartnett's manchild routine." All Schulz and KBTL's six supporters on the council had to do was vote for Schultz and KBTL to eliminate Ting even though progressives had no intention of voting for KBTL in the final round.
After Ting was eliminated, the final vote was 8-2 for Schurz. Councilors Sharon Bushor and Sara Moore, who have supported the co-op throughout the process and voted KBTL as their first choice and Schurz as their second in the first round, both chose Schurz in the final vote. Dieng and Tracy cast their votes for the co-op, while Deane and Shannon declined to cast votes for either option. Deane said he considered his vote a "No" vote, rather than abstaining. "I did not feel it was responsible on my part to vote for something I did not understand," he said, citing the lack of public support and his own lack of understanding of a bid that had come together only hours before. Shannon also characterized her vote as a "No," rather than an abstention.
"The outcome is a disappointment to me and those councilors who supported Ting or KBTL and believed that they were the best option for Burlington," wrote Councilor Chip Mason. "The winning bid represents a compromise as neither KBTL nor Ting were able to generate majority support from the City Council despite months of effort. I am committed to insuring that the final agreement and relationship with Shurz/ZRF is favorable to the City of Burlington, its taxpayers and BT customers and provides all of the protections we demanded, and they agreed to, on net neutrality, privacy, anti-monopoly future sale, right of first refusal and put right."
Dave Hartnett's Behavior Criticized
Joan Shannon questioned Schurz's commitment to net neutrality, and ZRF's refusal to divulge the investors funding the purchase and the meeting grew testy when she raised questions about councilors who met individually or in small groups with Nisar and Schurz. "You're out of control, Councilor Shannon!" yelled Councilor Dave Hartnett, pointing her finger at her. At another point in the proceedings, Hartnett shouted an expletive and stormed out of Contois Auditorium during the first long break from public deliberation, with Councilor Chip Mason following close behind. Reporters could overhear the two talking in the hallway. Hartnett told Mason he did not want to vote for any of the three bidders. “This is crazy,” Hartnett said to Mason.
Shannon told reporters about a meeting between Nisar, City Council President Jane Knodell and Councilor Kurt Wright at the Burlington Airport last Wednesday. The rendezvous appeared to break a resolution that barred councilors from reaching out directly to the bidders. The gag order was designed to keep individual councilors from influencing bidders, creating the impression that they were speaking for the whole council, and undermining the work of the city’s negotiator, Terry Dorman. When asked about the meeting, Wright said everything was on the level. “All we were ever told is we couldn’t meet individually,” Wright said. Wright explained that Dorman set up the meeting, and he checked with city attorney Blackwood. They met at the airport out of convenience, because Nisar was leaving town. They talked about potential problems with Nisar’s bid, Wright said. Later, when Nisar was in front of the council, Shannon asked him about the meeting. After initially dodging the question, he tepidly said he did not meet with councilors. Several councilors tried to interject, sensing Nisar was in hot water. “You’re out of control, Councilor Shannon. You’re going down the wrong path,” screamed Hartnett.
"The rendezvous (between Kurt Wright and Jane Knodell with Nisar) appeared to break a resolution that barred councilors from reaching out directly to the bidders. The gag order was designed to keep individual councilors from influencing bidders," wrote Eileen Andreoli at VT Digger. "Yet Kurt Wright's response was, 'All we were ever told is we couldn’t meet individually.'"
"The actions of Councilor Dave Hartnett have been particularly distressing" said former City Counciler Tom Ayres. "Bellowing expletives, storming out of meetings, personal attacks, and self-congratulation have unfortunately become standard fare for Councilor Hartnett, regardless of whether the topic is BT, commission appointments, transportation initiatives, smoking in parks, or support for organized labor. Given Daves frequent pronouncements trumpeting transparency, it was particularly hypocritical for him to play a closed-doors role in leading Schurz/ZRF to the BT trough. Kudos to Councilor Joan Shannon for standing up to Dave."
"It's not only the corruption of a secret, last-minute, unwritten, and unformed bid that Knodell, Wright, and Hartnett concocted," said one comment on Seven Days. "It's also the unhinged personal behavior of one councilor throughout the night -- yelling and storming out of the meeting; yelling at and berating the Mayor; interrupting and bellowing while Shannon had the floor (asking fair and appropriate questions about the brand new, secret bid), and accusing them both of lying. Shouldn't he have been ejected from the meeting for such behavior? But I guess Knodell needed his vote for Schurz so she did nothing."
Motives of Progressives Questioned
"Regardless of the merits of Ting, they became associated with the Dems, and as such, had to be opposed at all costs," wrote Dave Gibson. "Pretty sad. Anti-Dems teamed up and pulled out all the stops from jigging the voting process to shameful verbal assault on Joan Shannon as she tried to do her job to vet the 12th hour orchestration last night. They chose to sacrifice BT to avoid allowing Dems to win a fight - that really wasn't theirs in the first place. While Progs selected their choice (before offers were even revealed), Dems as a Party did not choose anyone - it just appeared that way because a majority of Dems chose Ting. So for Anti-Dems, I guess its Party before City. We've seen this in Congress over the past 8 years of Obama, and here we see it in Burlington. Burlington is smart and engaged however. Those tactics are revealed in this environment, and they back fire. Just watch. We will not forget."
Later in the week, City Council President Jane Knodell tried to brush off questions about the process by saying she was too busy with her day job and a sick dog to speak at length about details of the winning bid, but said she fully understood what the city council did, and that she assumed "other councilors did their homework." Knodell said she pushed for Schurz over Ting because Schurz is a family-owned company, and because it would allow "a locally-based, Burlington-centric telecom." Local control and ownership has been a major consideration, with many Burlington residents telling the Burlington Telecom Advisory Committee that it was their primary concern at a meeting at the start of the year. "It’s not the same as local control, it’s not the same as local ownership," Knodell said. But, she said, Schurz has a philosophy of decentralization.
Many Uncomfortable with Lack of Transparency in Process
Councilor Max Tracy said that he was uncomfortable with how the bid had been negotiated. “We came into this meeting thinking we were going to be debating one LOI and midstream, out of the view of the public, we got a completely different LOI that was negotiate out there in the hall,” Tracy said. “I think it’s incredibly unfair to the citizen of Burlington who have not had a chance to look at this LOI…it’s just a slap in the face to the public process that’s happened here.”
"Before highlighting the substantive and procedural outcomes from last night’s City Council meeting, I wanted to apologize for being unable to convince a majority of my fellow councilors to support what I believed to be the most viable of the bids for Burlington Telecom - the bid from Ting/Tucows," wrote Council Member Chip Mason. "I believe Ting offered the highest return for the Burlington taxpayers, a commitment to bringing jobs and investment to Burlington, a proven record of excellent customer service, competitive pricing and a commitment to net neutrality and privacy protections. I am disappointed that I was faced with the choice of voting in a flawed and opaque process, in a last minute setting, with little public vetting of a bid that changed several times over the course of the evening. My fiduciary and ethical responsibility to you obligated me to select an adequate but imperfect entity to purchase BT last night. Ultimately, I believe that I made the right fiduciary decision for Burlington, its residents, taxpayers, BT customers and employees. I am also sorry that the way we reached this compromise and the decision to move forward and vote was deeply flawed and confusing."
Councilors Max Tracy and Ali Dieng, who voted in favor of KBTL were uncomfortable with the lack of transparency in the process. “Burlington residents are going to wake up tomorrow morning and be furious that they did not get to weigh in,” Tracy said.
"I can't think of a less transparent process than coming up with-- after years of developing offers and months of bringing finalists to the table-- develop a new offer on the backs of envelopes and napkins after midnight," Shannon said.
"Keep BT Locals proposal was the weakest from the outset of deliberations this past spring, when I was still on the council. It was troubling to hear Councilors Tracy and Dieng imply that all for-profit entities are conspiratorial capitalists interested only in fattening up BT for Comcasts ultimate consumption. This was disingenuous on three counts: first, Ting/Tucows has a reputation in both Canada and the U.S. for being precisely the kind of successful, socially responsible company Vermonters have long championed. Second, the advocacy for KTBL was a slap in the face to the present employees of BT, who strongly preferred Ting. And third, the power-to-the-people rhetoric ignored the fact that it was a Progressive administration that got Burlington so deeply mired in the BT debacle in the first place," said former City Counciler Tom Ayres. " The reported failures of Schurz to commit to net neutrality and ZRF to reveal its investors should be subjects of grave concern for the City Council as it ponders a final BT purchase agreement in the coming days."
"Burlington, once again, got backdoored," wrote Faried Munarsyah. "Last night's last-minute hallway deal-making handing an important public utility to a private entity that did not exist when the meeting started, happened when most members of the public who came to spoke at the public input portion (KBTL supporters outnumbered Ting's 6-1, none had spoken in favor of ZRF/Shurz) had mostly left. Some of those remaining, including myself, a state rep, and a reporter - were literally locked out of City Hall. Of all the sketchy political maneuverings I've seen the council engaged in my 20+ years here, this one takes the cake. The mayor and Shannon saw their pet privatization project blew up in their faces when the other Miro democrats chose expediency after the old guard Knodell, Wright, and Hartnett parlayed the public's genuine, and their own fake support for KBTL and Bushor's signature flippability to squeeze Ting out, scoring a political victory. Those four should really have their own party designation (the City Council OG, anyone?) At least Shannon stuck to her guns, Mason and Paul made a lot of noise about unfairness and how they couldn't, in good conscience, explain how all this is OK to their constituents, yet in the end voted for it anyways."
According to an editorial in the Burlington Free Press, Burlington residents have every right to wonder what happened to the promise of an open and public process for picking a buyer for Burlington Telecom. "By taking the vote before the revised Schurz offer could be fully vetted by residents and other stakeholders, the City Council essentially negated the months-long public process for the sale of the one-time municipal Internet telecom,"said the editorial. "The move was a power play – Schurz and its minority partner, ZRF Partners, had the money that gave them the financial nimbleness to revise their offer. Competing bidders were left with no time to cook up their own counter proposals." "Now this last minute back room deal brings a dark horse over the finish line," wrote Michael Long. "Revealing the feather weight of public input and of serving the public interest or of valuing democracy."
Progressives Dump KBTL
KBTL was the big loser in the process. KBTL only received two votes in the final tabulation from Councilors Max Tracy and Ali Djang after Councilors Richard Deane and Joan Shannon abstained from the final vote after voting for Ting. "Just two weeks ago KBTL had the opportunity to partner with Ting with 20% equity in the joint venture but the partnership failed to materialize after the motion to partner with Ting failed to pass the KBTL board by a single vote," said BTWatcher. "I am amazed at how obtuse the board members of KBTL have been. KBTL didn't realize until the game was over that they had been nothing more than 'useful idiots' of the Progressives who dumped them as soon as they had served their purpose. Now KBTL has nothing and city of Burlington is left with a buyer who has received poor ratings for customer service, has lobbied against net neutrality, and as a closely held family owned company has little transparency."
Mayor to Sign Letter of Intent with Schurz
Council Chair Jane Knodell said Mayor Miro Weinberger will sign a letter of intent within the next week to finalize the sale. The city attorney said council must sign the agreement by Dec. 31. The vote authorized Mayor Miro Weinberger to enter into a purchase agreement with Schurz and Nisar. Weinberger promised he would not sign without a "very tight and well-written" document. "This is a surprise to me," he said. "I had no idea this was going to transpire." He called the process a spectacle and said he believed the people of Burlington deserved to weigh in, but said he believed the new Schurz/ZRF bid was a stronger offer. The council will vote to approve the signed purchase agreement next month according to the planned timeline.
Weinberger said this was the most challenging vote he's seen the council take. “While I was as surprised as anyone by last night’s outcome, I am relieved that after weeks of uncertainty, the City Council has finally selected a winner that does not breach prior Council-approved Burlington Telecom agreements that would have exposed the City and taxpayers to another round of lawsuits," he said. "With last night’s vote, we are now in a position to close the book on Burlington Telecom’s decade of financial challenges and achieve long-term benefits for BT customers, taxpayers and the City."
"In the coming days, I will be working hard on behalf of Burlingtonians and BT employees to negotiate in writing what Todd Schurz and Faisal Nisar verbally committed to at last night's City Council meeting" said the Mayor in a statement. "I will ensure that the final agreement includes clear provisions regarding internet affordability, customer service, net neutrality, bridging the Digital Divide, and other items that reflect our community's values." According to an editorial in the Burlington Free Press, the mayor, in essence, is saying that the city chose an offer without locking down the details and without knowing the details of the final agreement, there is no way of knowing the full impact on the community.
The final letters of intent — documents outlining promises Schurz is making to the city — aren't public yet, as the mayor's office and city attorney are negotiating with Schurz. Weinberger said his office on Wednesday received the documents — an amalgamation of previous bids. He said it's unrealistic to expect a sales agreement to come to a council vote by Dec. 18, the last scheduled meeting of the year, but is optimistic that unless something goes wrong, the city will find a way to make the end of year deadline. The city's share of the proceeds will drop from 50 percent to 35 percent if the purchase agreement is not signed by the end of the year.
Questions Remain about Schurz Offer
According to an editorial in the Burlington Free Press, the timing of the final Schurz bid left the public with no time to question the bid and evaluate the various provisions to consider their impact on customers and the community, as well as on the city’s balance sheet. Major questions remain. Councilor Joan Shannon asked Schurz who would operate and manage Burlington Telecom and Schurz CEO Todd Schurz said he was not sure who would manage BT day to day. “I wasn’t expecting to answer that question," said Schurz. Schurz said that under the bid, his company would pay cash to the city, retain existing BT staff, and allow 20 percent — or potentially higher — city equity. Schurz will not increase broadband costs for five years. "The last [deal] we didn't have all sorted out because it took us four days. This one was 15 minutes." Schurz told the council when he stumbled over questions.
Tuesday afternoon, Katie Vane, a spokeswoman for the mayor, said she did not expected Schurz and ZRF would provide updated documents to the city until the end of the week. She said, prior to releasing the documents publicly, the mayor and the city attorney planned to review the documents, which are expected to be a hybrid of already-submitted bids, to make sure what was conveyed at the council meeting is represented on paper.
According to Councilor Chip Mason the details of the Schurz bid were: (1) Schurz is the owner and ZRF an investor; (2) purchase price of $30.8 million with a potential increase based upon 2018 performance; (3) the City of Burlington has the right to roll over cash proceeds from the sale into a 20% ownership interest in BT; (4) committed to full buildout of Burlington and neighboring communities on same time frame as proposed by BT; (5) $250,000/year contribution for 7 years to create a technology innovation fund and $50,000/year contribution to basic technical skills education for workforce/high school students; (6) no price increases on broadband for 60 months; (7) greed to anti-monopoly future sales restriction (no sale to Comcast); (8) committed to net neutrality; (9) put right in favor of the City if it rolls over to equity; and (10) a right of first refusal in favor of the City on the future sale of BT.
Jess Aloe reported that Burlington Telecom will also have a local board who will play a role in financial and strategic decisions, Schurz said. Who will sit on that board has yet to be determined, although the midnight summary put together by the city's lawyers had as members Schurz himself, Nisar, possibly Gary Evans, the former CEO of Hiawatha Broadband and has consulted for Burlington Telecom, and an industry expert appointed by the city.
Questions remain about Schurz's policy on net neutrality. In 2015, Brian Lynch, who serves in a dual role as Schurz's senior vice president in charge of the broadband division, signed a letter as general manager of then-named Antietam Cable arguing that it would be too arduous for small rural telecommunications companies to be subject to the FCC's regulations, and that they supported a free and open internet without blocking content. In July 2017, Lynch sent another letter to the Federal Communications Commission recounting how pleased the company was that the commission was considering rolling back the regulations because being regulated had caused them to pull back on their expansion plans. In his September letter of intent that was submitted for the eliminated October bid, Todd Schurz said he was committed to net neutrality for Burlington Telecom. 
- Youtube Video of 8 Hours Meeting of Burlington City Council Meeting November 27, 2017
November 27, 2017: Ting Sponsors Internship at McDaniel College
The Ting Blog reported on November 27, 2017 that Ting Internet is hosting Michael N. for a writing internship at McDaniel College, Writing for Main Street. "Michael had the chance to write for the Ting Westminster blog for the fall semester from September to December 2017. He covered local events as well as customer features, and assembled his work into fun blog posts to be distributed on social media." "“Before I started the internship, I was attracted to Ting because of the people who work here," said Michael. "My family has been a customer of Ting Mobile since 2013 and every interaction we have had with the company has been a very positive experience.”
Michael’s main takeaways from his internship were about the importance of creating compelling content as well as developing brand consistency. “In writing for the web, I learned about the importance of being clear, concise and accurate in the message I am trying to send. I learned that when people are reading a blog post, they want to stay entertained through the piece, and don’t want to read something that is unnecessarily long. In Writing for Main Street, I learned about the importance of having a brand identity for a business, and writing to consistently support that brand.”
November 22, 2017: Ting Sponsors Makerspace in Westminster
The Ting Blog reported on November 22, 2017 that Ting has opened their very own Ting Makerspace in Westmisnter, MD. At the Ting Makerspace grand opening, Adam Eisner, Ting VP of Networks raved about the implications of Makerspaces in communities like Westminster. “Having a Makerspace set up gets people really interested in technology. Once they’re really interested in technology they’ll want to use more if it in many different ways and really that all ties back to gigabit Internet.” The Ting Makerspace comes equipped with a mini 3D printer, a 3D scanner, a CNC router, a full spectrum laser, Arduino starter kits, a Dremel, a soldering iron and a photo booth. The Makerspace also has various designing tools and programs like SolidWorks, Inkscape, Easel, Meshmixer and more.
November 21, 2017: Tucows updates offer to acquire BT business
Reuters released a press release from Tucows reporting that "Nov 21 (Reuters) - Tucows Inc:
- Says on Nov 20, city of Burlington D/B/A Burlington Telecom released updated bid letter of co regarding co’s bid to acquire all assets of BT
- Says is offering to acquire BT business for a total consideration of $32.3 million - SEC filing Source text: click here to read official SEC documents"
November 20, 2017: ZRF and Schurz Team Up With Joint Venture
Seven Days, the Burlington Free Press, My Champlain Valley, and VT Digger reported on November 20, 2017 that Schurz Communications and ZRF Partners, previously eliminated in the bidding for Burlington Telecom, have gotten back in the running — this time as partners with a $25 million joint bid that would invest heavily in the local tech economy. Tucows put forward a $32.5 million proposal, up $2 million from its previous offer. And the co-op Keep BT Local raised its bid from $12 million to $18 million — though the co-op has yet to raise the $6 million difference.
Schurz and ZRF Joint Bid Finalized in a Week
Schurz CEO Todd Schurz and Faisal Nisar, founder of ZRF, met in Chicago for the first time last Tuesday, Schurz said in an interview in the Burlington Telecom offices. They agreed to move forward together last Friday. Under the proposal, ZRF which has no previous telecom experience and at this time has only one employee, would have full management control of the joint entity. Schurz would have a minority ownership. "Our strengths complement each other's weaknesses," Schurz said. "We've listened to what the community is saying," Nisar said. Nisar refused to answer questions about the conflict of interest on Monday. "We're trying to look forward, not backward," he said. "We don't think there will be any issues with the current proposal."
The joint proposal came about through Gary Evans, an adviser to Nisar and the retired CEO of Hiawatha Broadband Communications, which Schurz bought last month. Evans connected Nisar and Schurz last week, Schurz said, and the two men spoke for "hours" about their vision. Evans has served as a consultant for Burlington Telecom.
ZRF/Schurz Looking to 'Flip' Burlington Telecom in 5 - 10 years Says Joan Shannon
According to Council Member Joan Shannon, ZRF/Schurz have not committed to operating Burlington Telecom for more than five to ten years. "The family biz was not looking to flip," said Shannon. "But this is not the 'family biz' offer. This is an investor offer from ZRF."
New Bid from KBTL
KBTL submitted updates to its offer Monday, including increasing the price from $12 million to $18 million based on being able to raise $6 million. If the equity can't be raised, the co-op would offer notes or carried interest to each of the parties due to receive proceeds of the sale, but is willing to reduce the price back to $12 million if the parties are unwilling to accept.
Ting Has the Highest Bid
Ting's latest offer is the highest remaining bid. It is offering just over $32 million total and promising to make Burlington a regional hub for its business.
With the recent news that the Federal Communications Commission said it plans to repeal regulations that ensure equal internet access, commonly called net neutrality rules, critics worry that without these rules, internet providers will be able to speed or slow internet access, or charge extra fees for streaming services. Ting has pushed to retain net neutrality rules, and Keep BT Local has said it would retain them as well. The ZRF Partners and Schurz letter of intent released Monday did not directly address net neutrality.
City Council Will Vote on November 27
Councilors are grappling with getting all this new information to the public. “The real challenge I have is, does the community have enough time to digest it, or does the council have enough time to communicate it,” said Councilor Adam Roof. Councilor Karen Paul said that traditionally major proposals like the ones bidders released Monday are public for at least two weeks before the council acts on them. “Are people going to feel that too much was done too quickly? I’m sure people are going to feel that way,” Paul said.
The council is scheduled to vote on a final buyer on November 27. The meeting is scheduled to begin at 5:30 p.m., 90 minutes earlier than usual, according to the city council president. During Monday’s meeting, councilors will first vote for their two top bidders. The bottom vote getter will then be out, and in the second round each councilor will vote for one bidder until a winner is selected, Roof said. There will be no mechanism for a tiebreaker, Roof said. “We have to figure it out. There will be no delays, no games,” Paul added. “We have to stop doing this.”
Even After the Council Chooses a Buyer the Process is Not Over
Even after the council chooses a buyer the process is not over. The Mayor can veto a Council decision. Council could overturn a veto with a two thirds vote, but if the veto was sustained, the item would fail. The Mayor is thought to favor Ting. Blue Water can also reject a first-time operator like ZRF or KBTL (that is, an entity that has never operated a telecom). That risk of rejection may increase if Blue Water believes it is negatively affected by a lower purchase price.
November 14, 2017: Ting Works at 'The Haven' in Charlottesville
The Ting blog reported on November 14, 2017 that 'The Haven,' a day shelter and housing social service provider located in downtown Charlottesville, Virginia joined the Friends of Ting program in 2017 and Ting has helped 'The Haven switch over their phone system to operating entirely on an Internet connection. Today all the phones at The Haven operate on a Ting gigabit fiber connection. That means when housing case managers and day shelter staff members answer the phone or send an email, those communications are powered by Ting. “It was powerful to have a local business reach out to us and support the work we are doing by providing Internet for us. It’s a tremendous gift,” says Owen Brennan, The Haven’s Operations Director. Guests have access to reliable phones and can even provide family and friends with a phone number to reach them at. “For half of our guests, our phones are the only phone contact they have. And certainly guests make use of our computers.”
One especially important benefit of access, is the social connection the Internet helps people make when they are in a particularly vulnerable positions. “The other half of our guests, who do have phones, a lot of them do have smart phones. Access to Facebook helps people connect with family and friends and really helps them tap into the social networks, that for a lot of folks, end up being how they get out of homelessness, by reconnecting with family or finding a friend to stay with.” The Haven is there to help along the way and offer housing support to all, beginning with the most vulnerable. “We want people to feel welcome and feel like they’re coming into a home-type situation. If the staff members and volunteers on duty don’t have to worry about the phone line or Internet connection then that frees them up to have conversations with guests and to welcome guests that are coming in.”
November 13, 2017: Burlington City Council Makes Third Attempt to Decide Who Blue Water Holdings Will Sell Burlington Telecom to
Seven Days, the Burlington Free Press, and NBC5 reported on November 13, 2017 that in their third attempt to decide the buyer for Blue Water's Burlington Telecom, Burlington City Council has decided to allow all four original bidders for Burlington Telecom to resubmit their bids for consideration and has created a subcommittee to figure out how the voting process will work in the next round. In addition to Ting/Tucows and KBTL, previously eliminated bidders ZRF and Schurz Communications are once again joining finalists Keep BT Local and Ting Tucows in this round and will have until Monday to resubmit their bids. The City Council hopes to make a final decision on who will buy Burlington Telecom by November 27, 2017.
Four Member Subcommittee Appointed
A four-member committee, composed of Jane Knodell (P-Central District), Kurt Wright (R-Ward 4), Chip Mason (D-Ward 5) and Adam Roof (I-Ward 8), is tasked with deciding by the end of the week how the council will narrow four finalists to one buyer at a meeting scheduled for November 27. Knodell voted for KBTL at the first City Council meeting on October 17, 2017, Mason and Roof voted for Ting, and Wright voted for Schurz.
Roof said many members of the public had reached out to express frustration with the twists and turns of the process. "The process undoubtably has had twist and turns," said Roof. “It calls for a group of four councilors to consider options of how the council will proceed with voting during our meeting on the 27th. It clarifies the roles and standards of negotiation from this point forward. It further clarifies under what circumstances councilors may interact with the bidders. It sets in a clear fashion items that will help this council and the public make a fully informed decision on the 27th. Looking forward I think this resolution lays out how and when we will get to the finish line.”
The resolution also directs councilors to refrain from contacting bidders individually. That decision follows a controversy last week when Joan Shannon (D-South District) criticized Knodell and Wright for communicating with bidders.
The council adopted the measure by an 11-1 vote. Councilor Ali Dieng was the only opposing vote.
City Council Can Perform Due Diligance on All Four Bidders
The city council will have the option to meet with Burlington Telecom staff, visit the headquarters of each bidder and get a legal and financial analysis of all bids. Some councilors already visited Tucows in Toronto. The bidder proposals will be made public soon after they are submitted.
KBTL Releases New Plan to Raise Funds
On November 13, 2017, KBTL released their new plan to raise additional funds by selling cooperative shares for $500 each, which co-op board member David Lansky said could increase the cash the co-op has and possibly could lead to the co-op's raising its $12 million bid. Half the share price would be granted to each Burlington account, while the remaining $250 would be payable at $5 per month. Customers using the subsidized lifeline program would pay $1 per month.
Ting Will See What Happens at Next Council Meeting
Monica Webb, Ting's director for market expansion and government affairs, declined to discuss whether the Canadian-based company would offer an updated bid or stay in the process and said the company would "see what happens" at Monday's council meeting. "Honoring the existing democratic process and the result it created would be ideal," she said.
Tucows CEO Elliot Noss told analysts and shareholders at Tucows' Third Quarter Earnings Conference Call on November 9, 2017 that "Burlington is a great example of the difficulty in predicting the flow of any potential transaction. There is always uncertainty. It is just in this case much of it happens publicly and the big decisions are shown live streams on YouTube. We have no update other than what was public in the City Council Meeting last Monday and we will see what happens next in the City Council Meeting this Monday. We remind that this is all available live streamed on the internet."
Schurz Will Have a Chance to Tell its Story More Clearly
Schurz Communications CEO Todd Schurz said in a phone interview with Seven Days' Katie Jickling that the company would improve its public relations campaign now that it's been given a second chance. Schurz praised the process as "robust" but said that earlier this fall, "half-truths and mischaracterizations" had circulated about his company's customer service, prices and the political affiliations of his family members. This time around, Schurz said he'd try to tell Burlingtonians the company's story more clearly. "We’d like to learn from our mistakes," he said.
Schurz received one vote out of 12 in the initial City Council meeting when the company was eliminated. "[Dave Hartnett] has preached the importance of local interests and yet somehow justifies an elaborate scheme to bring back Schurz, a cable company out of Indiana with an awful record on customer satisfaction," said Tucows executive Michael Goldstein speaking not for Tucows but as an individual. "[Hartnett] admitted to me that Ting is the best bet to keep prices low, keep satisfaction high, grow jobs and contribute meaningfully to the community and to be going strong exactly as we are many years into the future. He admitted that 'public company' versus 'family owned' are just words that elicit emotional reactions, not valid, substantive concerns."
Corporate Transparency of Schurz and Ting/Tucows
Hugh Pickens, an analyst who owns stock in Tucows and follows the company closely, says that corporate transparency is one aspect of the contrast between Schurz and Tucows that does not appear to have received much attention from Burlington City Council. Corporate transparency describes the extent to which a corporation's internal actions, plans, and policies are observable by outsiders as a consequence of SEC disclosures and regulation and the set of information, privacy, and business policies concerning corporate decision-making and operations available to employees, stakeholders, shareholders and the general public. Tucows CEO Elliot Noss is on the record as saying that he always tries to provide as much transparency as possible into Tucows plans and operations to allow investors to track Tucows' business. "Tucows has a high degree of corporate transparency as evidenced by the information available on my web site Tucows Analysis," says Pickens. "Burlington residents, who have expressed a high degree of concern about the future of Burlington Telecom after the sale, will have much less insight into the policies and intentions of a privately owned business like Schurz which is not required to file reports with the SEC or provide quarterly earnings reports and conference calls for analysts."
ZRF Has No Comment
According to Seven Days, Faisal Nisar, head of ZRF Partners, did not respond to requests for comment. "Maybe the board goes back to a private equity firm that would just look to sell BT again in a couple of years (most likely, to a large cable company because that would be the richest possible buyer)," said Tucows excutive Michael Goldstein speaking for himself and not as a representative of Tucows in a comment on Reddit. According to the Burlington Free Press, the option of choosing a first-time operator like ZRF or KBTL (that is, an entity that has never operated a telecom), is the risk that Blue Water may reject that purchaser. That risk of rejection may increase if Blue Water believes it is negatively affected by a lower purchase price.
December 31 Deadline Looms
The city's share of the proceeds will drop from 50 percent to 35 percent if the purchase agreement is not signed by the end of the year. Friday, Knodell said she expects there to be some wiggle room. Mayor Weinberger said he was concerned there will be no council decision to select a winning bidder until late November, but he added it is "premature to concede that we will miss this long-established deadline."
November 13, 2017: Tucows' Michael Goldstein Gives His Personal Opinion on how the Burlington Telecom Sale Process Has Gone So Far
On November 13, 2017 Michael Goldstein, Ting's vice president for sales and marketing, posted a long comment on a Burlington message board on the website Reddit. In his message, Goldsten specified he was speaking on behalf of himself but said the negotiated deal would have been a great outcome for Burlington.
Hi. I am with Ting. I’m not sure if anyone is still following this thread. I think we’ve made all the public statements we need to make at this point. But I figured I would use this (relatively discreet) placement for just a few blunt, final thoughts. (By the way, I'm not sure if my colleagues here will even agree with how blunt I am about to get. So let's say formally that these opinions are my own!) For me, there are two distinct objectives in the idea of local ownership: Ensure that local interests are served in the operation of the business Maintain a local investment in what seems to be a valuable asset with upside I truly believe that KBTL was a valiant effort to deliver on both those. (Truly. It’s pretty tough to root against the co-op even when you are bidding against the co-op.) In the end, they were not able to secure sufficient financing to deliver on that local investment. And I think the city should have always been wary that they would bring much to the table to improve operations of the business toward the goal of best serving those local interests.
Regarding those interests, it is so important to separate “local” as a romantic idea from “local” as a set of crucial, tangible needs. I have heard those needs to be:
I have always believed that Ting’s track record long before this process started and everything we have said and done throughout the process has actually indicated that we are the best bet to deliver on all four. You maintain reasonable prices and grow jobs when you are able to operate the business successfully. It is partly an ethic and partly a competence. We bring both. You deliver an outstanding customer experience when you combine the values that BT and Ting share with infrastructure and tools that turn those values into great execution. We bring that and the folks at BT were thrilled at how much better they could do their jobs with our help. We are contributing meaningfully to the communities in which we currently operate and nobody even made us promise to do it! It’s just the right way to succeed in a local business. Having said that, we have made concrete promises to do just that in Burlington.
- Maintain reasonable pricing
- Deliver an outstanding customer experience
- Grow jobs
- Contribute meaningfully to the city and the startup community
The idea of Ting and KBTL negotiating a deal was smart. You ended up with everything we would bring to the operations, an asset valued at $30.5 million and up to 40% local ownership of that asset (up to 20% for the city, up to 20% for local investors or members, starting with the co-op). I think it was a great outcome for Burlington. But it was not accepted by the co-op board.
Now you really have to ask yourself what game the progressives on council are playing and what they are really trying to achieve for Burlington. Heck, more specifically, you have to ask what Dave Hartnett is trying to achieve. He voted for two rounds for KBTL and then admitted that he never considered them viable. He has preached the importance of local interests and yet somehow justifies an elaborate scheme to bring back Schurz, a cable company out of Indiana with an awful record on customer satisfaction. He admitted to me that Ting is the best bet to keep prices low, keep satisfaction high, grow jobs and contribute meaningfully to the community and to be going strong exactly as we are many years into the future. He admitted that “public company” versus “family owned” are just words that elicit emotional reactions, not valid, substantive concerns. Maybe the board goes back to a private equity firm that would just look to sell BT again in a couple of years (most likely, to a large cable company because that would be the richest possible buyer). Again, that would do nothing to serve local interests. You also need to ask yourself what the co-op really wants to achieve.
In fact, I think the process worked. You had eight solid bids. The co-op’s presence absolutely helped move all bidders, including us, on key points and helped you get to a great outcome. You got to a fair, market-driven value of $30.5 million, a strong operator, hard promises to deliver on your key interests and, perhaps most importantly, up to 40% ownership going forward. The co-op is prepared to lose (because at this point their voters have admitted that they didn’t manage to come up with a viable bid) rather than accept that compromise. The council is prepared to glorify bidders that were never in the city’s best interest to begin with just to deny the mayor a victory. I think the idea of 100% local ownership was a great idea. But I think you have a pretty good fallback in Ting. You have a fair price and you have someone that has proven and promised that it would share your values and serve you well. I think folks should still be demanding that the council stop playing political games and deliver the responsible choice.
November 10, 2017: Ting and KBTL Fail to Reach Agreement on Joint Venture
NBC5 reported on November 10, 2017 that Ting and KBTL said they negotiated but could not come to an agreement on a joint venture after the Burlington City Council set a deadline of 5 p.m. November 10, 2017 for a deal. The two sides said they were open to the idea of operating the company together but were disappointed a deal could not be reached by the deadline. City council said if there could not be an agreement, it would invite the other two bidders, Schurz and ZRF, back into the process. A final decision could be made at the regularly scheduled meeting on November 27, 2017.
Mayor Miro Weinberger released a statement tonight saying he was disappointed. "While I'm dissapointed a Ting proposal to allow the co-op to own up to 20 percent of the new Burlington Telecom - in addition to the previously negotiated city ownership interest - narrowly failed to secure KBTL board approval, the effort speaks well of both organizations."
"We had a series of good meetings with Elliot Noss and Monica Webb about how Ting and KBTL might be able to work together to purchase and operate BT," wrote KBTL board member David Lansky in an email to Mayor Miro Weinberger and the city council, referring to Tucows' CEO Noss and Webb, its head of market development and government affairs. "Throughout these meetings we experienced the Ting representatives as generous with their time, thoughtful, sincere, respectful, and open to discussion and consideration of a broad collection of options. We were unable to reach agreement on a way to work together that is acceptable to both parties." In an interview with Seven Days, Lansky would not specify the sticking points in the negotiations. "We tried to do something incredibly ambitious — form a collaboration between two organizations that have very different structures, histories, cultures — in five days," he said. "There's no one to blame. There are no bad people here." Lansky would not completely rule out returning to the negotiating table with Tucows at some point. "I don't want to close the door on anything," he said. "Until there's a closed deal, everything is possible."
According to WCAX5, former Burlington Mayor Peter Clavelle was a key player in the negotiations. The Progressive is the city's longest-serving mayor and he led the charge to create Burlington Telecom 15 years ago. Current Mayor Miro Weinberger invited Clavelle to assist in talks this week. Clavelle was also key in landing an agreement to redevelop the Burlington Town Center mall.
November 8, 2017: Council Member Joan Shannon Criticizes Jane Knodell for Contacting Eliminated Bidder ZRF
Seven Days Reported on November 8, 2017 that Councilor Joan Shannon (D-South District) has criticized City Council President Jane Knodell's phone calls to ZRF Partners over the past weeks, which, she said, "wreak havoc on the process." "Councilors should not be negotiating with anybody," she said. The council had hired the head of Dorman and Fawcett, Terry Dorman, as negotiator for a reason, Shannon said. Shannon said Knodell's conversations with other bidders were part of a political charade by councilors who voted for Keep BT Local but now are backing off that support. "President Knodell isn't exactly rooting for @KeepBTLocal & @TingBurlington to successfully negotiate," Shannon tweeted on Wednesday. "I hope KBTL supporters like Schurz because it looks like that's where we're headed."
Knodell acknowledged that she had several phone conversations with ZRF Partners over the last few weeks, but said she did not negotiate anything. "To characterize my conversations with anyone as negotiations is absolutely wrong and baseless," said Knodell. "The council has been very divided. I felt it was prudent to keep our options open."
While communications with bidders without council approval do not explicitly violate council rules, they obscure a process meant to take place in the public eye, Shannon said. Knodell had not told the council about her communications, Shannon added. In an interview last Friday, Mayor Miro Weinberger also said that he had discouraged councilors from reaching out to bidders. "That's not something I support," he said.
Councilor Kurt Wright Also Reached Out to Schurz
According to Seven Days Councilor Kurt Wright (R-Ward 4) also reached out to Schurz and defended those calls. "Obviously we should not be negotiating, but it's important to be prepared, because we know there's a timeline," Wright said. "If we sprung it on them, then we'd be getting criticism of, how are we going to do this on the tight timeline?" "I think we should stay on the high road here," Wright added, urging councilors to focus on the negotiations at hand.
Questions Remain About the Process
"Why was there a deadlock vote of 6-6 on Monday?" wrote Ken Grillo as a comment to the story in Seven Days. "If the vote was taken the week before, KBTL would have won 6-5 since Karen Paul had recused herself. Instead at least 3 of the 6 KBTL supporters chose to postpone what would have been their winning vote. Why did they do that? Maybe those KBTL supporters really didnt want KBTL to win. Why was Jane Knodell keeping the communication channel open with ZRF? She chose KBTL as her top candidate and could have voted them in on Oct 30. Instead she chose to postpone a winning vote for KBTL. I dont get it." "We need a new city council," added Ellen Joans. "What a mess."
November 8, 2017: David Provost, Chairman of Burlington Telecom Advisory Board, Says Bidding Process Has Simply Become Political
The Middlebury Campus reported on November 8, 2017 that David Provost, chairman of Burlington Telecom’s Advisory Board and Executive Vice President for Finance and Administration at Middlebury College, says the bidding process for Burlington Telecom has simply become political. “The piece that’s too bad about what’s going on now is it’s simply become political,” said Provost. “We sent forward KBTL with the key understanding that its bid didn’t meet the financial standards,” Provost said. “If we sent them to the council, that would give the co-op a longer chance.
Provost Says Benefits of KBTL Would Go to Maine Fiber
KBTL plans to borrow $10 million of its $12 million bid from Maine Fiber at a 14% interest rate. Although the supporters of the co-op think the city should own as much of Burlington Telecom as possible, according to Provost, over the next five years $25 million will go back to the firm. “The irony of them saying ‘keeping it local’ is that all of the money is going to Maine,” says Provost.
Knodell Says Selection of Ting/Tucows Would Benefit its Stockholders
Council President Jane Knodell doesn’t think that Ting’s proposal will be able to adequately provide the returns to Burlington that the people deserve. “What we’re giving up is local ownership and local control. Because that’s very valuable to me, I think we need to be compensated,” Knodell said. “We should get more of our returns.” According to Knodell, the co-op would directly provide returns to taxpayers in the form of dividend checks or, if the co-op were able to provide it, through lower prices. The caveat is that Burlington residents who don’t use BT as their provider won’t recoup the same benefits. Another concern of Knodell’s is the discrepancy in value of Ting’s earnings in Burlington as compared to those in the stock market. As a publicly shared firm, the majority of gains will thus end up with the shareholders, rather than Burlington residents. “The company is poised to have very strong growth in subscribers and growth in profits,” Knodell said. “They will benefit from that. Burlington taxpayers will not, because they will no longer be the owners.”
Stiff Time Pressure on City Council to Resolve the Impasse
There is stiff time pressure on the City Council to resolve the impasse over Burlington Telecom’s control. According to Provost, the city can control who purchases the telecommunications company only up until December 31. After that, the decision is transferred to the leadership of Blue Water. Blue Water also has the right to disapprove of a finalist under certain circumstances, such as the city choosing a first-time telecom operator as a buyer.
In the Burlington Telecom Management and Sale Agreement with Blue Water that was approved by the Council in 2014 (and called out again specifically in the criteria for sale of Burlington Telecom adopted by the Council on April 25, 2016) is the City's right to direct the sale of BT to a "Qualified Purchaser" that has the "capability of operating a telecommunications company of size and service similar" to BT and is "reasonably expected to satisfy any statutory criteria in order to obtain a certificate of public good from the PSB. Such a purchaser "may be a first time operator if [Blue Water] reasonably determines such first-time operator to be able to timely obtain a certificate of public good from the PSB."
November 8, 2017: Burlington City Council President Jane Knodell Contacts Eliminated Bidder ZRF, Says ZRF and Schurz Are Willing to Re-Enter the Bidding Process
The Burlington Free Press reported on November 8, 2017 that according to Burlington City Council President Jane Knodell, the two bidders for Burlington Telecom who have already been eliminated have been contacted and are willing to come back to the table and re-enter the bidding process if Ting/Tucows and KBTL are unable to develop a joint proposal that is acceptable to the City Council. Mayor Miro Weinberger said that he had concerns about extending the timeline to choose a buyer for Burlington Telecom. Burlington's share of the profits drops to 17.5 percent if a purchase agreement isn't signed by December 31, 2017. Weinberger, who has made comments supporting Ting, said that the fact that the co-op and Ting were having a conversation reflects the "common ground" between the two.
The two bidders who were already eliminated from the bidding process are Schurz and ZRF. ZRF Partners, an equity investment firm run by Faisal Nisar, withdrew days before the names of the four finalists were made public, after the mayor said he raised concerns about a conflict of interest. ZRF's initial bid was $17 million while Ting is now offering $30.5 million, Schurz was offering $30.8 million at the time it was eliminated and KBTL is offering $10.5 million in cash with the city retaining a $1.5 million ownership. "ZRF will make certain changes that address issues raised with them by the mayor in late September," said Knodell. Schurz was eliminated from the process on October 16, 2017 after if only received one vote by the City Council while KBTL received 6 votes and Ting/Tucows received 5 votes.
According to an article in Seven Days on November 8, 2017, Knodell acknowledged that she had several phone conversations with ZRF Partners over the last few weeks.
Some City Councilors Say the Appeal of ZRF's Proposal is its Community-Oriented Approach
According to some city councilors, the appeal of ZRF's proposal was its community-oriented approach. Faisal Nisar, the principal at ZRF, earned an MBA from Columbia Business School and then spent three years working at Merrill Lynch in New York City. Starting in 1999, he spent 17 years "managing investments in technology and media companies" at Baker Capital, a private equity firm in New York City, according to his LinkedIn profile. Nisar launched ZRF, the entity he used to submit a proposal for BT, in April 2016. Nisar's bid at $17 million, wasn't the highest, but it attracted "significant interest" from some councilors, according to Councilor Kurt Wright. "They had an aggressive plan in regard to economic development and small business development in the community," Wright said, noting that the company had also planned to expand beyond city limits. "Many of us were very interested in them as our No. 1 or No. 2 choice." According to Councilor Ali Dieng (D/P-Ward 7), Nisar was attractive for his creative and community-oriented approach. Nisar had promised to invest heavily in BTV Ignite and proposed partnering with the Burlington High School's technical center, Dieng recalled.
"I'm extremely disappointed; I was a huge supporter of ZRF," said Dave Hartnett after ZRF withdrew from the bidding. "I'm not really quite sure where this leaves us." Wright said, it was clear that the damage had been done. ZRF wanted to hear from the mayor that he no longer had conflict of interest concerns, Wright said — and Weinberger couldn't give that assurance. "[ZRF] didn’t want to be dragged back in there under that cloud," Wright said. "They've already been jerked around a little bit here."
Risk of Choosing a First Time Operator Like ZRF or KBTL
According to Bizapedia, ZRF Partners is a New Jersey Domestic Limited-Liability Company that was formed on April 1, 2016 by Faisal Nisar. According to a Linkedin profile of Faisal Nisar, the founder of managing director of ZRF Partners, ZRF Partners is a private investment and advisory firm focused on building value through operational and strategic improvements. A search of the internet does not show that ZRF has any prior experience operating a telecom. According to the Burlington Free Press, the option of choosing a first-time operator like ZRF or KBTL (that is, an entity that has never operated a telecom), is the risk that Blue Water may reject that purchaser. That risk of rejection may increase if Blue Water believes it is negatively affected by a lower purchase price.
November 6, 2017: Burlington City Council Deadlocks, Directs KBTL and Ting to Try to Negotiate Joint Venture
The Burlington Free Press, Seven Days, VT Digger, WCAX3, MyNBC5, WAMC, and VPR reported that the Burlington City Council deadlocked twice in a 6 to 6 vote between KBTL and Ting and finally ended the impasse by directing the two companies by an 11 - 1 vote to spend the next week discussing a joint venture between the two companies to operate Burlington Telecom. The formal resolution was put forth by Ward 7 Democrat/Progressive Ali Dieng. “The city council hereby requests that the Keep Burlington Telecom board, KBTL local, and representative from Ting/Tucows develop a joint venture proposal and deliver it to the city council and mayor.” Councilor Karen Paul offered amendments to clarify some language in the clauses. Both companies were amenable to the changes.
Under the resolution, the joint venture proposal will be delivered to the City Council next week, where councilors will be able to vote on what's brought forth. If the council votes down the joint proposal, or if the two finalists can't come to an agreement, the Council "could resolve to re-open the Burlington Telecom sale process including and not limited to the four initial bidders; KTBL, Tucows/Ting, Schurz and ZRF."
Only one councilor – Dave Hartnett – voted against the resolution. Hartnett said he had mixed emotions and he had been prepared to flip his vote from Keep BT Local to Ting/Tucows. “Now the board of directors of KBTL sells themselves out to Ting, I find that very ironic I really do, Hartnett said. “I think it was a bad decision. Ting’s not the right partner for Burlington in so many ways and there are better partners including the two that we could add back into this.”
City Council Asks KBTL and Ting to Present Joint Venture at Next Council Meeting
The agreement passed the the City Council instructs the two bidders to come up with a proposal that would benefit the city of Burlington and BT subscribers, as well as create a governing structure for the combined group. Both sides seemed amenable to working together after the lengthy impasse. "There is some philosophical alignment about doing what's best for the community," said Monica Webb, Tucows' head of market development and government affairs. “We talked about some broad concepts that both parties would be agreeable to and we suggested that we work out more details over the coming week,” Webb said. Neither group made any firm commitments about what a joint venture would look like, but after the meeting Webb expressed optimism, mentioning that Ting/Tucows have public-private partnerships in other cities as well.
"Our view is to hold true to [the co-op model] as much as possible," said Andy Montroll, vice chair of the KBTL board. "We don't know whether there's a place to go with this," but he added that the group is "looking forward to attempting something." "What we're looking to do is what's best for our community and if there's a desire that Keep BT Local and Ting speak we're certainly happy to do that. We don't know what the end results would be but having conversations and trying to see if there's a mutual way to work through this is certainly an option that we'd be open to looking at.”
Montroll said KBTL and Ting are holding their first meeting Tuesday. City Council President Jane Knodell said last week that "given the condition of the bids to date, neither option in its current form” meets the needs of the city. "I personally feel the best outcome would be some model that combines the strength of these two options," she said, referring to the Tucows and KBTL bids. Councilors took out language ensuring that the Ting and KBTL joint proposal be a cooperative, a major feature of the KBTL proposal. “I’m disappointed that the language ‘through a co-op model’ was eliminated,” said KBTL supporter Max Tracy, P-Ward 2. “I wish you great luck in trying to reconcile these two very different proposals.” Councilor Kurt Wright says the council will have its final vote on who will buy the cable and internet provider on November 27th. “It boils down to...do they come up with framework for an agreement?” said Wright. “If they don’t, then we go to this new process, or we still go to this new process that the council doesn’t support.”
City Council President Knodell Makes Case Against Ting
The meeting began with lengthy monologues from each councilor defending their respective decisions. Council President Jane Knodell (P-Central District) relied on her background as a University of Vermont professor when she started the council meeting with a economics lecture on what she saw as the weaknesses of the Tucows offer. “We have before us two potential buyers of BT (Burlington Telecom) that are in many ways opposite of each other. Ting is a wholly is wholly owned by a publicly traded corporation based in Toronto called Tucows and KBTL (Keep Burlington Telecom Local) is a new consumer cooperative based in Burlington. There's a stark trade off here. Ting is reasonably well capitalized although not the strongest on this account that we have seen that Burlington loses control of the asset altogether. KBTL offers total local ownership and control of the asset but it lacks an upfront equity base on which to run the company.” She described the bid as creating inadequate returns for Burlington and a "loss of local control." “I just have to say, I am not feeling the love,” she concluded, to whistles and applause from the pro-KBTL crowd.
Councilor Adam Roof says Burlington Telecom Staff Have "a strong preference for Ting"
Councilor Adam Roof, I-Ward 8, said Burlington Telecom's staff had shared that they have "a strong preference for Ting" during a meeting last Thursday. "They also shared concerns about the KBTL bid and their ability to quickly execute a full build-out of Burlington and beyond," he wrote. The telecom's director of marketing and public relations, Abbie Tykocki, briefly addressed the council shortly before the meeting adjourned, stating that the sale process had been hard on her and her colleagues and asking that they not be made into political pawns. Tykocki, on Monday afternoon, said that while telecom employees were free to speak about their personal preferences, it would put the staff in an awkward position to make an endorsement of either finalist. "It’s inappropriate for us to state a preference for one bid or another," she said. "However the councilors interpret the information they got from us is entirely up to them."
South District Democrat Joan Shannon cited numerous concerns about the local coop’s bid including potential litigation. “KBTL was only advanced because of public interest. Moving KBTL forward will mean either it is vetoed by the mayor, vetoed by Bluewater or vetoed by the PUC (Vermont Public Utility Commission). The clear choice between these two options is Ting.”
Mayor Weinberger Meets With Representatives from Ting/Tucows and KBTL
Because of the resolution governing how the voting process worked after each of the votes the council had to take a recess. After the first tie vote, the council broke for a 15 minute recess and briefly returned only to have to break again when the vote was tie. During the break after the second vote – which was supposed to be only 10 minutes but lasted over 40 minutes – a group of city councilors, Mayor Miro Weinberger and representatives from both Ting/Tucows and Keep BT Local met behind the glass doors in the city hall lobby. The city attorney looked on to ensure there wasn't a quorum of councilors, thus triggering public meeting laws. After a few minutes, Knodell strode out, muttering: "There's some kind of bullshit going on in there." But in spite of Knodell's misgivings, the group reached an agreement. When the council reconvened, Tucows' Webb and KBTL's Montroll said they had agreed to work together. The councilors voted on the compromise, giving the two organizations four days with which to come up with the joint venture agreement. Knodell envisioned a Tucows proposal with some revisions based on KBTL's community-based model.
What Will the Joint Proposal Look Like?
What a final proposal will look like is unclear. According to Seven Days the two bidders seem to be diametrically opposed: KBTL has no telecom experience but strong local support, while the Toronto-based Tucows has experience operating a telecom — in addition to more secure financial footing. The council seemed resigned to compromise. "I'm strongly committed to the cooperative model, but we have to try to come to some mutually beneficial solution," said Council Member Max Tracy.
If the two groups cannot reach an agreement by Friday, two other bidders, Schurz Communications and ZRF Partners, will be invited back and the council will select a buyer from those four on November 27. But if the agreement is reached by Friday, the council will vote on the joint venture proposal next Monday. If the joint Ting and KBTL proposal is rejected during the next council meeting, the council will open the bidding process back up during the following meeting Nov. 27. Ting and KBTL will be back in the running, along with the two previous finalists, Indiana-based Schurz Communications and Faisal Nisar, who runs a private equity firm in New Jersey called ZRF Partners. However, Nisar has said he no longer wants to be considered as a potential purchaser of Burlington Telecom. Ting representative Monica Webb said she wasn’t going to make a judgment on how long Ting/Tucows would stay in the sale process if the groups weren’t able to come to an agreement on how to move forward together.
- Youtube Video of Burlington City Council Meeting November 6, 2017
November 2, 2017: City Councilor Karen Paul Quits Job to Vote on Burlington Telecom Sale
Seven Days, the Burlington Free Press, and WCAX3 reported on November 3, 2017 that Burlington City Council member Karen Paul has resigned from her job and plans to vote on the Burlington Telecom sale at the Burlington City Council meeting on November 6, 2017 after recusing herself for an unexplained conflict of interest at the City Council meeting on October 30, 2017. According to WCAX3, with Paul back in the mix -- sources say the council is back to being evenly split between the bid from Ting and the bid from Keep Burlington Telecom Local.
Paul, a staff accountant with the accounting firm McSoley McCoy & Co., announced the decision in an email to other councilors and Mayor Miro Weinberger. "This morning, effective tomorrow, I have resigned my position with my employer which was the source of that professional conflict," Paul wrote in the email sent around 4 p.m. Thursday. "I intend to vote on the sale of BT assets on Monday evening." "After eight years of working to address Burlington Telecom’s challenges ... I never imagined that I would find myself in a position where I would not be able to cast a vote on this most important decision," Paul wrote in her email. "I have worked to identify ways to resolve the conflict and have determined that there is only one way I can resolve the conflict," she said, referring to the resignation. City attorney Eileen Blackwood "informed me that I may join the debate on this agenda item," Paul added.
When Paul recused herself during Monday's meeting, she said little about her conflict of interest. She did say it had come to light over the weekend and that the issue "has nothing whatsoever to do with the parties interested in purchasing Burlington Telecom." Councilors were unsure about the nature of the conflict, council president Jane Knodell (P-Central District) said on Thursday morning, before the news had been released. "It’s hard to know how serious the nature of the conflict is," Knodell said. "The timing of the discovery of the conflict is hard for me to understand." According to Knodell, councilors are not required to specify what the conflict is in order to recuse themselves.
Mayor Miro Weinberger lauded her decision. "Karen is an extremely hardworking and devoted City Councilor," Weinberger said in a written statement to Seven Days. "Her resignation shows just how committed she is to Burlington."
Paul joined McSoley McCoy & Co in January 2016 after running her own money management company, Paul Financial Services, for 20 years, according to her company bio.
City Attorney Eileen Blackwood said her office had reviewed votes Paul had cast regarding Burlington Telecom, both on the city council and the Burlington Telecom Advisory Board. When a person discloses a conflict of interest, the city's legal department looks if the person had cast any decisive votes. Blackwood said she was not aware of any times where Paul had cast a decisive vote on the telecom issue.
November 2, 2017: What Happens If There is Tie in Vote on Burlington Telecom Owner?
Vermont Biz reported on November 2, 2017 on what may happen on October 30, 2017 when the Burlington City Council votes on whether KBTL or Ting will operate Burlington Telecom. City attorney, Eileen Blackwood, answered the following questions for Vermont Biz:
Q: If the Council vote is a tie how is that resolved? (Does the mayor vote?)
A: “The Mayor cannot vote on a Council matter, as he is not a Councilor. City Council would have to determine the method for resolving a tie in keeping with Robert’s Rules of Order.”
Q: Can the mayor veto a council decision and then what happens?
A: “The Mayor can veto a Council decision. Council could overturn a veto with a two thirds vote, but if the veto was sustained, the item would fail.” (Blackwood during the Council meeting said if the veto were sustained, then the original vote would be as if it never happened)
Q: If a councilor recuses herself can a substitute be brought in and who decides on who that is (this happens on some boards and courts)?
A: “There are no substitutes.”
Q: If a councilor quits how is she replaced (would the mayor choose as the governor would)?
A: “We would have to determine what the Charter dictates with regards to Councilor resignation.”
Q: Does Blue Water have the right to refuse to go along with the Council's decision and under what conditions?
A: “Blue Water does have the right to disapprove of a finalist under certain circumstances, such as if the City were to choose a first-time telecom operator as a buyer.”
November 1, 2017: Tucows Reschedules Third Quarter Earnings Report
Tucows issued a press release on November 1, 2017 announcing that it has rescheduled its third quarter 2017 financial results conference call to Thursday, November 9, 2017 at 5:00 p.m. (ET). The Company expects to report is third quarter 2017 financial results via news release at approximately 4:05 p.m. (ET) the same day.
The earnings conference had originally been scheduled for November 6, 2017 but this evidently conflicts with the Burlington City Council Meeting on November 6, 2017 where the council will make its final decision on whether to go with Ting/Tucows or KBTL for Burlington Telecom.
November 1, 2017: Tucows Gets Personal in Bid to Buy Burlington Telecom
Katie Jickling, a reporter for Seven Days, a Burlington, VT based Independent Newspaper, traveled to Toronto with five members of Burlington City Council to sit in on meetings between Council members and Tucows to hear Tucows' sales pitch to choose a new owner for its municipal telecom company, Burlington Telecom. Following are some excerpts from the article which is well worth reading in its entirety:
With this reporter in tow, the Burlington contingent arrived at the former carpet factory just before 9 a.m. for a day of meetings and tours. About 200 of Tucows' 500 employees work in the two-story brick building on the west side of the city. Inside, whiteboards, rows of computers, potted plants and sleek office furniture give the place a hipster techy vibe. Company milestones are advertised on wall hangings that resemble championship sports banners. The coffee maker is programmed to tweet the news of each fresh brew. Councilors met with eight leaders from the company's various departments in a first-floor conference room. After introductions, small talk and coffee served in company mugs, the Canadians broke the ice.
An opening line from the vice president of sales and marketing, Michael Goldstein, revealed that the company has a good idea of what it's up against in Burlington. "We usually spend time thinking we need to dress more like grown-ups," he quipped. "Now we're trying to dress less like an evil corporation." Noss described the ideal Ting city as one with universities and plenty of bookstores and coffee shops. "So Burlington is perfect," he said. Over the next seven hours, company reps played up Tucows' "hyper-local approach."
Tucows was in sales mode. After lunch Friday, the group video-conferenced with the company's Oregon-based director of field operations. Other employees explained the nuts and bolts of fiber mapping and installation — tools they'd use to bring fiber to Burlington's most inaccessible homes. Noss sat at the head of the conference table, energetically presiding over events like a master of ceremonies. He highlighted a company ethos that he said would jibe with Burlington's culture: an appreciation for good coffee, an adherence to net neutrality, health food in the company kitchen and, of course, the cow theme. The councilors interviewed the Tucows leaders. They asked about the decision-making processes, local control, customer service and Burlington jobs. How was the company's relationship with its shareholders? Would Tucows end up selling BT to a large corporation such as Comcast? With the exception of a 2002 sale of an electronic library, "I've never sold anything," Noss assured them.
- Seven Days. "Toronto-Based Company Gets Personal in Bid to Buy Burlington Telecom " by Katie Jickling. November 1, 2017
October 31, 2017: City Council Postpones Vote On New Burlington Telecom Owner
Seven Days, the Burlington Free Press, NBC5, CBS3 and VT Digger reported on October 31, 2017 that in an anticlimactic ending to a four-hour meeting, the Burlington City Council decided in an 8-3 vote to wait another week to pick a new Burlington Telecom owner when councilors will skip public forum and pick up where they left off.
Karen Paul Recuses Herself from Voting
Councilor Karen Paul (D-Ward 6) recused herself from Monday's vote. Paul had previously backed Ting. Paul said as the meeting began that she had discovered "a professional conflict" over the weekend relating to her work as a CPA at McSoley McCoy & Co. Paul refused to describe the conflict, though she said that the issue "has nothing whatsoever to do with the parties interested in purchasing Burlington Telecom." Paul declined to comment further on the nature of her conflict of interest, or how long the conflict existed before coming to light. City Attorney Eileen Blackwood, when asked, said she does not believe that Paul's conflict could have impacted prior votes.
"To hear the news, that possibly there’s a city councilor that sat through this whole process that had a conflict of interest" raised concerns, said Councilor Dave Hartnet. He added later, "It's not responsible for the council to move forward tonight." In her remarks recusing herself, Paul said she has been working on Burlington Telecom for eight years and would have preferred to vote for the final choice. "This is not the position I would like to be in," she said. However, Hartnet said he still had concerns, saying that Paul could have influenced other councilors and that he was worried about voting without getting more legal information. "I don't feel good about that," Hartnett said.
Motion to Postpone Passes on Second Try
Councilor Dave Hartnett pushed to postpone the vote after two hours of public comment. Hartnett's motion came after Councilor Karen Paul recused herself, citing a professional conflict of interest. Paul voted for Ting in the preliminary round of voting two weeks ago and has served on the Burlington Telecom Advisory Board. Hartnett, who told the Burlington Free Press earlier Monday afternoon that he planned to vote in favor of selecting the co-op, Keep Burlington Telecom Local, said he would not cast a vote even if the council decided to move forward. During a recess, Hartnett said he was concerned after learning from Burlington's legal team that there was a possibility that councilors who voted for the co-op could be personally sued by Citibank. The lawyers tried to reassure councilors that they wouldn't be liable, Hartnett said, but he was still concerned.
Hartnett's motion failed on the first vote. But after councilors had the opportunity to ask Ting CEO Elliot Noss and the co-op's Chairman Alan Matson questions, Councilor Kurt Wright moved to reconsider postponing. The council voted 8-3 to adjourn the council meeting and postpone the vote on the second try. "I think it's wise to do this," City Council President Jane Knodell (P-Central District) said of the delay. "The council has done a lot of listening, but it hasn’t had the opportunity to do very much talking to each other. There are aspects of this decision that have not been explored, have not been fleshed out."
KBTL Supporters Address Council
Keep Burlington Telecom Local has gathered support from a vocal segment of residents and won the votes of six city councilors in a preliminary vote earlier this month. Ting, a subsidiary of Toronto-based Tucows, won five votes. KBTL supporters urged the need for local control of the telecom. "The number one criteria was local control," said David Lansky, a member of the KBTL board."I don't understand how Tucows and Ting can meet that criteria." "I don't support selling off our assets to the highest bidder," said state Rep. Brian Cina (P-Burlington). "Please don't let big business interests and out of state banks intimidate you. We need to protect what is ours." “Don’t sell our franchise, stay with democracy and don't let Citibank dictate what we do in Burlington Vermont,” said Joe Patalano.
Burlington Telcom Employees Urge Vote
In an emotional plea, Abbie Tykocki, director of PR and marketing for Burlington Telecom, urged the council to hold the vote. "We are not pawns on a political chess board," she said as she criticized the council for not actively seeking BT employees' input in the sale decision. "We are citizens of Burlington and we are stressed ... I ask you, I implore you ... to put this to a vote."
Mayor Weinberger Urges Vote
Mayor Miro Weinberger also asked for a final decision. "I believe the council has a fundamental responsibility and that is to vote," he said. "We have a chance tonight to end a long, long journey that has been very strained and very problematic." He noted that it was Ting supporters who were ready to vote and KBTL backers who were now questioning their initial decision. In a statement released ahead of Monday's meeting, he said that selecting Ting would "ensure a strong and affordable future for BT," pointing to the possibility of a credit rating increase and the promised economic investment. He called the co-op bid "well-intentioned but very weak." "The Council should not let slip away tonight's hard-earned chance to finish the job," Weinberger said. The mayor urged the council to vote on Monday night, saying that it was "time to see we have the political will" to make a tough decision. "Ting is committed really to regional, economic development that I think is quite exciting,” Weinberger said. “This proposal has a 10-year plan to invest $50 million in capital investment, building out the fiber network, not just in Burlington, but likely in other parts of Chittenden County."
Joan Shannon (D-South District) called for councilors to respect the public who had shown up, as well as Ting CEO and president Elliot Noss, who had traveled from Toronto for the meeting. Four members of the Burlington Telecom Advisory Board, led by chair David Provost, urged the council to adhere to the board's recommendation. In June, the board ranked KBTL as the weakest of eight proposals. "Just know that our guidance, suggestions and recommendations are not political," Provost said. "They were developed with the best interests of Burlington in mind."
Tucows CEO Elliot Noss Speaks
Tucows CEO Elliot Noss answered questions in front of the City Council and gave a two minute statement during the public comment session. He said he saw his company's bid as "stewardship" of Burlington Telecom. During questioning, Noss said that if Ting were to re-sell the utility, the new owner would have to abide by the full terms of the agreement between his company and the city.
Some Burlington citizens spoke in favor of Ting. "If KBTL were to advance tonight as the winning offer," said Burlington resident Russ Scully, " I think we know that there’s a number of events that are gonna ensue; starting with a lawsuit from Citibank.” “If Keep Burlington Telecom Local is my new management company, I'm done,” said Ted Adler, a Burlington resident. “It doesn't have the backbone. It doesn't have the experience.”
The Blame Game
After the city council meeting, the mayor and councilors traded recriminations. WCAX reported on the back and forth:
"A bomb dropped on the process," said Kurt Wright, R-Burlington City Council. Wright is on the Mayor's side in backing Ting, but he says the Mayor is going about breaking the council's deep divide all wrong. "I think this just taking the attitude of -- as it seems the mayor has done -- which is kind of my way or the highway attitude -- I don't think that's getting us to a good place right now," "I would say that unfortunately the mayor has participated in the process in a way that hasn't helped the process," said Council President Jane Knodell, P-Burlington. Knodell is in the Keep BT Local camp. She says this is the most divided she's seen the council -- and the public -- since Mayor Weinberger was first sworn in nearly six years ago. "I don't think it's productive to revisit the past because we are where we are, but I would hope the mayor would take some responsibility for how we got in this polarized place," she said.
"We are where we are because of a series of city council decisions," said Mayor Weinberger. He says councilors chose Ting and KBTL as finalists even though he pushed them to ditch KBTL from the final 2 and keep the bid from Schurz. Even councilors who are now complaining say if Schurz was in the mix now it could have brought consensus. "Unfortunately they chose not to do that, and at this point I think its very difficult to go backwards."
"You also have to know what went on behind the scenes," Wright said. He says councilors warned the mayor and his democratic allies that keeping Ting in the mix would only elevate support for KBTL among councilors because so many constituents support its local control message. And that's what happened. Wright says a meeting Sunday between some councilors and the Mayor before the vote should have been about finding a compromise. "Our thought was, lets try to work through that," Wright said. "The Mayor really didn't want to hear any of that." Wright says the meeting ended badly. The mayor agrees but says that is just because he told the councilors that he and the public expect the City Council to choose the next owner of Burlington Telecom from the two finalists the City Council selected. He calls this a long, strenuous and expensive process.
- Youtube Video of City Council Meeting October 30, 2017
October 30, 2017: Citibank Threatens to Sue if Burlington Council Chooses KBTL
Seven Days, the Burlington Free Press, WCAX, and WPTZ reported that Citibank's legal counsel sent a forcefully worded email containing a threat to sue the city of Burlington if the city council selects Keep BT Local's bid to take over Burlington Telecom. The co-op's offer is "not even remotely commercially reasonable and not qualified," Kevin Fitzgerald wrote in an email Sunday night to city attorney Eileen Blackwood. A city council decision in favor of the KBTL bid would be "vigorously opposed by Citibank on several fronts including but not limited to immediate litigation." A representative of Citibank wrote to Burlington's lawyers over the weekend to say choosing the co-op's offer would "be a profound, willful and bad faith breach of Burlington's patent contractual, legal, equitable and fiduciary obligations owed to Citibank, including a breach of the implied covenant of good faith and fair dealing, and will be vigorously opposed by Citibank on several fronts including but not limited to immediate litigation."
Blue Water Expresses Concerns
The city has also received a communication from Michael Furlong, a lawyer representing Blue Water, expressing concerns about the co-op's bid, said Councilor Chip Mason, D-Ward 5. Furlong wrote that Blue Water, the local group that purchased Burlington Telecom and leased its assets back to the city in 2014, would not insert itself into the city's decision making process, but has serious concerns about whether the co-op can make it through the state's regulatory process. Blue Water has the right to disapprove of a finalist under certain circumstances, such as the city choosing a first-time telecom operator as a buyer. Mason said he believes Furlong's email confirms that they will use that right. "KBTL is a first-time operator of a telecom system, lacks management experience, and its proposed debt financing reflects junk bond credit or worse," Furlong wrote in an email. "The City’s comparison of bidders found KBTL does not meet four of the 13 criteria considered, and the City’s outside financial and technical consultants found KBTL’s bid proposal inferior to other remaining bidders."
KBTL Inaccurately Portrayed the Terms of Their Loan
KBTL inaccurately portrayed the terms of their loan in a final proposal the group submitted to the city last week. KBTL, which plans to borrow $10 million of its $12 million bid from the Maine Fiber Company, said in a new written offer to the city last Thursday that it secured its loan at 8 percent interest, significantly lower than the original 14 percent. But that's no longer true, KBTL board chair Alan Matson confirmed Sunday afternoon. "We were unable to reach an agreement with Maine Fiber on an 8 percent base interest rate that included contingent payments based on the future success of Burlington Telecom," Matson wrote in a Facebook post on Monday afternoon. "While Maine Fiber agreed in concept to this idea and worked hard to support the idea, we were never able reach an agreement on a structure that was materially different (in almost all scenarios) from the 14 percent loan that we have already committed to with them." The terms of the loan, he said, are the same as they were during October 16 council vote. Matson confirmed the information with Terry Dorman, head of Burlington Telecom operator Dorman & Fawcett, in a series of emails on Sunday morning.
"I have to admit, I am frustrated. This is exactly what I feared, Chip Mason (D-Ward 5) told Seven Days on Sunday afternoon. "We’re less than 30 hours away from a supposed vote and the terms are just now being determined. That’s not OK." City Councilor Adam Roof, I-Ward 8, who went to Toronto last week to research Ting's operation, said he has a "ton of respect" for the co-op and does not want to get into a finger-pointing match. But, he said, lowering the interest rate would have been a "material change." "Does it impact the assessment? Yes, it does," he said. Roof voted for Ting in the preliminary vote and said he plans to vote for Ting again on Monday night.
Some KBTL Supporters Still Adamant
Councilor Max Tracy, P-Ward 2, said he will be voting for the co-op and believes the local choice to offer the best long-term benefit for the city. He said his understanding of the settlement does not require the city to pick the highest offer. "We'd have a very strong case if Citibank brings litigation," he said. Tracy added that the language about Blue Water's right to refuse a buyer is "vague." Council president Jane Knodell (P-Central District) said she'd vote for KBTL and expected a 6-6 tie at Monday's meeting — meaning a winner may not be chosen then. What happens if that is the case is unclear, according to Knodell. "We have to look at our different options about what our next steps are," she said. The co-op's last minute change didn't affect her decision, she said, though she added, "They might have gotten a little bit ahead of themselves." "I think the city of Burlington needs to get its fair share of [Burlington Telecom's] future profits," Knodell said of her vote. "Ting does not provide that."
Outcome of October 30 Vote Still Unclear
It is not exactly clear what happens if there is no winner. Several councilors said they believed Monday's vote may result in a 6-6 tie, and it was unclear how the council will proceed in the case of a tie. The mayor supports the Ting bid but he does not get a vote, so he cannot break the tie. In a statement he said, "Delay, or selecting the well-intentioned but very weak KBTL offer, exposes the City to serious legal and financial risk." Although Weinberger does not cast a deciding vote, he could use his veto power.
October 28, 2017: Ting and KBTL Present Final Pitches for Burlington Telecom
VT Digger reported that Ting and KBTL released their final letters of intent on the eve of the Burlington City Council meeting on October 30 to select a buyer for Burlington Telecom. Mayor Miro Weinberger said Friday that he still believes KBTL has not done enough to address the financial, regulatory, legal and operational concerns he and others have raised and that Ting's bid had substantively improved, putting into writing a pledge to invest $50 million in Burlington Telecom over the next decade. Weinberger said in addition to having industry leading customer service and support, Ting’s plans to grow its business in Burlington will be a boon to the local tech economy. Ting will also make Burlington a hub for research and development on ambient connectivity, holding out the potential for more tech jobs in the future, helping city and state to retain skilled young people, including graduates of Champlain College’s cybersecurity program, said Tucows CEO Elliot Noss. The majority of Burlington’s business community is supporting Ting’s bid as well with the Lake Champlain Regional Chamber of Commerce saying that beyond the capital and experience Ting offers, there are legal and regulatory issues with the co-op bid that make it a risky proposition.
Meanwhile at a news conference and rally on the City Hall steps Friday, close to 40 co-op supporters urged councillors to go with Keep BT Local’s $12 million offer, over the $30.5 million final offer from Ting. They said the benefits of local ownership outweigh the larger sale price, arguing that Ting, which is a subsidiary of the publicly traded Canadian company Tucows, would manage Burlington Telecom in the interest of its shareholders — not local residents and subscribers. “They will bend and sway and blow in the wind in whatever direction their stockholders and equity investors demand, so that they can make more money,” said co-op backer Melinda Moulton, CEO of Main Street Landing. To shore up concerns raised by the City Council as to how KBTL would survive an economic downturn or pay unexpected costs while strapped with millions in debt, the co-op secured a lower 8 percent interest rate from Maine Fiber which was previously 14 percent. To secure the lower interest rate, KBTL agreed to make additional payments contingent on Burlington Telecom’s financial success that would essentially bring payments up to a 14 percent interest rate, but only if things are going well, said KBTL board chair Alan Matson.
Ting has committed in its letter of intent to put $250,000 annually into community benefit projects. KBTL has pledged to make a similar investment as co-op board member Andy Montroll said it would match Ting’s offer of $250,000 per year. That commitment isn’t explicitly reflected in the co-op’s letter of intent. Both Ting and KBTL said they would retain all current Burlington Telecom employees. Noss said one aspect of Burlington Telecom’s future is being “trivialized” in the sale process is the actual day-to-day operation of a fiber network. “People are acting like operating an ISP (Internet Service Provider) is just instant soup, like you just add water, but it’s more complicated. You need fresh vegetables and the right spices,” Noss said.
- Letter of Intent From Ting
- Bid from Ting
- Letter of Intent from KBTL
- Bid from KBTL
- Email from Citibank Threatening Litigation October 29, 2017
October 25, 2017: Five Burlington Council Members Travel to Toronto to Visit Tucows
VT Digger reported on October 25, 2017 that in a trip has been in the works for weeks, five Burlington City Council Members. Adam Roof, Chip Mason, Karen Paul, Richard Deane, and Joan Shannon traveled to Tucows' headquarters in Toronto to perform due diligence to get a sense of the company’s culture and operations before casting their final vote on October 30. All of the councilors making the trip voted to advance Ting’s bid at the council’s Oct. 16 meeting. “I’ll be the first to say the optics aren’t ideal,” said Adam Roof adding that the trip is being paid for by Burlington Telecom. “There will be no inappropriate courting,” Roof said. “This is a due diligence trip through and through.” Mayor Miro Weinberger and members of the Burlington Telecom Advisory Board made a similar trip to the headquarters several weeks ago.
State Rep. Selene Colburn, who supports KBTL, said the trip was available to all city councilors but that the group going is essentially the Democratic caucus and a representative for the Democratic mayor — all of whom have publicly supported Ting over the co-op. “They didn’t create this dynamic, but now it’s the Democrats and the mayor’s office going to meet with Ting,” Colburn said. Brian Lowe, the mayor’s chief of staff, said such due diligence visits are typical when the city is negotiating a major transaction, and it was open to any member of the council. "The responsible step here is for all Councilors to see Ting's operations first hand," wrote Dave Gibson in a comment to the article. "I'm stunned to learn that they hadn't already. Meetings in Burlington with a select few cannot provide an accurate feeling for the culture of a company. How could any Councilor not choose to visit informally with employees in their space."
October 24, 2017: Namecheap Drops Lawsuit Against Tucows
Domain Name Wire reported on October 24, 2017 that Namecheap has dropped its lawsuit against Tucows voluntarily dismissing the case without prejudice, meaning that it can refile the claims at a later time. According to Andrew Alleman this suggests that the parties are working out their differences outside of the courtroom.
October 17, 2017: How Members of the Burlington City Council Voted in Narrowing Burlington Telecom Sale Candidates
The minutes of the October 16, 2017 meeting of the Burlington City Council showed that members of the Council voted in narrowing the Burlington Telecom Sale Candidates as follows:
- KBTL: Sara Moore, Sharon Bushor, Jane Knodell, Max Tracy, Dave Hartnett, Ali Dieng
- Ting: Karen Paul, Adam Roof, Chip Mason, Joan Shannon, Richard Deane
- Schurz: Kurt Wright
Democrats - 4 Members
- Joan Shannon - South District - Ting - Member of Burlington Telecom Advisory Board (BTAB) - Shannon, who supported Ting, praised the company for advocacy regarding net neutrality and the commitments the company has made toward the community, such as BTV Ignite. "It's extremely important that we grow our tech economy," she said.
- Karen Paul - Ward 6 - Ting - Member of Burlington Telecom Advisory Board (BTAB) - Paul said KBTL’s pro-formas pencil out, but they include no cushion for the unexpected. A recession or other economic disruption could tank a co-op owned Burlington Telecom, said Paul. Paul requested an outside analyst to weigh the benefits and risks of the co-op bid that are "out of the realm of conventional economic analysis," including net societal benefits.
- William "Chip" Mason - Ward 5 - Ting - Mason brought up that Citibank has indicated that it may sue the city again if it believes it hasn't received its share of profits. In a discussion on Facebook on October 14, Mason posted that "BT survived because: (i) the city settled with CitiBank for $10mm and agreed to give them 50% of the sale proceeds in an arms length sale; and (ii) because Bluewater agreed to purchase the equipment and lease it back to the city in exchange for 40% of the sale proceeds. The value of BT has been established by 2 independent bids of $28mm and $30.5mm. KBTLs offer is $12mm which nets those we agreed to share proceeds with much less. CitiBank has already indicated that they will bring suit against the City if it accepts the lower offer and intervene in the PUC proceeding. CitiBanks claim could be as high as $4.5mm and would have to be paid by the taxpayers which the PUC will not allow. We also have two different residents who have threatened to bring suit if we accept the lower offer. I, too, appreciate the decision of a prior council to lease to City Market but the vote on BT is not the same. There were not threats of litigation. Onion River had been in business for over 20 years and the city was not precluded by charter from helping. I would welcome the opportunity to speak to you or anyone else about these issues. The mediated settlement agreement with Citibank and the agreement with Bluewater are public and approved by City council after much debate. The threat of litigation arises because of the disparity in the bids which wasn’t known until offers were submitted. If KBTLs offer were twice as high this would be a non issue. We were months away from trial in federal district court facing a claim for $33 million and the loss of the assets. Absent the settlement BT would have been sold and we would have had no say and not the possibility of some return to the taxpayers. I am not patronizing any participant in this conversation or my constituents. The reference to the best interest of the city refers to the fiduciary duty each councilor has when taking action. Each councilor comes to that decision in his or her own way. The threat of litigation is not my opinion."
- Richard Deane - East District - Ting - Deane emphasized that this is not the final vote the council will make regarding the sale of Burlington Telecom. “I think we need to be certain of four critical points. That those two candidates that we choose are financially stable, that the chosen firm must have proven managerial and technical expertise. Third they have to have the best chance to be favorably evaluated by the Public Utility Commission. Finally they must offer the best assurance the $16.9 million of taxpayer funds that were inappropriately allocated by a previous administration are returned.”
Progressive Party - 3 Members
- Jane Knodell - Central District (City Council President) - KBTL - City Council President Jane Knodell, despite her vote for the co-op, said it was a "reasonable" position to be worried about the risks facing the co-op's bid and said that Monday's vote might not translate into continued support when the council picks a winner at the next City Council meeting on October 30. "I will vote for it tonight, but I don't think it's there yet," said Knodell. Knodell said even though she started out a skeptic of the bid from Keep BT Local, it was growing on her. But Knodell also was clear to point out she still thought the proposal needed work. “I’m here tonight to support Keep BT Local but also to say keep working because there will be hurtles and … I think the people that are saying we are very worried about the financing that is legitimate,” Knodell said. Knodell reviewed the bidders’ pro-formas, or 10-year projections. The information is not public, because it includes proprietary information about the bidders. Currently, Burlington Telecom is paying for growth out of profits. Keep BT Local would have a difficult time keeping up with debt payments under that scenario, Knodell said. “It can be done, but it has to be flawless,” she said of the co-op’s plans for Burlington Telecom. Her message to the co-op board: “Please don’t rest on your laurels. Keep working hard.” Though Knodell didn’t vote for Ting, her comments signaled that it may be the bid she ultimately supports if the co-op can’t sufficiently improve its offer. The council president said she thinks Burlington should choose a buyer who can help the local tech economy flourish, something Ting has made the greatest commitment to thus far, pledging $250,000 [per year] to specific local efforts including BTV Ignite. “The next Skype could come out of Burlington. I think we need to be thinking quite big when it comes to this sale,” Knodell said
- Max Tracy - Ward 2 - KBTL - Tracy voiced strong support of the bid, saying the community had long set forth a criteria for local ownership and adding that the city should support the co-op in overcoming any hurdles. Tracy said public input was what ended up tipping the scales in favor of Keep BT Local. Tracy read emails submitted by the public. According to Tracy, 186 support the co-op, compared to 20 for Ting and 16 for Schurz. Tracy posted on his Facebook page on October 16, 2017 that "We need lots of advocacy and big turnout for the next meeting on 10/30."
- Sara Moore - Ward 3 - KBTL
Independent - 3 Members
- Adam Roof - Ward 8 - Ting - Roof addressed the emotion that has been swirling over the deliberations. “I am not fearful or scared or intimidated by the CitiBank potential lawsuit. Nor am I intimidated or fearful or directed by the mayor and his opinions. I do think that KBTL for me has a long way to go to mitigate the concerns that I have especially around the financial dynamics.” Roof said he was disappointed that the discourse had, at moments, turned less civil. He wrote he has received calls that he characterized as political threats and harassment. "Last week I answered a call from a blocked number informing me that if I did not vote for KBTL I would 'have a target on my back' and that 'capitalist pigs will be slaughtered,'" he wrote in an email that went out to about 20 or 30 people shortly before the meeting. He blasted the threats as both tasteless and ineffective, but said he was encouraged that the "majority of Burlingtonians are kind and thoughtful people who realize that far more unites us than divides us."
- David Hartnett - North District - KBTL - Hartnett cast a vote for the co-op while adding he had concerns about all three bids. "I was probably the first councilor to speak up and say they weren't financially viable," he said about the co-op. "I'm willing to give them one last chance." In spite of the "major hurdles" the co-op faces, "You’ve worked hard to earn my respect," said Hartnett. "I’m a hometown guy and I’m from Burlington."
- Sharon Foley Bushor - Ward 1 - KBTL
Democrat/Progressive - 1 Member
- Ali Dieng - Ward 7 - KBTL - During the proceedings Dieng, referring to the fact that one of Ting/Tucows 40,000 domain resellers had sold a domain name that was used for a neo-nazi web site, told the Council that "I hear members of this council supporting entities that are hosting white-supremacy web sites, that are hosting neo-nazi web sites." Dieng added that he had received threats from some members of the Burlington City Council. "I have received so many threats just because of this issue. When I was coming here I was so excited that I will join other people who are so excited about this city. How can we partner and make this happen for the residents of Burlington. I'm going to tell you the truth. I was disappointed by some members of this council, by some members at this table, who gave me some threats about this vote. If you vote this way, it will follow you in the next election in March. Think about that."
Republican - 1 Member
- Kurt Wright - Ward 4 - Schurz - "It’s not about fear [of litigation against the city], it's whether there’s legitimate concerns about whether Keep BT Local can pull it off," said Kurt Wright (R- Ward 4) as he explained his unwillingness to support the co-op and its $10 million loan with a 14 percent interest rate. "I don’t take those considerations lightly."
- What Members of the Burlington City Council Think About the Burlington Telecom Bidding Process October 10, 2017
- Letter from Mayor Miro Weinberger on Burlington Telecom Finalists October 10, 2017
October 17, 2017: Burlington City Council Narrows Sale of Burlington Telecom to Ting/Tucows and KBTL
The Burlington Free Press, Sevens Days, VT Digger, Vermont Public Radio, WAMC, and My Champlain Valley reported on October 17, 2017 that the Burlington City Council voted to advance the bids of Ting/Tucows and KBTL in the process to buy Burlington Telecom with six of councilors voting for KBTL, five voting for Ting/Tucows and one voting for Schurz which has now been eliminated from the sale process.
City Council Hears Supporters of KBTL
The city released more than 200 pages of emails from residents sent to firstname.lastname@example.org, the dedicated email address set up for residents to share Burlington Telecom input. People who chose to weigh in overwhelmingly — though not unanimously — expressed a preference for local ownership. The public comment period was dominated by people speaking in support of Keep BT Local’s bid to buy Burlington Telecom. Many of those speaking in support of Keep BT Local spoke passionately about the benefits of having Burlington Telecom run by a local company and criticized Mayor Miro Weinberger and some city councilors for not supporting the co-op’s bid. “When [Weinberger] said that the offer of Keep BT Local was not viable I felt really sad,” said Diane Pearson. “I came tonight to to ask each of you one question before you vote tonight: how can our community not be viable and what can be more viable than our community?
About 150 residents crowded into Contois Auditorium to voice their support for the co-op's bid. They stood along the walls and sat on the floor, bearing signs with slogans in favor of Keep BT Local. "How about we keep our internet & just sell Miro instead?" read one, taking a shot at Mayor Miro Weinberger. Read another, "Hands off our internet." "This is probably the biggest issue you've ever voted on," former Progressive state legislator Dean Corren told the council. "Decades from now, it will seem silly that we considered having something other than local control over the telecom." Others urged the council to consider the extensive public support for the co-op. Among the lawn signs placed in yards around the city, "You've never seen a sign saying, 'Give it to Tucows,'" said Charles Simpson, referring to Ting's parent company. People applauded and laughed.
A few people spoke in favor of the other bids, arguing that Burlington has an obligation to all its taxpayers in the sale — not just the Burlington Telecom subscribers who would become co-op members. Others questioned whether the debt-financing is workable. John Callow said that the prior mismanagement of Burlington Telecom needed to be considered and the council should consider the proposals from Schurz and Ting/Tucows. “They both offer tremendous amount professional experience and have demonstrated they can compete in a marketplace around the country,” Callow said. “Contrast that with the local option which is somewhat undervalued.
Taxpayers Speak at Public Forum
The public forum prior to the city council’s deliberation was dominated by residents pleading with leaders to keep the local bid in the running.
- Dave Mahr: "I live in the new North End. You will hear a number of emotional pleas in support of Keep Burlington Telecom Local. But I urge you to take the advice of a Nobel Prize winning economist, Richard Thaler, and base your decision on the facts and figures versus your emotions.”
- Dean Corren: “Not only is the coop a very viable offer but it is the only one that meets the key criterion of keeping control local.”
- John Caulo: “I wanted to speak in favor of the Schurtz and Ting proposals. We’ve got two proposals that are fairly equally valued. Contrast that with the local option which is somewhat undervalued. This transaction and whom you select will have a bearing on the future vitality of our community.”
- Tom Hyde: "I’m from Ward 6 and I think it’s really important that the reason that we’ve been told that City Bank would sue the city if the Keep BT Local bid is accepted, that should be disclosed.”
Discourse, at Moments, Turned Less Civil
Councilor Adam Roof said he was disappointed that the discourse had, at moments, turned less civil. He wrote he has received calls that he characterized as political threats and harassment. "Last week I answered a call from a blocked number informing me that if I did not vote for KBTL I would 'have a target on my back' and that 'capitalist pigs will be slaughtered,'" he wrote in an email that went out to about 20 or 30 people shortly before the meeting. He blasted the threats as both tasteless and ineffective, but said he was encouraged that the "majority of Burlingtonians are kind and thoughtful people who realize that far more unites us than divides us."
Mayor's Recommendation Disregarded
Mayor Miro Weinberger had urged councilors to block the advancement of the co-op in the bidding process, arguing that KBTL isn’t financially viable, lacks managerial experience and would face legal and regulatory hurdles. At a news conference last week he said a lawsuit from Citibank is a “near certainty” should Burlington accept the co-op’s low offer.
Dean Corren, a former Progressive state representative, gave remarks that typified those of co-op supporters. He referred to Ting and Schurz as “Comcast by any other name,” highlighting a major concern among advocates for local ownership who fear no deal with a corporate buyer would bind a telecom giant should it purchase them in the future. “You cannot run a city based on threats of corporate litigation,” Corren said. Corren was not the only Keep BT Local supporter who took aim at the mayor. Ward 8 Independent Adam Roof addressed the emotion that has been swirling over the deliberations. “I am not fearful or scared or intimidated by the CitiBank potential lawsuit. Nor am I intimidated or fearful or directed by the mayor and his opinions. I do think that KBTL for me has a long way to go to mitigate the concerns that I have especially around the financial dynamics.”
Weinberger defended himself against criticism. The settlement, he said gave the city control over the future of Burlington Telecom. Citibank had initially sought to force the fiber network into receivership. “We heard frequently tonight that it’s important to fight the banks and not be afraid of litigation. I just hope we all remember the history. We did fight. I did fight,” Weinberger said.
Progressive Caucus Voted Unanimously to Support KBTL
The Burlington Progressive Party voted unanimously Sunday to support the Keep Burlington Telecom Local bid, saying it offers "the greatest long term value to Burlington residents." The party cited the success of other cooperatives, including City Market, in Burlington.
Some of the councilors who cast their votes for the co-op warned the supporters who packed Contois Auditorium that they still had some concerns. City Council President Jane Knodell, despite her vote for the co-op, said it was a "reasonable" position to be worried about the risks facing the co-op's bid and said that Monday's vote might not translate into continued support when the council picks a winner at the next City Council meeting on October 30. "I will vote for it tonight, but I don't think it's there yet," said Knodell, adding that she had started out as a skeptic toward the co-op, but it was growing on her.
Concerns About KBTL Continue
Ralphine O'Rourke, a private attorney hired by the city to assist with the sale of Burlington Telecom, told Weinberger and the council that she and Eileen Blackwood, the city attorney, had spoken with Citibank's lawyer. O'Rourke wrote that the lawyer, Kevin Fitzgerald, told them the co-op's offer would "not meet the City's obligations to Citibank." She added that the bank was uninterested in equity in the co-op-run company. "In terms of our providing you with a risk assessment regarding the possibility of whether Citibank would bring a claim, it has moved from quite possibly to definitely," she wrote.
The co-op addressed the question of Citibank's potential legal challenge on its website. "It is our position that the potential problem with Citibank can be cured, but it requires cooperation with City Council and the Mayor," the co-op wrote. "We are fully prepared to respond to this concern and are confident that with the City’s help we can clear these hurdles." The co-op’s board has said it believes it has a financially sound proposal that will pass regulatory muster. On Monday, KBTL announced an “Executive Transition Advisory Board” to help guide it through the next phase of the bidding process. Among those on the executive transition team are Avram Patt, a former Washington Electric Co-op general manager, and Carina Driscoll, a former state representative, city councilor and Sen. Bernie Sanders’ stepdaughter.
Councilors also expressed concerns about the financial viability of Keep BT Local's bid. The co-op's $12 million offer would be financed by a $10 million loan with a 14 percent interest rate. "It’s not about fear [of litigation against the city], it's whether there’s legitimate concerns about whether Keep BT Local can pull it off," said Kurt Wright (R- Ward 4) as he explained his unwillingness to support the co-op. "I don’t take those considerations lightly."
Councilors May Change Their Votes in Final Vote on October 30
Councilors said that their votes Monday night weren't necessarily an indication of their final choice. The two finalists will continue to refine their offers before the council selects the winning bid on October 30. While half of the City Council voted for Keep BT Local, some of them made it clear that their vote to move the co-op into the next stage of the sales process didn’t guarantee they’d support the bid in the final vote. Several councilors who voted for Ting said they appreciate the benefits of local ownership that the co-op offers, but those benefits won’t be realized if Keep BT Local can’t survive the in the short term. City Councilor Karen Paul, D-Ward 5, said the co-op’s pro-formas pencil out, but they include no cushion for the unexpected. A recession or other economic disruption could tank a co-op owned Burlington Telecom, she said.
East District Democrat Richard Deane emphasized that this is not the final vote the council will make regarding the sale of Burlington Telecom. “I think we need to be certain of four critical points. That those two candidates that we choose are financially stable, that the chosen firm must have proven managerial and technical expertise. Third they have to have the best chance to be favorably evaluated by the Public Utility Commission. Finally they must offer the best assurance the $16.9 million of taxpayer funds that were inappropriately allocated by a previous administration are returned.”
City Council President Jane Knodell said even though she started out a skeptic of the bid from Keep BT Local, it was growing on her. But Knodell also was clear to point out she still thought the proposal needed work. “I’m here tonight to support Keep BT Local but also to say keep working because there will be hurtles and … I think the people that are saying we are very worried about the financing that is legitimate,” Knodell said. Knodell reviewed the bidders’ pro-formas, or 10-year projections. The information is not public, because it includes proprietary information about the bidders. Currently, Burlington Telecom is paying for growth out of profits. Keep BT Local would have a difficult time keeping up with debt payments under that scenario, Knodell said. “It can be done, but it has to be flawless,” she said of the co-op’s plans for Burlington Telecom. Her message to the co-op board: “Please don’t rest on your laurels. Keep working hard.”
Though Knodell didn’t vote for Ting, her comments signaled that it may be the bid she ultimately supports if the co-op can’t sufficiently improve its offer. The council president said she thinks Burlington should choose a buyer who can help the local tech economy flourish, something Ting has made the greatest commitment to thus far, pledging $250,000 to specific local efforts including BTV Ignite. “The next Skype could come out of Burlington. I think we need to be thinking quite big when it comes to this sale,” Knodell said.
October 16, 2017: City Council to Decide on Burlington Telecom Finalists at October 16 Meeting
Vermont Biz reported on October 16, 2017 that the Burlington City Council will meet at 7 pm EST on October 16, 2017 to select two finalists to buy Burlington Telecom. A final decision will be made by the Council October 30. Two out-of-state bidders and one local bidder are the finalists. Last week, Mayor Miro Weinberger urged the City Council to advance to the final round the bids from Ting/Tucows and Schurz Communications. This was expected as they were the high bidders. The third bidder, Keep Burlington Telecom Local (KBTL), presented a bid that would provide less than half the cash and a high debt load. The chairman of the BT advisory council already had advised against the KBTL bid because of that. The bid from the Canadian company Ting was $27.5 million; Schurz from Indiana was $30.8 million; and KBTL was $12 million, with $10.5 million in cash, including $10 million financed at 14 percent interest. All the bidders offered a way for the city to retain a minority stake in the "new" BT. KBTL would run the fiber-based telecom as a for-profit co-op, which would include current subscribers. BT provides Internet, phone and television service.
City Council President Jane Knodell said on October 12, 2017 that it was “very probable” the co-op would be one of the two selected. The co-op has had broad public support, Knodell said. The Burlington Free Press reported on October 16, 2017 that the Burlington Progressive Party voted unanimously to support the Keep Burlington Telecom Local bid on Sunday, saying it offers "the greatest long term value to Burlington residents." The party cited the success of other cooperatives, including City Market, in Burlington.
According to a story on Vermont Public Radio, each councilor will get one vote Monday night and the two proposals with the most votes will advance to the final stage of the sale process.
October 13, 2017: Ting/Tucows Clarifies Some Points in its Burlington Telecom Offer
Tucows CEO Elliot Noss sent a letter to David Provost, Chairman of the Burlington Telecom Advisory Board and Terry Dorman on October 13, 2017 clarifying some points in their offer:
Re: Concerns about Tucows as a publicly-traded company
Over the last 24 years, Tucows’ has succeeded by providing our customers with a great experience for a fair price. Actions like suddenly raising prices, enacting data caps, selling customer information, or cutting back on service would damage the reputation our entire company is built on, and would be inconsistent with our actions for over two decades. We have simply never done these things. Treating customers and employees right leads to company success. Investor success follows, but does not lead our decisions. Our investors understand and value this choice, and would expect us to do nothing less for Burlington Telecom and the people of Burlington.
We also think it’s important to note that Ting does not follow a traditional cable or media model. We are a progressive Internet company, with a genuine customer-centric approach to running our business. We’re open to operating differently--and better--than cable, telecom, and media companies, and this model has won us devotion from customers in our other markets and in our mobile business, as well as awards for our city-friendly partnerships, from community broadband organizations. We fought for Net Neutrality before it became a discussion topic. We also worked against SOPA/PIPA and have been actively engaged in every issue to protect consumer interest and an Open Internet since the beginnings of the Internet, and we will continue to do so, in Burlington, if we are chosen.
Re: Burlington Telecom staff retention
We would need every current BT employee to continue running the operation, and we hope they stay. Our expectation is that the headcount and opportunities for Burlingtonians to grow over time as the network expands and gains more subscribers, and that employees would have access to expanded career options.
Re: Burlington Telecom’s importance within the Ting Internet family
Of Ting’s five cities, BT would immediately become our largest and most developed market. The comprehensive experience of the BT workforce, through both good times and lean ones, would bring significant insights to Ting, and underpin our ability to develop a winning model in Burlington for how ubiquitous gigabit fiber can transform a community through spurring entrepreneurship and innovation, and improving overall social and economic outcomes.
Re: Annual $250,000 community commitment
We would like to underscore that Tucows’ local commitment would be $250,000 per year to programs in Burlington that support municipal, economic development and entrepreneurship. This type of hyper-local community support is a signature strategy that Ting Internet is renowned for in all of our markets. The Burlington commitment includes:
The remainder would go to programs developed with local community involvement such as:
- $60,000 per year to BTV Ignite
- $50,000 per year to free TV advertising for local startups and community events
Re: Lifeline support for low income households
- Free service to select, local non-profits
- Sponsorship of local events and programs
- Low-income Internet service subsidies
- Internship programs
- Zones offering free gigabit-powered, state-of-the-art Wi-Fi
- Additional public, educational and government (PEG) access channels
- Free co-working space
- Small business challenges
In our community commitment, we cited low-income Internet service subsidies. That will absolutely include continuing BT’s support for the Federal Lifeline Broadband program. However, we do not think the Lifeline program is enough, and we have started to work on innovative approaches with local communities that provide more effective solutions to the digital divide, and we would expect to bring these lessons to Burlington.
Re: Assets and liabilities
Tucows’ offer is for all of the assets required for the current operations of Burlington Telecom. It assumes a zero cash balance at closing.
October 13, 2017: 'Keep Burlington Telecom Local' Pushes Its Case on the Steps of City Hall
VT Digger reported on October 13, 2017 that supporters of 'Keep Burlington Telecom Local' rebutted arguments against their bid on October 13, 2017 at a press conference held outside City Hall, and reiterated they were “very actively pursuing” a purchase of the city’s internet, cable and telephone service provider. KBTL Chairman Alan Matson called the 14% interest rate KBTL will be paying on its $10 million loan from Maine Fiber “no doubt higher than what we’d like” but said the loan was structured with lower payments in the first years and higher as time went on. Matson said the co-op could buy out the loan after three years and negotiate with a new lender. Matson also cited co-op board members and supporters with managerial and legal skills, including appearing before the Public Utility Commission, which must approve any sale.
City Council will narrow the three bidders down to two finalists on Monday night. City Council President Jane Knodell on October 12, 2017 said it was “very probable” the co-op would be one of the two selected. The co-op has had broad public support, Knodell said.
October 12, 2017: 'Keep Burlington Telecom Local' responds to Questions on Reddit AMA
on October 12, 2017, Alan Matson, Chairman of 'Keep Burlington Telecom Local' board, responded to questions on KBTL's Reddit AMA.
Question: People have stated that KBTL lacks expertise in the ISP business, how would you refute that?
Alan Matson: Several things...but the key is that KBTL's being led by a Board of Directors. If we are successful, the Board will hire a general manager who actually runs the telecom. This hire is truly what should be looked to for the expertise. Second...on our board are three business folk who have all started up successful businesses plus a lawyer who has a practice that includes telecom and has submitted CPGs for telecom companies in Vermont. As for the point of who would we hire for a manager.....our intent has always been to keep the existing management in place...if at all possible...and that continues to be our plan.
Questions: What challenges to would you anticipate in gaining PSB approval if selected?
Alan Matson: While I'm not the lawyer on the Board, I understand that there are two issues that have been raised about PSB (Now Public Utilities Commission "PUC") approval. They are management and financial stability. Additionally...there are two CPGs in play here....phone and cable. I'll start with phone...this CPG should not be an issue. Phone CPGs pretty much ask some simple questions about prior bankruptcies. The cable CPG will be the tougher one...on the management front, we are quite confident that our bid is successful that the PUC will have no issues with our management. It's tough to say more at this point. On the financial front....we have submitted Pro-forma financial info to the City as regards our bid, and right now nobody is saying that it doesn't work or that the assumptions are wrong. Also...the PUC tends to encourage competitive providers which BT is in this situation.
Question: As I understand it (and I am not paying much attention) your bid is much less than the others. Why should you get the franchise?
Alan Matson: Key is the value to the City as a whole and not just the headline bid number (of which the City only gets 25% over $6 million). Also, the total $$ value of the bid is only one of the criteria listed in the sale criteria.
Question: Why is the mayor being such a dick to you guys?
Alan Matson: I can't speak to motives, but the mayor is only one part of the decision process here, and our offer continues to provide for the City benefits that don't exist in the other bids. We're continuing to highlight those benefits, as well as highlighting what we think are misrepresentations about all three bids. Basically, we think the risks of our bid are being exaggerated, whereas the risks of Tucows and Schurz are being overlooked. For example, Tucows does not currently manage any cable companies, nor do they have the cash on the balance sheet to purchase BT which makes debt issuance likely. Schurz, on the other hand, has a recent history of buying and selling media properties (including a cable company in Florida last year) and uses data caps in their pricing model for at least one of the cable companies.
Question: I've been a supporter of KBTL for quite a long time, if you'd asked me as recently as a month ago I'd have said that you guys should win the bidding process with no doubts in my mind. Between the several events of the past month I have to say that you are now my last choice. I've read the proposals. I've examined the available financials. I've listened to what the Mayor has to say and taken the time to understand why he said it. Most importantly I've read the Ting/Tucows and KBTL AMAs.
People have been up in arms about the Mayor saying that the city should reject your offer. If that was all he said I would agree, however, he clearly stated that his reason for wanting to reject your bid is that accepting it would open the city to additional legal risk. That means that KBTL is effectively asking the city and it's tax payers to not only accept significantly less money ($7.5 million allocated to the city from your bid vs approximately $11 million from Ting and $11.5 million from Schurz) but to accept significant legal risk on your behalf. It's quite possible that legal fees and an eventual settlement with Citibank could exceed the $7.5 million paid to the city from your bid. This would effectively mean having the tax payers pay you for the honor of giving you a profitable business with significant valuable assets.
Alan, you and the other directors should be ashamed of your AMA. This AMA represented a significant chance to engage with the community you seek to serve, and you failed to do so in any meaningful way. In your AMA you also went out of the way to disparage your competition, something I have not seen from either Ting or Schurz, and something that I find highly unprofessional.
First, you state that Ting (Tucows) has no experience managing a cable company, while failing to mention that you and your board also have no experience managing such a company. In fact you have no experience managing a telecom company of any kind. In the quoted sentence you also mention that Ting doesn't have sufficient assets on hand to purchase Burlington Telecom for cash, and that they would very likely issue debt to do so. You're a business person, so you know that large asset purchases are almost always debt financed, it is absolutely the normal course of business. In fact it would be much more remarkable if Ting were to make this purchase entirely with cash. What you're doing is attempting to frighten people who are less business savvy than yourself. Shame on you!
When asked an incredibly important question about your total lack of expertise or any experience at all in running a telecom company you fail to provide a concrete plan. Instead what your prospective customers get is a vague answer of "Our current plan is to probably keep existing management... maybe." Given this answer I have way less faith in your ability to manage Burlington Telecom than I already had.
October 10, 2017: Burlington Mayor Miro Weinberger Recommends City Council Choose Ting/Tucows or Schurz Communications
The Burlington Free Press, VT Digger, Seven Days, and Vermont Biz reported on October 10 and 11, 2017 on Burlington Mayor Miro Weinberger's public announcement at a press conference on October 10, 2017 that he recommends the City Council move forward with Ting/Tucows and Schurz Communications excluding the effort known as Keep Burlington Telecom Local (KBTL). Weinberger did not endorse either of the proposals by Ting/Tucows and Schurz, but said both should remain when the City Council winnows the finalists down to two choices Monday night. The financial offers by those two companies are substantially higher than that made by the Keep Burlington Telecom Local co-operative, according to Weinberger.
A 2014 settlement with Citibank, the network’s main creditor, requires the city to sell Burlington Telecom. A separate agreement with a holding company that bought Burlington Telecom’s assets, and is leasing them back to the city, allows Burlington to direct the sale. For the city to keep the largest possible share of the proceeds, it must select a buyer by the end of the year. KBTL is offering $12 million; the fiber company Ting is offering $27.5 million; and broadcaster Schurz Communications is offering $30.8 million.
Mayor Says "The KBTL Proposal is Not Viable"
According to Mayor Weinberger, KBTL's $12 million bid is doomed by legal, financial and regulatory concerns, and is inferior to the $27.5 million offer from Ting and the $30.8 million put up by Schurz Communications. "Fundamentally, at this point, the KBTL proposal is not viable," Weinberger said. David Provost, who has spent the last eight years as the volunteer chair of the Burlington Telecom Advisory Board, went further adding that the KBTL bid was “the weakest” of the eight received and was forwarded to the City Council only because “we thought it was important to keep a local option available.”
Mayor Praises KBTL's Role in the Process
However Mayor Weinberger repeatedly thanked the co-op group for its involvement and said it made the bidding process better, saying KBTL's involvement — dating back to before the sale process began, when the group was just advocating local control — improved community engagement and forced other companies to make offers that reflect the city’s values. “In part because of the KBTL-inspired community engagement, both the Schurz Communication and Ting proposals are very strong, and ultimately accepting either will result in big wins for Burlington Telecom customers, taxpayers and the city itself,” Weinberger said.
Mayor Weinberger's Complete Statement
“I appreciate the hard work of the KBTL Board and other volunteer supporters to present the City with an option for local ownership,” said Mayor Miro Weinberger. “KBTL’s focus on local issues throughout this process has helped shape the City’s goals and will positively impact BT’s future no matter which bid the City selects. Regrettably, however, the KBTL offer is simply not a viable option for the City to pursue. Selecting it would result in legal action and substantial taxpayer financial exposure, threaten to undo years of BT progress and put Burlington Telecom’s future on very uncertain footing. The KBTL focus on securing local benefits has improved the two very strong proposals from Ting and Schurz. These proposals would secure a bright future for BT, put the days of broadband monopoly behind us for good, lead to substantial reinvestment in our community, return millions of taxpayer dollars, and create the possibility of meaningful City ownership in the future company.”
City Bank Will Almost Certainly Sue the City of Burlington if the City Council Chooses KBTL
Mayor Weinberger said he has strong legal concerns if the KBTL proposal moves forward. Weinberger said Citibank, which is set to receive a portion of proceeds from the purchase of Burlington Telecom, has told city attorneys that the potential risk for legal action has increased to “near certainty” if the city accepts a bid that’s less than 50 percent of the other two bids, as is the case with KBTL's proposal. Some co-op supporters acknowledge that risk, Weinberger said, but want the city to be part of the solution in overcoming potential financial problems as it did with the development of City Market. The difference, Weinberger said, is that state law prohibits the city from subsidizing telecom operations.
Weinberger added that even though the co-op bid meets a minimum threshold dollar figure included in the agreement with the holding company, that doesn’t mean the city can accept a low offer without consequence. “Citibank is saying the gap between the proposals is too great and does not satisfy a commercial reasonableness test that all contracts (to buy Burlington Telecom) must abide by,” Weinberger said. “We are now advised by our attorneys that what was characterized as a risk of legal action by Citibank at the last City Council meeting has now become the near certainty of legal action, and real legal exposure to the city, should we attempt to move forward with a bid that’s less than 50 percent of the two other bids."
Weinberger added that not only would the City of Burlington face the high probability of a lawsuit from Citibank if the City Council chooses KBTL, but that the city could be sued by residents of Burlington who do not believe that choosing KBTL protects the city's interests.
The City also has financial concerns with KBTL's proposal, with KBTL relying on a $10 million loan at 14% interest. Questions also exist as to whether the KBTL board can put together an experienced and competent management team, something the mayor said is already included in the other offers.
Ting/Tucows and Schurz Communications Have Strong Proposals That Will Benefit the City
Mayor Weinberger emphasized the positives found in the proposals from Ting/Tucows and Schurz Communications. According to Weinberger, both proposals include a pledge to build out the system so that it can reach portions of the city where service is not now available and both Ting/Tucows and Schurz Communications are committed to strong privacy policies, net neutrality and to having an office and "major staff presence" in Burlington. "Ultimately, accepting either will result in big wins for Burlington Telecom customers, taxpayers and the city itself," Weinberger said.
Weinberger added that selling to Ting/Tucows or Schurz Communications could also head off potential lawsuits from taxpayers who are out $17 million after the previous administration improperly plowed money into a then-struggling Burlington Telecom. The mayor could veto the Council's decision, but would have no authority in the decision other than that selling to Ting/Tucows or Schurz Communications would allow the city to recoup roughly $6 million of that money while ensuring Burlington Telecom continues to offer fast, affordable internet service.
Both Ting/Tucows and Schurz Communications Need to be Chosen So the City Has Leverage to Negotiate With Them
Mayor Weinberger urged members of the Burlington City Council to accept both the Ting/Tucows bid and the Schurz Communications bid so that city officials can do a final blitz of negotiations with the two companies. If the City Council chooses KBTL as one of the two companies to go forward in final negotiations, then the city will have little leverage to get a higher "best and final" offer from the remaining out-of-state company said Hugh Pickens, an industry analyst who owns stock in Tucows and has been following the Burlington Telecom bid process closely.
Alan Matson Says Weinberger's Recommendation is Not the Death Knell for KBTL's Proposal
Alan Matson, chairman of the Keep Burlington Telecom Local board, said after Weinberger’s news conference that the mayor’s position “makes it tougher” for his group to move its plan forward. “I don’t necessarily see it as a death blow. It sure doesn’t help us," said Matson. According to Matson, KBTL has a strong proposal in place despite a lack of experience in running a telecom company. “I couldn’t be more confident of our management plan, that our management plan will be as strong as anything put forward,” Matson said. According to Matson, Weinberger's recommendation is not necessarily the death knell of KBTL's proposal. "He's one voice in this process," Matson said of Weinberger. While it certainly doesn’t help the co-op’s cause to have the mayor oppose its bid, “The death blow will be a full City Council vote,” Matson said.
Matson added that the idea that Citibank can take this type of action to influence the sale at the last minute is further evidence of the need for local control, so Burlington Telecom will not continue to be at the mercy of outside entities. “There will be pressures on any company that has multiple locations and multiple lines of business that may or may not favor Burlington at some point or another," said Matson.
October 10, 2017: What Members of the Burlington City Council Think About the Burlington Telecom Bidding Process
The Burlington Free Press reported on October 10,2017 that the Burlington City Council will have the final say on which two of the three remaining bidders for Burlington Telecom will proceed to the next step. Voting will take place on October 16, 2017. The final decision on the winning bid will also be made by the Burlington City Council. The mayor could veto the Council's decision, but would have no authority in the decision other than that.
Alan Matson of KBTL said he is still working to win councilors’ support ahead of next week’s vote but doesn’t have a count for how he expects that to play out. If Democrats line up behind Weinberger — a fellow party member — that leaves enough votes unaccounted for to swing the process in either direction, he said.
City Council President Jane Knodell has already said that she was undecided but leaning towards voting for the co-op 'Keep Burlington Telecom Local' to win the bid to run Burlington Telecom. "Some people are more risk-averse than others," said Knodell adding that some councilors might want to stay away from what they would see as a high-risk option, while others would say that there may be risk, but there might also be a lot of potential for return if the co-op model could succeed." Another Councilor, Max Tracy, said he had some unanswered questions, though his top choice was also the co-op. "It’s going to be a challenge for whoever we choose," said Tracy about the regulatory process going forward. He added that he expected continued negotiation and the city to help the winning bid through the process. Councilor Joan Shannon said she would be looking at the hurdles each bid would have to overcome to get approval from the Public Utility Commission. "We're obligated to select the bidder who has the best chance to get through the regulatory process," Shannon said.
Following are the members of the Burlington City Council sorted by party affiliation with any public information on their background and the way they may be planning to vote.
Update: Here is how the members voted on October 16, 2017.
Democrats - 4 Members
- Joan Shannon - South District - Member of Burlington Telecom Advisory Board (BTAB) - Joan Shannon said she would be looking at the hurdles each bid would have to overcome to get approval from the Public Utility Commission. "We're obligated to select the bidder who has the best chance to get through the regulatory process," Shannon said. [Voted for Ting on October 16, 2017]
- Karen Paul - Ward 6 - Member of Burlington Telecom Advisory Board (BTAB) - According to a profile in the Burlington Free Press in 2014, Paul is a CPA who ran for office in 2008 to contribute her financial skills to the Council and has worked to address challenges including uncovering the city's audit and working to put into place more transparent budgeting procedures. "I am inspired to run to continue working to address our pension underfunding and restoring our City’s credit rating." To our knowledge, Paul has not expressed an opinion of the Burlington Telecom bid process or how she will vote. [Voted for Ting on October 16, 2017]
- William "Chip" Mason - Ward 5 - Mason has been supportive of Mayor Weinberger's approach to the Burlington Telecom bidding process. After Weinberger announced that one of the bidders had asked to be removed from the process, "the Democratic mayor stood flanked by Chip Mason (D-Ward 5) and Richard Deane (D-East District), who said they'd stay focused on the remaining bids," according to an article in Seven Days that appeared on September 26, 2017. [Voted for Ting on October 16, 2017]
- Richard Deane - East District - Dean has been supportive of Mayor Weinberger's approach to the Burlington Telecom bidding process. After Weinberger announced that one of the bidders had asked to be removed from the process, "the Democratic mayor stood flanked by Chip Mason (D-Ward 5) and Richard Deane (D-East District), who said they'd stay focused on the remaining bids," according to an article in Seven Days that appeared on September 26, 2017. [Voted for Ting on October 16, 2017]
Progressive Party - 3 Members
- Jane Knodell - Central District (City Council President) - Member of Burlington Telecom Advisory Board (BTAB) - City Council President Jane Knodell has already said that she was undecided but leaning towards voting for the co-op 'Keep Burlington Telecom Local' to win the bid to run Burlington Telecom. "Some people are more risk-averse than others," said Knodell adding that some councilors might want to stay away from what they would see as a high-risk option, while others would say that there may be risk, but there might also be a lot of potential for return if the co-op model could succeed." Knodell said on October 12, 2017 it was “very probable” the co-op would be one of the two selected. The co-op has had broad public support, Knodell said. Knodell is the longest-serving Progressive councilor serving her 19th nonconsecutive year on Burlington's governing body. The Stanford-educated economist has taught at the University of Vermont since 1986, during which time she's also authored papers such as "Rethinking the Jacksonian Economy: The Impact of the 1832 Bank Veto on Commercial Banking." She stepped down from the city council after she was appointed UVM's provost in 2010 but returned in 2013, shortly after resigning from that position. "She's less loquacious than your average politician, but when Knodell does talk — in a slightly gravelly voice and at a professor's measured pace — councilors listen," writes Alicia Freese. "She's probably the smartest person at the table," said Progressive Councilor Max Tracy. According to Freese, Knodell can be blunt during policy debates. Drawing on her fiscal acumen, she's challenged Mayor Weinberger on subjects ranging from the fate of Burlington Telecom to the future of the Burlington Town Center mall. But her opposition generally takes the form of probing for answers rather than waging personal attacks. She's been especially vocal about the city-run Burlington Telecom, insisting that it remain locally owned and that city officials try to recoup the $17 million still owed to taxpayers. According to the Burlington Free Press, Knodell, a Progressive, had the endorsement of the Democratic Party in the 2017 election. The cross-party endorsement came at the urging of Mayor Miro Weinberger, who also criticized the "hijacking" of the Progressive Party by what he called a reactionary fringe. Knodell said she believes in marrying the economic development agenda espoused by the mayor with the Progressives' equity agenda. [Voted for KBTL on October 16, 2017]
- Max Tracy - Ward 2 - Max Tracy says he has some unanswered questions, though his top choice is KBTL. "It’s going to be a challenge for whoever we choose," said Tracy about the regulatory process going forward. He added that he expected continued negotiation and the city to help the winning bid through the process. Tracy Wright has been highly critical of Mayor Weinberger's handling of the Burlington Telecom bidding process. After Weinberger announced that one of the bidders had withdrawn from the process, according to a story in Seven Days, Tracy compared Weinberger to former mayor Bob Kiss, who secretly propped up the telecom with $17 million in city funds. Like Kiss, Weinberger was "making decisions in secret without council or public consultation as well as ... not taking personal responsibility for mistakes that were made with regard to BT," Tracy wrote in a message to Seven Days that day. "He is, simply put, a hypocrite." According to an article in Seven Days published on October 11, 2017, the thirty year old Tracy is know as "the council's most combative Progressive." According to Seven Days, "even though his activist efforts have been largely unsuccessful, Tracy sees himself as more than a gadfly. He's looking long-term to win policy changes that benefit working-class Burlingtonians and to shift the conversation in the direction of Progressive values." [Voted for KBTL on October 16, 2017]
- Sara Moore - Ward 3 - Moore has been critical of certain aspects of the way Mayor Weinberger has handled the Burlington Telecom negotiations. After Weinberger asked the fourth bidder to withdraw without input from the council, Moore said "It's hard not to consider that maybe he's trying to limit what people know about the way that this is playing out." [Voted for KBTL on October 16, 2017]
Independent - 3 Members
- Sharon Foley Bushor - Ward 1 - Bushor is the longest serving member of the Burlington City Council having served 30 years. According to a profile in Seven Days in 2012, Bushor is Burlington's hardest-working City Councilor and no one carries out a councilor’s duties more conscientiously than Bushor. “She immerses herself in details,” says Bill Keogh, who served alongside Bushor for 16 years. “She studies all the documents and brings up items the council might otherwise miss.” To our knowledge, Bushor has expressed no position on the current bidding process for Burlington Telecom or how she may vote. [Voted for KBTL on October 16, 2017]
- Adam Roof - Ward 8 - Roof has been somewhat skeptical of Mayor Weinberger's handling of the Burlington Telecom bidding process. After Weinberger announced that one of the bidders had withdrawn from the process, according to a story in the Burlington Free Press, Roof, who attended the announcement and met with the mayor afterwards, said he was reserving judgment on the situation until he had more clarity on what exactly had happened. "If the mayor made a unilateral decision instructing a bidder to be removed, I would have a problem," he said. "It’s a worthwhile question to ask." [Voted for Ting on October 16, 2017]
- David Hartnett - North District - Member of Burlington Telecom Advisory Board (BTAB) - According to an article in the Burlington Free Press on July 31, 2017, Hartnett said that the City Council is trying to come up with the best deal for the taxpayers of Burlington with regard to the bid process for Burlington Telecom, as well as not interfere with the ongoing operations of the company. "We’re really pushing hard to stay on this timeline," Hartnett said. He was optimistic about the city's ability to meet the deadline. [Voted for KBTL on October 16, 2017]
Democrat/Progressive - 1 Member
- Ali Dieng - Ward 7 - Dieng has been critical of Mayor Weinberger's handling of the Burlington Telecom bidding process. After Weinberger announced that one of the bidders had withdrawn from the process on September 26, according to a story in Seven Days, Dieng cast blame for keeping the sales process under wraps and not listening to public feedback — most of which has been in favor of the co-op . Dieng said that the fourth bid from Nizar was attractive for his creative and community-oriented approach. Nisar had promised to invest heavily in BTV Ignite and proposed partnering with the Burlington High School's technical center. [Voted for KBTL on October 16, 2017]
Republican - 1 Member
- Kurt Wright - Ward 4 - Wright has been critical of Mayor Weinberger's handling of the Burlington Telecom bidding process. After Weinberger announced that one of the bidders had withdrawn from the process on September 26, according to a story in Seven Days, Wright alleged that Weinberger had asked the fourth bidder to withdraw without input from the council. "There was a breach of trust," Wright asserted. [Voted for Schurz on October 16, 2017]
October 6, 2017: VT Digger Writes: 'Parent Company of Burlington Telecom Bidder Registers neo-Nazi Site,' Tucows Responds
VT Digger published a story on October 6, 2017 that a domain name reseller WSMDomains registered a domain name to a neo-Nazi website Stormfront. WSMDomains is one of the 40,000 third party-resellers to domain name wholesaler Tucows, the parent company of Ting, a mobile phone and fiber internet service provider, which is among three finalists looking to purchase Burlington Telecom.
According to VT Digger Internet companies are under increasing public pressure to deny service to groups that promote hate speech but are under no legal obligation to do so.Tucows CEO Elliot Noss says domain registration is a “fundamental protocol” on the internet, part of its basic infrastructure, and website content issues should be addressed by the hosting company or the reseller before a registrar considers taking action. “I’m comfortable saying we object to the content more than most. That makes these issues even more difficult,” said Noss. To deny Stormfront access to Tucows’ domain registration services would be the equivalent of a phone company cutting its service, or a municipality telling them they can’t use public roadways, said Noss. “The great irony, in the Burlington context, is this is a net neutrality issue."
In August, Tucows announced it would stop providing domain privacy protection services to the Daily Stormer, another neo-Nazi website. "Tucows was never the webhost nor the registrar for the domain. Tucows provides a domain privacy service for millions of domains belonging to our wholesale domain resellers and to other registrars. The domain in question was transferred to one of our registrar partners and the privacy service was automatically applied," said Tucows in a press release on August 15, 2017. "The process of balancing free speech and the ugly opinions that people share is neither easy nor pleasant. Every day we receive many, many complaints about the content on any number of the 24 million domains on our platform. Let us be exceptionally clear: we find the content of many of these pages patently abhorrent and evidence of the worst that humanity can stoop to. Nevertheless, there are legal mechanisms and processes in place for dealing with issues of free speech and we consider it our responsibility to follow them. We have and will act in what we call “exigent circumstances” where there is an imminent threat of violence or crime. GoDaddy responded to the Daily Stormer appropriately under these circumstances. However, these circumstances aside, we have found that the clearest path forward, to protect freedom of speech and expression, is to act where we have evidence that due-process has been observed. When such is provided to us, we act on it."
- Tucows Official Statement Regarding the Daily Stormer August 15, 2017
October 5, 2017: 'Keep Burlington Telecom Local' Unable to Hold Planned Reddit AMA, Postpones One Week
'Keep Burlington Telecom Local' announced on October 5, 2017 that they would be unable to hold their scheduled Reddit AMA (Ask Me Anything) that they had planned for October 5, 2017 and had postponed it for one week because something unexpected had come up for Board Chair Alan Matson. "We were planning on doing the AMA today, but board chair Alan Matson had something unexpected come up and can't make it, so we're rescheduling the AMA for next week, same time and place (Thursday, 10/12 from 3-4pm). Apologies for the inconvenience, and looking forward to your questions and discussion then!'
Ting/Tucows previously held an AMA on September 21, 2017 to address the community's concerns and respond to issues raised by citizens of Burlington and current customers of Burlington Telecom. There were 92 questions and answers on Ting/Tucows' AMA and another 32 on their pre-AMA.
Schurz Communications, the third bidder for Burlington Telecom, has not made any announcement on whether they plan to hold an AMA to address issues raised by the community and respond to concerns from Burlington citizens.
The Burlington City Council will select two finalists to go forward in the selection process at their meeting on October 16, 2017.
- Keep Burlington Local AMA October 12, 2017
- Ting/Tucows AMA September 21, 2017
October 4, 2017: Burlington City Council President Jane Knodell is Undecided but Leaning Towards Voting For 'Keep Burlington Telecom Local'
The Burlington Free Press reported on October 4, 2017 that City Council President Jane Knodell said that she was undecided but leaning towards voting for the co-op 'Keep Burlington Telecom Local' to win the bid to run Burlington Telecom. "Some people are more risk-averse than others," said Knodell adding that some councilors might want to stay away from what they would see as a high-risk option, while others would say that there may be risk, but there might also be a lot of potential for return if the co-op model could succeed. "If you think that's so important, then you're going to be willing to take a chance," said Knodell. Knodell said she was still raising concerns about the financing model the co-op has proposed. Knodell said if KBTL could lower the 14% interest rate on the $10 million in debt that 'Keep Burlington Telecom Local' will be taking on, she believed the path forward would become much more viable.
Another Councilor, Max Tracy, said he had some unanswered questions, though his top choice was also the co-op. "It’s going to be a challenge for whoever we choose," said Tracy about the regulatory process going forward. He added that he expected continued negotiation and the city to help the winning bid through the process.
According to the Burlington Free Press, Councilor Joan Shannon said she would be looking at the hurdles each bid would have to overcome to get approval from the Public Utility Commission. "We're obligated to select the bidder who has the best chance to get through the regulatory process," Shannon said.
About City Council President Jane Knodell
According to a profile of Knodell in 'Seven Days' written in 2015 Knodell is the longest-serving Progressive councilor serving her 19th nonconsecutive year on Burlington's governing body. The Stanford-educated economist has taught at the University of Vermont since 1986, during which time she's also authored papers such as "Rethinking the Jacksonian Economy: The Impact of the 1832 Bank Veto on Commercial Banking." She stepped down from the city council after she was appointed UVM's provost in 2010 but returned in 2013, shortly after resigning from that position. "She's less loquacious than your average politician, but when Knodell does talk — in a slightly gravelly voice and at a professor's measured pace — councilors listen," writes Alicia Freese. "She's probably the smartest person at the table," said Progressive Councilor Max Tracy. According to Freese, Knodell can be blunt during policy debates. Drawing on her fiscal acumen, she's challenged Mayor Weinberger on subjects ranging from the fate of Burlington Telecom to the future of the Burlington Town Center mall. But her opposition generally takes the form of probing for answers rather than waging personal attacks. She's been especially vocal about the city-run Burlington Telecom, insisting that it remain locally owned and that city officials try to recoup the $17 million still owed to taxpayers.
According to the Burlington Free Press, Knodell, a Progressive, had the endorsement of the Democratic Party in the 2017 election. The cross-party endorsement came at the urging of Mayor Miro Weinberger, who also criticized the "hijacking" of the Progressive Party by what he called a reactionary fringe. Knodell said she believes in marrying the economic development agenda espoused by the mayor with the Progressives' equity agenda.
October 4, 2017: City of Burlington Releases Report from Burlington Telecom Advisory Board (BTAB)
On October 4, 2017 the city of Burlington released a report from the Burlington Telecom Advisory Board (BTAB) on the three bidders. The original report was written in July in order to give the full City Council the consensus view of BTAB members on the slate of bidders proposing to purchase Burlington Telecom (BT). The BTAB is made up of four City Councilors and four community members with relevant experience and has advised the City Council for many years on the decisions related to the future of Burlington Telecom.
Members of BTAB include:
- David J. Provost – Board Chair, Executive Vice President, Middlebury College
- Clem Nilan - Board member, Former General Manager, City Market
- Theresa Alberghini DiPalma - Board Member, Network SVP Marketing and External Relations, UVM Medical Network
- Tim Halverson – Board Member, Owner EB Strong’s, Halverson Street Café
- Joan Shannon – Board Member, (City Councilor, South District)
- Karen Paul – Board Member, (City Councilor, Ward 6)
- Jane Knodell – Board Member, (City Council President)
- Dave Hartnett – Board Member, (City Councilor, North District)
- Burlington Telecom Advisory Board (BTAB). "Report to City Council on Prospective Buyers" Original report July 10th, 2017, Updated October 4, 2017
BTAB Evaluation of 'Keep BT Local Co-Op'
The KBTL proposal to date has been the weakest of the 8 respondents. The proposal submitted on 5th June was incomplete and a further update due on 30 June was also incomplete. The proposal relies very heavily on expensive debt and this weak capital structure has the BTAB very concerned about the risk of losing the asset again to the lender. We are also concerned that there is no management depth beyond the existing team. The BTAB is pessimistic that the PSB would ever approve this structure given the debt, lack of capital and lack of management experience in the industry. The BTAB has moved this proposal forward to the Council due to the significant public interest in the offer. However, unless KBTL can address the concerns of the BTAB we do not believe this to be a viable offer.
- Member owned local co-operative – local solution
- Long standing interest in acquiring BT assets
- Removes uncertainty of future sale, if remains viable
- Would seek to keep BT Management Team and Operations, if not possible, they have a contingency plan.
- Vision for BT beyond local ownership unclear
- Financial offer at low end of valuation range
- Funded with $10M of debt at 14% interest rate
- Limited capital to grow BT’s operations
- Currently the Maine Fiber investment is not finalized
- Weak capital structure unlikely to obtain State approval
- Assets exposed in event of financial challenges, exposed to losing the asset to Maine Fiber Company and BT failing.
- LOI failed to capitalize on the coop model.
- Consumer orientation could stifle business development
- Liquidity challenge for City of Burlington if the City leaves its money in.
- Only members benefit, not all taxpayers
Update From the July Report
- The Maine Fiber investment is characterized as “not finalized” in the July BTAB Report, but KBTL has now received a commitment from Maine Fiber.
BTAB Evaluation of Tucows
A strong offer and proposal for the council to consider. One of the strongest offers in terms of price, customer service and capital. Name would likely change to Ting, and real control of operations would move from Burlington. No new debt, but it is a publicly held company and risk of a future sale would always be a possibility. BTAB offers Ting/Tucows as a finalist to the City Council with one reservation about its publically held status and a desire to continue to work with them to strengthen their proposal and minimize the risk to the City in the event of a sale of the Company.
- Highly profitable, high multiple, domain name business
- Now focused on fiber as their next growth segment
- Strong focus on customer service
- Relatively new entrant in several muni fiber markets
- Local presence and customer facing operations
- Strategic investor offering second highest price
- No new debt used for BT purchase
- Based in Toronto, publicly traded on NASDAQ
- Fiber is relatively new and unproven future growth play
- Control would be centralized outside of Burlington
- No interest shown in meeting BT management team
- Core business highly cash positive, but declining margin
- Less control over sale, as a public company
- Will change the name from Burlington Telecom to Ting
Update From the July Report
- Ting has decided to keep the name BT and add a slogan to the brand symbol so that it reads “BT” with small text noting “Powered by Ting.”
BTAB Evaluation of Schurz Communications
An extremely strong offer and proposal for the council to consider. The strongest offer in terms of price, experience and track record of holding onto investment. Current operations would remain in Burlington. BTAB offers Schurz as a finalist to the City Council, with further parameters needed on the options for the unlikely event of sale in the future, to protect the City’s interest.
- 5th Generation, 150-year-old family investment fund
- Strategic investor already in the fiber & cable business
- No debt used for BT purchase
- BT name, management team, staff and operations would remain, GM tbd
- Strong commitment to and focus on customer service
- Strongly decentralized local management approach
- Culturally good fit, and a team that works well together
- Highest financial bidder and likely long-term holder
- Focused on continuing to grow BT – product/geography
- Track record of investing/holding for the long term
- Would be a good local corporate citizen, track record of giving back to community
- Other holdings include newspapers - challenging sector
- Local ownership only through any City carried interest
- Local control ceded
- Inside family members control the board and the company
Update From the July Report
- Schurz has now committed to devolving decision-making about BT to the Burlington management team wherever possible, in recognition of the community’s strong desire for local control.
October 4, 2017: City of Burlington Releases Letter from City Attorney Eileen Blackwood Regarding Concerns with Bidders for Burlington Telecom
On October 4, 2017 the city of Burlington released a letter to the Mayor and City Council from City Attorney Eileen Blackwood dated September 7, 2017 and updated October Z 2017 regarding Legal Issues involved in the sale of Burlington Telecom. According to the letter as the various proposals to purchase BT have been being reviewed, some legal issues have arisen that should be taken into account as the Mayor and Council consider the potential purchasers. One issue involves the role of the Public Utility Commission; the second involves the role of Blue Water, and the third concerns the role of Dorman & Fawcett. The first issue came up in the context of evaluating the various proposals for the City's carried interest I then asked our outside counsel Ralphine O'Rourke at Primmer, Piper for an independent opinion, particularly focusing on what risks would arise from a Council decision to roll over some or all of the City's net sales proceeds. Her legal memo is attached but is summarized below.
Regulatory Concerns for Public Utilities Commission Approval and Carried Interest Investment
The purchase and sale agreement for this transaction will ultimately be subject to the review and approval of the Vermont Public Utilities Commission (PUC) (formerly known as the Public Service Board), which must grant the buyer a Certificate of Public Good (CPG) before the sale can close. In its process, the commission will give great weight to the opinion of the Department of Public Service (DPS), particularly in relation to the statutory and so-called EMCO criteria that the PUC will ultimately evaluate. Those PUC criteria are set forth in the criteria for sale of Burlington Telecom, adopted by the Council April 25, 2016, and in Attorney O'Rourke's attached memo.
Rejection of the sale by the PUC would put the City in a very difficult position, as by the time that decision is made, the City will have missed important deadlines in the agreement with Blue Water, and will be in a substantially weaker negotiating position with future prospective partners than it is in today. Given the regulator's criteria and role, the City must consider how the PUC will view this transaction. • Both the DPS and the PUC are likely to more easily approve an entity with a demonstrable track record of success in managing a municipal telecom and demonstrable access to capital, rather than a first-time cable operator, as they are charged with considering both the financial stability and operational experience of the proposed company. The regulators are likely to subject to greater scrutiny an entity formed solely to purchase BT, which has no experience actually operating a telecom business, than they would more established and better capitalized companies.
- The regulators are likely to look favorably upon the return on the City's existing investment into BT that will flow from a higher sales price and may not support a City decision to accept a lower valuation without strong justification, as returning less benefit to the taxpayers.
- Two of the finalist bids currently before the Council would allow the City to opt to reinvest its "net sales proceeds" in a carried City interest in the future BT entity and one requires that reinvestment. However, in considering that carried interest, the PUC will still have to evaluate the existing charter provisions about our telecom authority, as Attorney O'Rourke describes in her attached memo. If the PUC believes the City investment is speculative and could result in losses, it may hesitate to agree to a carried interest Even if the PUC allows some carried interest, it may require the City to take some of the net sales proceeds in cash in order to ensure that the taxpayers have seen some return and may require certain legal protections against losses (more fully described in Attorney O'Rourke's memo). The legal team recommends that whatever proposal is taken to the PUC should include the option to take the entire net sales proceeds in cash if the PUC requires that
Blue Water Approval
An additional challenge to be considered is that Blue Water has an interest if the sale is to a first-time operator.
In the BT Management and Sale Agreement with Blue Water that was approved by the Council in 2014 (and called out again specifically in the criteria for sale of Burlington Telecom adopted by the Council on April 25, 2016) is the City's right to direct the sale of BT to a "Qualified Purchaser" that has the "capability of operating a telecommunications company of size and service similar" to BT and is "reasonably expected to satisfy any statutory criteria in order to obtain a certificate of public good from the PSB. Such a purchaser "may be a first time operator if [Blue Water] reasonably determines such first-time operator to be able to timely obtain a certificate of public good from the PSB."
An option that involves a first-time operator (that is, an entity that has never operated a telecom), therefore, faces the added risk that Blue Water may reject that purchaser. That risk of rejection may increase if Blue Water believes it is negatively affected by a lower purchase price.
Potential for Perceived Conflict of Interest
Dorman & Fawcett (D&F) has been wearing many hats over the past few years, and from time to time the issue of conflict of interest has arisen. D&F agreed to defer its fees during these past several years, allowing them to accumulate and be paid at the sale, in return for receiving 10% of Blue Water's interest in the net sales proceeds. From the City's perspective, this arrangement seemed to give D&F an incentive to find a purchaser, at a good price, who could receive a CPG in a timely manner; their interest therefore seems aligned with the City's interests. However, the Council's April 2016 Resolution on the BT Sale Criteria specifically acknowledges that others may perceive D&F's financial interest as creating a conflict of interest, or the perception of such a conflict, such as an interest in accepting the highest offer. That is a perception the City has kept in mind throughout this process.
Initially, some of the bidders had included a continuing role for D&F after the sale, either as operator or with the option to roll over its sale proceeds into an equity stake in the future entity. Because of concerns that this continuing role could be perceived as a potential conflict of interest, D&F has informed all the finalists that none of the bids should be based on D&F's having a continuing role in the new entity beyond a transition period.
Other Legal Interests
In 2014, the City entered into a settlement agreement with Citibank that was "predicated on the assumption that the [financing with Blue Water] is intended as a bridge to the eventual arm's-length sale of the System to a private entity." After the closing of that sale, the City is to share 50% of its portion of the net proceeds of the sale with Citibank Citibank, therefore, has an interest in what the net proceeds consist of, and the City must evaluate in good faith how the finalist's proposals will address Citibank's interest A proposal that fails to treat Citibank's interests equivalently to the City's so that it realizes its 50% share is likely to face legal challenges.
In 2009, Burlington taxpayers sued the City and its former CAO Jonathan Leopold for having spent $17 million of taxpayer money on BT, despite the charter provisions requiring that taxpayers not suffer from BT's losses. The claims against the City were ultimately dismissed, but some taxpayers may raise new claims if the City chooses a bid that they believe is not as beneficial to the taxpayers (as opposed to the subscribers of BT) as another option. Thus, the interests of taxpayers, as well as those of BT subscribers must be considered. When BT is sold, the employees of BT will end their employment with the City. Currently, the City's pension plan has an unfunded liability, a portion of which is attributable to those BT employees. For the year ending June 30, 2016, that amount was $1.lmillion, but it fluctuates from year to year depending on market conditions and other factors. When BT is sold, the City will need to contribute to its pension plan from the net sales proceeds some amount to cover that liability, and as soon as the City's new actuaries are on board, there will be a better estimate of what that amount will be. However, it is likely that the City will need to take at least some portion of its net sales proceeds in cash.
From a legal perspective, the state regulatory agencies are more likely to approve a proposal that involves an established, independent company with experience in telecom operations and a significantly higher valuation and access to capital and would look less favorably on one that involves a new company with a much lower valuation. . The state regulators may hesitate to allow the City to roll its entire net sales proceeds into the new entity, and if rollover is allowed, will likely require protections against losses. Blue Water, Citibank, and non-subscriber taxpayers all have interests that must be considered to avoid legal challenges.
- Burlington Telecom. "Letter to the Mayor and City Council from City Attorney Eileen Blackwood dated September 7, 2017 and updated October Z 2017 regarding Legal Issues involved in the sale of Burlington Telecom"
October 4, 2017: City of Burlington Releases Independent Financial Analysis of Bidders for Burlington Telecom
On October 4, 2017 Burlington Telecom released the independent financial analysis of the three bidders for Burlington Telecom performed by Jeffrey Small CPA which is contained in a letter dated September 25, 2017. Small was engaged to review the financial status of the above three named companies in regards to their financial stability and how that then integrates with their letters of intent to purchase Burlington Telecom. Following are the conclusions of the report:
- If we assume a EBITDA of 3.5 million then an enterprise valuation of Burlington Telecom using the Industry average multiples of 8.1 it would compute to a market value of 28.35 million. If we use the enterprise valuation EV/Sales ratio and the 2018 budgeted sales of 10 million, we would come up with a valuation of 25 million for the enterprise value.
- If we assume a FMV (fair market value) of between 25 and 30 million, then the Keep BT Local proposal would pass this equity interest to the Burlington subscribers of BT as owners/members. As stated in the Keep BT Local LOl "In recognition of the fact Burlington residents/taxpayers have already paid nearly $17 million dollars toward the development and operations of BT, there would be no additional cost for Burlington subscribers to become member/owners of KBTL." This means Burlington residents that are non BT subscribers will not get any benefit from any equity or value transfer.
- In analysis these three companies from purely a financial strength standpoint, the strongest company is Schurz Communications, Inc. with Tucows, Inc. also being a strong company while Keep BT Local has weaknesses with various financial benchmarks. [redacted]
- The cost of debt for Tucows, Inc. and Schurz Communications is well below the industry standard while Keep BT Local cost of debt is substantially higher than the Industry standard. [redacted]
- Cash balance to be left at closing in the company would be zero in Keep BT Local and Schurz Communications. [redacted] Tucows, Inc. is silent on amount.
- Independent Financial Analysis of Bidders by Jeffrey Small CPA September 25, 2017
October 4, 2017: City of Burlington Releases Independent Legal Analysis of Bidders for Burlington Telecom
On October 4, 2017 the City of Burlington released an Independent Legal Analysis of the bidding process for Burlington Telecom performed by Ralphine O'Rourke, Esq. of the law firm Primmer Piper Eggleston & Cramer PC (PPEC) and documented in a letter to the city dated October 2, 2017 regarding the "Carried Equity Interest in New Burlington Telecom Enterprise and Blue Water Approval Rights." O'Rourke was asked to provide her thoughts with respect to the City of Burlington's allocation of all, or a portion of, the net sale proceeds from the sale of Burlington Telecom to acquire an equity interest in the new BT enterprise upon the sale of the assets of BT by Blue Water Holdings, LLC and the City to a third party and also asked to consider what approval rights Blue Water has in connection with the sale of BT. Following is a summary of the report:
- The City Charter expressly allows the City to establish a joint venture or other business relationship to provide telecommunications services;
- Upon the City's exercising its authority to establish such a venture, it must be approved by the Vermont Public Utility Commission ("PUC");
- The PUC, in issuing a certificate of public good ("CPG") for such a joint venture, must ensure that any losses from the business are not borne by the City's taxpayers, and in the event of complete abandonment or curtailment, that the costs associated with investment in the telecommunication network are not borne by the City's taxpayers;
- In order to obtain a CPG to that effect, the City (and the other owner of New BT) will need to be able to demonstrate that no losses will be borne by City taxpayers as a result of the joint venture;
- The PUC has numerous and substantial other standards that it considers in connection with issuing a CPG, which include considerations relating to the management experience and financial stability of the petitioner and
- If the petitioner for the CPG is a first-time operator, Blue Water has the right to "reasonably determine" if such first-time operator would be able to timely obtain a CPG from PUC.
- Burlington Telecom. "Letter from Ralphine O'Rourke, Esq. Primmer Piper Eggleston & Cramer PC (PPEC)" October 2, 2017
October 3, 2017: Ting Video: How Does Ting Decide What Optical Network Terminal to Use?
An ONT (Optical Network Terminal) is your home’s main connection back to the fiber network. In most cases, it’s a gray box attached to the side of your home with a fiber line plugged in. ONTs come in a number of configurations. “When we first launched Ting Internet, we used (what we could call) an all-in-one gateway,” says Eisner. “The fiber terminated into the box and that box was also responsible for broadcasting wireless Internet throughout a home of business.”
So why did we replace our original ONT? “We eventually moved away from that model, really because we found it wasn’t flexible enough for what people wanted to do with their Internet service.” Ting wants you to be able to use your Internet however you want. It’s yours, after all. “We view ourselves as a fat pipe of internet that doesn’t really want to get in the way of the king of things the customer wants to use the Internet for.”
October 3, 2017: Emtelle Says They Are Supplying Complete, Cost-Effective Blown Fiber Solutions that Allow Ting to Pass 1,000 homes per month in Holly Springs
Emtelle, a global leader in the manufacturing of blown fiber and ducted solutions, issued a press release on October 3, 2017 that says that de-skilling of installation staff throughout the US is absolutely critical if targets for mass deployment of optical fiber are to be achieved without unacceptable disruption in towns and cities as street-works are carried out. " For Ting Fiber in Holly Springs, NC, for example, Emtelle is supplying complete, cost-effective blown fiber solutions that allow the company to pass 1,000 homes per month."
October 2, 2017: 'Keep Burlington Telecom Local' to do Reddit AMA
'Keep Burlington Telecom Local' announced on October 3, 2017 that Keep BT Local co-op board president Alan Matson is game to do an AMA Thursday, October 5, 2017 from 3-4pm. "It also sounds like at least a few of the other board members and other key volunteers will be available at that time to chime in about our bid to make BT subscriber-owned, so bring your questions, and hopefully it will be a good conversation!"
October 2, 2017: Burlington City Council Discusses Burlington Telecom at Public Forum
Dorman & Fawcett Won't Operate Burlington Telecom After Sale
Seven Days reported on October 3, 2017 that during a public forum at City Hall on October 2, 2017 to discuss the sale of Burlington Telecom, Terry Dorman told the Burlington City Council that his law firm Dorman & Fawcett, hired in 2009 to help resuscitate the failing telecom and to facilitate a sale, will not continue to operate Burlington Telecom once the utility is sold. Dorman did not elaborate on the decision, which he announced as councilors questioned him and BT general manager Stephen Barraclough about the remaining three bidders. City council originally had planned to use Monday's meeting to select the top two bidders but that decision has been put off for October 16. The city must complete the sale by the end of the year to maximize its share of the profits.
Attendees Offered Strong Words of Support to 'Keep Burlington Telecom Local'
Much of the forum centered on 'Keep Burlington Telecom Local' as attendees offered strong words of support for the co-op during public comment; some held signs saying "Hands Off Our Internet, Keep BT Local." The council also accepted a host of letters — almost all of which were in support of keeping the telecom locally owned. "We are now at a civilizational turning point, especially as regards war and climate change. The question is whether our operations will continue to be dominated by profit and bottom-line thinking, or whether we can reconceive our footings, and turn toward cooperative and community-based structures," wrote Marc Estrin as a comment to the story in 'Seven Days'. "Burlington Telecom's offer, though smaller, quantitatively, than that of the others, is far larger in its meaning and effect. I hope that the Burlington City Council will have the values and the vision to look past the bottom line to the real horizon."
Burlington Could Face Possible Legal Risk with Selection of 'Keep Burlington Telecom Local'
But Burlington could face legal risk if it selects the $12 million bid proffered by KBTL, according to city attorney Eileen Blackwood. "We are definitely confirming that there is risk" that the city's creditor, Citibank, could take legal action if Burlington doesn't select a bid that would allow the bank to maximize its share of the sales profit, according to Blackwood. The co-op's bid is the lowest of the three remaining potential buyers. The council must choose between a $12 million offer from the Keep BT Local co-op, a $30.8 million offer from Schurz Communications and a $27.5 million bid from Ting. Blackwood said she could not specify how risky it might be. Councilors also had questions for Dorman about selling BT to the other, higher bidders. Of particular interest: Would the profit interests of Schurz and Ting trump the needs and desires of Burlington taxpayers? Dorman assured councilors that they can control the terms of the sale and write those terms into the contract. "I think the city has the opportunity to get whatever is important to the city in writing," said Dorman.
According to VT Digger there are also questions as to whether Keep BT Local would be able to get regulatory approval from the Public Utility Commission, which must issue a certificate of public good to the eventual buyer.
The PUC must consider the purchasing company’s financial stability, management and technical expertise. The co-op purchase price relies on the city retaining a $1.5 million stake in Burlington Telecom. Burlington’s charter allows the city to enter a joint-venture to operate a telecommunications company, but the Public Utility Commission must determine that in such an arrangement, the risk is borne by other investors, not city taxpayers, the state or ratepayers. Making that determination is complicated because the $17 million the city improperly plowed into Burlington Telecom nearly a decade ago was a combination of taxpayer dollars and money loaned by Citibank, Blackwood said. In the intervening years, ratepayer money was invested in Burlington Telecom as well.
Were the city to invest in the new owner of Burlington Telecom, it would be difficult for regulators to parse whether Burlington’s investment would place taxpayer or ratepayer money at risk of future losses, Blackwood said. Both Ting/Tucows and Schurz would allow Burlington to purchase a stake in the new Burlington Telecom, but their offers don’t rely on the city retaining partial ownership. The settlement allows Bluewater to reject a buyer if it determines that a first-time operator does not have a “reasonable likelihood” of getting PUC approval, said Ralphine O’Rourke, an attorney with Primmer, Piper, Eggleston & Cramer whom the city has hired to help navigate the sale process. Blackwood said officials have not asked Bluewater whether it would make that finding for Keep BT Local, because they want to leave room to negotiate with the company should the city decide it wants to sell to the co-op. The regulatory uncertainty is a cloud over the sale process, because Burlington plans to pick a buyer by year’s end to maximize its return on the sale, while the PUC could take more than a year to issue a certificate of public good, Blackwood has said.
October 2, 2017: Study Says Spending on Fiber to the Home Will Total ~$175 Billion Over the Next Ten Years
Fierce Telecom reported on October 2, 2017 that Deutsche Bank Markets Research said in a research note that AT&T and Verizon are setting the pace for fiber network spending in the United States with wide-ranging plans to satisfy a broad set of consumer and business wireline and wireless needs. “Telecoms have become much more public signaling their intent to increase fiber investment, with AT&T and Verizon leading the spending ramp,” says the study. "To support the upcoming innovations such as autonomous driving, IoT, smart cities, the US needs to densify its fiber network. The US fiber penetration rate is 20% vs. 75% for leading OECD countries, which suggests a large gap needs to be closed.” Deutsche Bank said in order achieve these goals, its “proprietary top-down fiber model suggests spending on fiber to the home will total ~$175B over the next decade (an additional $25-30B will likely go towards 5G).”
After establishing its “One Fiber” initiative, Verizon signed two key fiber supply deals: it will spend $1 billion with Corning to buy 1.5 million miles of fiber over three years and a $300 million deal with Prysmian to buy 1 million miles of fiber over 3 years. As part of a deal with the FCC for AT&T to acquire DirecTV, AT&T committed it would connect 12.5 million homes with 1 Gbps-capable FTTH network services by 2019. The service provider has connected over 5.5 million homes with hopes to connect a total of 7 million by the end of this year. Interestingly, AT&T said it might reach close to 14 million by 2019. CenturyLink has set a 3-year spending plan, committing to rolling out 100 Mbps and higher speed broadband services from 2 million homes passed in 2016 to over 10 million homes passed by 2019.
Matt Ellis, CFO of Verizon, told investors during the Bank of America Merrill Lynch Media, Communications & Entertainment Conference that the service provider will consider whether to lease, buy or build, dictated by the business case it’s trying to prove out. “As we add fiber—and I think we’ve been pretty consistent in this—we can buy existing fiber, we can build fiber, or we can lease existing fiber,” Ellis said. “I think it is going to be geography by geography will determine what the best and cost-effective approach will be to add the capacity and generate the returns off of.”
September 29, 2017: Burlington Free Press Says City Hall Stumbled during Burlington Telecom Bid Process
The Burlington Free Press published an editorial on September 29, 2017 saying that the bidding process for Burlington Telecom lacked sufficient transparency. "When dealing with Burlington Telecom, City Hall has no room for missteps that even hints at anything less than a full effort toward absolute transparency," wrote Engagement Editor Aki Soga. "When dealing with Burlington Telecom, city residents have every right to demand that the people they elected to represent their interests conduct themselves with the utmost scruples."
September 29, 2017: Domain Name Server OpenSRS Suffers Network Outage After DNS Attack
The Register reported on September 29, 2017 that Tucows' domain name server "OpenSRS" had a network failure, taking down scores of customers' portals with it during a DNS attack followed by an unrelated equipment failure. "At 1AM UTC we were the target of a sophisticated DNS attack that was followed by an unrelated double failure of core network equipment at our main Canadian data center, caused by an undocumented software limitation," said Tucows Executive Vice President Dave Woroch. "We were able to quickly recover from the equipment failure but continued to experience the DNS attack until 13:10 UTC, when the attack was stopped and systems started responding reliably again. The network equipment failure made it more difficult for us to identify that we were under a DNS attack and impacted our response time. "The Incident Report for the event noted that OpenSRS is now working on creating more separation between components of their DNS infrastructure that will improve resilience to similar attacks in the future.
September 28, 2017: Ed Adrian Says Local Sounds Awesome and It Is, Until It Isn’t
Former Burlington City Council member Ed Adrian published an op-ed on Vermont Public Radio on September 28, 2017 that "an advocacy group called Keep Burlington Telecom Local, is once again promoting community ownership of BT. Local sounds awesome and it is, until it isn’t. We can’t afford to celebrate idealistic aspirations, no matter how lofty or pure, at the expense of taxpayers. My view is that we’re lucky to have excellent out-of-state bidders offering to buy and take over BT operations – because while our little City on the lake is capable of doing amazing things, I don’t believe we can compete in the telecom industry without help from the outside."
September 28, 2017: Fourth Bidder on Burlington Telecom Has Chosen to Remain Out of the Bidding Process
Burlington Mayor Miro Weinberger and City Council President Jane Knodell made the following public announcement on the Burlington Telecom website on September 28, 2017: “Since Tuesday we have spent hours together and with other parties exploring whether there is a way in which the fourth bidder could re-enter the BT sales process. The bidder has chosen to remain withdrawn from the process. The City greatly appreciates the interest the bidder had in Burlington and the ideas and energy they brought to the process. Resolving this matter has delayed focus on the bids that are before the City Council for consideration. Instead of voting to narrow the field to two bids on October 2, as planned, the Council will hear a public summary by Terry Dorman of each of the three proposals and have the opportunity to ask Dorman & Fawcett and the City’s attorneys questions about the bids. The Council will then vote to select two final bidders to conduct legal due diligence with on October 16.”
Identity of the Fourth Bidder Revealed to be Faisal Nisar of ZRF Partners
City officials would not name the bidder or release more information, citing a nondisclosure agreement signed by all parties but according to Seven Days, the fourth bidder is Faisal Nisar, a 42-year-old investor who operates his own private equity business, ZRF Partners. Reached by phone last week at his New Jersey home, Nisar confirmed his involvement. He declined to speak further, citing concerns about the nondisclosure agreement he had signed with the city. Nisar's name has not previously been made public. Nisar and Dorman have ties. The two once served together on the board of a Massachusetts-based technology firm, Custom One Design. Dorman said he's known Nisar for 12-plus years in a professional capacity. The two also shared a friendship with Gary Evans, who consulted with BT from 2009 to 2013 and was key to its survival, according to Councilor Joan Shannon (D-South District).
"For now, we have withdrawn our bid," Nisar said around 9 p.m. Wednesday. He declined to speak further citing both his non-disclosure agreement and his respect for the city and the Burlington Telecom sale process. Nisar, who lives in New Jersey, said he was concerned that anything he said would complicate the city's sale process going forward. "They're going through an important process," he said. "I wish them well."
Nisar Submitted Bid for $17 million
Nisar had submitted a bid for $17 million, according to Kurt Wright (R-Ward 4). Ting is offering $27.5 million, while Schurz is offering $30.8 million. Keep BT Local is offering $10.5 million in cash with the city retaining a $1.5 million ownership.
Appeal of the Fourth Bidder's Approach
According to some city councilors, Nisar's proposal had appeal. Nisar earned an MBA from Columbia Business School and then spent three years working at Merrill Lynch in New York City. Starting in 1999, he spent 17 years "managing investments in technology and media companies" at Baker Capital, a private equity firm in New York City, according to his LinkedIn profile. Nisar launched ZRF, the entity he used to submit a proposal for BT, in April 2016. Nisar's bid wasn't the highest, but it attracted "significant interest" from some councilors, according to Wright. "They had an aggressive plan in regard to economic development and small business development in the community," Wright said, noting that the company had also planned to expand beyond city limits. "Many of us were very interested in them as our No. 1 or No. 2 choice." According to Councilor Ali Dieng (D/P-Ward 7), Nisar was attractive for his creative and community-oriented approach. Nisar had promised to invest heavily in BTV Ignite and proposed partnering with the Burlington High School's technical center, Dieng recalled.
The loss of the fourth bidder was "somewhat unfortunate," said Councilor Joan Shannon (D-South District). "I don't think they're nefarious actions." Instead, the controversy has made Nisar's bid "this kind of forbidden fruit, which makes it much more appealing than it would have been," Shannon said. "I'm extremely disappointed; I was a huge supporter of ZRF," said Dave Hartnett (D-North District). "I'm not really quite sure where this leaves us." Wright said, it was clear that the damage had been done. ZRF wanted to hear from the mayor that he no longer had conflict of interest concerns, Wright said — and Weinberger couldn't give that assurance. "[ZRF] didn’t want to be dragged back in there under that cloud," Wright said. "They've already been jerked around a little bit here."
Dorman & Fawcett Deny that Any Conflict of Interest Exists
At the heart of the questions about a potential conflict, according to councilors, is Dorman & Fawcett's involvement. But councilors were not specific. Dorman denied to Seven Days that any conflict exists. "There isn't one based on everything I know. We stand behind the work we've done," he said. The firm is dedicated to getting the city the best possible result, he said. The company's employee, Stephen Barraclough, has been running BT since 2010. All bidders expressed interest in retaining Dorman & Fawcett to manage BT, said city attorney Eileen Blackwood. Dorman has been entertaining offers for BT since he took the job, he said, and, when the city was ready to sell this year, he reached out to those who had previously expressed interest or seemed like a good fit. Each of the four finalists had expressed interest in retaining the firm, city attorney Eileen Blackwood said at a September 20 press conference. Knodell said the decision is ultimately up to Dorman & Fawcett. "In many ways it'd be great if they would stay in, but I don't know the status of that conversation," she said.
Ting/Tucows, Schurz, and Keep Burlington Telecom Local Are the Remaining Three Bidders
According to the Seven Days both Ting/Tucows and Schurz are offering cash. Ting is offering $27.5 million, while Schurz is offering $30.8 million. Keep BT Local is offering $10.5 million in cash with the city retaining a $1.5 million ownership. Elliot Noss, the CEO of Ting, said he had been following the Burlington Telecom story for years. He said he first reached out to the mayor's office in 2014 about the possibility of purchasing the utility and was put in touch with Terry Dorman, who he said has been his main point of contact and has "run the process." Noss said the signals he has received from Dorman, the mayor and other Burlington officials "struck a balance between being encouraging and noncommittal." Schurz's CEO, Todd Schurz, said he was approached by a "third party that knows BT and knows us." He declined to say who the person was, but a Schurz spokesperson, Brian Lynch, said it was not Dorman or anyone associated with their firm. They only met Dorman and other parties of the city after the formal sale process began, he said.
Katie Vane, a spokeswoman from Weinberger's office, said equivalent site visits were not made to ZRF or Keep BT Local because they were not operating telecom companies, and the point of the visits was to get a grasp of how their operations worked.
Independent Financial Report Not Yet Released
On September 25, 2017 an independent financial analysis of the four bids was presented to city officials. Knodell said earlier this month, while announcing a new timeline that promised more transparency and a robust public process, that the analysis would be made public. However, it has yet to be released.
The Selection Process Has Been Delayed Two Weeks
The controversy has once again delayed the selection process, which must be made by the end of the year for the city to maximize its share of profits from the sale. The city council originally planned to narrow the field to two on October 2 and pick a winner on October 16. Now, the council "will hear a public summary by Terry Dorman of each of the three proposals and have the opportunity to ask Dorman & Fawcett and the City’s attorneys questions about the bids," officials said in a statement. The two finalists will then be chosen on October 16, the statement said.
September 28, 2017: Mayor Miro Weinberger and City Councilor Joan Shannon Discuss the Bidding Process on 'The Mayor's Show'
Burlington, VT Mayor Miro Weinberger hosts his monthly show and discusses the upcoming sale of the city-owned Burlington Telecom internet, phone and television service provider with Burlington City Councilor Joan Shannon.
September 27, 2017: Tucows Acquires Roam Mobility from Otono Networks
Street Insider reported on September 27, 2017 that Tucows has acquired Roam Mobility from Otono Networks. Roam is a Mobile Virtual Network Operator (MVNO) operating on the same nationwide GSM network as Ting Mobile. “When we look at other services in this space, we tend to admire the ones that have solved a specific problem for a specific target. Roam has done a beautiful job for Canadians who travel to the United States,” explained Elliot Noss, President and Chief Executive Officer of Tucows. “With their rate plans, user experience, messaging and even SIM card distribution, they have established themselves as the obvious choice there.”
The acquisition includes three Roam brands that will each continue to operate independently alongside Ting within Tucows’ mobile network access group. There will be no changes for either Roam or Ting customers. The three brands and their specific focus areas are:
- Roam Mobility, offering prepaid roaming replacement plans to travellers visiting the United States for a few days or a few weeks, as well as Snowbird plans for Canadians spending the winter in the United States.
- ZIP SIM, backed by a quick, automatic activation process and straightforward rates, helping international business travelers get quickly connected when visiting the United States.
- AlwaysOnline Wireless, powering short-term, on-demand LTE data plans for hotspots, tablets, and iPad with Apple SIM. As one of the first consumer eSIM-enabled providers on the planet, AOW has had innovation at its core from the beginning and its global roaming footprint has helped it connect customers in over 90 countries including the United States, Canada and the U.K.
Noss added, “We get well-positioned brands, smart product features and a lot of knowledge and skill. Meanwhile, these brands join a business that is investing every day in growth.”
Tucows also adds two new international wireless carrier partners to its existing relationships in the United States, enabling support for global data on iPad with Apple SIM. Revenue from the Roam businesses will start contributing to Tucows financials toward the end of September. However, it is not expected to have a material impact on overall company performance.
“We are thrilled to have found a home for our consumer brands that shares our commitment to customer experience and our passion for building great products,” said Emir Aboulhosn, Chief Executive Officer of Otono. “As we now accelerate our shift and increase our focus towards innovation for eSIM enablement and orchestration, we are also excited to begin building new capabilities for Tucows and Ting.”
Tucows will also be partnering with Otono for eSIM enablement and will utilize the Otono Platform in the near future to bring greater device support to Ting. eSIM allows mobile users to more easily choose mobile networks and switch between networks on their tablets and wearables. Otono is at the leading edge of this shift from traditional SIM cards to eSIM. Ting expects to announce more details on eSIM support in the coming months.
September 26, 2017: Burlington Business Leaders Hold News Conference to Urge City Council to Vote for Out-of-State Burlington Telecom Bids
VT Digger reported on September 26, 2017 that the Lake Champlain Regional Chamber of Commerce held a news conference urging the city council to consider the two out-of-state bids, Tucows/Ting or Schurz Communication, over the Vermont-based co-op bid, Keep Burlington Telecom Local. "I've taken the time to review each (bid) and have come to the conclusion that the co-op proposal does not compare equally and favorably to the others and doesn't offer the citizens and its residents the protections, financial and otherwise, that are guaranteed by the other finalists," said Tom Torti, President of the Lake Champlain Regional Chamber of Commerce since 2006. Torti said he is a supporter of the co-op ownership generally, but KBTL’s offer relies on a $10 million loan with a 14 percent interest rate, which would leave the telecom “too highly leveraged” to be successful going forward. "It has nothing to do with the model and everything to do with financing."
Andy Montroll, a board member of Keep Burlington Telecom Local, said that if Burlington Telecom is sold to one of the telcos with offers on the table, decisions about its future will be left to out-of-state executives. Torti countered that Burlington Telecom required the clandestine bailout of $17 million in taxpayer money that the city spent improperly to prop up Burlington Telecom nearly a decade ago precisely because it was strapped with debt and didn’t have experienced managers, something he said is also lacking in the co-op’s bid.
September 26, 2017: Elliot Noss Speaks to MOI Global community at the Latticework 2017 Summit on "Disrupting the Communications Industry — Implications for Investors"
MOI Global reported on September 26, 2017 that Elliot Noss spoke at the MOI Global community at the Latticework 2017 summit, held at the Yale Club of New York City in September, 2017.
We are the largest wholesalers of domain registration in the world. GoDaddy is the largest domain name registrar. We made up this creature, “wholesale domain registration” nearly twenty years ago. That is essentially a platform business, a relatively low-growth business — if you want to talk about mid-single digits as a growth business. It’s a platform business that spin off loads of cash.
We’re an MVNO, which means we buy capacity from — we’re not legally allowed to say it, but if you go and search the coverage map, you’ll see the magenta map and you can figure it out. The MVNO business is great because U.S. mobile phone service is the second-most expensive in the world (second only to Canada, which is where I’m from). We have been able to build a business making north of 50% contribution margins, where our customers are paying $23 a device and they are measured (by net promoter score) as the happiest, most satisfied mobile-phone customers in the world. That’s a scrappy business from a customer acquisition standpoint, where you have essentially no industry growth; everybody who’s going to get a mobile phone already has one. That is a tough business route — taking share — but [we are] less than one-tenth of 1% of the market. We’re a termite eating a tree: there is a lot of room and the tree doesn’t notice.
Now you have these two good businesses, both of which spin off cash and require virtually no capital. We bought back our stock for as long as we could, then the telecom world presented itself again to us, and for the last 2.5-3 years we’ve been going hard fiber to the home. We fundamentally believe that we’re at the beginning of a 15-20-year cycle, where infrastructure built for telephone or television has been retrofitted essentially to deliver the internet. It’s a simple thesis to say that at the end of a 15-20-year cycle, the vast majority of connections in the U.S. will be end-to-end fiber with a bit of Wi-Fi hanging off the edge. Two years ago I would have said that at this point there would be 50 or 100 companies copying us, but I’ve come to appreciate that there’s an intersection around operating capabilities — we’re a bunch of old ISP guys at heart — capital, and the ability to manage a construction project, which might be a bit rarer than I first thought, and so the window stays open.
September 26, 2017: City of Burlington Considers Inviting Telecom Bidder Who Withdrew His Proposal Back to the Table
Burlington Mayor Weinberger and City Council President Knodell issued a statement on September 26, 2017 regarding the potential fourth Burlington Telecom bidder who made withdrew his proposal from consideration. “After extended consultation with the City’s attorneys and Council discussion, there was a strong Council consensus that the City should explore whether the possible conflict of interest with the fourth bid could be resolved. If so, the fourth bidder will be encouraged to promptly submit a final LOI. Together we will be pursuing this outcome immediately.”
The Bidder that Dropped Out May Be Back in the Running if a Possible Conflict of Interest Can Be Resolved
According to the Burlington Free Press, the drop-out bidder may be back in the running to buy Burlington Telecom following a rift between the mayor and some councilors over the circumstances leading to the bidder's withdrawal — if a possible conflict of interest can be resolved. If the conflict of interest is resolved, the fourth bidder will be encouraged to submit a final letter of intent promptly. Knodell said they are hoping to connect with the fourth bidder Tuesday. The council is set to narrow the field to two finalists next Monday. Mayor Weinberger said the bidder made an "independent decision" to withdraw, but that some communications from him may have prompted the decision. "I, as mayor, had some concerns about the fourth bidder and conveyed them to the bidder," he said last week. The potential conflict of interest was a concern raised by the mayor. Weinberger said the non-disclosure agreements prevented him from discussing the details of his communications but confirmed that he had "directly" communicated with the bidder.
The withdrawn finalist had been described by Burlington Telecom Advisory Board Chairman David Provost as "a private equity investor with valuable local relationships and extensive telecom experience and a vision for aggressive BT regional growth." Knodell says 8 of the 12 councilors felt the bidder that pulled out was their first or second choice. "Someone should care as a citizen of Burlington because what if it was the best proposal? What if it was the proposal that worked best for the citizens of Burlington and gave us the best return? They have so much to offer the city in the way of new business formation, building a strong tech economy, and creating good jobs for young people coming out of our school system," Knodell said.
City Councilors Knew who the Fourth Bidder Was
According to Vermont Biz, because of non-disclosure agreements, city councilors knew who the fourth bidder was and were able to review its proposal, but neither they nor the mayor could disclose who it was or what terms they were going to propose. Weinberger said in announcing the three bids that he had presented his concerns to the bidder and to the Council and that the bidder independently decided to withdraw. Weinberger said he could not disclose what his concerns were. "Many city councilors were concerned about how this company disappeared from the mix," said Councilor Kurt Wright. He and Knodell both felt the mayor had a hand in its withdrawal. "There was great, significant support for this company." "In my evaluation, they were the strongest from the point of view of business formation, business services, creating good jobs, building the tech economy," Knodell said. The company had been described as a local, "private equity" firm.
However, neither Wright nor Knodell described it as such or in any other way provided who was behind it or what its bid might have looked like. Wright, a Republican, ran for mayor against Weinberger, but lost by a comfortable margin (58 percent-37 percent in March 2012). Knodell is a Progressive. The mayor's office has been dominated by Progressives or Progressive leaning Independents for more than three decades (Bernie Sanders, Peter Clavelle, Bob Kiss) with a short interlude for one Republican Mayor (Peter Brownell, 1993-1995). Weinberger is the first Democrat since 1981. Wright is currently the only GOP member on the Council.
Possible Conflict of Interest for the Law Firm of Dorman & Fawcett
The mayor and city attorney have still not said publicly why the bid was withdrawn, but according to VT Digger an email from the mayor to city councilors, obtained by Seven Days, provides some insight. “You will see that, in the wake of the legal, regulatory and conflict of interest concerns that have arisen, Terry [Dorman] requested that [the bidder] withdraw its proposal. I support Terry’s decision and expect there will be further conversation about it in our session this evening.”
Terry Dorman, referred to in the email, is a member of the law firm Dorman and Fawcett that the city hired a few years ago to manage Burlington Telecom. Dorman and Fawcett have provided feedback to the city throughout the sale process and will keep 10 percent of the proceeds when Burlington Telecom is sold. The mayor has acknowledged that this is a potential conflict of interest — one that he said the city has managed carefully as it looks to find a buyer. Asked during a news conference announcing that the final bids would be made public, city councilors did not respond directly to a reporter’s question as to whether Dorman and Fawcett had connections to any of the bidders.
One Local Bid Remains From 'Keep Burlington Telecom Local'
Knodell also discussed the one remaining local bid from Keep Burlington Telecom Local (KBTL). "The advantage by going with Schurz or Ting," Knodell said, "is they're well capitalized. They have resources." They are cash bids, Knodell said, "That's pretty attractive, in many ways," but BT would no longer be Burlington-based and their ultimate interests are related to their shareholders. "The relative weakness in [KBTL's] bid is, compared to Schurz and Ting, is that they are thinly capitalized."
September 25, 2017: Tucows Responds to NameCheap Lawsuit
Domain Name Wire reported on September 25, 2017 that Tucows has filed their first response to a lawsuit brought by Namecheap to transfer four million domain names registered to Namecheap customers that use the Enom platform using the “Bulk Transfer After Partial Portfolio Acquisition” or BTAPPA. According to Tucows response, Tucows says it is not opposed to transferring the domains but suggests that a BTAPPA would be an “extraordinary and resource-intensive process”. Tucows suggests a different transfer method, such as providing EPP codes or transferring them to Namecheap’s accreditation but hosting them on the Enom platform.
According to Tucows' response, "The Master Agreement, which is never characterized as an asset purchase, explicitly references “EPP transfer codes” (that are only applicable to standard ICANN transfers) and makes no mention of BTAPPA. On July 27, 2017, Namecheap for the first time contended to Tucows that BTAPPA was a requirement of the Master Agreement. See Rome Decl. (ECF No. 10) at Ex. A. In a letter to Tucows, Namecheap’s counsel for the first time characterized the Master Agreement as an “asset purchase” that “closed” when Namecheap’s exclusivity obligations under Section 3 of the Master Agreement concluded. Id. Namecheap’s counsel further contended that the “asset purchase” meant that the Namecheap-managed .COM and .NET domain names qualified for BTAPPA under unidentified Verisign “guidelines,” and that Verisign had in fact approved the transfer via BTAPPA of the Namecheap-managed .COM and .NET domain names. Id. Namecheap’s counsel did not (and has yet to) identify the referenced Verisign “guidelines” or produce Verisign’s supposed approval of the BTAPPA."
Namecheap responded that "Absent a bulk transfer, Namecheap customers are likely to face a high degree of confusion by suddenly and involuntarily finding themselves dealing with eNom/Tucows (with whom they have had no relationship) at the time of renewal rather than Namecheap (the service provider with whom they contracted), and being told to perform several tasks in order to be moved from eNom to Namecheap. Pursuant to ICANN’s transfer policy, they will also be required to extend the domain registrations for an additional one-year term (at an additional cost) in order to move to Namecheap’s platform. Some of those customers are also likely to encounter situations where the domain name expires before the transfer is completed, which may lead some domains to end-up being stuck in mandatory “grace periods” (with large fees for reinstatement), or even being deleted and thus available for someone else to register. Finally, recurring issues of instability and insecurity associated with the eNom platform pose a separate and ongoing risk of harm to the actual registrants of the VeriSign Domains (all of them Namecheap customers) for so long as they remain under eNom’s sponsorship."
- Original Motion filed in US District Court. "Namecheap versus Tucows and Enom" Filed August 30, 2017
- Tucows Response to Namecheap September 18, 2017
- Namecheap's Response to Tucows September 21, 2017
History of the Enom Acquisition by Tucows
Read more about the history of the sale of Enom to Tucows at:
- September 1, 2017: Namecheap Files Suit For Bulk Transfer of 4 Million Domain Names
- August 8, 2017: In Domain Services, the Integration of Enom is Going Well
- May 9, 2017: Tucows CEO Elliot Noss Explains the Impact of the Enom Acquisition and Deferred Revenue on Q1 Earnings
- May 9 2017: Enom Integration Has Gone Very Well This Quarter
- May 2, 2017: Why Rightside Sold Enom to Tucows
- February 20, 2017: Rightside Activist Investor Says Enom Was Sold to Tucows Too Cheap
- February 9, 2017: Tucows CEO Says Acquiring Enom is Overwhelmingly about Generating Scale and Realizing Cost Efficiencies
- January 25, 2017: Elliot Noss Says Combining Tucows with Enom Will Be Done Piece by Piece with Backwards Compatibility in Mind
- January 20, 2017: Tucows Acquires Enom with its Network of over 28,000 Domain Name Resellers and 14.5 million Domain Names under Management
September 21, 2017: Ting Hosts Reddit AMA to Discuss Burlington Offer
The Ting Blog reported on September 21, 2017 that Ting will host an AMA (Ask Me Anything) from 3 to 4pm on September 21, 2017 to hear and respond to questions about their BT offer, business or "anything else you want to know."
Some of the most interesting questions and answers include the following:
Assuming you win the bid...
1. Burlington Telecom's prices right now are significantly lower than what you offer in your other locations. Currently, I am also aware of programs that subsidize access for low income families, as well as discounts for college students. Do you plan on raising prices in the area and getting rid of these programs?
2. Will you continue to maintain, upgrade, and expand the network in the years to come? Since Burlington will be just one of many cities (and probably your smallest) will we get as much attention from you as your other locations? Do you plan on expanding the network to neighboring areas like Winooski, South Burlington, Essex, Williston, Colchester, etc?
3. How many new jobs will be created in the Burlington area? Will anyone currently employed by Burlington Telecom be laid off? Will support be "centralized" to either your own call center at your headquarters or a call center in another country like India, or will we still be able to talk to someone from Burlington?
4. Will the people of the Burlington area have any say in decisions made about the network in the future? Will the people most "in charge" be residents of the Burlington area (people from here employed by you), or executives in an office hundreds of miles away in another country?
5. Will there be any possibility of you selling the network to another telco, possibly Comcast or Fairpoint? shudder
6. Had any of you heard of Burlington or been to Burlington or Vermont before the bidding talks started happening? If so, what were your impressions of us?
Answer from Elliot Noss
1. In our current FTTH markets we charge $89 for a gig. In Burlington it is $70 with contract and $83 without. So there is not really a significant difference. There are a bunch of things as follows:
- We have committed to maintaining prices for 30 months. this does NOT mean in month 31 we will be raising prices. what is true is that there are currently tons of SKUs and we greatly prefer simplicity. we will be looking for some ("gamers package" I am talking to you!).
- We believe that prices for telecom are too high in general and are likely to fall in the longer term, not rise. the inputs for these services are all essentially subject to moore's law so they should. and we are used to living in markets (like domain names) where falling prices are the expectation. television content is an (UGH) exception.
2. I think this was answered somewhere else and will look for a link. Basically, build baby build!
- We are strong supporters of addressing digital divide issues and will be looking to implement specific programs to address these issues. we have started to do so in Charlottesville and expect to do so in every market we are in including (hopefully) Burlington. these programs need be developed for and with each community individually.
3. The best way to answer this is to say we are growing and need more good people. The best place to get a sense of this is to look at the slides in our presentation talking about our history with companies we have acquired and the people from those businesses. If we are really lucky, my successor will be a Burlingtonian!
4. We delegate a lot of authority to people on the ground, who will be people of Burlington! More importantly, we really try and make an effort to engage with the local community. Community leaders, groups and organizations, neighbourhoods and just people, to learn about what is important to them and what can most help. We believe that FTTH can be transformative and we want to be part of that.
5. No one here has any intention of selling to any of those large incumbents. shudder
6. I have been following the Burlington Telecom story for many years now and of course was familiar with the city otherwise. I have been three times now and love it!
Answer from Ross Rader
Regarding #3, Our plan is to keep customer service in Burlington and grow that operation to also help us in other cities. We run a distributed operation already - we have customer service staff in Charlottesville VA, Toronto ON, Starkville MS, St. Catharines ON, Nelson BC, and just outside of Chicago IL - a Burlington team will be a great complement to that.
I started in the customer service business in the 90's as a technical support rep for an early ISP, I'm really excited by the prospect of being able to sit down with everyone at BT so I can learn more about why the people of Burlington love BT so much already, what their magic service formula looks like and share as much as I can about what we've learned over the years. Everything I've heard about the Burlington team has been very positive and I think we'll learn a lot from them.
We believe that we can do a better job of servicing our customers than any one else - we don't outsource Ting Internet CS today and we've made an explicit decision not to go that route in the future. We've experimented with it elsewhere in the business and it really requires a different discipline and skills and even if you nail it, the results are just kind of meh. By focusing on delivering great service through our own staff, we can really get into the details of providing great service - and our track record shows it. Ting Mobile consistently ranks at levels consistent with the service delivered by Apple, Nordstroms and Zappos and Ting Internet tracks even higher than that. Working together, I think the two teams have a great opportunity to build on the already excellent results that we see from BT customer service.
Answer from Adam Eisner
I'll comment on 2. One of the commitments we've made is to continue to expand the network, both inside and outside Burlington. So we would certainly continue to expand inside the city, yeah. BT has also identified many of the areas you mention as possible expansion targets, and we've reviewed the initial plans and really like what we see. It's early, and we'd finish Burlington work first, but we'd get into surrounding areas as well.
This issue with 5, though, is if one of those incumbents decides they want to acquire you, as a publicly traded company your board has the legal obligation to accept the offer if it is sweet enough. As someone who follows business ownership and acquisition patterns quite closely, it's a real and significant risk that recalls the classic scene from Silicon Valley.
So, even if your as good as your earnest PR voices claim at the moment, your ownership structure leaves our community vulnerable. The co-op, on the other hand, would require a vote of all subscribers, which is a far more powerful structural firewall.
Answer from Elliot Noss
This is true about any ownership structure other than municipal ownership. Sadly, that is now precluded because history. We (Ting) can't change that, only try and make it the best it can be from here.
We have agreed to sale restrictions with respect to existing Burlington incumbents.
We cannot guarantee the future. What we do believe is that running an ISP is a challenging business and that we might be among the best in the world at it. We also aspire to learning (from you) all about what is best for Burlington. We aspire to combine the best of an amazing operation and customer service infrastructure (your customer service experience will get even better!) with a deep respect for the local nature and needs of the community.!
1. Do you feel having a headquarters outside of the country will hinder your ability to maintain the high levels of customer service and same day responsiveness that BT is known for?
2. Considering BT also does cable and phone service, are you going to support those customers or focus strictly on internet and fiber business?
And local staffing is a huge plus. If you win the bidding, what elements of the business will continue to be staffed locally? I assume you'll outsource call center type positions to your existing facilities.
Answer from Adam Eisner
1. We've got a long track record of working on a distributed basis - we're an "internet first" company, so it really is in our genes. For example, we have customer service staff in Charlottesville VA, Toronto ON, Starkville MS, St. Catharines ON, Nelson BC, Kirkland WA and Chicago IL - it will be real work, but we know what it will take to bring a Burlington team into that organization and foster its growth in positive ways. You point out that BT is already known for providing great customer service which is really exciting for me. I don't think for a second that we know everything about providing great customer service - there are always things we can improve - I'm really looking forward to the prospect of working with the BT team to see how they are achieving those great results, comparing that to what we are doing and sharing best practices in both directions.
2. And to your question about local staffing - I think it is important to point out that we wouldn't just be talking about entry level positions. We take great pride in our corporate values, one of which being that leadership and innovation can happen anywhere in the organization - that extends to all of the towns we work in - we're definitely not a "all the good stuff happens at HQ" kind of company. If our bid is successful, I can definitely see lots of opportunity for Burlingtonians to tackle other aspects of Ting's work, not just BT. (our proposal laid out a lot of this and underlined our track record in this area so I won't rehash it here...)
Being from waaay out of town, what do you know about the Burlington, VT, USA market and why should we trust such a fast-expanding shop to operate in our small sandbox?
Answer from Trish McLean
Hi - It's true that we're not local and we would never be able to be local on our own. But how we've approached it in our other markets is to get involved and do the work. While we have a small national team - I'm in marketing for example, most of what we do is driven by our local teams. We would never assume to simply know what's right for a community. We'll always listen. We've always done community meetings where people have a chance to get to know us and for us to understand their concerns. And then we do the best job we can delivering a great product and great customer service.
In terms of growth, we are expanding but not in my opinion too fast. As you know it takes a while to build a fiber network and there's many steps to setting up a market, lighting customers and then operating. I feel pretty confident in our ability to scale because so much of what we do is done by the local teams. Hope this helps -
I'm curious how exactly you will keep profits and ownership local. According to surveys in the city done last year, the #1 issue that was most important to this sale was keeping the Telecom local. As a publicly traded company, how can you give residents the service and local commitment we have come to expect, especially when your #1 responsibility is to your shareholders first and foremost?
Answer from Elliot Noss
The best way we can answer is to suggest you check out all our public facing customer feedback (reddit/facebook/twitter, etc.). We deeply believe that happy customers = good business and our shareholders have come to believe us. They didn't always, as you can see by our stock chart for many years. Eventually results win out.
It is worth noting that despite being public for over 17 years, we have never sold a share and never raised money. We are not a conventional public company. But our shareholders are as happy as our customers. And many people start in one of those groups and end up in the other!
Up 'til now I've only heard of Ting/Tucows in the mobile/cell service and the domain name industries. Moving into a traditional ISP role seems like a new venture. Has Ting/Tucows operated any residential or commercial ISP's before? What does Ting/Tucows seek to gain by purchasing Burlington Telecom? And why here, why now?
Answer from Elliot Noss
We have been doing this for a while. You can see the front door here.
Burlington is a more mature fiber market and it is once a market is penetrated that the REALLY interesting benefits can start to accrue. If we are lucky enough to be successful here, we can start to learn things about the benefits that fiber provides together, and we can spread those learnings to help make positive change in other communities.
Burlington is a natural to lead the nation in something like this!
Follow up Question:
I mean, from a business perspective, what does Ting seek to gain by purchasing Burlington Telecom? What's the bottom line?
Answer from Elliot Noss
The most important thing about it for us is operating a FTTH at scale (>50%). We believe that is where the magic happens. The opportunity to really take the impact of ambient connectivity to the next level and for what we learn together in Burlington to be a model for the rest of the country.!
It sounds like you're expanding rapidly. How can we be sure your corporate growing pains won't affect us? How will you be able to focus on our local needs and engage our rabidly interactive and opinionated citizens/subscribers/businesses on a regular basis?
Answer from Trish McLean
Burlington would definitely be a big deal to us, as you can probably tell, we're excited at the idea of getting involved.
Keep in mind with the local team we'll be accessible and engaged with the whole community. By that I mean, having community meetings, getting feedback, talking with partners and being available to respond via phone/email/social.
Answer from Adam Eisner
Fair question. It's not untrue to say we've been expanding quickly, for sure. That said, we've been scaling the business for quite some time. For example: we are actively building right now in Holly Springs and Charlottesville. We aren't building in Westminster because the City manages the build, but we're operating there. We are also building in Sandpoint, ID and Centennial, CO concurrently. So all of that is a long way of saying: we are comfortably building and selling in several markets at once right now, and it's going really well. All the systems, structures and plans we've put in place are designed to let us operate in multiple markets at once.
Now for the citizens part. ;) We do interact a lot with each municipal government, businesses and citizens. We're involved in multiple public private partnerships, and get that it's important a) that the partnerships successful for both municipality and Ting and that b) everyone is heard. I certainly see that as incredibly important here. To be honest, we manage that by getting out and being everywhere as much as possible with our local teams (which are led by a local city manager who knows the area inside out), holding events, communicating the heck out of build plans, and so on. We really do think constant communication is key.
Just wondering How vast your resources are in order to keep the kind of eye on BT that a local co-op with a singular focus can, especially when you have a number of other projects ramping up across the country?
Answer from Adam Eisner
This is a really good question. I think the answer is: each one of our operations are incredibly local. We're incredibly aware that you can't manage a local fiber operation remote. As a result, we have deep and expansive local operations in every market, including field ops/installations, city managers, marketing and support. They are local Ting employees, working out of local warehouses/operations centers and experience spaces we have built. They drive trucks we have procured locally. And so on.
Where we CAN add additional help and value from a remote/centralized operation is in operational muscle. For example: can use our experience managing multiple construction projects to build more, faster. (That's what we meant by "building footprints" in our presentation: we can cover large areas quickly and effectively because we have the experience and resources to do so). We can use the platforms we have to extend tools to customers, quickly. Those kinds of things.
As a supporter of Keep BT Local co-op's bid and how it'll keep OUR money circulating in OUR community rather than paying off your lenders, I was a little dismayed to see you co-opt their slogan on your slide decks for the PowerPoint. Not a great way to start your introduction to the community by usurping a truly local bid's own name and slogan. I sense you see the opportunity many of us saw years ago when we pushed to create BT, and now is being sold off by short-sighted politicians to out-of-state/out-of-country profiteers who see us as a long term Tucow cash cow. What's the expected return on your investment of $27M - 15%? 20%? 25%? What jacked up rates are you going to charge us after the 30 month "grace period" for Internet VOIP only?
Answer from Michael Goldstein
Hi Shay. I work for Ting.
I am going to try to address your comments and questions. If your intention is more to rant or campaign than to get to know us, that’s cool too. This is Reddit after all. Both the history and fate of BT are disappointing. Skepticism toward politicians and telcos is pretty fair. And doubts that anyone non-local will be quite as accountable to maintain jobs, offer great service at reasonable prices and generally play nice are completely understandable. We get it.
All I will say about us is this. We compete with multi-billion dollar telcos and cable companies in each of our Internet markets and in our national mobile business. We can’t outspend them. We can’t outscale them. In fact, they can pretty much copy anything we do on product or price. Our only competitive hope is to care more, to try harder, to be more honest and fair and to be more responsive. It’s all we got.
Please ask Charlottesville, Virginia, Holly Springs, North Carolina and Westminster, Maryland and ask any of our cellphone customers. You will find them all here.
Regarding your comments:
The choice to keep the bidding process secret was not ours. (As you’ll see, we prefer to engage early and often.) Here is the Mayor talking about why the City made that choice: http://www.burlingtonfreepress.com/story/news/2017/07/31/city-council-hears-burlington-telecom-bids-secret/520827001/
Those slides in the deck were a response to an explicit question from the City. How will you commit to keeping BT local? It’s not a slogan, we were repeating the question! ☺ The City is pushing every bidder to do just that in all the ways that really matter (jobs, accountability, community participation and contribution). We are thrilled to do it. Again, it’s what we are doing in the other towns and nobody asked us to.
You ask if we’ll jack up prices. Look at our business in other cities. Look at our mobile business. Look at how we have passed along rate cuts when we have reduced our own costs. Look at what I wrote about the pricing bullshit that goes on every day in our industry: https://ting.com/blog/ting-pricing-promise/
Again, I am not claiming that we don’t ultimately want to grow our business. I am not claiming that we are headquartered in Burlington. But if we don’t do right by the people of Burlington and any other town we service, they will go elsewhere and we won’t grow anything.
Follow up Question
Thanks for the reply and it was part rant part question. I have a lot of concerns a publicly traded company that is heavily invested in by some of the largest hedge funds taking control of our public utility. And, I don't see how you make a return on $30M without raising prices or cutting services or siphoning off money that would otherwise stay here if you were truly local. I say that not in hostility, but just as an observation of what's happened in Vermont with small telcos that come in with big promises to stay local and just get swallowed up in five to 10 years. You wouldn't be the first if/when it happens to you. The top criteria from residents in any sale was that BT remain under local control. Not just who's employed by it, but who's earning the profits. I wish you luck but I'll be sticking with the coop model, which has proven to be an extremely successful business model in Burlington - from housing to supermarkets to some of our biggest employers. Cheers.
Answer from Michael Goldstein
Shay, this is a great conversation. Thanks. I will tell you that our current bid for this size customer base at these current prices and levels of service is actually a perfectly good investment. As long as we treat customers well and they stick around for a while, there is nothing wrong with this breakeven analysis that would cause me to think that we need to charge more or spend less. Anyone who thinks differently is either doing different math or is less patient than we are.
What makes you guys the best candidate for buying BT? Or more specifically, what is unique that only you can bring in this offering?
Answer from Monica Webb
We’ve spent time in Burlington and engaged with the City at length. We’ve done a video about why we think Burlington and Ting would be great partners. In large part, it comes down to a fit of values between Burlington and Ting. We both feel passionately about strong local presence, outstanding customer service, the fastest, most reliable and most affordable Internet we can offer, and the myriad of issues that impact Internet users, including digital divide, net neutrality and consumer privacy.
But we admit that talk is cheap. Companies will say a lot of things to put themselves in the best light. So never mind what I’ve just said. Look at our track record. Look at the comments on https://reddit.com/r/ting. Look at our ratings on Consumer Reports, where Ting mobile has been rated #1 or #2 of all mobile companies the last three years running. Check out our Net Promoter Score (NPS), which is the percentage of our customers that would recommend us. Our NPS for Ting mobile is 70+, which is the top score in the world, and our NPS for Internet is >90, though it’s early days for measuring that. And look at our website (www.tucows.com/aboutus) and see what we have always stood for. We lobby, we agitate, we support and we actively engage on issues of concern to Internet users, beyond our customers.
We really think we would make a great steward for the amazing network and legacy of BT. But I would encourage everyone here to do their research. Kick the tires. And the only thing we can ask is that you evaluate all of your options in an informed way.
September 20, 2017: Ting is One of Three Finalists to Become Steward of Burlington Telecon Fiber Network
The Ting Blog reported on September 20, 2017 that Tucows is one of three finalists bidding to become the steward of the Burlington, Vermont fiber network. Burlington Telecon currently has about 5,800 fiber customers and is currently available to 16,000 residences.
Ting welcomed the opportunity to bid on the contract. "We think that our community involvement, our customer-first approach and our commitment to the open Internet and net neutrality make Ting the right choice to work with BT to maintain the fiber network and continue to grow its footprint," writes Andrew Moore-Crispin in the blog post. "Ting is admittedly not a small local service provider. We could also never possibly be mistaken for a national conglomerate. We have the benefit of some scale in our business, with lots of lessons learned and efficiencies gained across our handful of markets. We also consider each market its own opportunity, with its own culture, needs, challenges and preferences. We are not looking to make Burlington work for our business. We want to make our business work for Burlington."
"If our bid is successful and we take responsibility for the BT network, you’ll find us an active community partner here in Burlington. Local events, cornerstone buildings, libraries, shared spaces, festivals and the like are what make a geography a community. We support these things and more in the Ting towns we serve. Whether it’s working with a local art space and providing gigabit fiber Internet at no charge or sponsoring a keystone community event, we don’t just think about marketing impact when we decide where to put our advertising and sponsorship dollars. We come out for things like farmer’s markets, community movie nights, festivals and things that defy simple categorization. We support and even create Makerspaces in the towns and cities we serve. We’re looking forward to talking to Generator Makerspace now that our bid is public information to see if we might work together, like we do with other Makerspaces in Ting communities."
"More than being a part of the communities we serve, we believe strongly in the open Internet and in net neutrality. We protect the open Internet in both word and deed. Tucows, Ting’s parent company, is run with the belief that the Internet is the greatest agent for positive change the world has ever known. We believe that better Internet infrastructure is what will help to keep North America at the fore. We believe that this national issue can only really be solved at the local level."
According to an article in the Burlington Free Press on March 14, 2017, three of the most important criteria the Burlington Telecom Advisory Board is looking for in a service provider are: affordable service, a local presence, and a long-term strategic vision for the future. Other criteria set out by the board include a commitment to net neutrality, the principle that internet service providers should not favor or block particular websites, a commitment to BTV Ignite, and a management team that will support expansion to underserved communities in Burlington.
"I think it's the right process," said City Councilor Dave Hartnett, D-North District, who sits on the advisory board. The process will allow the board to reach out to potential buyers who will match the values held by Burlingtonians, rather than hold an auction process. "We're not necessarily looking for the highest bidder," said Hartnett.
Burlington Telecom is for sale following a scandal involving the administration of former Mayor Bob Kiss, which secretly diverted $17 million from the city's general fund to the city-owned provider of internet, television and phone service. Mayor Miro Weinberger settled a $33 million lawsuit brought by Burlington Telecom’s main creditor, Citibank, in 2014, which requires the utility be sold after four years. “The city was in a very deep hole. In 2012, when it was being sued by Citibank for $33.5, plus penalties and interest in addition the $17 million of tax payer funds we didn't have access to, and we had our credit rating downgraded to junk bond status,” said Mayor Miro Weinberger. “Because we have fixed BT, we have restored the city's financial credit rating. That is something that saves us millions of dollars a year."
Under the settlement, the city was allowed to pick the buyer as long as an undisclosed financial threshold is met. Settlement money came from Blue Water Holdings LLC, an entity backed by the Merchants Bank and created by Burlington businessman Trey Pecor. Blue Water bought the company and leased it back to the City of Burlington, which continued to operate it as a municipal utility. The sale must be finalized by January 2019, or Blue Water can pick the buyer.
VT Digger previously reported on February 1, 2017 that under a plan developed by the Burlington Telecom Advisory Board, potential buyers must meet certain criteria and qualified buyers would make presentations to the Burlington City Council, which would then approve one buyer. The board planned to launch the sale process in March and select a buyer by July. “An alternative process would be like a ‘for sale’ sign,” Advisory Board Chair David Provost said. “We’re not looking for a buyer with the most money, or a big national and international footprint. There’s (public) fear of selling to a huge conglomerate, but I don’t think the criteria will allow that to happen.” The sale criteria was developed by the board with public comment, and approved by the City Council in April 2016. The purchaser must be financially sound and have experience running a broadband company and the buyer must go through a certificate of public good process to operate as a cable provider.
The Burlington Free Press reported on September 20, 2017 that City Attorney Eileen Blackwood had announced three finalists to buy Burlington Telecom: Ting or Tucows Inc., Schurz Communications Inc. — and Keep BT Local. Eight entities submitted bids to buy the telecom. The City Council chose four as finalists but one of the finalists has dropped out.. One finalist, Keep BT Local, has been public about their desire to buy the utility throughout the process. The cooperative, which is made up of local residents and business owners, has been passing out leaflets throughout the city and gathering signatures on a petition. At a late August council meeting, David Provost, the chairman of the Burlington Telecom Advisory Board, said the board had "serious concerns" about the co-op's financing model and lack of operating experience.
Final letters of intent from the three finalists were made public on September 20. Now a public comment period will begin between until an October 2 special City Council meeting that the mayor plans to call. At that special meeting, the council is expected to take a vote further winnowing the field to two final bids. Then at a regularly scheduled October 16 meeting, the council is expected to select a buyer for the fiber network. Any sale of Burlington Telecom must be approved by the Public Utility Commission — formerly the Public Service Board — but city officials say that the commission doesn’t need to sign off on the deal before January for the city to retain a larger share of the sale proceeds. The city has previously said that none of the offers would result in major staff changes at Burlington Telecom; that the city would have the option to retain a “significant ownership interest”; and that the entity would continue to offer residents an alternative to other cable or broadband providers.
Two offers are from established telecommunications companies. Both are cash offers and would not require Burlington Telecom to take on any new debt. The final offer comes from Keep BT Local, a group proposing a cooperative member ownership model, which publicly identified itself early in the process. The two cash offers from telecommunications companies are within a few million dollars of each other, and are more than double the offer from Keep BT Local.
According to the Seven Days both Ting/Tucows and Schurz are offering cash. Ting is offering $27.5 million, while Schurz is offering $30.8 million. Keep BT Local is offering $10.5 million in cash with the city retaining a $1.5 million ownership. "Keep BT Local's" offer also includes $10 million in debt financing it will pay back at 14 percent interest over 10 years. "14% is a very heavy burden to carry. If no standard lender will lend the funds, at any interest rate, that should tell you something. No business history and no collateral should also be a red flag," wrote Charles Haffter in a comment to the article. "Given where the current prime rate is, if this is correct, lenders must have no faith in the coops ability to run a successful telecom company."
All three bids include commitment to building out Burlington's fiber network, commitment to net neutrality, commitment to investment in community initiatives like BTV Ignite, commitment to customer service and restrictions on future sales. The anti-monopoly future sales clause would mean that a company can't sell Burlington Telecom to another telecom that owns a big section of the market in the area, but does not restrict other types of sales. The city will be looking at a company's history of buying utilities to ensure Burlington Telecom doesn't get sold to a bigger company in the near future. According to the article in the Burlington Free Press, Ting/Tucows is a public company based in Toronto that has been operating for 2 years (Tucows has actually been in business since 1993). Schurz Communications is an Indiana-based company that has been in business for 144 years.
An independent financial analysis of the bidders is currently underway and Council President Jane Knodell said on September 13, 2017 that she expects the document to be released to the public on September 25, 2017. "We can have meaningful public input," she said. The input will take the form of public comment sessions, written comments, and councilor engagement with constituents at neighborhood meetings.
- Tucows 8-K Filing with the SEC disclosing their bid for Burlington Telecom September 20, 2017
- Report of Development of Criteria for Sale of Burlington Telecom March 9, 2016
- Tucows Letter of Intent to Bid on Burlington Telecom September 18, 2017
- Ting's Presentation to the City of Burlington September 18, 2017
- Summary of Proposals from the Three Finalists September 20, 2017
- Comparison of Finalist's Offers September 20, 2017
September 19, 2017: ADTRAN Teams with Ting Internet to Provide In-Home Healthcare Monitoring in Westminster
ADTRAN issued a press release on September 19, 2017 reporting that ADTRAN has partnered with Ting Internet on two Mid-Atlantic Gigabit Innovation Collaboratory (MAGIC) Smart Homes in Westminster where Ting is providing gigabit broadband to two MAGIC Smart Homes for individuals living with disabilities in Carroll County, Maryland. According to ADTRAN, MAGIC Smart Homes will have sensors installed that can collect health measurements, as well as behavioral data that will help health specialists draw conclusions about how to improve quality of life and ensure safety inside the home. The intelligent MAGIC Smart Homes move “smart homes” well beyond a concept to a reality that will help improve lives and enable individuals to “age in place.” “Applying smart home technology to healthcare monitoring will help us improve the quality of life, ensure safety in the home, and provide much needed medical data to our community’s health providers,” said Dr. Robert Wack of MAGIC. “Ting Internet’s and ADTRAN’s roles in helping to develop a scalable fiber network to Westminster ensure the routing of this health data is highly secure, reliable and instantaneous.”
“As we continue to expand our service area, having the opportunity to witness first-hand how gigabit speeds can impact an individual’s quality of life in every aspect has been eye-opening,” said Adam Eisner, VP of networks at Ting Internet. “The applications that are benefiting from gigabit speeds continue to push the limits and do what traditionally was thought to be unachievable. The lives that the MAGIC Smart Home project is improving are proof of how broadband transforms communities.”
September 19, 2017: T-Mobile and Sprint are in Active Talks about a Merger
CNBC reported on September 19, 2017 that T-Mobile and Sprint, the two companies that Ting has individually partnered with as an MVNO, are in active talks about a merger. Both companies and their parents, Deutsche Telekom and Softbank, have been in frequent conversations about a stock-for-stock merger in which T-Mobile parent Deutsche Telekom would emerge as the majority owner. People close to the situation stress that negotiators are still weeks away from finalizing a deal and believe the chances of reaching an agreement are not assured. The two sides have not yet set an exchange ratio for a deal, but are currently engaged in talks to hammer out a term sheet.
According to Bloomberg, Deutsche Telekom would put T-Mobile executives, led by Chief Executive Officer John Legere, in charge of the combined company, according to the person, who asked not to be identified because the talks are private. That’s important for the German carrier, which owns about 64 percent of T-Mobile and has come to rely on it as a key driver of sales and earnings growth, according to a second person familiar with the talks. It favors a deal with Sprint because potential savings could come relatively quickly, the person said. The idea of a combination between the No. 3 and No. 4 carriers was shot down by regulators in 2014, but with a new administration preliminary discussions picked up earlier this year. Washington regulators appointed by President Donald Trump haven’t signaled an insistence on maintaining a four-player nationwide wireless market that was a feature of the preceding administration.
September 6, 2017: How does Ting Internet Decide Where to Build Next?
Monica Webb explained on September 6, 2017 on the Ting YouTube channel that there are many factors at play when choosing the next lucky city to get Ting crazy fast fiber Internet. Does the city want us there? Do the residents want and need gigabit Internet? What kind of Internet options are already available? Other varyingly sexy factors like geography, population density, utility pole ordinance and the construction permitting process that the city has in place all factor in too.
Christian asks what factors going to deciding where to expand from internet service one day. I'd love to see you guys in Indiana.
There are a few factors that go into deciding where Ting goes in terms of the next internet market. First off we want to know that a city wants us there we want to know that city officials want to work with us and they're interested in that level of service because a high level of cooperation is required between Ting and city officials in order to deploy the network.
We need to know that the city wants us we need to know that the residents want us and we need to know how it's going to be in terms of efficiency of deploying.
Is your city's permitting regimes streamlined is it easy to get access to utility poles if we have to string cable on poles. These are all really important considerations. Does your market want a gigabit of service?
So all of those things we look at before we go to a community but ultimately it's the community and the residents of the community that need to take the first step in expressing their interest to Ting and you can do that on our website. You can encourage your city officials to do it on our website.
September 6, 2017: Google Fiber Shuts Down Kansas City Customer's Service Over 12 cent Bill
From the how-not-to-run-your-fiber-customer-service-and-billing department comes a report from Ars Technica on September 6, 2017 that Google Fiber cut off a Kansas City customer's internet access because she owed 12 cents after an odd series of events involving an unused e-mail address, automated customer account systems, and a sales tax increase. Google Fiber quickly restored her connection and forgave the 12-cent balance after she called customer service, but the incident highlights a problem that Google Fiber may need to fix in order to prevent other customers from losing service over similarly trivial amounts.
When her service was first cut off, Victoria Tane said she thought there must have been a problem on her end. But after two days of unsuccessfully trying to figure out what was wrong, she called Google Fiber customer service. "When she called, customer service informed Tane that her service had been suspended," the Star reported. "A 12-cent balance was overdue. There had been e-mails and, the company said later, two voice messages trying to collect." When Tane offered to pay the 12 cents, she was told that Google Fiber wouldn't take checks for less than $10.
Customer service consultant Micah Solomon criticized Google Fiber for not setting up its systems to prevent disconnection over tiny amounts. "Solomon said the company’s systems should have been set up to detect that the rift was over such a small amount of money and drop the case instead of the customer’s service," the article said. "Google Fiber’s systems may have operated efficiently, he said, but in this case they 'backfired.'"
September 5, 2017: Bret Fausett Joins Tucows as Chief Legal Officer and VP, Regulatory Affairs
Domain Name Wire reported on September 5, 2017 that Bret Fausett has joined Tucows as Chief Legal Officer and VP, Regulatory Affairs. Fausett previously worked as General Counsel role at Uniregistry.
September 1, 2017: Namecheap Files Suit For Bulk Transfer of 4 Million Domain Names
Domain Name Wire reported on September 1, 2017 that Namecheap, an Enom reseller before the sale of Enom to Tucows on January 20, 2017, has filed a lawsuit against Enom and Tucows alleging that Tucows is dragging its feet in the transfer from Enom’s accreditations to Namecheaps's own accreditation of 4 million domain names that were registered at Namecheap while it was an Enom reseller.
At issue is whether the transfer qualifies for a “Bulk Transfer After Partial Portfolio Acquisition”, or BTAPPA. This type of transfer was set up to transfer a bunch of domains between registrars in bulk. Namecheap says that Verisign has already approved the transfer of these domains through BTAPPA but Tucows, according to the suit, says it doesn’t qualify as a BTAPPA.
According to Namecheap's lawsuit, "Tucows has refused to complete the bulk transfer of the VeriSign Domains to Namecheap using the BTAPPA service based on the unmeritorious argument that doing so would violate ICANN/VeriSign rules, regulations and processes," says Namecheap in its lawsuit. "Tucows acquired eNom from Rightside on or about January 20, 2017. Tucows knew of eNom’s obligation to imminently transfer more than 4,000,000 domains to Namecheap and negotiated a reduced purchase price to account for their imminent transfer. Days after the acquisition, Tucows’ CEO confirmed that Tucows stepped into eNom’s shoes as its successor-ininterest and would honor its obligation under the Master Agreement to complete the transfer of the Namecheap-managed domains (specifically including by bulk transfer)."
According to Namecheap's lawsuit, "immediately following the eNom acquisition, during a meeting with Namecheap’s CEO, Richard Kirkendall, at the January 2017 NamesCon convention in Las Vegas, Tucows’ CEO, Elliot Noss, confirmed Tucows’ prior awareness of Namecheap’s transfer rights under the Master Agreement, and told Mr. Kirkendall that Tucows had specifically accounted for the imminent loss of the Namecheap-managed domains (specifically including the Enumerated Domains) in negotiating the price for acquiring eNom."
According to Namecheap's lawsuit, on "August 2, 2017, Tucows, via its attorneys, refused to comply with its obligation under the Master Agreement to sign the BTAPPA transfer request for the VeriSign Domains. Tucows based its refusal to comply on two purported grounds: first, that the transfer “would wreak such havoc and confusion” that there is no way that such transfer could “comply with all applicable ICANN and registry, rules, regulations and processes,” as required under the Master Agreement; and second, that Tucows is unaware of any agreement by which Namecheap purchased any or all of the portfolio of domain names managed by eNom (sic) or any other entity” that would satisfy the Qualifying Event requirements for an “acquisition” under the BTAPPA Guidelines."
According to Namecheap's lawsuit, "Tucows appears to believe a BTAPPA transfer of the Verisign Domains would “wreak such havoc and confusion” because the Verisign Domains are “thin” registries. As explained by ICANN, “A thin registry only includes technical data sufficient to identify the sponsoring registrar, status of the registration, and creation and expiration dates for each registration in its WHOIS data store. .COM and .NET are examples of thin registries. Thick registries maintain the registrant’s contact information and designated administrative and technical contact information, in addition to the sponsoring registrar and registration status information supplied by a thin registry. .INFO and .BIZ are examples of thick registries.” Tucows argues that a BTAPPA transfer of thin registries like the VeriSign Domains present a data integrity issue because the registrant data for the Verisign Domains resides with eNom (as the registrar) rather than VeriSign (as the registry). Bulk transferring thin registries, Tucows contends, poses a greater risk that data may be lost during the migration between registries."
History of the Enom Acquisition by Tucows
Read more about the history of the sale of Enom to Tucows at:
- August 8, 2017: In Domain Services, the Integration of Enom is Going Well
- May 9, 2017: Tucows CEO Elliot Noss Explains the Impact of the Enom Acquisition and Deferred Revenue on Q1 Earnings
- May 9 2017: Enom Integration Has Gone Very Well This Quarter
- May 2, 2017: Why Rightside Sold Enom to Tucows
- February 20, 2017: Rightside Activist Investor Says Enom Was Sold to Tucows Too Cheap
- February 9, 2017: Tucows CEO Says Acquiring Enom is Overwhelmingly about Generating Scale and Realizing Cost Efficiencies
- January 25, 2017: Elliot Noss Says Combining Tucows with Enom Will Be Done Piece by Piece with Backwards Compatibility in Mind
- January 20, 2017: Tucows Acquires Enom with its Network of over 28,000 Domain Name Resellers and 14.5 million Domain Names under Management
August 20, 2017: Fatbeam Provides Fiber to Two Businesses in Sandpoint
The Bonner County Daily Bee reported on September 20, 2017 that Fatbeam recently expanded Sandpoint's fiber network to serve two businesses, Timberline Helicopters and Tamarack Aerospace. Greg Green, president of the fiber installation company Fatbeam, said it is the perfect example of a private/public partnership after helping get the two companies lit up. “We turned both of these aerospace companies up at the request of the city,” Green said, adding that City Administrator Jennifer Stapleton deserves much of the credit. “It’s the first time we’ve ever tried to do a public/private partnership, and it’s worked.”
Stapleton said there are three players coming in on the city fiber. Fatbeam, whose service is predominantly focused on the schools and service to commercial clients. Intermax Networks is a North Idaho company that provides commercial and some residential service, and Ting, which will be coming in this fall, and primarily focuses on residential and small business. Intermax has provided fiber services to commercial businesses in Sandpoint for several years already, said the company’s president, Mike Kennedy in an interview with the Daily Bee. In May, it became the first company to enter into all of the required agreements with Sandpoint to provide service on the city’s fiber network. The city’s expansion, Kennedy said, has allowed Intermax to get into some places it otherwise would not have been able to. “So we kind of have a mixture of all three going on,” Stapleton said.
Ting had Sandpoint on its radar for some time before the city went live on fiber, and is currently working on getting a central office set up near City Hall. The space has been secured, and the company’s director of networks, Adam Eisner, said they plan to get the office built in September. Shortly thereafter, he said, Ting will start construction on the network. “We have been working with the city to develop and submit construction plans, so we are in that process right now,” Eisner said. “As that gets firmed up, we are hoping to begin construction. So we don’t have a precise date yet when we will start. I would be disappointed if we didn’t have shovels in the ground this year.” Ting plans to start with coverage in Sandpoint proper, with hopes of expanding to surrounding areas in the future, such as Dover, Kootenai, and Ponderay. Eisner said Ting just had its first Sandpoint employee start, and the company is in the process of securing facilities in the area. Along with the central office, Ting will need a warehouse for storing equipment. “In the next few weeks, in the next couple of months, you will really see us start to ramp up both our presence and our work there, which we are pretty excited about,” Eisner said. “We are almost there. We know people have been waiting awhile, but the rubber is starting to hit the road now.”
August 15, 2017: Tucows Clarifies the Daily Stormer Issue
Tucows made the following press release on their corporate blog on August 15, 2017:
Clarifying the Daily Stormer issue
Tucows (which owns the Enom, OpenSRS, and Hover brands) finds racism and its proponents detestable. We are proud to be a diverse company based in the most diverse city in the world. As well, Charlottesville, Virginia is home to a Tucows office and many of our employees there. We have all been shaken and deeply saddened by recent events.
In regards to the current issue around the Daily Stormer website, Tucows was never the webhost nor the registrar for the domain. Tucows provides a domain privacy service for millions of domains belonging to our wholesale domain resellers and to other registrars. The domain in question was transferred to one of our registrar partners and the privacy service was automatically applied.
Like Google, and GoDaddy before them, we felt this domain clearly violated our privacy service terms of service by inciting violence, and removed the privacy protection from the domain.
We are also monitoring our systems for incoming transfer requests for the Daily Stormer domain so that we can give our resellers the opportunity to deny those requests.
Domain names are gateways to speech and we take our responsibilities towards free speech and expression extremely seriously. Incitement to violence is not protected speech and the Daily Stormer regularly conducts such incitement, which is why we no longer provide it with any service.
The process of balancing free speech and the ugly opinions that people share is neither easy nor pleasant. Every day we receive many, many complaints about the content on any number of the 24 million domains on our platform. Let us be exceptionally clear: we find the content of many of these pages patently abhorrent and evidence of the worst that humanity can stoop to. Nevertheless, there are legal mechanisms and processes in place for dealing with issues of free speech and we consider it our responsibility to follow them.
We have and will act in what we call “exigent circumstances” where there is an imminent threat of violence or crime. GoDaddy responded to the Daily Stormer appropriately under these circumstances. However, these circumstances aside, we have found that the clearest path forward, to protect freedom of speech and expression, is to act where we have evidence that due-process has been observed. When such is provided to us, we act on it.
August 15, 2017: A Ting Video: Has Ting Thought About Quitting?
Luke Fredenburg asks if Ting ever felt like quitting the fiber game, Adam Eisner, VP of Internet, fires back with defiant ’no.’
That’s not to say we started off as seasoned experts. “When you’re a start-up company getting into the telecom and construction business, you do face a lot of adversity,” Eisner says. “In terms of companies who have been around a long time, doing things a certain way, that tell you this is the way things have to be done.”
We were new on the block but we had fresh eyes. We saw lots of ways to improve on established norms and came up with new processes.
Question: In the beginning the Ting team was a small start-up with a burning idea that was gold. Did you guys never feel like quitting and so what did you do to motivate yourself to keep fighting for your idea when it seems like you're free.
Answer: That's a great question so I would say there was no point where we ever said we should pull the plug or we are going to quit but I would say there's been a lot of points at which and even today we sort of look around and go this can be done better right. So what I mean by that is when you're an upstart company getting into the telecom and construction business you do face a lot of yeah it's kind of adversity in terms of companies that have been around a long time doing things a certain way.
They tell you this is the way things have to be done and then once you start doing it yourself you realize there's a lot of different ways you can sort of improve upon the techniques that have been used to do things like deploy networks, deploy fiber and so we really do find ourselves in a lot of ways and we've made some videos on it before things like blowing fiber or the way networks are deployed where we look around and say this isn't the way this necessarily been done for the past two decades but boy it seems like we're really on to something here by doing it our way and it's really worked out well so far.
August 8, 2017: Tucows Reports Record Earnings for Second Quarter of 2017
Original financial documents are available at:
- Tucows' (TCX) Q2 2017 Results August 8, 2017
- 2017 Q2 Consolidated Balance Sheets August 8, 2017
- Tucows' (TCX) CEO Elliot Noss on Q2 2017 Results - Earnings Call Transcript August 8, 2017
Net Revenue: Quarterly Net Revenue Increased 78% YOY
Tucows announced on August 8, 2017 that net revenue for Q2 2017 increased 78% YOY to $84.2 million from $47.2 million for 2016. “The second quarter of 2017 saw continued strong performance across all areas of the business our first full quarter following the Enom acquisition in January, which combined to drive year-over-year growth in revenue of 78% to a record $84 million, record earnings per share of $0.50 and cash flow from operations of more than $8.1 million,” said Elliot Noss, President and Chief Executive Officer, Tucows Inc.
“We continue to execute well on each of our strategic initiatives. Our domains team made great progress on the integration of Enom toward significant future synergies and, in fact, exceeded our expectations year to date on organic growth. Our Ting Mobile business continued to add customers on the core base and saw the lowest monthly churn from our core base in two years. Ting Internet continued its steady climb in Charlottesville, ramped significantly in both Westminster, Maryland and Holly Springs, North Carolina and, most importantly, took meaningful operational steps toward scalability far beyond our existing Ting Towns.”
Net Income: Quarterly Net Income Increased 29% YOY
Tucows announced on August 8, 2017 that net income for Q2 2017 increased 29% YOY to $5.0 million from $4.0 million for 2016.
EBITDA: Quarterly Adjusted EBITDA Increased 50% YOY
Tucows announced on August 8, 2017 that Adjusted EBITDA for Q2 2017 increased 50% YOY to $10.3 million from $6.9 million for 2016.
EBITDA: We Remain on Track for $42 Million in EBITDA
Elliot Noss told analysts on August 8, 2017 that "we remain on track toward our guidance of $42 million, or $50 million less the $8 million impact from the deferred revenue accounting for the Enom transition -- transaction. I say this as much as formal reiteration of guidance as a reminder of the adjusted $42 million number. As is often the case here, the near term looks bright and the long term looks even brighter."
Enom: Q2 Marks the First Quarter of Contribution from Enom Acquisition
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that the second quarter marked Tucows' first full quarter of contribution from the Enom acquisition that was completed on January 20, 2017. All of the numbers presented for this quarter reflect the consolidated business.
Operating Expenses: Total Operating Expenses for Q2 increased 50% YOY
Davinder Singh told analysts at the Q2 Conference Call on August 8, 2017 that total operating expenses for the second quarter of this year increased 50% to $14.3 million up from $9.5 million for the same period last year. The majority of the increase is due to the additional Enom operational expenses.
Capex: Capex for Ting Internet Came in at $3 million for the Quarter
In answer to a question from Hubert Mak, Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "in terms of CapEx, the big things that really have sort of taken that number way down, especially, I mean, thinking now at this point of having even thought $30 million, $35 million back in that kind of October, November time frame, it's really us learning the cadence that cities work at. So in that number, we had Holly Springs starting, I want to say, 4, 5 months ahead of when it actually started. That of course pushed back some of the customer adoption as well, because you can't sell what you don't have.
We also had both Centennial and Sandpoint being further along, kind of now we would've seen both of those as being kind of in construction in the second half of the year. And it looks like we're doing good work in both places, but I don't know if we're going to get a shovel in the ground this year in either place. So what I'll tell you -- I mean, the best thing I can tell you, Hubert, is we're learning and we're trying to be more accurate. We will be more accurate every year that goes along, and we're trying to be -- kind of to give people pretty good visibility as we're going through. I'd like to be spending more money.
Noss previously told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Capex will "be less than $30 million, $35 million, and the primary reason is because governments, municipal governments are just a little slower than we might expect. We have to build up our expertise at estimating their timelines. And I think we kind of had a little bit of happy years maybe in a couple cases and that'll slow down the spending. But I'm going to give you some more detail on that next quarter."
Marketing Expense: Marketing Expense Increased $300,000 YOY
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "marketing expenses increased by $300,000 year-over-year, primarily for the acquisition and ongoing support of Ting Mobile and Ting Internet customers; credit card processing fees, primarily to support the growth of Ting Mobile and Ting Internet; facility costs and stock-based compensation increased by $0.4 million."
August 8, 2017: Ting Mobile Moves Steadily Ahead
Net Adds: Ting Mobile Added 4,500 Accounts in Q2
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "Ting Mobile is currently at 170,000 accounts and 278,000 devices, up significantly from the 151,000 accounts and 245,000 devices we had just 2 quarters ago. Of the 19,000 additional customers, about half were RingPlus and half were organic growth. We originally talked about 5,500 organic adds last quarter. After digging into the data a little deeper, it appeared the more accurate number would be 5,000 in Q1 and 4,500 and Q2, both significant increases from the 3,000 adds in each of the 2 prior quarters. And the early part of Q3 looks like it is continuing to see improved gross adds, although we note that this competitive environment continues to get more difficult." 
Churn: Churn is Down to 2.19%
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "Ting Mobile had another outstanding quarter of retention, with monthly churn, not including RingPlus customers, at just 2.19%, down from 2.27% in Q1 and 2.38% in Q2 of 2016. It was the lowest churn we've seen in our customer base in 2 years. As I said last quarter, I am especially comforted to see such healthy churn just as mobile carriers are aggressively ramping up their promotions and cable operators are rolling out their mobile offerings. Remember that Ting is probably the easiest postpaid service in the industry to leave. These churn numbers seem to validate our strong belief that people would come to Ting for the savings and stay for the customer experience. I will remind you that churn historically goes up in Q3 and again in Q4, but with monthly churn numbers of 2.27% in Q1 and 2.19% in Q2, we're starting in a great place."
Churn: Ting Mobile is Working on Tactics to Reduce Churn Months or Years into the Future
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "we're also doing some really encouraging work with our customer data, identifying tactics today that could reduce our churn months or years into the future. For example, looking back over the past year, we measured a significant improvement in survival rate or, said differently, a significant reduction in churn among customers who have [indiscernible] their devices with us. This has us particularly excited about the ramp in iPhone sales in our shop since the Apple deal we mentioned last quarter. Most of those sales are going to existing customers. It also has us promoting new devices more aggressively to customers that are holding older models or gone long periods without an upgrade. With 278,000 active devices, customer retention starts to rival customer acquisition and its potential impact on the business. Combined with our increased emphasis on data gathering and analysis, we hope to discern a whole new set of rich strategic opportunities."
Ringplus: Ting Mobile Still Has 9,100 Customers from Ringplus
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "we initially migrated over 45,000 accounts. 22,000 of those initially accepted our terms of service, gave us a valid credit card and set up an account. 4,500 had departed even before the end of Q1, leaving us with 18,500. We fully expected many more to leave us in the months to follow, as happens with any involuntary migration. In Q2, about 9,400 more RingPlus customers left, with about 9,100 remaining. Diving deeper, that trend was 4,100 cancels in April, 3,100 in May and 2,200 in June, and we've seen even fewer RingPlus cancels again in July. It is tough to say when we get to a cohort that behaves like typical Ting customers in lifetime value, but we're quite happy with what we got for the effort expended."
Competition: The Landscape in Mobile is Increasingly Competitive
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "it now seems clear that there will be more casualties in the mold of RingPlus. Customers of these services can be a challenge, as they've often grown accustomed to unsustainable pricing models. But those pricing models, by definition, will get tougher to find. What is appealing about these customers is that they have picked up their heads and looked beyond the major carriers. This is the first crucial step to discovering Ting. As I've said before, we are well positioned as the credible, sustainable alternative to major carrier plans and major carrier experiences. Whether it is through so deals with the outgoing MVNOs themselves or campaigns directed to their customers, I'm hopeful more of these losses could be our gains."
Price: Ting Mobile is Not Ready to Pull the Price Lever Competitively
In answer to a question from Hubert Mak, Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that Ting Mobile is not ready to pull the price lever competitively. "pull a price lever competitively. I think that one of the things we've talked about in the past is where we could probably have the most impact on prices is in data, but that's where our costs are the worst. And so there's probably not a lot we can do there. And so what you'll see us doing is doing things sort of more tactically all the way across. So that's at that marketing level, at that churn level. Putting iPhones in the mix gives us a little bit more in terms of levers around equipment and things we can do there. We've added financing recently and have a pretty significant portion of our customers picking that up. And so it's really -- it's like the marketing. I'll expand that thought. It's a bunch of little things.
So we don't think there's a silver bullet. We do feel good about kind of doing that 95%, 100% over of a couple of quarters. IF you look at the first half of 2017 relative to the second half of 2016, it's over a 50% pop in gross adds. We feel good about that. That's outside of RingPlus. So as we start to maybe see more of those types of opportunities, we can look at those as sort of accretive on top of the growth picking up a bit. And then, of course, part of that is the churn, where, again, we think we're just getting smarter at the data level and we're digging in more. And so it's just work. I really, really don't think there's a silver bullet in any of this."
Advertising: Ting Mobile Has Been Tinkering with the TV Ads
In answer to a question fromRalph Garcea, Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "we've had some successes with a couple different tactics I -- that I don't want to go into specifically but that were new to the marketing mix. And I think where we're really getting more and more comfortable with is that it is a lot of little things, and then it's each thing a little bit better over time. So we're really doing what we like to do, which is put our heads down and grind. I wish I had a big dramatic "here's a couple thousand per quarter" addition that we could point to, but there isn't. I really think, in terms of customer acquisition tactics, the things that may be emerging, and we'll see if the traffic yields any outcomes, but some of this sort of smaller MVNO or less focused MVNOs who sort of talk with us about taking over customer bases because there is more, certainly, message traffic than there's been."
August 8, 2017: Ting Internet Continues its Progress
Charlottesville: Charlottesville is Really Only Limited by How Many Customers we can Install in a Week
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "Charlottesville is really only limited by how many customers we can install in a week." "While Charlottesville continued its steady growth in Q2, the combination of Westminster and Holly Springs, both at earlier stages, more than doubled in customers, recurring revenue and, most importantly, operational capacity."
Charlottesville: Tucows Has Spent a Lot of Time Re-auditing Charlottesville to Make Sure it Could Accept all the Growth that it Could
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "in Charlottesville, it's a little bit different because we bought an existing network. It didn't have the same sort of planned and staged rollout. In fact, one of the things that we spent a lot of work on in the last couple of months is kind of a re-auditing of the Charlottesville network to kind of refit it and make sure that it was set to accept all the growth that it could."
Westminister, Holly Springs: The Combination of Westminster and Holly Springs More than Doubled Our Customers and Operational Capacity
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "the combination of Westminster and Holly Springs, both at earlier stages, more than doubled in customers, recurring revenue and, most importantly, operational capacity." 
Westminister: Growth in Westminster Is Limited by How Quickly the Town can Expand the Network
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that growth in Westminster is only limited by how quickly the town can expand the network.
Holly Springs: Growth in Holly Springs is Limited by How Quickly We Ourselves can Expand the Network
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that growth in Holly Springs is limited by how quickly we ourselves can expand the network.
Centennial, Sandpoint: Centennial and Sandpoint Are in the Early Stages of Network Planning and Deployment
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "in both Centennial, Colorado, and Sandpoint, Idaho, we're finally in the early stages of network planning and deployment."
Centennial, Sandpoint: Ting May Not Get a Shovel in the Ground This Year in Centennial or Sandpoint
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "we also had both Centennial and Sandpoint being further along, kind of now we would've seen both of those as being kind of in construction in the second half of the year. And it looks like we're doing good work in both places, but I don't know if we're going to get a shovel in the ground this year in either place."
Scalability: Ting Internet is Building Capacity to Serve the Demand for its Services
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "since we launched this service, our efforts have been much less about building demand for our services and much more about building capacity to serve the demand. This capacity includes install teams and processes, network expansion, network equipment and operations, pull permits, trenching technologies, customer support teams, industry knowledge in the form of senior hires, and of course, a pipeline of potential new Ting talents. It also includes city and incumbent relations, digital divide projects and dealing with the additional complexities of business and enterprise customers. And the theme over and over again is finding efficiency and scalability through systems and processes.
Standardization and Scalability: Ting Internet is Forcing Itself to Operate with Three Active Towns Just Like We Would With Thirty
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "we are forcing ourselves to operate with 3 active towns like we would with 30." "Particularly when you are a challenger, and one that is eager to please as we are, it is tempting to so solve a problem for one customer or one town that is not necessarily repeatable for others. So we are forcing ourselves to operate with 3 active towns like we would with 30. Of course, all within the context of viewing these as hyper-local businesses. In terms of demand, people simply seem to want the product we're offering at the price we are offering it. We are doing a great job integrating ourselves into these communities and demonstrating that we are a different kind of provider."
Competition: External Forces are Moving in our Favor with Ting Internet
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "external forces [are] moving in our favor, Internet activities will continue to demand faster, more reliable access; wireless technologies will enhance the value of our fixed networks; and customers will continue to assert their power and look beyond incumbents to smarter, more innovative, more attentive service providers."
"Around 3 years ago, when we first shared our broad plans to pursue a fiber-to-the-home strategy, we talked about a simple hypothesis for the future of telecom. Fixed networks would always outperform mobile networks, therefore, people would use fixed networks when they could and mobile networks when they have to, and that the availability of fixed networks would naturally increase. Over the last 3 years, we have seen that trend develop and evolve."
"This quarter, we saw in particular a number of independent data points that really suggest we're starting to see the next phase of telecom. We saw acquisitions by both fixed and mobile incumbents in areas including fiber and fixed spectrum. We saw fixed incumbents commenting upon how competitive and difficult the mobile business was. We saw device announcements that include preparedness for the heterogeneous world that the transition to 5G now looks like. We can now see that the transition to 5G over the next couple of years will drive all of these trends significantly, and what comes out the other side will look very different than where we are now. We'll see the addition to the mix of additional spectrum in bands like 600 megahertz, 2 gigahertz and 3.5 gigahertz, each with robust equipment ecosystems that do not exist today but will 24 to 36 months from now, each with business approaches that are likely to be different from those we see today."
Adoption Rates: Ting Internet Still Expect 20% Adoption Among Serviceable Addresses in a Year and 50% in 5 Years
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "we continue to expect 20% adoption among serviceable addresses in a year and 50% in 5 years. These take rates, and with all the operational improvements I've mentioned, will be paying about $2,500 to $3,000 per customer, and those customers will be worth about $1,000 a year in margin."
Expansion: Ting Internet is in Active Conversation with Other Potential Towns
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that Ting Internet is "in active conversations with some viable prospects to be new Ting towns. I note that these discussions are always necessarily quiet until they are not."
In answer to a question from Patrick Retzer, Noss added the following: "So I will say, if you made me guess whether there would be new markets announced between now and year-end, my guess would be yes. There's lots of dialogue, there's lots of action. I did want to call out very specifically in the script that sometimes these things are just subject to confidentiality, and sometimes you have city processes where cities themselves have to be very deliberate in who they talk to, when they talk to them and how they talk to them. And so I think we've always got to be respectful of cities in their processes. And as you can imagine, these things, any discussion about core infrastructure, like fiber, will be politicized and necessarily, and I think just by its existence. I don't think it's a right or a left, or a red or a blue issue, but I do think that it is very impactful at a municipal level. And so you just we have to be a little careful, that's all. But yes, I would not be surprised with an announcement or 2 before the year ends, and I won't be disappointed if there's not."
Competition: Ting Internet is Very Confident in its Ability to be Flexible and Adaptive Against Larger Competitors
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "that I'm very confident in is our ability to be quite adaptive, quite flexible and I almost want to use the word adventurous. And I say that because, look, we're -- we've spent the bulk of our professional lives in deep Internet-centric markets. Telecom tends to be a little bigger, a little slower, a more -- a little more ponderous, a little more conservative. I think there's going be a lot of change at this next transition point, and I think that, that serves us well. It's kind of the more variables you throw into the mix or the more sort of pivot points, I think, the better served we are. Sometimes some of you have heard me say, talking about competing in the hypercompetitive, tiny-margin domain registration world and then moving into telecom, it was like moving from altitude to sea level with richer oxygen.
And I think that if and as, what, the speed of competition and the speed of the need for adaptation to market picks up, I think that serves us. I think it plays to our strengths and I think it plays away from some others. Now of course, we have a real weakness there, which is that we're small. The incumbents who are slow in pondering have a real advantage in that they're big. But that big will also tie them not only to practices but to -- practices in terms of business processes, but also to particular approaches to the market. We are -- because we're an MVNO, the bad news about being asset-light in this market, so we're not tied to anything. So we really get to deal with this change as it lands, and we're pretty excited about that."
August 8, 2017: In Domain Services, the Integration of Enom is Going Well
Enom: The Integration of OpenSRS and Enom continues to Go Well
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "looking at our Domains business, the integration of OpenSRS and Enom continues to go well as we pool people, knowledge, code and technology to ultimately deliver a greater experience to our resellers and synergies to our shareholders. We continue our efforts to deliver these benefits by 2019, with the caveat that the European Union General Data Protection Regulation, or GDPR, could impact our timing. I will describe this in more detail in a moment."
Enom: Feedback from Industry on the Integration is Positive
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "we are now just over 6 months into operating the Enom business and have had the opportunity participate in a number of industry events and hosting conferences with both brands. Feedback from resellers as well as suppliers and other industry members has been universally positive. Bringing these 2 businesses together was a logical evolution for both businesses from our perspective, and clearly, that has resonated with our target audience. We are acknowledged for our leadership role in the wholesale domain market and for having the expertise and resources to build something special and continue as a trusted supplier. Our resellers tell us that they look forward to seeing what we can do with the combined businesses. In fact, a number of resellers have domains on both platforms and they look forward to us simplifying their business operations."
Enom: The Bulk of the Acquisition Benefits Come from Retiring the Platform at the End of Integration
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "the bulk of the acquisition benefits come from retiring the platform and a lot of the data center kind of lockout density that is associated with the Enom platform. And those things don't come until right at the end of the integration work. So we're kind of where we are until we're not. But what's important is, because it's a big body of work, that the work is tracking well as it is."
Renewal Rates: Why There is a Big Difference in the Renewal Rates between Enom and OpenSRS
Elliot Noss told analysts at the Q2 Conference Call on August 8, 2017 that "the primary reason for the difference in rates -- well, there's 2, but the biggest component is the different nature of customers. So one of the things that I talked about, if you'll remember on the last couple of calls and in connection with the transaction, the Enom business has more traditional web-hosting companies in North America and Western Europe, whereas, on the OpenSRS side, we've done very well in those next-generation web-hosting companies and in parts of the developing world. And we really see a lot of the sort of difference in those customers' performance manifest in different renewal rates. And so that's not going to change, because what'll happen, really, over time is we'll just move everybody to a new platform."
"We're not going to call them one customers or the other. We might maintain the brand, but we're kind of looking at them on par. If you were to go back in time, 5 years, 8 years ago, you would have still seen a differential in renewal rates between the 2 businesses. Not quite as large, but at that point, it was because we had more of the larger customers who sort of valued the deeper customer relationship. And the Enom platform did a better job of getting the customers as they were sort of coming out of the gate and getting started. Their onboarding process was better, and a couple elements of their platform just made it that, that smaller, longer-tailed customer was there. And there also tended to be a couple few point difference in renewal rate that would be driven by that. So because it's about the type of customer, it's not just some sort of kind of widget in the machine that we can kind of get in and tinker with and change. So I think that we knew what we were getting when we signed up, and we're quite fine with that."
August 8, 2017: A Ting Video: Why is Fiber Internet Important Infrastructure for America
What if we told you these tubes are as important as the roads you drive on. Or the railway system. Or whatever Elon Musk is working on next. “But I don’t even commute,” you say. That may be true. But you definitely tele-commute. There’s no avoiding it.
Gone are the days when the internet was purely a medium for entertainment. As Monica Webb, Ting Internet's Government Relations, points out: we need it for work. For Education. For Health Care. The Internet touches almost everything, so it’s important that we have access to fast and reliable service for today and beyond.
August 1, 2017: Does Ting Plan to Expand its Internet Service to a Broader Audience?
Ting would like to be everywhere, right now, offering unlimited, symmetrical, crazy fast fiber Internet service to one and all. However, with every state, city and municipality comes its own set of challenges and rules. “It’s like building the state highway system,” says Monica Webb, Ting Internet’s Government Relations, “It takes time.” We’ve outlined the dirty process of digging fiber in the ground before, but there’s also a lot of talking that needs to happen on a local level with various officials and organizations to get the necessary approvals to put said fiber in the ground. The good news is that Monica and company are out there, on behalf of Ting, trying to bring fiber Internet service to your hood.
August 1, 2017: Tucows Announces Ting Events Around Centennial
The Ting Blog reported on August 1, 2017 that Ting will be marketing their high speed fiber at the following events in Centennial:
- Walnut Hill’s National Night Out Block Party, August 1
- South Suburban Parks and Recreation Races, August 13
- Homestead Farm’s Food Truck Wednesday, August 2 and 16, September 6 and 20
- Foxridge’s Fair, August 23
- Centennial’s Chalk Art Festival, September 24
July 27, 2017: Elliot Noss Talks About Intelligent Investing in a Changing World
Elliot Noss has a a podcast at Latticeworks presented by MOI Global where he talks about Tucows, his 15 year history with the company, and how mobile phone service and fixed Internet are provided today.
"Under Elliot Noss, Tucows challenged how software was distributed in the 1990s and how domain names were offered and managed in the 2000s and is challenging how mobile phone service and fixed Internet are provided today. For nearly twenty years, Elliot has loved and championed the Internet as the greatest agent of positive change the world has ever seen. Through his role at Tucows, his involvement in ICANN and his personal efforts, he has lobbied, agitated and educated to promote this vision and protect an Open Internet around the world."
July 20, 2017: Welcome to Ting Park — Holly Springs Activates $300K Naming Rights Deal with Tucows
The Triangle Business Journal reported on July 20, 2017 that Ting is paying Holly Springs $330,000 over three years for the naming rights to the athletic complex and 1,700-seat stadium, home of the Holly Springs Salamanders collegiate summer league baseball team and dozens of local youth league teams. Todd Rubin, Ting’s manager in Holly Springs, said in a statement that adding its name to the athletic park enables Ting to strengthen its roots in the town. “The park is a cornerstone in the community,” he said. “We feel proud to support it and privileged to put our name on it.”
Ting “lit” its first customers in Holly Springs in January, 2017 with customers who have signed on for its ultra-high speed internet service that ties into the town's municipal-owned fiber optic network. The signs and banners around the North Main Athletic Complex in Holly Springs were officially installed on Wednesday and marks the activation of an agreement between Ting, a high-speed fiber internet and mobile phone provider, and the town that was signed in February. Additional signage at the main entrance and on N.C. 55 Bypass will be installed later in the summer.
- Read more about Ting Fiber's Rollout in Holly Springs
July 18, 2017: Ting's Thoughts on Fiber to the Home versus Wireless Links
Adam Eisner, VP of Internet, explains that while Ting is keeping a close eye on wireless link technology, we still believe fixed fiber (the kind we put in the ground) will ultimately provide customers with the most consistent, high speed experience.
What are your thoughts on fiber to the home versus going last mile with a wireless link?
We get asked about wireless links a lot right now. It's a piece of technology that we're tracking pretty closely. We see all the different developments in the industry around that but really still believe that fixed fiber to a home is really the only way a customer can get a consistent high-speed experience that doesn't really vary in its consistency or delivery. So until we see some really solid developments around being able to predictably offer gigabit internet in the same way we can do it through fixed fiber I think you'll be seeing us stick to fiber.
July 12, 2017: TCX Added to Russell 2000 Small Cap Index
Cabot Wealth reported on July 12, 2017 that Tucows has been added to the Russell 2000 Small Cap Index.
July 6, 2017: Four Insiders Sold Tucows Stock During June
Rawleigh Hazen Ralls sold a total of 106,342 shares of TCX during the month of June, 2017 for a total sum of $6,097,430 and an average price of $57.34 per share.
Allen Karp sold a total of 1,900 shares of TCX during June, 2017 for $113,848.
Davinder Singh sold a total of 1,236 shares during June, 2017 for $74,160.
Erez Gixxin executed options for the purchase of 1,713 shares of TCX at $5.52 per share during June, 2017 paying $9,456.
- Read more about Insider Activity at Tucows
- Read Tucows and the Dog That Did Not Bark in the Night July 28, 2016
July 5, 2017: What's the Latest on Ting TV?
VP Adam Eisner talks about Ting TV, a project that Tucows has been working on in the background for some time.
Transcript What's the latest on Ting TV? Well I'm glad you asked. So Ting TV is deep into development. We are not too far away at this point from being able to talk more specifically about what's going to be available and when.
You know at a high level I think what you should expect to see the customer will be the same breadth of channels and service that you would typically want out of a TV provider with a few interesting twists around being able to make TV a more Tingy experience.
So I can't talk too much more specifically around what exactly that will be but you know expect some pleasant surprises and what the customer experience for television will be like.
June 29, 2017: Monica Webb Talks About How to Get More Competition in Home Internet
Monica Webb, Ting Internet’s Government Relations, points out that there’s a hunger for better Internet in America. However, many municipalities aren’t being served by the incumbents, and as a result are looking to private providers, like Ting, for help building out faster networks.
And if those efforts are being thwarted by legacy providers, you can step in and help by writing, emailing or calling your elected officials at the state level.
Transcript of YouTube Video
William Beachley asks will there ever be more competition in home internet and what we do we kind of stop the incumbents from lobbying again against better internet?
Well to start with will there be more competition in home internet? I like to think my glass is half-full that there absolutely will. I see municipalities by the hundreds expressing interest in building their own networks or partnering with a private provider to build a fiber network because they are not getting what they need. The residents and businesses are not getting what they need from their current providers.
So I think if municipalities continue to go down the road of how do they make it happen I think that you will see increased competition.
What do we do about providers trying to stop municipalities from from doing exactly that. Talk to your state senators, representatives, assemblyman.
Your elected officials at the state level are critical to enabling that or not allowing it to happen so know who they are, talk to them about why this is important to you as a person, why it's important to businesses in your area and get the businesses to talk to them as well because elected officials will vote on what they perceive their constituents want so you need to talk to them and you need to express how important it is and that will lead to a place where municipalities have networks and there's more competition.
June 26, 2017: Sprint Enters Into Exclusive Talks With Charter, Comcast On Wireless Deal
The Wall Street Journal reported on June 26, 2017 that Sprint is in talks with Comcast and Charter Communications on a deal that could lead the cable companies to invest in the wireless company’s network for the right to use its network at a reduced rate and might even result in the total purchase of Sprint. According to the WSJ, with a market value roughly equal to its $33 billion in net debt, a tie up may be the only way for Sprint to get the resources to invest enough in its network to remain competitive. A deal with cable would be bad for Sprint’s wireless competitors because it would reduce the likelihood of industry consolidation through the hoped-for merger of Sprint and T-Mobile.
June 23, 2017: Brutal Competition Means the Cost to Consumers of US Cellular Service in Rapidly Plunging
The Wall Street Journal reported on June 23, 2017 that the cost of U.S. cellular service is rapidly plunging, reversing years of increases that have squeezed consumers’ budgets and generated huge profits for wireless companies. The consumer-price index for wireless phone service, an indicator of current offers from cellphone service providers, dropped 12.5% in May from a year ago, according to the Labor Department. According to Ryan Knutson, offers from wireless providers are becoming increasingly extreme. Sprint this month launched a short-term promotion to give away a free year of wireless service to new customers who supply their own mobile phones.
A major reason for the steep decline in the wireless consumer-price index is companies’ return to unlimited-data plans. Back in 2010 and 2011, AT&T and Verizon ended their all-you-can-eat plans for smartphone customers and imposed monthly caps on usage. Verizon now charges $80 a month for an unlimited talk, text and data plan for a single line. Sprint charges $50 for a similar plan in the first year. In 2011, an unlimited Verizon plan cost $120 and one from Sprint cost $110.
Some economists believe consolidation among the four national carriers could end the price war, because three competitors with roughly equal market share would behave less aggressively to maintain the status quo. During a call with analysts last month, Sprint Chairman Masayoshi Son said he was looking to merge Sprint with another company and that T-Mobile was “the first priority.” But Sprint CEO Marcelo Claure said consolidation will make the industry even more competitive. “Sprint has been working hard to invest in its network and bring increased value to consumers, but as we look to the future, scale will be critical to sustaining competition,” he said in a written statement to The Wall Street Journal.
June 9, 2017: Elliot Noss Encourages Wireless Competition in Canada
Elliot Noss testifies in 2014 before the the CRTC, Canada’s regulatory body for all things telecommunications, in favor of increased competition in Canada's mobile phone service.
Andrew Moore-Crispin wrote on the Ting Blog on June 9, 2017 that Canadians pay among the highest cost for mobile phone service in the developed world and that allowing MVNO's to operate in Canada would benefit consumers.
The Canadian mobile service market has been divvied up between the “big three” wireless companies; Rogers, Bell and Telus. Collectively and colloquially known as Robelus. Yes here in Canada, our oligopolies are so entrenched that they have cute, short-hand names. “Value” wireless brands like Chatr, Public, Koodo—all owned by the big three— only serve to create the illusion of choice. Back in 2014, the CRTC, Canada’s regulatory body for all things telecommunications, opted not to force the incumbents into offering service to “mobile virtual network operators” (MVNOs). It deemed that the quasi-competition seen in the Canadian mobile market, wholly dominated by three major carriers, was sufficient. It pointed to a far distant fourth carrier, then Wind Mobile now Freedom Mobile, as a panacea for what ails Canadian mobile customers. In short, it’s not a terribly vibrant competitive landscape.
According to Moore-Crispin, there are successful models of mandated MVNOs in markets all around the world. In the competitive US environment, MVNOs brought with them a wave of choice and raised the stakes for things like customer choice, customer service and more generally, for customer control and the overall customer experience. In other words, MVNOs put the power in the hands of the customer where it belongs. "Minister Bains speaking out presents a glimmer of hope for Canadians tired of paying the highest prices in the developed world for mobile phone service."
June 9, 2017: Tucows Modifies Credit Agreement with Bank of Montreal
Reuters reported on June 9, 2017 that Tucows entered into an amendment to their credit agreement with the Bank of Montreal increasing the amount available for borrowing under Facility C, a committed, non-revolving credit facility by $502,500 which was the portion of Facility D which was not used by the Company to fund its acquisition of Enom.
June 5, 2017: Elliot Noss Says Canadian Government Wireless Review Probably Won't Open Up Market to MVNOs
CTV News reported on June 5, 2017 that a government-ordered review of a recent decision restricting access to the networks of Canada's big wireless service providers is being hailed as potential good news for consumers. But Elliot Noss, CEO of Ting Mobile, an operator of a mobile virtual network (MVNO) in the United States, predicts the results of the review won't open Canada's wireless market to substantial competition any time soon. "If one of the (Canadian) providers would sell us network, we would come into the market immediately. We would love to," said Noss. "We don't expect that to happen in the near term, and today's announcement doesn't change that." Noss said the mandated review doesn't appear to open the door to full access to wireless spectrum by MVNOs, and it will likely be a long time before the regulator implements changes needed to ensure access by smaller players.
The Canadian Radio-television and Telecommunications Commission ruled in March that Rogers Communications, a Canadian communications and media company that operates in the field of wireless communications, cable television, telephone, and Internet connectivity, could block customers of Sugar Mobile, a subsidiary of Ice Wireless, from roaming on its network. The decision not only effectively paralyzed the startup, but also prevented other smaller mobile service providers from offering cheaper plans and consequently limits choice in the market, Innovation Minister Navdeep Bains said Monday in calling for a rethink of the ruling. "This decision excludes Wi-Fi based providers from access to regulated roaming services," Bains said while speaking at an annual conference in Toronto for the Canadian telecommunications industry. "And that effectively prevents Wi-Fi based providers from offering their low-cost plans to consumers. This lack of choice does not benefit Canadians."
June 2, 2017: Ting Moves Ahead in the Race for Fiber in Centennial
The Ting Blog reported on June 2, 2017 that there’s been some great progress on Ting Internet in Centennial. The City has been hard at work building a main fiber backbone constructing more than 34,000 feet of conduit and fiber with brand-new, carrier-grade backbone and finalizing contracts for construction of the next phase, including more than 30,000 feet which completes the first ring of the fiber backbone.
Ting Internet has been submitting plans for the Ting Centennial network to the City and are working together to finalize the design. Ting is also looking at real estate as they decide where to build required network infrastructure (known as the central office and fiber huts, in industry parlance) and lay down roots in Centennial. "Building a fiber network is no mean feat; there’s a ton of engineering and planning before we even think about putting a shovel in the ground. Before construction begins, we’ll announce some broad phases for the build, along with announcing which neighborhoods will get fiber first."
Right now Ting is taking pre-orders for fiber. "All things being equal, pre-order volume is absolutely a factor in our network planning. Build where there’s the most demand first; it just makes sense." The ten hottest neighborhoods in Centennial for pre-orders are: Orchard Valley, Saddle Rock, Willow Creek 1 and 2, Mill Creek, Heritage Village, Willow West, Tiffany, Chapparal, Piney Creek, Walnut Hills.
What about news that Comcast is planning to bring their gigabit to Denver and the surrounding area? "Gigabit gets promised a lot more than delivered. We (customers and lovable little providers alike) just need to believe it when we see it. Then, even when we see it, there is a big difference between the fiber-to-the-home, never compromised, symmetrical gigabit (upload and download of 1,000 Mbps) that Ting offers and what the cable companies tend to pass for gigabit Internet. Finally, we offer fair, honest pricing and outstanding customer support. How many of those words have you used to describe your cable company?"
June 2, 2017: Intermax Becomes “First to Fiber” in Sandpoint
Intermax issued a press release on June 2, 2017 that they will be the first company to enter into all of the required agreements with the City of Sandpoint to provide service on the city’s Economic Development fiber network. “The city has worked for years to make this happen, and we’re proud to have Intermax be the first provider on the city’s network. They are a local North Idaho company who has many clients in Sandpoint and Bonner County” said Jennifer Stapleton, Sandpoint City Administrator. “We’ve provided fiber services to commercial businesses in Sandpoint for years,” said Intermax President Mike Kennedy. “But today we are proud to be the first private partner with the City of Sandpoint to expand our network by licensing space on the city’s new fiber infrastructure”, Kennedy added.
- Intermax May Also Provide Fiber Service in Sandpoint February 19, 2017
- Ting Rolls out Internet in Sandpoint
May 25, 2017: OpenSRS Advises Resellers of Upcoming Uniregistry Price Increases
The OpenSRS blog reported on May 25, 2017 that Uniregistry has announced a number of TLD price increases taking effect on September 8th, 2017, a decision that has caused concern in the domain community. "We weren’t happy to hear the news but knew we had to take immediate action," writes Haley Midgette. "Our primary concern was to determine how the changes would impact you and your customers, and what adjustments could be made to minimize the effects." Tucows will continue to support the following TLDs: .click, .link, .help, .pics, .sexy, .christmas, and .tatoo. However Tucows will no longer support the TLDs that have the potential to be disruptive to your business because the following TLDs may subject your customers to unknowingly overpaying in a price range well beyond $100 per year: .audio, .juegos, .diet, .hiphop, ,flowers, .guitars,. hosting, .property, blackfriday.
According to OpenSRS, regardless of which boat a customer falls into, they’ll appreciate advanced notice especially those who own TLDs that Tucows is dropping. Resellers can advise those customers to request a renewal for the full 10-year period, well in advance of the September 8th deadline, should they wish to hold onto their domain name. "As a Reseller, you can take advantage of the opportunity to demonstrate that you are working proactively, and are committed to securing the best possible deal for your customers."
May 18, 2017: Three Insiders Sold Tucows Stock During May
Jeffrey Nathan Schwartz sold 4,962 shares of TCX on May 18, 2017 at 57.05. Jeffrey Nathan Schwartz sold 7,222 shares of TCX on May 18, 2017 at 57.0. Jeffrey Nathan Schwartz sold 4,691 shares of TCX on May 11, 2017 at 57.05.
Rawleigh Hazen Ralls sold 469 shares of TCX on May 16, 2017 at 56.90. Rawleigh Hazen Ralls sold 9,531 shares of TCX on May 15, 2017 at 58.26.
Michael Goldstein sold 4,163 shares of TCX on May 16, 2017 at 56.83. Michael Goldstein sold 9,876 shares of TCX on May 12, 2017 at 58.76. Michael Goldstein sold 6,442 shares of TCX on May 11, 2017 at 57.05.
- Read more about Insider Activity at Tucows
- Read Tucows and the Dog That Did Not Bark in the Night July 28, 2016
May 18, 2017: Global Appetite for Gigabit Internet Not Slowing Down
WHIR reported on May 18, 2017 that Gigabit internet implementations have jumped 72 percent worldwide since June 2016, with more than 219 million people around the world accessing a gigabit internet service. The U.S. has 56 million consumers with availability but this represents only 17 percent of the country’s population. "The gigabit revolution shows no signs of cooling down in 2017," says Sameh Yamany, Chief Technology Officer, Viavi Solutions. "As bandwidth increases, so does consumer appetite for it. Likewise new business models have been quick to take advantage of new bandwidth, as we’ve seen with streaming video and audio in the recent past – and which we believe will continue in the near future with VR, AR and the Internet of Things.”
May 9, 2017: Tucows Shifts Expired Domain Name Inventory from GoDaddy to NameJet
Domain Name Wire reported on May 9, 2017 that Tucows has stopped sending its expired domain name inventory to GoDaddy and will instead send it to NameJet. "Tucows’ move doesn’t come as a huge surprise," writes Andrew Allemann. "The company acquired half of NameJet when it bought Enom. Enom has sent its expired domain inventory to NameJet ever since it formed the partnership in 2007. However, the timing is a bit surprising given that Tucows’ deal with GoDaddy began less than a year ago. I would assume they had some sort of contractual obligations."
“We wanted to be good partners," says Paul Nicks, VP & GM, Aftermarket at GoDaddy. "We’re grateful for the opportunity Tucows gave us when they chose GoDaddy as their first partner for expiry inventory. We believe Tucows saw great results and we feel confident that GoDaddy’s performance will speak for itself and that we’ll earn the opportunity to win back that business.”
- September 29, 2016: Tucows Begins to Send Expired Domain Names to GoDaddy Auctions
May 9, 2017: Tucows CEO Elliot Noss Explains the Impact of the Enom Acquisition and Deferred Revenue on Q1 Earnings
Following is a transcript of Elliot Noss' video explaining the impact of the Enom acquisition and deferred revenue on 2017 earnings:
Hello. I thought it made sense this quarter to do a video talking about the impact of deferred revenue on our results for this quarter. I should note that I 'm talking about the first quarter of 2017.
If you've read the press release or if you listened to the conference call or read the script afterwards you would have heard me talk about a 4.8 million dollar impact from deferred revenue so I wanted to explain that a bit to help you all understand it in a little more detail and possibly save you from having to track me down for a deeper explanation.
How Accounting Works With Domain Names
First I want to talk about how the accounting works for domain names with deferred revenue.
When we sell a domain name we recognize it pro rata over the life of the domain. Typically, to take the simplest example, we sell a domain name for $12 and we sell it in January. In January we will recognize a dollar of revenue and we will defer $11 recognizing another dollar each month throughout that year's registration.
Now in addition we also will be pre-paying the registry fee. Let's imagine the registry fee was nine dollars for the year. So we'll be recognizing seventy-five cents in cost in January and then each month pulling a dollar to revenue and seventy-five cents into cost over the life of the registration.
How Deferred Revenue is Treated at the Accounting Level
Now the first thing that complicates this quarter is the way the deferred revenue is treated at the accounting level with transactions.
When a company acquires another company that has a deferred revenue asset on their balance sheet, essentially the deferred revenue gets wiped out and reset to zero. It's a simple way to think about it. So when we bring over that Enom book of business, we don't bring over all of the deferred revenue.
That deferred revenue gets re-evaluated and in this case there was a reduction of about eight million dollars.
Now that eight million dollar reduction is an accounting exercise obviously taken on by accounting professionals. That eight million dollar reduction is the total negative impact that we will have from the Enom transaction and that impact will take place overwhelmingly in 2017.
Refilling the Balances of Enom's Deferred Revenue
What we're essentially doing in the first quarter is we are refilling the balances of that deferred revenue. Now I'm just going to talk about the eight million dollars revalued. In January we are essentially putting that money back in, stocking up the balance for the remainder of the year, and pulling out 1/12 of that amount.
In February, when you're doing it, you will be recognizing both the February and the January and pushing the rest out. Over a year, that washes out.
As you can see in January it's going to have the biggest impact because in January you're only pulling in the one month and deferring the 11. But by the time that same thing is happening in December you've got all those previous months where you've already stopped yor deferral asset that you're pulling out into so the impact is by far the biggest in Q1.
Purchase Price Accounting
Now the second thing that complicates this is what's called purchase price accounting. I don't purport to explain it but it is a one-time charge in the amount of 1.4 million dollars that again takes place in Q1 and is part of the eight million dollars. That we are allowed at an SEC level to talk about in relation to EBITDA.
The rest of it, the other 3.4 million in the quarter we are not allowed to talk about because of the third complication.
SEC Change to Treatment of EBITDA for Companies that Sell Subscription Services
In May 2016, the SEC changed the way that they advised companies to talk about adjusted EBITDA. In particular the SEC was concerned how companies who sold a subscription service were in their EBITDA calculations and treating their sales as if they were the sales of a product.
Typically when you have a subscription service you recognize the revenue ratedly over the period of subscription. You know from what I've said above that that's what happens with domain names but unlike most subscriptions with a domain name once you pay upfront there is no right-of-return. The bulk of that work is done on our part right at the time we sell the domain name.
Put that aside because we're not debating the accounting treatment, we're just trying to understand it a little better. But because of the SEC's concern about subscription services, they strongly advise companies that that they should not bring deferred revenue amounts into adjustment of EBITDA calculations.
We had always included the amount of net deferred revenue in our adjusted EBITDA calculations. We did that through Q1 of 2016. When this change was made, we talked about it and we went along with the change and reported it on the basis of the new standard.
OpenSRS a Very Large, Slow Growing Business
Now because open SRS is a very large, very mature, relatively slow growing business, that change didn't really have a material impact on our adjusted EBITDA. It might have had a couple few hundred thousand dollar impact per quarter which we were very comfortable with. So we complied with the change.
But that change now, with the acquisition of Enom and with the way that the accounting treats deferred revenue, when you bring over balances with an acquisition has a material impact. The impact of deferred revenue is 4.8 million dollars in the quarter. That 4.8 million dollars really has an impact on adjusted EBITDA as we reported it under the old approach back in Q1 2016. In Q2 and going forward with the new approach only 1.4 million of the 4.8 million can be applied to adjusted EBITDA.
The Way We Run the Business Historically is on a Cash Basis
I know this is becoming convoluted but I'll ask you to bear with me and maybe watch the video a couple times if you need to. The point is that the way we run the business is on a cash basis. There's about a 4.8 million difference between the adjusted EBITDA number we report and the way that we have historically reported adjusted EBITDA prior to Q2 2016.
The total difference for 2017 will be 8 million dollars and you'll see that runoff.
To summarize, that impact I've talked about EBITDA on an apples-to-apples basis - going from 30 million dollars in 2016 going to 50 million dollars in 2017.
I've also talked on both the about the fact that the 50 million dollars EBITDA would be impacted by this change in the SEC approach would be more like in the 42 million dollar range. So you will see the 6.2 million we reported this quarter as relating to the 42 million number. If you wanted to compare it to the 50 million figure you'd add back that deferred revenue.
But most importantly that washes out through the year so in 2018 all of this will have washed through.
Summary of the Four Factors Affecting the Numbers
If we were to assume and this is just an assumption for strictly expository purposes which is the furthest thing from guidance, we would have assumed that we grew the business on a cash basis the way we have historically thought about it from 2017 to 2018 by 20%, the change in the this approach and the new way that the SEC would like us to talk about it, would have us go 30, 42, 60.
Using the old approach 30, 50, 60.
Of course the big difference in 2016 to 2017 is that Enom is coming.
So I hope that helps you understand both the what and the why. Again you have the combination of deferred revenue treatment in domain names, purchase price accounting, the way that the deferred revenue is treated with acquisitions, and a change in SEC policy or at least guidance that really leads to a somewhat convoluted explanation.
May 9, 2017: Tucows Reports Continuing Strong Financial Results for First Quarter of 2017
Original financial documents are available at:
- Tucows' (TCX) Q1 2017 Results May 9, 2017
- 2017 Q1 Consolidated Balance Sheets May 9, 2017
- Tucows' (TCX) CEO Elliot Noss on Q` 2017 Results - Earnings Call Transcript May 9, 2017
Net Revenue: Quarterly Net Revenue Increased 55% YOY
Tucows announced on May 9, 2017 that net revenue for Q1 2017 increased 55% YOY to $69.5 million from $44.7 million for 2016.
Net Income: Quarterly Net Income Decreased 45% YOY
Tucows announced on May 9, 2017 that net income decreased 45% YOY in Q1 2017 to $2.4 million, or $0.23 per share, from $4.4 million, or $0.42 per share for 2016.
EBITDA: Quarterly Adjusted EBITDA Decreased 15% YOY
Tucows announced on May 9, 2017 that Adjusted EBITDA Q1 2017 decreased 15% YOY to $6.1 million from $7.3 million for 2016.
EBITDA: Tucows Reiterates Adjusted EBITDA Guidance of $42 million for 2017
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Tucows is "able to reiterate our guidance of $42 million, which is the $50 million, less $8 million of the impact from deferred revenue, that I've discussed on previous calls."
In answer to a question from Hubert Mak concerning the $8 million revenue adjustment, Noss stated that "maybe a cleaner way to think about it is that it's, that $8 million revaluation of deferred revenue balances washes out overwhelmingly. Kind of 90-something-percent of it washes out in a year, so you don't see that impact going forward. In other words, the growth in 2018 will be as if that never happened."
"The total impact of deferred revenue sort of on the balance sheet, is $4.8 million. Now $1.4 million of that comes from purchase accounting, which the SEC allows us to connect to adjusted EBITDA. The other $3.4 million is a resetting of the deferred revenue balances, which as of May of 2016, the SEC does not like, related to adjusted EBITDA."
"So you'll see us talk about those numbers differently. So of the $8 million that comes from the changes in deferred revenue balances due to accounting policies in relation to the transaction, $1.4 million of that we -- it's okay for us to connect to adjusted EBITDA and $6.6 million of that, we should not connect to adjusted EBITDA. So that totals to $8 million and that's kind of the $50 million going to $42 million. I won't even ask you if that made sense, because I doubt it did. I'll ask you to maybe digest it, listen to me say it again on the transcript or on the recording and watch the video. And I apologize for this being so complicated. Believe me, it's not my choice."
In answer to a question from Patrick Retzer, Noss clarified that "the significant majority, $4.8 million of $8 million of the impact from deferred revenue was in the first quarter. So you not only have sort of the business growing underneath, as the rest of the year plays out, you also have succeedingly smaller impacts from the deferred revenue. And those impacts in total in the next three quarters are still only about two thirds of what the impact is in this first quarter. The other thing is, I don't -- I want to be clear on the language. This is -- the $8 million is impact on the deferred revenue balances on the balance sheet, It is noncash, but it's not an expense per se in the same way. When you use the phrase, transaction expense, I didn't want anybody to get in their heads that it was deal costs or anything along those lines."
EBITDA: Net Income and Adjusted EBITDA for Q1 Are Tough to Read
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that the accounting for both Enom and RingPlus would make Q1 tough to read. "I noted that in relation to the Enom acquisition, there would be a deferred revenue impact of roughly $8 million in 2017. We have worked through the details and that number is pretty close to what we expected. The largest impact is in this quarter. The impact of the accounting treatment of deferred revenue impacted adjusted EBITDA by roughly $4.8 million this quarter. We note, that this impact is on adjusted EBITDA as we used it prior to May 2016. In addition, there were about $400,000 in deal costs this quarter."
EBITDA: The Enom Acquisition Has a Large Impact on our Numbers
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that the Enom acquisition activity has a large impact on the numbers. "On January 20, Tucows acquired Enom, a wholesale domain name registrar from the Rightside Group for a purchase price of $83.5 million. The Enom business adds approximately $15 million in gross margin, less additional direct costs, which we hope to expand to $20 million over the next couple of years through additional synergies. In total, we are now managing 24 million domains under the Tucows and Enom accreditations and another 5.5 million domains on behalf of other registrars. I will remind you that this transaction was overwhelmingly about generating scale and realizing efficiencies, primarily in platform efficiencies and licensed software. Based on trends over the last few years, the Enom customer base will likely negatively impact profit margin, gross margin growth and renewal rates."
Marketing: Marketing Expense Increased $800,000 YOY
Dave Singh told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that "marketing expenses increased by $800,000 year-over-year, primarily for the acquisition and ongoing support of Ting Mobile and Ting Internet customers. Credit card processing fees, primarily to support the growth of Ting Mobile and Ting Internet, public listing and stock-based compensation, increased by 0.2 million." 
Expenses: Total Operating Expenses for the Quarter were up 72% YOY
Dave Singh told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that "marketing expenses increased by $800,000 year-over-year, primarily for the acquisition and ongoing support of Ting Mobile and Ting Internet customers. Credit card processing fees, primarily to support the growth of Ting Mobile and Ting Internet."
Capex: Capex Will Be Less Than $30 to $35 million for 2017
In answer to a question from Hubert Mak, Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Capex will "be less than $30 million, $35 million, and the primary reason is because governments, municipal governments are just a little slower than we might expect. We have to build up our expertise at estimating their timelines. And I think we kind of had a little bit of happy years maybe in a couple cases and that'll slow down the spending. But I'm going to give you some more detail on that next quarter."
May 9, 2017: Ting Mobile Had Their Best Quarter Ever of Net Adds
Net Adds: Ting Mobile Added 5,500 Accounts and 12,000 Devices Outside of the RingPlus Deal
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Ting Mobile had a solid quarter of organic growth. "We added 5,500 accounts and 12,000 devices outside of the RingPlus deal that I mentioned in the last call. It was our best quarter for net adds in four quarters; our best quarter for gross adds in six quarters; and our most gross adds ever in a Q1. It was also the third straight quarter of increasing growth."
Churn: Churn Has Decreased to 2.27%
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that churn was 2.27% in Q1, down from 2.4% in Q1, 2016. "Churn on Ting Mobile has been a pleasant surprise ever since we reduced data prices in December of 2016. Again, without RingPlus, which will complicate churn numbers for a while, churn was 2.27% in Q1, down from 2.4% in Q1, 2016. It is encouraging that more customers are coming to Ting and fewer customers are leaving us, as the incumbents have started pushing their unlimited data plans."
Comcast Threat: The Entry of Comcast into the Mobile Space Will Be a Significant Threat
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that the entry of Comcast into the mobile space is obviously a significant threat "but we just keep hearing two things from Ting customers and prospects. First, Ting customers and hopefully millions like them, do not need unlimited data; and second, they're thrilled to spend even less than these unlimited plans cost. And in addition, customer experience matters. Customer experience and customer relationships continue to be our greatest advantages over the mobile carriers. And Comcast's entry into the category should hardly change that. It is also encouraging that most of the lifts we saw in adds versus previous quarters, came through attributable sources. In other words, things we have done and things we can track. We like that because it means we can potentially do more of these things."
Marketing: Ting Mobile Had a Range of Small Wins in Digital Marketing Programs
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Ting Mobile had a range of small wins in digital marketing programs such as Google AdWords, acquisition e-mail, retargeting, Facebook advertising and affiliate marketing programs with a handful of strategic partners. "We also funneled leads more aggressively to our phone sales team and saw increased conversions there. On all of these, we are testing and optimizing to discover just how much we can scale within our desired cost per acquisition."
In answer to a question from Hubert Mak, Noss clarified that "there was one other relatively speaking larger effort, which was something of a mixed media effort geared toward seniors, and that really didn't bear fruit. But it's the kind of, sort of bets, we're trying to make. And then, we're always talking about on the call, where we did see some reasonable traction, is in a bunch of the little things. So think about this as just doing a bunch of little things, a little bit better. I've talked a couple times on the call about sort of rebuilding some folks on the people side in marketing. And we're just seeing some of that take hold. So I don't think it's anything complicated, I just think it's a little more and a little better people doing a little more and a little better."
Marketing: The Next Round of Testing of the Infomercial Had Mixed Results
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that the Ting Mobile infomercial is not quite a winner that we are ready to scale or a loser that we are ready to give up on. "I mentioned last quarter, that we would be engaging in the next round of testing for the infomercial. We did that in April and are still picking through the prospects and performance now. It is not quite a winner that we are ready to scale or a loser that we are ready to give up on. We are mostly focused on conversion, and we'll keep searching for incremental improvements. There were things that were improved and things that still need to be improved. Work continues."
In answer to a question from Hubert Mak, Noss clarified that "I would say that the infomercial is a larger strategy as opposed to a key strategy, because it's all important. But we call out those larger ones, because we're spending more money on them and we want to let you follow along more easily. So there's no change in strategy. With the infomercial, we did a second round of testing. There was plenty we liked, and plenty we could see that we could still work on. So it's not there yet, It may not get there. It's not there yet, but there's still plenty of encouraging signs in there. And so we're going to go to the next round of testing. And I'll let you know exactly when that's going to be, either on the next call I'll tell you how that went, or I'll let you know when it's going to be."
RingPlus: 8,500 RingPlus Accounts Have Now Paid Some Portion of a Bill Out of Their Own Pockets
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Ting Mobile "migrated over 45,000 RingPlus accounts, 22,000 of which accepted our terms of service, gave us a valid credit card and set up an account. Of those, about 3,500 departed even before the end of the quarter. So combining the organic growth and the RingPlus customers, Ting Mobile added 24,000 accounts and 35,000 devices in Q1 to bring our total to 175,000 accounts and 280,000 devices. I will add, through last week, just over 14,000 of those RingPlus accounts are still active. And of those 14,000, about 8,500 have used their credits and have now paid some portion of a bill out of their own pockets."
"As a reminder, RingPlus was a Sprint MVNO that was shutting down in Q1. We came to an agreement with RingPlus and Sprint to migrate all their customers to our platform. I will also remind you that these are among the most frugal and transient customers in the industry and that a significant majority of them were paying nothing for service at RingPlus. However, we were very willing to invest introductory service credits and a lot of hard work in customer service and across the business in order to find the valuable customers within that base."
In answer to a question from Hubert Mak, Noss clarifed that "we were told by the parties that there were 80,000 accounts. It turned out that probably something like 35,000 of them were dormant or were people moving things from one plan to another or just were irrelevant. So then, when Sprint did the migration to our platform, they moved 45,000 accounts onto our platform. Before we let them manage those accounts on our platform, they had to come in, agree to our terms of service, they either had to just immediately port out, go somewhere else and port out, or agree to our terms of service, give us a valid credit card and set up an account, which is kind of just, set it up with name, rank and serial number. So 45,000 were migrated to our platform, 22,000 and change went through that three step process."
RingPlus: Ting Mobile Has Almost Broken Even With the RingPlus Customers
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Ting Mobile has "nearly broken even already on these customers, between the revenue we have collected from them and the cost of goods that we have paid to the carriers. Of course, we hope we have added a significant number of accounts that will behave like typical Ting accounts in monthly margin and churn going forward. But at the very least, we are pleased that we will likely have a positive return on the investment. And I would like to note that when looking at Q2 net adds, the continued churn from RingPlus customers will have an impact."
RingPlus: Ting Mobile Expects Significantly More Churn from the RingPlus Accounts
In answer to a question from Hubert Mak, Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Ting Mobile expects there to be significantly more churn with the RingPlus customers. "We're seeing that in the first few weeks as that continues to burn down. We do expect to see more churn. So that will impact the Q2 numbers as well. And we're going to continue to make it nice and easy to see, here's what's organic and here what's RingPlus."
Apple: Ting Mobile Has Signed its own Carrier Deal with Apple
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that after 5 years of trying to get them to return our phone calls, Ting Mobile has signed its own carrier deal with Apple. "First, this is a remarkable testament to our brand reputation and our business success. It gives us something that only network operators and a very small handful of MVNOs have. More importantly, it delivers tremendous benefits for our customers. Ting will now offer the iPhone with a Ting SIM right in the box, rather than sending folks elsewhere to try to find the appropriate model. Ting will always have the latest iPhone, the moment it is available for preorder. Ting will now offer AppleCare+ service and 24-month financing on all new phone models. Ting will now procure certified used iPhones directly from Apple. Ting will also get the Apple carrier bundles on all iOS devices, which includes visual voice mail and WiFi Calling. This deal will give our customers better phones, better purchase terms and protection for those phones, and better experiences activating and using those phones. We will roll this out in the Ting shop and on Ting devices within the next few days."
In answer to a question from Hubert Mak, Noss clarified that "it's tough to tell how much of a burden going to the Apple Store was instead of buying from us on the website. I'm somebody who uses an iPhone with a Ting SIM in the U.S. and I really dislike not having visual voice mail. So it will be nice to have that now. I'm looking forward to that carrier pack dropping. Should that impact? Yes, I think that should have a little impact. And then we'll see. There's a bunch of those little things in there, like the financing alternative, we'll see, we rolled out some financing alternatives that didn't really have much impact. Maybe with the iPhone, in particular, it will."
In Many Ways It Feels Like Ting Mobile Has Truly Arrived
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that in many ways, it feels like Ting Mobile has truly arrived. "Our carriers send us acquisition prospects, Apple likes us, and customers increasingly turn to us as a credible, sustainable alternative to major carrier plans and major carrier experiences. Most importantly, net adds are trending up through improvement in both gross adds and churn."
"In Ting Mobile, we've continued the trends of increasing core net adds with continued improvement in both gross adds and churn. We have sorted through a number of tactics that will hopefully continue to bear fruit. We were also able to successfully digest the RingPlus customer base and have it perform roughly in line with what we hoped for. And after 5 years, we are now one of the very few MVNOs to have a direct relationship with Apple to sell the iPhone, a real tribute to how you're seen in the market. With the OpenSRS business, we had our strongest quarter for organic growth in the last number of years."
May 9, 2017: Ting Internet Continues its Progress
Charlottesville: Ting Internet Continues to See Growing Adoption in Serviceable Neighborhoods in Charlottesville
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Ting Internet continues to see growing adoption in serviceable neighborhoods and we continue to expand our network to neighborhoods where preorders are waiting.
"We are also just now lighting up our third apartment building of over 200 tenants."
Westminster, Holly Springs: Ting Internet Has Been Giving Westminster and Holly Springs a Lot of Attention in Recent Months
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Ting Internet has been been giving Westminster and Holly Springs a lot of attention in recent months. "Q1 saw the beginning of increased activations in Westminster, where the town has expanded its network and Holly Springs, where we are aggressively building out. The experience and people that we have acquired in Charlottesville have been crucial to helping these towns start to ramp. But each town requires some of its unique, own unique efforts on staffing, government relations, public relations and more. Having three very active Ting towns, now also allows us to use our centralized systems and processes, looking far ahead to a future where could have numerous Ting towns. So as examples, we've been improving the way we provision and monitor accounts, the way we schedule and track installs and more. As I've always said, the Internet business includes a lot of elements that will always be hyper-local, like awareness building and trench digging. But we are identifying every opportunity for centralization and automation and readying ourselves to scale more efficiently."
Holly Springs: Perhaps Ting Fiber Will Expand Out to Neighboring Communities to Holly Springs
In answer to a question from Patrick Retzer on the chatter that that perhaps Ting fiber will expand out to neighboring communities around Holly Springs, Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that "with any fiber build, there tends to be some fiber envy in contiguous areas. And I'd be surprised if in general, when we're in a fiber footprint, we wouldn't be expanding in some direction outside of it, as we have completed the build in that market."
"So where the efficiency would come from there would be in leveraging the -- really two things, the staff that are on the ground in that city and some of the brand awareness and just sort of word-of-mouth that you'll build up and reputation from being already in the area."
Sandpoint, Centennial: Sandpoint and Centennial Are Still Hard at Work on Their Municipal Core Fiber Networks
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Sandpoint, Idaho, and Centennial, Colorado, are still hard at work on their own municipal core fiber networks. "We will share more as we get closer to being able to build out off these networks and start lighting up customers there."
"We haven't even put a shovel in the ground in Centennial and Sandpoint," said Noss in answer to a question from an unidentified analyst clarifying that the 20% penetration in the first year does not apply to the entire 85,000 households in the four Ting towns.
Enterprise: Ting Internet Has Hired Leadership for an Enterprise Sales Team to Work Across all our Ting Towns
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Ting Internet has hired leadership for an enterprise sales team to work across all our Ting towns. "They'll be working closely with our product, support, network and operations teams, to develop a high-end feature set, account management capabilities, and a Service Level Agreement that puts us in a position to support large businesses, hospitals, college campuses, schools, government buildings, and more."
"I remind you that most fiber businesses start with enterprise, anchor tenants, MDUs and greenfield builds. We have started with true fiber to the home and then work our way up to the more profitable opportunities."
Expansion: Ting Internet's Pipeline of New Potential Ting Towns Remains Full
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Ting Internet's pipeline of new potential Ting towns remains full. "We're excited about opportunities of all different sizes and shapes. We feel like we are being courted more than we are courting. We are also dealing with governments, which tends to take time."
Expansion: Our Best Guess is Ting Internet Will Have Two or Three New Markets in 2017
In answer to a question from Patrick Retzer, Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that "if I had to make a best guess, I think two to three [new fiber markets] would be about right. But again, I'll stress, we've got lots of work to do, it's what we have on our plate. And I'm quite fine if we don't announce anything. And there's lots of action out there, and so it could even be 3, 4, 5."
Google: Google Backing Away From Fiber Doesn't Really Affect Ting Internet
In answer to a question from Patrick Retzer, Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that "it's such a big market, and Google had such big halo, that I don't know that, that [Google backing away from new fiber markets] will necessarily have a material impact. It's not, in any way, like Boy, we're pleased that Google Fiber is limited now to the 11 markets they're in and not expanding further. We really believe that in the case of fiber to the home, a high tide rises all boats and we would love to see more players in the space, not less."
Adaption: Ting Internet's Core Assumptions and Metrics on Cost and Adaption Remain Valid
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Ting Internet's "efforts so far on the ground have helped reinforce the core assumptions and metrics that I have shared on the Ting internet business. We expect to see 20% adoption amongst serviceable addresses in a year and 50% in five years. At these take rates we will be paying about $2,500 to $3,000 per customer and those customers will be worth about $1,000 a year in margin."
In answer to a question from an unidentified analyst, Noss clarified that the 20% penetration in the first year does not apply to the entire 85,000 households in the four Ting towns. "No, what you've done there is you've applied 20% to the 85,000. The 85,000 is a complete footprint build for the 5 cities that we've have announced. We haven't even put a shovel in the ground in Centennial and Sandpoint. We won't be, we'll, I'll be updating in some detail across the other 3 markets. But that's not, those are different things. And again, I want to reiterate just for people listening, less so for you, [Ralph], when I put out that 85,000 number, it was to help people understand that even with the 5 markets that we've announced today, there was a lot of meat on the bone, so the purpose of putting out that number. I will, again, start to update a little bit more next quarter on the serviceable addresses, et cetera. And we continue to be comfortable with that 20% first year take rate number."
Cost: Cost Reductions for Fiber Installation are Really Incremental
In answer to a question from an unknown analyst on the possibility of getting the cost down to $2,000 to $2,500 per home if Ting Internet moves into contiguous cities, adds automation and uses some of the learning on the trench digging side, Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that the cost reductions are really incremental. "I think that one of the things, and I don't know this, but I wouldn't be surprised if one of the things that discouraged Google was the, you can't -- a home costs to build what it costs to build. There are some savings, but they are smaller. I think that, that's a number that we're consistently looking at. We have found some neat ways to save money on a per home basis. We find that experience is helping us. But -- and I do want to, when I talk about that $2,500 to $3,000, that's a lit home, so at 50%. So we think about $1,000 to $1,400, plus the install to build a home. You're not going to get that $1,000 down to $500. And if you're in a geography, the range there is because of the different costs in each geography. If you're in a geography where it's costing you $1,200 and you can get down into the lower $1,100s or into the high $1,000s, you're doing fantastic. So we're always looking for ways there, and we're finding those ways, but they are grinding for sure."
May 9, 2017: Domain Services Has Doubled in Size with the Acquisition of Enom
Enom: Enom Integration Has Gone Very Well This Quarter
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that "the Enom integration has gone very well this quarter, with the heaviest lifting on the operational integration and on converging their data behind us; with pleasant surprises on the people side and most importantly, with the business itself comfortably meeting expectations and holding some interesting opportunities that we had not counted on."
Dave Singh clarified that Enom's operations have only contributed to Tucows' results since January 20, 2017. "Second quarter will be the first time our results reflect the full quarter of contribution from Enom."
Enom: Tucows Expects Cost Savings from the Enom Acquisition Four to Eight Quarters Out
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that Tucows expects cost savings from integration to be mostly four to eight quarters out. "We will continue to operate Enom and OpenSRS as distinct reseller brands and see the businesses as complementary and affording us the benefit of increased market coverage. We have started to integrate the teams from Seattle and Toronto and continue to be pleased, even in these first few months, with the skills and knowledge that the Enom team brings to the entire organization."
In answer to a question from Ralph Garcia with Echelon Wealth Partners, Noss clarified that "it will take 8 quarters to get from -- to get the extra $5 million or so, in cost synergies that we expect. So that will strictly be about building the new platform, building a new platform, and migrating their existing book of business onto it and thereby reducing a bunch of costs. Most of those costs will come from data center footprints and commercial software licenses that we'll avoid."
"So first of all, we'll be learning. The businesses had different approaches to data and so we're rationalizing some of that stuff. But we generally think of their businesses on the wholesale side, their business as being slightly lower margin, slightly lower renewal rate, and kind of a longer-tail profile customer."
Wholesale: For the Combined Wholesale Unit, Total Registrations were $4.5 million
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that for this combined wholesale unit, total registrations were $4.5 million in the quarter with approximately half coming from Enom and the Melbourne IT domains acquired in April 2016.
OpenSRS: Total Registrations Excluding the Two Acquisitions Grew 10% YOY
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that for the legacy OpenSRS business, or the resellers prior to the two acquisitions, we had our strongest quarter in a while, with total registrations growing 10% year over year.
In answer to a question from Ralph Garcia with Echelon Wealth, Noss clarified that the growth in OpenSRS was pleasantly surprising. "The growth there, I think it exceeded even some of the folks working on it who were quite optimistic. I think it came generally from some of the larger customers, who were just engaging in successful activities. It wasn't any one customer. But that growth, the outsized portion of that growth, was concentrated in between five and 10 customers and there's enough there that I'm hopeful, so I'm not going to quite take up my expectations on that business. But I'll certainly be pushing it a little more. And we'll see if some of those people can keep it up."
The Combined Renewal Rate Declined to 74%
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that the combined renewal rate declined to 74% in the quarter, still well above the industry average, but deflated a bit by the Enom domains, which renew at a lower rate.
Retail Domains Has Effectively Doubled with the Addition of Enom Retail Customers
Elliot Noss told analysts during the 2017 first quarter earnings conference call on May 9, 2017 that on the retail side, the business has effectively doubled with the addition of the Enom retail customers. "Again, we acquired a mature retail business and customer base with slightly negative growth characteristics. While the Hover business continues to grow, combining the Hover and Enom customers into a larger single retail business will significantly suppress that growth as we look ahead to 2018. In Q1, that combined retail business represented 400,000 transactions, over 350,000 customers and an 81% renewal rate. Again, for both wholesale and retail, I will report on the aggregated businesses going forward. I will only pull out particular metrics or stories on particular brands, if they meaningfully impacted the results or signal some new strategic direction or contain some other important piece of information."
May 5, 2017: Tucows Makes New Closing High of 62.10
Tucows made a new closing high of 62.10 on volume of 76,778 shares traded. Tucows is up 76.19% YTD. In February, 2012, Tucows launched Ting, a mobile virtual network operator (MVNO). Ting's launch coincided with a rise in Tucows (TCX) stock price. Tucows' stock price has risen 1916% since January 1, 2012. The S&P 500 has risen 86% over the same period.
May 2, 2017: Why Rightside Sold Enom to Tucows
Ever since Tucows announced that they had purchased Enom from Rightside on January 20, 2017, people have been wondering why Rightside made the sale. Even one of Rightside's biggest stockholders said it was a bad deal for Rightside and the market agreed as Tucows' stock price jumped 25% after the sale while Rightside showed a more modest gain.
Andrew Alleman wrote in Domain Name Wire on May 2, 2017 that the reason that Rightside sold Enom to Tucows is that Namecheap has always been a big part of Enom’s business and when new TLDs came out, Namecheap started registering many of these domain names under its own registration accreditation. Then, in January, 2017, Namecheap started registering .com domains through its own accreditation which means that Rightside was about to show a big drop in revenue in Q1 of this year. That's when Rightside moved to sell Enom. "It found a willing buyer in Tucows," writes Allemann. "On stage at NamesCon, Tucows CEO Elliot Noss said he was aware that Namecheap was moving off the platform. But that doesn’t hurt the deal from Tucows’ perspective." According to Alleman, Namecheap had negotiated very low rates with Rightside because it was so big and if you measure your business on revenue growth as Rightside does then losing Namecheap was a big loss. In Tucows’ case, however, it hopes to add about $20 million EBITDA/year from the business so losing Namecheap shouldn’t negatively impact that because it was so low margin.
Read more about the history of the sale of Enom to Tucows at:
- February 20, 2017: Rightside Activist Investor Says Enom Was Sold to Tucows Too Cheap
- February 9, 2017: Tucows CEO Says Acquiring Enom is Overwhelmingly about Generating Scale and Realizing Cost Efficiencies
- January 25, 2017: Elliot Noss Says Combining Tucows with Enom Will Be Done Piece by Piece with Backwards Compatibility in Mind
- January 20, 2017: Tucows Acquires Enom with its Network of over 28,000 Domain Name Resellers and 14.5 million Domain Names under Management
May 1, 2017: TCX Makes New Closing High of 59.75
Tucows stock (TCX) rose 1.10 to make a new closing high of 59.75 on volume of 46,744 shares. Tucows is up 69.50% YTD from 36.45 on January 3, 2017.
April 28, 2017: Ting's Project in Westminster is One of the Nation’s Most Closely Watched Public-Private Fiber Partnerships
Governing Magazine published a long article by Daniel C. Vock in their May issue about the different approaches small and medium cities are using to form public-private partnerships to bring high-speed Internet to their communities. According to Vock small cities face a conundrum. On one hand, building and running a city-owned network is extremely difficult because they often don’t have employees with the technological expertise to run an Internet service. On the other hand, as their experiences with cable and phone companies show, cities have learned they can’t rely solely on the private sector to provide high-speed connections. That’s why so many cities have turned to public-private partnerships, using a mix of public resources and private know-how to achieve what neither sector could do on its own.
According to Vock, the approaches that small communities take to get fiber vary widely, and many are still in their early stages. But it’s the public-private partnership between Ting and Westminster that experts are watching most closely these days. "The city of Westminster has struck a deal with Ting that, it hopes, will result in a citywide network of fiber-optic connections to every home and business," writes Vock. "Under the terms of their public-private partnership, the city is laying all the fiber itself, which Ting is then paying to lease for customers, whom it is responsible for signing up and serving. The more fiber the city installs, the more customers Ting can reach. The more customers Ting signs up, the more the company pays the city."
The effort to bring higher-quality Internet access to the Maryland city started more than a decade ago, and the city considered all options, even the idea of installing and offering broadband on its own. Ultimately, it decided to partner with a private provider. Westminster had a few advantages that helped make it more attractive. For one, the city had enough cash on hand to fund a small pilot project. And Westminster found that businesses in town were very excited about getting the service. More than 90 percent of companies signed up when it became available to them. One of the things that distinguishes Westminster’s approach is that the city is building and keeping control over the physical fiber network. The strategy, says Councilman Robert Wack, who has worked extensively on the issue, is “perfect for municipalities. We are in the long time-horizon business,” he says. “We build water treatment plants that have a useful life of 40 years. We dump millions of dollars into pavement and nobody bats an eye because everybody understands how important good roads are for economic development. Why would building fiber be any different? We’re basically building a road for data.”
For Ting, selecting cities to work with comes down to both objective measures, like demographic data, and subjective judgments, like how easy a city is to work with. One thing that stood out about Westminster, says Monica Webb, the company’s director of government relations, was that the town was not just eager for service but also willing to do most of the hard work of financing and then installing the fiber all the way up to buildings. But Webb cautions that there are not enough private companies like Ting to partner with all the cities that want high-speed Internet. After the Westminster deal went through, Ting received more than 2,000 requests from residents or public officials to come to other communities. Currently, Ting serves just five cities, with a few more in the works. “Sometimes, the best thing cities can do is to do it themselves,” she says. “There needs to be a plan B.”
Even if private companies bring gigabit speeds to every big city in the country, they’d never be a viable solution for getting faster Internet to the small towns and rural communities that need upgrades the most concludes Vock. That’s why so many cities have turned to public-private partnerships, using a mix of public resources and private know-how to achieve what neither sector could do on its own.
- Learn more about Ting's rollout in Westminster
April 26, 2017: TCX Breaks 60 Intraday
TCX broke 60.00 on April 26, 2017.
April 24, 2017: Tucows Makes New Closing and Intraday Highes
Tucows made a new closing high of 58.35 and a new intraday high of 59.90 on a volume of 69,715 shares traded. The previous closing high was 58.15 on April 20, 2017 and the previous intraday high was 59.4 on April 21, 2017.
Tucows made another new closing high of 59.00 on April 25, 2017.
April 20, 2017: Tucows CEO Elliot Noss Speaks about Giga-bit Fiber at Charlottesville's Tom Tom Founders Festival
Ting Internet has been proudly sponsoring Charlottesville's Tom Tom Founders Festival since we first arrived in town. This year, Tucows CEO Elliot Noss, was invited to speak on a panel discussing what fiber internet can do for a city. Joining him is Mayor Andy Berke of Chattanooga, the city to watch for how the best Internet access improves cities; Sheila Dugan of GovEx at Johns Hopkins University and Aimee Meacham of the National Telecommunications and Information Administration. The panel discussion was moderated by Deb Socia of Next Century Cities.
- Learn more about Ting Fiber's Rollout in Charlottesville
April 20, 2017: TCX Reaches New All Time Closing High of 58.15
Tucows reached a new closing high of 58.15 on April 20, 2017.
April 19, 2017: Centennial Seeks Voting Members for Fiber Commission
Village Publishing reported on April 19, 2017 that the City of Centennial is seeking two qualified citizen voting members to serve on its Fiber Commission, which was established to oversee FiberWorks. Centennial’s fiber backbone will connect and complete the city’s underground fiber infrastructure, connecting to key sites and community anchor institutions, such as schools, libraries and public safety. The two voting members must be Centennial residents and will be appointed at large, meaning they will represent the citizens throughout the city. To be considered for appointment, applicants should: Demonstrate expertise in a field relevant or associated with the purposes and goals of Centennial FiberWorks; Commit to attending commission meetings twice a month, periodic City Council meetings and other occasional community meetings; Be clear of potential conflicts of interest or the appearance of impropriety on commission action; Affirm motivation for seeking the appointment. Members will serve terms of two years and no more than four terms and will spend at least 10 hours per month, which includes a minimum twice-monthly meetings and the review of information prepared by staff.
- Learn more about Ting's Fiber Rollout in Centennial
April 17, 2017: FCC Could Issue New Rules to Help Google Fiber Compete with ATT
Ars Technical reported on April 17, 2017 that the Federal Communications Commission is considering rules that would speed up the process of attaching wires to utility poles making it easier for Google Fiber and companies like Ting Internet to quickly complete utility pole work. Current FCC rules allow for up to a five-month waiting period before new ISPs can install wires on utility poles that already hold the wires of incumbent providers like ATT. The FCC's current five-month timeline for processing pole attachment requests includes 45 days for application review and engineering surveys, 14 days for cost estimates, 14 days for "attacher acceptance," and another 60 to 75 days for the "make ready" work of moving existing wires. The new FCC proposal from Chairman Ajit Pai could shave a couple of months off the maximum waiting periods. "Google Fiber is pleased the Commission is taking up the issue of pole attachment timing," the Alphabet-owned ISP said in FCC filings last week. Google Fiber offered what it called "minor edits" to fix some inaccurate descriptions of the current rules in the FCC's draft proposal, it but didn't suggest any major revamping.
Pai's pole proposal is part of a larger plan titled "Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment." A vote on this notice of proposed rulemaking is scheduled for April 20. There would then be a public comment period before the FCC decides whether to issue final rules. The entire rulemaking process will probably take at least a few months. "[A]ttaching Internet-related equipment to utility poles is a major cost element for companies of all sizes," Pai wrote. "We’ll seek to both lower costs for and speed deployment of this equipment."
April 14, 2017: Elliot Noss Speaks about “What Can the Gig Do For Your City” at Hometown Summit in Charlottesville
Next Century Cities reported on April 14, 2017 that Tucows CEO Elliot Noss participated in a panel on "What Gig Can Do for Your City" at the Hometown Summit during Tom Tom Founders Festival in Charlottesville, VA as they discussed how and why cities invest in fiber internet and municipal broadband. Others on the panel included Deb Socia (Executive Director, Next Century Cities), Mayor Andy Berke (Chattanooga, TN), Sheila Dugan (Senior Implementation Advisor, Cities, Center for Government Excellence at Johns Hopkins University), and Aimee Meacham (Director of External Affairs, BroadbandUSA, NTIA). “I have seen first hand the incredible benefits, such as economic and job growth, better education, and telehealth opportunities, that bringing gigabit speed service has had on Next Century Cities’ member communities,” Deb Socia said. “Mayors are uniquely able to understand and execute broadband deployment plans that fit their communities’ needs, and as such should be given the tools necessary to make sure everyone is digitally included.”
- Learn more about Ting Fiber's Rollout in Charlottesville
April 10, 2017: Ting is Strongly Opposed to Selling Consumer Browsing Data
According to the Electronic Frontier Foundation, despite massive backlash from the American people, Congress passed and President Donald Trump signed into law a resolution that repeals the Federal Communications Commission (FCC) rules to protect consumers from privacy invasions by their Internet service providers (ISPs) like Comcast, AT&T, Verizon, and Time Warner Cable. The rules—which codified and expanded on existing online privacy protections—were passed by the FCC in October of last year and set to go into effect later this year. They would have kept ISPs from selling customers’ data and using new invasive ways to track and deliver targeted ads to customers. Additionally, the rules would have required those companies to protect customers’ data against hackers.
April 7, 2017: TCX Makes All Time Closing High of 54.10
TCX closed at an all time high of 54.10 on April 7, 2017 up 1.70 from the previous day's close. Tucows' previous closing high was 21 years ago on April 6, 1996 on its first day of trading when the stock opened at 57 and closed at 53 on a volume of 406,000 shares.
Tucows continued with a new closing high of 55.5 on April 10, 2017.
Tucows continued with another new closing high of 57.65 on April 11, 2017.
Tucows reached a new closing high of 57.85 on April 13, 2017.
Tucows reached a new closing high of 58.15 on April 20, 2017.
April 6, 2017: Google Moves Two Top Executives Off Fiber Project
Bloomberg reported on April 6, 2017 that Google has removed two prominent executives Milo Medin, a vice president at Access, and Dennis Kish, a wireless infrastructure veteran who was president of Google Fiber, from its Google Fiber division, the latest sign of the business pulling back from ambitious, expensive goals. A Google veteran since 2010, Medin was a chief advocate for the company’s high-speed Fiber service in Washington. He has also been leading some of Alphabet’s more experimental efforts to tap wireless spectrum for better internet delivery. It’s unclear if that effort will move to another part of Alphabet. Google pushed to bring Fiber to more than a dozen U.S. cities but it hit some hurdles, including increased competition and legal challenges from telecommunications firms. Google Fiber also grew into one of the costliest efforts for the company, outside of the dominant Google internet business. After halting its expansion, some analysts praised Alphabet for implementing cost-cutting measures. Last month, Google Fiber canceled some planned installations in Kansas City, its first market.
April 5, 2017: Ting Internet is Hiring an Enterprise Strategic Account Manager
The Ting Blog reported on April 5, 2017 that Ting Fiber is hiring an Enterprise Strategic Account Manager (ESAM) working out of Centennial who will be responsible for selling data, cloud and video services to new and existing customers as well as creating and developing long-term relationships with new and existing customers in the Enterprise and Mid-market space. This is a hunter, consultative field sales position within Ting's Business Services team that will report to the Director, Enterprise Sales. "While we are stretching our fiber to homes and small businesses that pay us $89 and $139 a month respectively, we are literally passing by enterprises, apartment buildings, schools, hospitals, city buildings and other large organizations that would gladly pay us thousands," reads the post. The candidate should have over 4 years of B2B sales experience, preferably selling data, voice, cloud and/or video solutions with ideally two years of Telecommunications or Premise Based Voice and Data product sales and have a working knowledge of computers, computer networking, Internet solutions and fiber connected networks.
March 24, 2017: Kenneth Schafer is Stepping Down as Tucows' Chief Information Officer
Domain Name Wire reported on March 24, 2017 that Tucows has issued an 8-K announcing that Kenneth Schafer is stepping down effective today as Chief Information Officer at Tucows to pursue another opportunity and his resignation is not a result of any dispute or disagreement with the Company. Schafer served as Executive Vice President, Chief Information Officer at Tucows since September 2, 2016, having previously served as Executive Vice President, Products since 2009. Schafer joined Tucows in 2006 as VP Marketing. Prior to joining Tucows, Schafer worked as an independent strategic Internet consultant for eight years.
March 22, 2017: While Shooting a Commercial in Centennial, the Ting Team Enjoyed the Experience of Flying Over the Mountains in a Chopper
The Ting Video Team is always looking for interesting ways to showcase Ting Internet towns. Last time, they rented a hot air balloon. This time, while shooting a commercial in Centennial, they enjoyed the experience of flying over the mountains in a chopper. For some of the team, the helicopter ride was an experience that can now be crossed off the ol’ bucket list.
- Learn more about Ting Fiber's Rollout in Centennial
March 20, 2017: Tucows Insiders Sell Stock
Market Exclusive reported on March 20, 2017 that David John Woroch , EVP of Tucows sold 5,000 shares of the company’s stock at an average price of 49.02 for a total transaction amount of $245,100.
Gissin Erez sold 7,300 shares of Tucows stock at $47.00 on March 14, 2017 for a total of $343,100.
The Cerbat Gem reported on February 17, 2017 that Director Rawleigh Hazen Iv Ralls sold 30,000 shares of Tucows stock at an average price of $46.85, for a total transaction of $1,405,500.00 in a transaction on February 14, 2017. Following the completion of the sale, the director now owns 188,647 shares of the company’s stock, valued at approximately $8,838,111.95.
Sports Perspectives and Market News reported on February 22, 2017 that Director Allen Karp sold 2,650 shares of Tucows stock at an average price of $42.52 for a total value of $112,678.00 in a transaction that occurred on February 21, 2017.
- Read more about Insider Activity at Tucows
- Read Tucows and the Dog That Did Not Bark in the Night July 28, 2016
March 17, 2017: Dave Singh to Succeed Michael Cooperman as Tucows CFO
Reuters reported on March 17, 2017 that following an 18 year career with Tucows, chief financial officer Michael Cooperman will retire at age 65 effective April 1, 2017 and will remain with company in a senior advisory role to ensure a seamless transition. Tucows Board of directors has appointed Dave Singh to succeed Cooperman.
"Mike and I have had a strong and fruitful working relationship for a number of years," said Tucows President and CEO, Elliot Noss. "When Mike started in 1999, the goal was to see if we could monetize shareware distribution. Last month, we purchased an $80 million company and laid miles of optical fiber. We simply could not have had the success we have had without him. I am forever grateful for his partnership, wisdom and grit and for helping and supporting me when I most needed it. I am also very grateful that Mike has made it his responsibility to hand-pick, train and oversee his successor. As a result, we enter the Dave Singh era with the same confidence we have enjoyed for the past 18 years." "My career at Tucows has been a rewarding and enriching experience," said Cooperman. "The Company is in a strong position to continue growing and driving value for investors, and I am confident that Dave will continue to build on this momentum as CFO."
Singh joined the Tucows Finance team in February 2016 and brings nearly two decades of audit and public company financial experience. Prior to joining Tucows, Singh spent 8 years at KPMG in Vancouver primarily focused on public company audits in the technology field. After KPMG, Singh joined TELUS and held a number of roles, including Director – TELUS Financial Reporting & Analysis, Director – Consumer Retail and most recently CFO of the TELUS International, TELUS’ outsourcing division. Telus is a Canadian national telecommunications company that provides a wide range of telecommunications products and services including internet access, voice, entertainment, healthcare, video, and IPTV television. The company is based in the Vancouver, British Columbia area; it was originally based in Edmonton, Alberta, before its merger with BCTel in 1999. Telus's wireless division, Telus Mobility, offers HSPA+, and LTE-based mobile phone networks. Telus is the incumbent local exchange carrier in British Columbia and Alberta. Telus had Revenue of CAD$ 12.5 billion in 2016, Operating income of 2.3 billion (2015), Net income of 1.38 billion and 47,700 employees.
Singh is a Chartered Professional Accountant with the Institute of Chartered Accountants of BC. Singh is a graduate of the Transportation and Logistics Management program from the Sauder School of Business at the University of British Columbia and holds a joint Executive MBA from Schulich School of Business and Northwestern University. "Having previously worked at a large bureaucratic company, I love the agility and can-do attitude of each and every Tucows employee. I come to work excited every day knowing I'll be challenged and have fun."
March 15, 2017: Bloomberg Says Tucows is Roaring Back with Enom Acquisition, Ting Mobile, and Ting Fiber
Gerrit De Vynck wrote at Bloomberg on March 15, 2017 that Tucows is roaring back to life with an acquisition and a deepening effort to win over disgruntled U.S. mobile phone customer after a decade-long hibernation following the dot-com crash. According to Bloomberg, business is booming as ICANN, the nonprofit gatekeeper of web addresses, opens up hundreds of new domain names, giving individuals and companies the chance to have a web address that ends in something more creative than “.com” or “.org,” like “.beer” or “.Republican.” “It is a hyper-competitive market with extremely thin margins but we were early and we have had scale since nearly the beginning,” said Chief Executive Officer Elliot Noss. When someone buys a web domain for $15, most of it goes to regulators and registries. Tucows gets $1.20 to $1.40 per transaction, Noss said. Tucows also agreed in January to acquire long-time rival Enom from Rightside Group Ltd. for $83.5 million, consolidating its place as the main wholesaler of internet domains.
But, according to Bloomberg, Tucows' big bet on future growth is building out high-speed fiber networks in five mid-sized U.S. cities. The company plans to invest between $30 million and $35 million in the business in 2017 and that number will grow in the coming years, Noss said. Ting Fiber is going after U.S. consumers dissatisfied by the internet service provided by cable TV companies, which sometimes have near-monopolies over certain regions. “We have two businesses that generate a lot of capital, we’re happy to deploy it there,” Noss said referring to Tucows' domain wholesale business and Ting Wireless, a cell-service provider with 170,000 customers that rents space on T-Mobile US Inc. and Sprint Corp.’s networks, and re-sells it to consumers with its own customer service and billing practices.
Tucows recently expanded its credit revolver from $75 million to $140 million to fund the Enom acquisition. Still, the company’s leverage ratio is low and Noss said he’s open to pushing it as high as three times net-debt to ebitda if the right acquisition target came along. “We have a lot of power in our balance sheet,” Noss said. “We would look at anything in our spaces at the right price.”
March 15, 2017: Fuquay-Varina Hopes That Ting (or Someone Else) Will Begin Extending Branches Off the Holly Springs Backbone into Fuquay-Varina Residential Districts
The News and Observer reported on March 15, 2017 that throughout the past year, Fuquay-Varina has been working to ensure that the wave of high-speed fiber internet moving into other parts of Wake County soon will be able to take hold in Fuquay-Varina. Fuquay-Varina’s neighbor to the north, Holly Springs, has been able to leverage its municipal fiber network into a partnership with internet provider Ting, which is now providing high-speed internet service to certain neighborhoods in Holly Springs. According to the News and Observer, Fuquay-Varina is hoping that once its full network is live, Ting or other third-party internet providers such as AT&T and Google will take notice and begin extending branches off the backbone into Fuquay-Varina residential districts.
The immediate purpose of Fuquay-Varina’s network, though, is to service municipal government buildings, where Town Manager Adam Mitchell said employees need gigabit speeds to efficiently send massive mapping files and other large datasets back and forth. Fiber-optic lines offer speeds at least 10 times faster than what’s available along standard copper internet cables. “We also like the idea of having a reliable backbone and network to service our facilities and our needs,” Mitchell said. “Having infrastructure that we can maintain, that we can service, that we have security in, for us, has great value.”
Fuquay-Varina is a town in Wake County, North Carolina, United States. The population was 17,937 at the 2010 census, up from 7,898 at the 2000 census. The town is a 25-minute drive south of Raleigh, the capital of North Carolina. The hyphenated name attests to the town's history as two separate towns. Fuquay Springs and Varina merged in 1963 to create the modern town. Economically, the town initially grew due to tobacco trade and agriculture, but has seen recent population growth and real estate development due to its proximity to Research Triangle Park.
- Learn more about Ting Fiber's Rollout in Holly Springs
March 10, 2017: The Centre Region of Pennsylvania Has Fallen Behind its Peers in Fiber Optic Internet
Mark Parfitt wrote in an op-ed piece in the Centre Daily Times on March 10, 2017 about how the deployment of publicly accessible fiber-optic internet is one movement where State College has fallen behind many peers. "Where we have fallen even further behind is the ability to provide fiber internet as part of a broader economic development strategy.," writes Parfitt. "Make no mistake: fiber-optic internet is no longer a luxury in the business world. It is a basic necessity and an absolute “must have” when selling the Centre Region as a place to do business. After gigabit internet was introduced to Chattanooga, Tenn., the founder of a business incubator told the New York Times that 'it created a catalytic moment' and 'allowed us to attract capital and talent into this community that never would have been here otherwise.'"
According to Parfitt, the competition to become a fiber community is fierce and instead of asking fiber suppliers why we need them, we need to proactively communicate why State College is a good contender for a fiber town. "For example, Ting, a gigabit internet supplier that recently wired the college community of Charlottesville, Va., won’t spend time convincing towns “why” they should prioritize fiber. Ting’s website argues that communities should 'be coming to the discussion with the sense that crazy fast-fiber internet is a thing they need in order to keep pace.'"
"Now is the time to explore how we can best develop and deploy our own gigabit internet," concludes Parfitt. "Centre Region leaders have proven capable of uniting across municipal lines to improve other regional infrastructures. The same can be done with fiber-optic internet."
March 10, 2017: Tucows Hosts Third Annual Ting Open StarCraft 2 Competition in San Jose
The Ting Blog reported on March 10, 2017 that Ting will host the finals of Season 3 live of the Ting Open alongside BaseTradeTV in San Jose, California on March 25 and 26. "The four StarCraft 2 semi finalists will compete live at the Corsair headquarters on March 25 and 26. This tournament will be open to the public, so if you live in the area or would like to take a weekend trip to watch some of the best StarCraft 2 players in the world compete face to face, come join us!" The Ting Open Season 3 finals will be streamed live from twitch.tv/basetradetv.
March 10, 2017: Ting Team Holds Community Information Night About Fiber Internet in Centennial
The Ting Blog reported on March 10, 2017 that the Ting Team is hosting a Community Information Night about fiber Internet in Centennial at Smoky Hill Library on March 23, 2017. "If you have questions about Ting Internet or would like to learn more, this is an event you don’t want to miss out on," says the announcement. "The team will be on hand to give a short presentation followed by an opportunity to ask us questions. We’ll be kicking things off at 7pm and wrapping things up at 9pm. Light refreshments will be served. Admission is free, so feel free to bring your friends and neighbors! Please RSVP on our event page."
- Learn more about Ting Fiber's Rollout in Centennial
March 8, 2017: Tucows Files Annual Report with SEC
Source of Revenue from Ting Internet: "The Company also derives revenue from the sale of fixed high-speed Internet access (“Ting Internet”) in select towns including Holly Springs, North Carolina; Westminster, Maryland; and Charlottesville, Virginia. Our primarily sales channel of Ting Internet is through the Ting website. The primary focus of Ting Internet is to provide reliable Gigabit Internet services to consumer and business customers. We also derive revenue from providing Internet hosting and network consulting services to business customers in Central Virginia through our acquisition of a 70% share in Ting Virginia, LLC on February 27, 2015."
Employees: "As of December 31, 2016, we had approximately 375 full-time employees. None of our employees are currently represented by a labor union. We consider our relations with our employees to be good."
Risk Factors in Fiber Investments: "We have invested and expect to continue to invest in new fiber to the home (“FTTH”) deployments in select markets in the United States. The investments are a reflection of our ongoing efforts to build FTTH network via public-private partnerships in communities we identify as having strong, unmet demand for FTTH services. Such FTTH investments may involve risks and uncertainties, including: insufficient revenues from such investments in the short and medium term to offset any new commitments assumed and expenses associated with these new investments; inadequate return of capital on our investments; inability to obtain the appropriate technical and operational resources; and unanticipated local or federal regulatory changes that could cause us to fail to realize the anticipated benefits of such investments. Because these new FTTH deployments are inherently risky, no assurance can be given that such investments will be successful and will not adversely affect our financial condition and operating results."
Seasonality: "During the summer months and certain other times of the year, such as major holidays, Internet usage often declines. As a result, many of our services (OpenSRS, Hover and Ting) may experience reduced demand during these times. For example, our experience shows that new domain registrations decline during the summer months and around the year-end holidays. Seasonality may also affect advertising, which may have a slight impact on advertisement-based revenue. These seasonal effects could cause fluctuations in our financial results. For Ting Mobile, we see increased gross activation and churn activity in late summer as part of back-to-school activities as well as the holiday season in December."
Competitors: "Our competitors may be divided into the following groups: • US Mobile Phone Service providers such as AT&T, Verizon, T-Mobile and Sprint, who primarily compete with Ting Mobile Services. • US Broadband providers such as Comcast, Verizon and CenturyLink, who primarily compete with Ting Internet Services. • Retail-oriented domain registrars, such as GoDaddy and Web.com who compete with our Reseller customers in Wholesale Domain Services and with Hover. • Wholesale-oriented domain registrars, su ch as GoDaddy, who market services to resellers such as our customers. • Wholesale Email Service providers, such as Google, Microsoft, Bluetie and MailTrust."
Competitive Advantages in Network Services: "We believe the primary competitive factors in our Network Access Services are: • Providing superior customer service experience • Providing a simple and friendly user experience through more usable web and application interfaces and more fair and transparent pricing; • Being agnostic on telephony and internet hardware, including phones and network routers; and • Providing superior technology, speed and reliability with fiber to the home services"
Branding: "In recognition of the evolving nature of the internet services market and to make it easier to clearly differentiate each service we offer from our competitors, we enhanced our branding by focusing our service offerings under four distinct brands namely “OpenSRS”, “YummyNames”, “Hover” and “Ting”. We also believe that maintaining and enhancing the “Tucows” corporate brand and our service brands is critical to expanding our customer base. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brands may become increasingly difficult and expensive. Maintaining and enhancing our brands will depend largely on our ability to be a technology leader providing high quality products and services, which we may not do successfully. To date, we have engaged in relatively little direct brand promotion activities. This enhances the risk that we may not successfully implement brand enhancement efforts in the future."
Risk Factors from Debt Service Obligations: "In January 2017, we amended and increased our existing credit facilities to $140 million from $60 million in order to complete the acquisition of Enom. As of March 3, 2017, our outstanding debt under our credit facility was $97.7 million. Our ability to generate cash flow from operations to make principal and interest payments on our debt will depend on our future performance, which will be affected by a range of economic, competitive and business factors as well as changes in government monetary or fiscal policy. If our operations do not generate sufficient cash flow to satisfy our debt service obligations, we may need to seek additional capital to make these payments or undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets or reducing or delaying capital investments and acquisitions. We cannot assure you that such additional capital or alternative financing will be available on favorable terms, if at all. Our inability to generate sufficient cash flow from operations or obtain additional capital or alternative financing on acceptable terms could have a material adverse effect on our business, financial condition and results of operations."
Volatility of Stock Price: "Our share price has varied recently and the price of our common stock may decrease in the future, regardless of our operating performance. Investors may be unable to resell their common stock following periods of volatility because of the market ’s adverse reaction to this volatility. The following factors may contribute to this volatility: • actual or anticipated variations in our quarterly operating results; • interruptions in our services; • seasonality of the markets and businesses of our customers; • announcements of new technologies or new services by our company or our competitors; • our ability to accurately select appropriate business models and strategies; • the operating and stock price performance of other companies that investors may view as comparable to us; • news relating to our industry as a whole; and • news relating to trends in our markets. The stock market in general and the market for Internet-related companies in particular, including our company, has experienced volatility. This volatility often has been unrelated to the operating performance of these companies. These broad market and industry fluctuations may cause the price of our common stock to drop, regardless of our performance."
Corporate Culture: "We believe that a critical contributor to our success has been our corporate culture, which we believe fosters innovation, creativity and teamwork. As our organization grows and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture. This could negatively impact our future success."
Real Property: "We do not own any real property. Our principal administrative, engineering, marketing and sales office totals approximately 26,900 square feet and is located in Toronto, Ontario under a lease that expires on December 31, 2020. In addition, we also maintain offices of approximately 14,100 square feet in St Catharines, Ontario, approximately 11,200 square feet in Charlottesville, Virginia, approximately 5,000 square feet in Holly Springs, North Carolina, approximately 4,000 square feet in Starkville, Mississippi, approximately 2,900 square feet in Bonn, Germany and a satellite office in Westminster, Maryland. Substantially all of our computer and communications hardware is located at our facilities or at server hosting facilities in Toronto, Ontario and Ashburn, Virginia."
Legal Proceedings: "We are involved in various investigations, claims and lawsuits arising in the normal conduct of our business, none of which, in our opinion, will materially harm our business. We cannot assure you that we will prevail in any litigation. Regardless of the outcome, any litigation may require us to incur significant litigation expense and may result in significant diversion of management attention."
2017 Stock Buyback Program: "On February 28, 2017, the Company' s Board of Directors authorized the repurchase of up to $40 million of the Company's common stock at the Company's discretion. The new $40 million buyback program commenced on March 1, 2017 and will terminate on or before February 28, 2018. Purchases for this program will be made exclusively through the facilities of the NASDAQ Capital Market. All shares purchased by the Company under this program will be retired and returned to treasury. Repurchases under this program may have included open market purchases, block trades or a combination of such methods. The number of shares purchased and the timing of the purchases depended on a number of factors, including share price, trading volume and general market conditions, working capital requirements, general business conditions, financial conditions, any applicable contractual limitations and other factors, including alternative investment opportunities. The Company may suspend or discontinue the repurchases at any time, including in the event the Company would be deemed to be making an acquisition of its own shares under Rule 13e-3 of the Exchange Act. Subject to applicable securities laws and stock exchange rules, all purchases will occur through the open market and may be in large block purchases. The Company does not intend to purchase its shares from its management team or other insiders."
2016 Stock Buyback Program: "On February 9, 2016, the Company announced that its Board of Directors had approved a stock buyback program to repurchase up to $40 million of its common stock in the open market. Purchases were made exclusively through the facilities of the NASDAQ Capital Market. The stock buyback program commenced on February 10, 2016 and terminated on February 9, 2017. The Company repurchased 308,416 shares under this program during the year ended December 31, 2016 for a total $7.2 million."
2015 Stock Buyback Program: "On February 11, 2015, the Company announced a stock buyback program. Under this buyback program, the Company could repurchase up to $20 million of the Company's common stock over the 12-month period that commenced on February 11, 2015. The Company repurchased 868,549 shares under this program during the year ended December 31, 2015 for a total of $20.0 million."
Revenue from Ting Internet: "High speed Internet access, Internet hosting and network consulting services generated $3.7 million in revenue during Fiscal 2016, up $0.5 million from Fiscal 2015. Growth in High speed Internet access revenues was as a result of the increased Ting Internet footprint in Charlottesville, VA in Fiscal 2016. We expect expansions in Westminster, MD and Holly Springs, NC to contribute to revenue in 2017. Increased access revenues were partially offset by ongoing declines in legacy revenues from hosting and network consulting services."
Loan Repayments on Stock Repurchases, Acquisitions, and FTTH Capital Expenditures: "In accordance with the terms of the 2016 Credit Facility, Facilities A, B and C accrue interest and standby fees at variable rates based on borrowing elections by the Company and the Company’s Total Funded Debt to EBITDA ratio. Facility A is for general working capital and general corporate requirements. It requires interest only monthly payments and a final principal payment due upon maturity of the 2016 Credit Facility. The purposes of Facility B and C are to support share repurchases, acquisitions and capital expenditures associated with the Company’s FTTH program. Under the repayment terms for Facilities B and C, the amortization periods are based on the purposes of the loan as follows: borrowings for share repurchases are repaid over four years, borrowings for acquisitions are repaid over five years and borrowings for FFTH capital expenditures are repaid over seven years."
Opportunities, Challenges, and Risks: "As a MVNO our Ting service is reliant on our Mobile Network Operators ("MNOs") providing competitive networks. Our MNOs each continue to invest in network expansion and modernization to improve their competitive positions. Deployment of new and sophisticated technology on a very large scale entails risks. Should they fail to implement, maintain and expand their network capacity and coverage, adapt to future changes in technologies and continued access to and deployment of adequate spectrum successfully, our ability to provide wireless services to our subscribers, to retain and attract subscribers and to maintain and grow our subscriber revenues could be adversely affected, which would negatively impact our operating margins. Ting has also enjoyed rapid growth in its first four years of operation. During this growth phase we have been able to continue to grow gross customer additions and maintain a consistent churn rate, which has allowed us to maintain net new customer additions despite the impact of churn on a fast growing customer base. We expect price competition to grow more intense in the industry which could result in increased customer churn or reductions of customer acquisition rates either of which could result in slower growth rates or in certain cases, our ability to maintain growth. The communications industry continues to compete on the basis of network reach and performance, types of services and devices offered, and price. The increased competition in the market for Internet services in recent years, which we expect will continue to intensify in the short and long term, poses a material risk for us. As new registrars are introduced, existing competitors expand service offerings and competitors offer price discounts to gain market share, we face pricing pressure, which can adversely impact our revenues and profitability. To address these risks, we have focused on leveraging the scalability of our infrastructure and our ability to provide proactive and attentive customer service to aggressively compete to attract new customers and to maintain existing customers. Substantially all of our Domain Services revenue is derived from domain name registrations and related value-added services from wholesale and retail customers using our provisioning and management platforms. The market for wholesale registrar services is both price sensitive and competitive and is evolving with the introduction of New gTLDs, particularly for large volume customers, such as large web hosting companies and owners of large portfolios of domain names. We have a relatively limited ability to increase the pricing of domain name registrations without negatively impacting our ability to maintain or grow our customer base. Growth in our Domain Services revenue is dependent upon our ability to continue to attract and retain customers by maintaining consistent domain name registration and value-added service renewal rates and to grow our customer relationships through refining, evolving and improving our provisioning platforms and customer service for both resellers and end-users. In addition, we also generate revenue through pay-per-click advertising and the sale of names from our portfolio of domain names and through the OpenSRS Domain Expiry Stream. The revenue associated with names sales and advertising has recently experienced flat to declining trends due to the uncertainty around the implementation of ICANN ’s New gTLD Program, lower traffic and advertising yields in the marketplace, which we expect to continue. From time-to-time certain of our vendors provide us with market development funds to expand or maintain the market position for their services. Any decision by these vendors to cancel or amend these programs for any reason may result in payments in future periods not being commensurate with what we have achieved during past periods. Sales of domain names from our domain portfolio have a negative impact on our advertising revenue as these names are no longer available for advertising purposes. In addition, the timing of larger domain names portfolio sales is unpredictable and may lead to significant quarterly and annual fluctuations in our Portfolio revenue. Our revenue is primarily realized in U.S. dollars and a major portion of our operating expenses are paid in Canadian dollars. Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar may have a material effect on our business, financial condition and results from operations. In particular, we may be adversely affected by a significant weakening of the U.S. dollar against the Canadian dollar on a quarterly and an annual basis. Our policy with respect to foreign currency exposure is to manage our financial exposure to certain foreign exchange fluctuations with the objective of neutralizing some or all of the impact of foreign currency exchange movements by entering into foreign exchange forward contracts to mitigate the exchange risk on a portion of our Canadian dollar exposure. We may not always enter into such forward contracts and such contracts may not always be available and economical for us. Additionally, the forward rates established by the contracts may be less advantageous than the market rate upon settlement."
Acquisition of Enom: "On January 20, 2017, the Company, through its indirect wholly owned subsidiary, acquired all of the issued and outstanding capital stock of Enom, Incorporated, a domain name registrar business, from the Rightside Group, Ltd. The purchase price was $83.5 million in cash, less an estimated net working capital adjustment of approximately $6.8 million and other customary adjustments. Concurrent with the acquisition, the Company entered into an Amended Credit Agreement to, among other things, reduce the existing non-revolving Facility C from $40 million to $35 million, and establish a non-revolving credit facility of $85 million of which approximately $84.5 million was drawn to fund the acquisition, working capital deficit and related transaction costs. The Amended Credit Agreement provides the Company with access to an aggregate of $140 million in funds. Under the amended credit agreement, the Company has agreed to comply with the following financial covenants at all times, which are to be calculated on a rolling four quarter basis: (i) maximum Total Funded Debt to EBITDA Ratio of 3.00:1 until September 30, 2017, 2.50:1 until September 30, 2018 and 2.25:1 thereafter; and (ii) minimum Fixed Charge Coverage Ratio of 1.20:1. Further, the Company's maximum annual Capital Expenditures cannot exceed $32.8 million per year, which limit will be reviewed on an annual basis. In addition, funded share repurchases are not to exceed $20 million, or up to $40 million so long as the total loans related to share repurchases do not exceed 1.5 times of trailing twelve months EBITDA. The amended credit agreement also provides for an additional interest rate tier if the Company exceeds a 2.25x funded debt to adjusted EBITDA ratio and repayment terms remain unchanged for the existing facilities with the new non-revolving credit facility having a repayment term of five years with equal quarterly repayments commencing in second quarter of 2017."
Acquisition of Additional Stake in Ting Virginia: "On February 1, 2017, the Company exercised its call option to purchase an additional 20% ownership interest in Ting Virginia, LLC for consideration of $2.0 million."
Director Nomination: "Our Corporate Governance, Nominating and Compensation Committee is responsible for identifying potential nominees to our Board of Directors. In considering candidates for nomination, our Corporate Governance, Nominating and Compensation Committee seeks individuals who evidence strength of character, mature judgment, career specialization, relevant technical skills or financial acumen, diversity of viewpoint and industry knowledge. As set forth in the charter of our Corporate Governance, Nominating and Compensation Committee, our Board of Directors endeavors to have directors who collectively possess a broad range of skills, expertise, industry and other knowledge and business and other experience useful to the effective oversight of our business. In addition, our Board of Directors also seeks members from diverse backgrounds so that our Board of Directors consists of members with a broad spectrum of experience and expertise and with a reputation for integrity. In determining whether to nominate a current director for re-election, our Corporate Governance, Nominating and Compensation Committee will take into account these same criteria as well as the director ’s past performance, including his or her participation in and contributions to the activities of the Board of Directors. 76 Our Corporate Governance, Nominating and Compensation Committee will evaluate and consider recommendations for director candidates from shareholders using the same criteria described above. As set forth in the charter of the Corporate Governance, Nominating and Compensation Committee, recommendations submitted by the Company ’s shareholders shall be submitted, along with the following to the attention of the Chairperson of the Corporate Governance, Nominating and Compensation Committee at 96 Mowat Avenue, Toronto, Ontario M6K 3M1 Canada at least 120 days before the first anniversary of the date on which we first mailed our proxy materials for our prior year’s annual meeting of shareholders: • the name and address of the recommending shareholder; • the candidate ’s name and the information about the individual that would be required to be included in a proxy statement under the rules of the SEC; • information about the relationship between the candidate and the recommending shareholder; • the consent of the candidate to serve as a director; and • proof of the number of shares of our common stock that the recommending shareholder owns and the length of time the shares have been owned."
- Read Tucows Annual Report with the SEC March 8, 2017
March 3, 2017: Ting Considers Bringing Fiber-optic Internet Service from Charlottesville to Crozet
The Crozet Bulletin reported on March 3, 2017 that Ting has yet to announce formal plans to run fiber to Crozet, but rumors are circulating. “Ting is planning to pull fiber to Crozet,” wrote Mark McCardell, a member of the Parkside Village Homeowners’ Association, addressing other Crozet residents via neighborhood social networking site Nextdoor.com. “Many in our neighborhood have already paid the $9 to pre-order. The more people that express interest, the greater the incentive for them to pull the fiber out to Crozet.” Ting Internet vice president of networks Adam Eisner said nothing has been decided.
“The acquisition of BRI put us into the Charlottesville area and since then the goal has been to cover as much of the city in fiber as we can. That said, as we continue to build up Charlottesville, we’ll be looking at customer interest in surrounding areas, and Crozet checks off a lot of the boxes that are interesting to us in terms of evaluating markets.," said Eisner. “On the customer side of things, we’ve worked with a lot of HOA’s in the Charlottesville area that got our attention basically by generating interest on the ground-level. While some companies are very specific about the metrics they need to move into a given area—for instance, Google says they need 20 percent in x or y neighborhood or they’re not coming—we don’t do that. Instead, what we do is take $9 pre-orders, which serves as a barometer to gauge people’s interest.” While Eisner refrained from setting a specific number, he said that a strong level of preorders would indicate it was worthwhile for Ting to invest in the expensive process of running fiber down Route 250 and into Crozet. “We have a unit that’s dedicated to working with HOA’s on bringing service in, so if the interest is there, that would be the place to begin,” he said.
- Read more about Ting Fiber's Rollout in Charlottesville
March 3, 2017: Ting Fiber's Adam Eisner Discusses the Advantages of Fiber
The Crozet Bulletin reported on March 3, 2017 on Adam Eisner, Ting Internet vice president of networks, discussing what fiber-optic service can do. “So, I’ll start with saying this is the fastest Internet you could possibly get,” said Eisner. “Fiber is essentially a transformative technology—in other words, having a gigabit completely changes what you can do at home or work.” Imagine a future where, despite four kids gaming online, Netflix streaming in the back bedroom, a video conference taking place in mom’s home office, high-resolution photos uploading, dad in the kitchen making a Google Home grocery list—so on and etc.—there’s never any lag-time or buffering, ever, with uploads next to instantaneous. “Fiber allows the possibility for increasing connectivity between devices in the home, because data is no longer an issue,” added Eisner. “You could have 20 or 30 devices all running at once and no matter how many you have everything happens immediately… Like autonomous cars in the realm of transportation, this technology is going to absolutely revolutionize what’s possible in a household.”
March 1, 2017: Tucows Announces $40 Million Stock Buyback Program
Tucows announced on March 1, 2017 that that its Board of Directors has approved a stock buyback program to repurchase from time to time up to $40 million of its common stock in the open market. The new $40 million buyback program will commence March 1, 2017 and will terminate on or before February 28, 2018. Purchases for the new $40 million buyback program will be made exclusively through the facilities of the NASDAQ Capital Market. All shares purchased by Tucows under the stock buyback program will be retired and returned to treasury. The timing and exact number of common shares purchased will be at Tucows’ discretion and will depend on available cash and market conditions. Tucows may suspend or discontinue the repurchases at any time, including in the event Tucows would be deemed to be making an acquisition of its own shares under Rule 13e-3 of the Securities Exchange Act of 1934, as amended. Subject to applicable securities laws and stock exchange rules, all purchases will occur through the open market and may be in large block purchases. Tucows does not intend to purchase its shares from its management team or other insiders. The purchase will be funded from available working capital and existing credit facilities. As of March 1, 2017, Tucows had 10,469,406 common shares outstanding.
March 1, 2017: Centennial, CO - A Great Town Deserves Great Internet
Centennial, Colorado knows all about starting something: A business. A movement. It's a place to work. To play. To raise a family.
- Learn more about Ting Fiber's Rollout in Centennial
February 27, 2017: i2Coalition to Present Internet Community Leadership Award to Tucows CEO Elliot Noss
CircleID reported on February 27, 2017 that the "Ron Yokubaitis Internet Community Leadership Award" will be presented to Elliot Noss, the Chief Executive Officer and President of Tucows, at a ceremony on May 3rd in Washington, D.C., during the closing ceremonies i2Coalition's yearly Washington, D.C. Fly-In. "Elliot has been challenging industry norms since the early days of the commercial Internet. He is one of the Internet's most effective champions for users' rights during that entire period," said i2Coalition Executive Director Christian Dawson. "Elliot sees beyond the business. He works diligently through his role at Tucows, his involvement in ICANN, and his personal efforts. He identifies important opportunities Internet infrastructure providers have to bring positive change in the world. Elliot has lobbied, agitated, and educated to promote and protect the Open Internet around the world. We are proud to have him as our Internet Community Leadership Award recipient and keynote speaker for our 2017 Fly-in event."
February 21, 2017: Ting Purchases Naming Rights For Holly Springs Athletic Complex
The News and Observer reported on February 21, 2017 that Holly Springs unanimously approved an agreement February 7, 2017 that would allow Ting to rename the town’s $19 million North Main Athletic Complex including the facility’s 1,800-seat, multi-purpose stadium and the complex at large which has been home to the Holly Springs Salamanders, a collegiate summer league baseball team, and Wake Tech’s baseball team. As part of the agreement, the town will refer to the complex by Ting’s chosen name in all official town communications, and Ting will be able to use the facility for two company-sponsored events each year. The three-year contract for a total of $330,000 won’t begin until the complex’s primary sign is erected. Town spokesman Mark Andrews said he expects that process could take several months. A name like “Ting Park” is expected to be chosen, although the contract gives the company some discretion over the name while giving the town veto power if a proposed name is too unusual. Daniel Weeks, Holly Springs’ assistant town manager, said the town had considered pursuing the sale of the complex’s naming rights for the past few years. The town approached Ting about six months ago about such an agreement, he said. “Ting had some interest in getting there first,” Andrews said. “Because some people still call it SAS Soccer Park. People remember who had the name first. Like with the RBC Arena, in Raleigh – I can’t even remember what it’s called now.”
- Learn more about Ting Fiber's Rollout in Holly Springs
February 21, 2017: Holly Springs Mayor Appreciates How Unobtrusive Ting Fiber's Installation Practices Have Been Relative to Other Fiber Service Providers
The News and Observer reported on February 21, 2017 that Holly Springs Mayor Dick Sears said he has appreciated how unobtrusive Ting’s fiber installation practices have been relative to those of other fiber service providers which have generated complaints throughout the area while laying fiber cables along residential streets. Speaking about the agreement to provide naming rights to Ting for the North Main Athletic Complex, Sears said the town wouldn’t want to burden one of its most popular facilities by associating it with an unpopular company, but he’s confident Ting’s name will continue to develop a positive connotation among residents as it builds its network in Holly Springs during the next three years. “We’ve already been out to watch how they do it compared to their competition,” Sears said. “Their tear-up is minimal. When a rival company came into our neighborhood, they tore up some of the yards pretty good. They fixed it pretty well, but not great.”
- Read more about Ting Fiber's Rollout in Holly Springs
February 20, 2017: Rightside Activist Investor Says Enom Was Sold to Tucows Too Cheap
Domain Incite reported on February 20, 2017 that J Carlo Cannell, an investor who owns 9% of Rightside, says that the $76.7 million deal to sell Enom to Tucows “marks a step in the right direction” for the company, but that he was “not satisfied” with the price or the $4 million legal fees accrued. "Conversations with management suggest that the Company took only two months to evaluate and close the transaction. Perhaps if they had been more patient and diligent, shareholders would have enjoyed more than the 0.5x 2016 revenues which they received in this 'shotgun sale'," wrote Cannell. "This price was a fraction of Tucows’ own valuation of 2.6x 2016 estimated revenue. For the two trading sessions following the Enom transaction, NAME traded up 10% while TCX was up 32%, suggesting that investors believe it was a better deal for TCX shareholders than NAME shareholders."
Cannell said last week he has formed Save NAME Group, named after Rightside’s ticker symbol, as a means to exert pressure on the board and added that it is currently “difficult to justify” the company remaining publicly listed, and that the “sale of the entire company” or a “special and substantial dividend” could help appease shareholders.
February 19, 2017: Sandpoint City Council Passes Resolutions on Dark Fiber Fees and a Lease Agreement with Ting Fiber
The Donner County Daily Bee reported on February 19, 2017 that the Sandpoint City Council passed resolutions for dark fiber fees, a memorandum of understanding with Bonner County concerning the fiber network backbone, and a lease agreement with Ting Fiber, Inc. for a piece of city-owned property to house network equipment. Council members also heard presentations from Ting and Intermax Networks representatives who are looking to offer service to residents in the near future. Monica Hubbard from Ting said the company officials are currently focused on planning and design, which will take about six months, after which construction will begin. During the planning and design process, the company will put out a neighborhood announcement based on its pre-order campaign. Residents can pre-order service for $9, she said, which is refundable if someone changes their mind. Neighborhoods with the highest pre-order rates are generally built first, Hubbard said. "Our goal here is to start construction, based on the neighborhoods that have the strongest demand, sometime in the summer with a goal of finishing in November," Hubbard said. "If we don't finish by November, of course, we have to go into next spring and we'd rather have it wrapped up in November."
Ting will likely use the "indefeasible right of use" cost outlined in the dark fiber pricing structure, which is a lump sum, one-time fee. IRU pricing is outlined at $3,550 per strand with a six-strand minimum. For 13 to 24 strands, the price per strand is $2,367 — a 33-percent discount — and 25 or more strands at $1,183 per strand. According to the pricing structure, Ting will be charged an annual maintenance fee of $333 for up to 24 strands, and $167 per year for 25 or more strands. The maintenance fee includes a stipulation that it can be increased or decreased every other year based on changes in actual maintenance costs.
The final resolution approved by council on the topic of fiber was the lease agreement with Ting for a portion of city-owned property at the corner of Superior Street and Ella Avenue. It was determined by city staff the location would be ideal for Ting's equipment hut because the city is not using it and because it is located along the main fiber line.
- Learn more about Ting Fiber's Rollout in Sandpoint
February 19, 2017: Intermax May Also Provide Fiber Service in Sandpoint
The Donner County Daily Bee reported on February 19, 2017 that one other company is also interested in providing fiber service in Sandpoint. Jim Cost with Intermax said Ting is "not the only player in town" and the North Idaho-based company is also looking to provide service in Sandpoint. Intermax is located in Coeur d'Alene and, while it does not offer television packages, Cost said the company offers high speed data services, managed IT services, security services and digital voice services. Since it was founded more than 10 years ago, the company has grown to more than 3,500 customers in North Idaho. "We've been building this a long time and we continue to hope to play a big part in the growth of economic development for Sandpoint and surrounding areas," Cost said.
According to their web site, Intermax Networks has built the largest independent fiber and private microwave data network in North Idaho providing internet, digital phone, transport connections, and Point-to-Point circuits connecting North Idaho to places all across Idaho and the Northwest. Their main office is in Coeur d’Alene, Idaho with offices in Sandpoint and Bonners Ferry serving Kootenai, Bonner, Boundary, and Spokane Counties. Intermax supplies more than 3,000 customers with service on a monthly basis, from individual residences to major infrastructure connections for business, government, health care and schools. Their network includes direct Intermax fiber connections to: Tierpoint in Liberty Lake, Downtown Spokane (U.S. Bank), Seattle (The Westin Fiber Hub) and other POPs around the Inland Northwest. Intermax has a staff of nearly 30 people across three offices in North Idaho and is owned and managed by North Idaho people. "We have no conflicting objectives in California or Virginia. We don’t have a corporate parent expecting us to send our earnings to New York or be small outposts for large corporate mergers."
Intermax says they have built the largest independent fiber network in Northern Idaho with over 350 miles of total fiber connectivity and has fiber connections at many professional and office locations in Coeur d’Alene and Sandpoint. The Intermax network taps into the internet from three core locations with direct links to Seattle, Boise, and Denver.
- Learn more about Ting Fiber's Rollout in Sandpoint
February 17, 2017: Directors Sell Tucows Stock
The Cerbat Gem reported on February 17, 2017 that Director Rawleigh Hazen Iv Ralls sold 30,000 shares of Tucows stock at an average price of $46.85, for a total transaction of $1,405,500.00 in a transaction on February 14, 2017. Following the completion of the sale, the director now owns 188,647 shares of the company’s stock, valued at approximately $8,838,111.95.
Sports Perspectives and Market News reported on February 22, 2017 that Director Allen Karp sold 2,650 shares of Tucows stock at an average price of $42.52 for a total value of $112,678.00 in a transaction that occurred on February 21, 2017.
February 16, 2017: RingPlus Drops Lawsuit Against Sprint
Prepaid Reviews reported on February 16, 2017 that RingPlus has voluntarily dropped their lawsuit against Sprint that included a number of allegations including breach of contract, extortion, trade dress infringement, patent infringement, and unfair practices and competition. The lawsuit has been dismissed with prejudice, which means that it can never be brought up again. Details on exactly what kind of deal was reached (or other reasoning for the voluntary dismissal) are not available, but it seems kind of like the death knell for this little MVNO. In the meantime, customers who have not already ported out of RingPlus will be transferred to Ting.
February 16, 2017: Why Comcast is so Afraid of Municipal Broadband and Open Access
Karl Bode wrote at Techdirt on February 16, 2017 that for years incumbent ISPs have waged a not-so-subtle war on towns and cities looking to escape from the high prices and abysmal service of the country's broadband duopoly but now many cities have taken to either building fiber networks themselves -- or striking public/private partnerships with companies like Google Fiber or Ting/Tucows -- because the private sector has failed to deliver the service and connectivity they want at prices they can afford. That's why large ISPs like Charter, Comcast and AT&T have spent the last decade lobbying for protectionist bills across twenty different states banning local citizens from making these kinds of decisions for themselves.
For example, city-owned Huntsville Utilities has been building a fiber broadband network that should service the lion's share of the city's homes and businesses over the next few years and the network will be open access -- meaning that ISPs can come in and compete with each other over the regional infrastructure. Google Fiber has already signed up to be one of at least three ISPs taking advantage of the build, and should begin offering service there by the middle of this year. "FCC data has long noted that the open access model provides consumers with better service at lower prices, thanks to the miracle of competition," says Bode. "Obviously that's a nightmare for large ISPs used to doing the bare minimum while charging captive subscribers the absolute maximum. As such, the government consistently has treated open access networks like a plague, given that regulators and lawmakers are consistently terrified of upsetting some of the biggest campaign contributors in the country."
According to the FCC Study, "Our most surprising and significant finding is that “open access” policies—unbundling, bitstream access, collocation requirements, wholesaling, and/or functional separation—are almost universally understood as having played a core role in the first generation transition to broadband in most of the high performing countries; that they now play a core role in planning for the next generation transition; and that the positive impact of such policies is strongly supported by the evidence of the first generation broadband transition. The importance of these policies in other countries is particularly surprising in the context of U.S. policy debates throughout most of this decade. While Congress adopted various open access provisions in the almost unanimously-approved Telecommunications Act of 1996, the FCC decided to abandon this mode of regulation for broadband in a series of decisions in 2001 and 2002. Open access has been largely treated as a closed issue in U.S. policy debates ever since. Yet the evidence suggests that transposing the experience of open access policy from the first generation transition to the next generation is playing a central role in current planning exercises throughout the highest performing countries. In Japan and South Korea, the two countries that are half a generation ahead of the next best performers, this has taken the form of opening up not only the fiber infrastructure (Japan) but also requiring mobile broadband access providers to open up their networks to competitors. In leading countries like Sweden and the Netherlands, following the earlier example of the United Kingdom, regulators are addressing the complexities of applying open access policy to next-generation infrastructure by pushing their telecommunications incumbents to restructure their operations and functionally separate their units that sell access to network infrastructure from their units that sell connectivity directly to consumers. Moreover, countries that long resisted the implementation of open access policies, Switzerland and New Zealand, changed course and shifted to open access policies in 2006."
"Claiming that municipal broadband is spend-crazy government run amok is a violent misread of what's actually happening in these towns and cities," concludes Bode. "Municipal broadband business plans are like any other business plan; some are good, some aren't. Ideally that should be up to the locals to decide, not billionaire CEOs and grumpy armchair partisans sitting half a world away in judgement. Municipal broadband isn't the devil, it's a genuine, grassroots, local reaction to market failure; one that can be avoided by ISPs doing one thing: actually delivering the kinds of services, prices and features locals have spent fifteen years clamoring for."
February 13, 2017: Google Fiber Battles ATT in Louisville With a Mix of Fiber Optics and Fixed Wireless
Digital Trends reported on February 13, 2017 that in early February, the "new cities" section of the Google Fiber website quietly moved Louisville, Kentucky from its list of "Potential" cities to "Upcoming" cities, joining San Antonio, Texas and Huntsville, Alabama and setting the stage for a Battleground with ATT where Google Fiber will prototype its next generation architecture, using a mix of fiber optics for the internet backbone and fixed wireless for the last mile to connect customers. This has the potential to supercharge deployments by bypassing the hardest, slowest, and most expensive part of the process--digging ditches and climbing poles to connect cables to every single residence. Meanwhile AT&T Fiber is unleashing an army of employees and contractors to wire up virtually every single home in the city where Google Fiber is preparing to launch the prototype for the 2.0 version of its ultra high speed service. Combined with their ongoing lawsuit over utility pole access in Louisville, it's turning the southern city into the epicenter of the fiber broadband wars of 2017--with important implications for the future of both companies and gigabit internet across the United States.
Return of the Jedi
Google Fiber has had a unique connection to the city ever since Louisville Mayor Greg Fischer went to bat for Google Fiber with a "One Touch Make Ready" ordinance that gave Google Fiber (and other broadband challengers) the right to make use of public utility poles owned by providers such as AT&T. Louisville and Google argued that the move was a common sense measure to bring more broadband competition and quickly spread ultra high speed internet throughout the city. According to ZD Net AT&T took the city to court over it, and Louisville immediately morphed into an important battleground for the future of Google Fiber and broadband. In the initial Google Fiber cities, it could simply make a deal with the city and get to work. However, Louisville was more like many other US cities with a tangled web of ownership, laws, and ordinances around utilities. If Google Fiber could make it in Louisville, then it could set a precedent that could spread to other cities. "We will vigorously defend the lawsuit filed today by AT&T. Gigabit fiber is too important to our city's future," said Mayor Fischer. Google Fiber joined the lawsuit on Louisville's side, and said, "Mayor Fischer, we couldn't agree with you more, and stand with you."
Fiber-optic cable infrastructure rollout costs were also a huge impediment. Last summer, Google Fiber acquired WebPass wireless, a gigabit technology that only needs point-to-point airspace, obviating the need to dig or hang cables. Webpass wireless isn’t cost effective in terms of connecting to single homes, but it’s fine for sending data traffic between larger buildings and distribution hubs. Louisville will be Google Fiber’s first hybrid wireless and fiber-optic cable gigabit internet service city.
Google Fiber's Louisville network is going to include its wireless Webpass technology for last-mile connections to homes. While other cities where Google Fiber had already done infrastructure work--San Antonio, Huntsville, and Raleigh, North Carolina--have continued with the same technology as the original Google Fiber cities, the timing of the Louisville build (along with the One Touch Make Ready battle) has made it the perfect candidate for Google Fiber to launch the 2.0 version of its gigabit ambitions. "We are excited to bring Google Fiber to Louisville and are still figuring out the path," said a Google spokesperson. "We've made great progress working with the city and are excited to find innovative new ways to deploy superfast internet, such as One Touch Make Ready and wireless technology. We'll make a full announcement with the city at the right time."
The Empire Strike Back
Then, in August, AT&T openly mocked Google Fiber's decision to start using wireless to speed up its deployments. In a published statement, AT&T said: "Google Fiber still complains it's too hard... Meanwhile, without excuses or finger-pointing, and without presenting ultimatums to cities in exchange for service, AT&T continues to deploy fiber and to connect our customers to broadband services in communities across the country. Welcome to the broadband network business, Google Fiber. We'll be watching your next move from our rear view mirror." In March 2016, AT&T touted to the press that it was about to connect its first two subdivisions to gigabit fiber in Louisville. In July, AT&T started bragging that it was already installing gigabit fiber throughout Louisville--even as Google Fiber was getting all the hype after the One Touch Make Ready ordinance, but had yet to start its deployment. AT&T's work across the city has exploded. TechRepublic has heard from several contractors associated with AT&T that the company is bringing in more and more contractors and is working non-stop to put tons of new fiber in the area. It has told the contractors that they have to keep up or else AT&T will give the business to others who can. And, that it expects to work continuously over the next couple years bringing fiber to every corner of the city.
All of AT&T's moves over the past couple months in Louisville appear to indicate that the telecom giant is looking to go to war over the next generation of internet broadband. And, it views Google Fiber as its most dangerous opponent. "With the lawsuit ongoing, it's clear that this battle is getting personal." writes ZD Net. "Google Fiber is setting the stage for its comeback tour, to display its latest innovations. AT&T, on the other hand, is hoping to stamp out any energy the upstart could drum up, working hard to dig and deploy gigabit before Google Fiber arrives in Derby City. In the fight for the next generation internet, Louisville is set to be the Gettysburg of the fiber war--in the courtroom and neighborhood-to-neighborhood."
February 17, 2017: Tucows Mentioned in the Wall Street Journal
The Wall Street Journal reported on February 17, 2017 that Roslyn Layton, a visiting fellow at the American Enterprise Institute who has studied net-neutrality practices in other countries and was part of Mr. Trump’s transition team, believes we need what she calls “soft net neutrality,” where multiple stakeholders, including both big internet companies and carriers come together and make the rules together.
Investors are proceeding with caution. “We’re assuming that net neutrality in its wired and wireless fashion is gone,” says Andy Weissman, a venture capitalist at Union Square Ventures who has been an outspoken defender of net neutrality. He’s investing in Tucows, an internet service provider that is beginning to roll out fiber in some areas. Tucows will be “pure pipes” he says, which means in the future, it could differentiate from incumbent carriers by committing to equal treatment for all data.
- * January 12, 2017: Brad Burnham at Union Square Venture Joins Tucows Board of Directors
February 12, 2017: The Future of Ting Internet at McDaniel College in Westminster
The McDaniel Free Press reported on February 12, 2017 that the biggest challenge between Ting Internet and McDaniel College in Westminster is figuring out how Ting’s service will work with McDaniel’s existing infrastructure. Seamlessly combining the two infrastructures and networks may be quite difficult. “There’s some technical challenges that both of us are looking at,” says Greg Dumont, chief information officer at McDaniel, “We want to take it slow.”
Part of what makes partnering with Ting so complicated is the nature of Westminster’s fiber internet project, a private and public partnership. Like every lot in town, the city will bring the fiber infrastructure to the edge of the campus property, but it’s up to the college what to do from there. Another problem is the volume of traffic that McDaniel would add to Ting’s network. Dumont says that Ting was originally planning on operating on a single bandwidth pipe, pushing all of their traffic together. “We were a little cautious in the beginning when the project started,” Dumont said about the single pipe, “Several thousand users will be more than they’ve ever done.” But Ting soon changed their model, showing some dedication to their possible client’s interests.
Whether or not the partnership between McDaniel and Ting will work out is somewhat contingent on how the remainder of the project continues. “It’s like entering a marriage,” says Val Giovagnoni, Ting Internet city manager for Westminster, “There’s so much that has to be discovered for Ting to be explored [with McDaniel].” For now, McDaniel community members will have to wait to see what happens between the new internet provider and their college. “It’s got to be a right fit,” Dumont added, “let’s not rush anything.” “No decision has been made today,” Giovagnoni concluded. “It’s not an overnight, we’ve got to do it right. You can’t rush good things.”
- Learn more about Ting Internet's Deployment in Westminster
February 10, 2017: How Ting Has Expanded into Holly Springs
Triangle Business Journal reported on February 10, 2017 that Ting Mobile has been connecting fiber customers in Holly Springs for about a month and its earnings call on February 7, 2017 provides insight into how the math works when it comes to implementing high-speed connections. Elliot Noss, CEO of Ting’s Canadian parent Tucows, told analysts Ting expects a 20 percent adoption among its serviceable addresses in a year and 50 percent in five years. “At these take rates, we’ll be paying about $2,500 to $3,000 per customer in CapEx and those customers will be worth about $1,000 a year in margin,” he says, adding that, in Holly Springs, pre-orders are guiding the buildout. “We’re moving quickly to convert all the [Holly Springs] pre-orders in the first few neighborhoods there into active customers,” he says.
However legacy contenders have been building up their own fiber arsenals in the background. CenturyLink continues to expand its gigabit offerings in the Triangle offering its highest-tier service plan in parts of several towns across the region, such as Wake Forest, Clayton and Pittsboro, but with some geographic limits. “All new subdivisions we build into are fiber to the home with Gigabit speeds, and the growth in our markets has been robust, so more and more fiber being added daily,” Rondi Furgason, vice president of operations, said in an email. On the other hand, Wake Forest partnered with a Salisbury firm, RST Fiber three years ago, only to have the company abandon its plans (and, in some cases, its equipment) in the town.
- Learn more about Ting Internet's Deployment in Holly Springs
- February 8, 2017: Hugh Pickens Projects The Number of Ting Internet Customers and Gross Margins Resulting from the 2017 CapEx Spend
February 7, 2017: Tucows Finishes Year With Record Revenue and Earnings
Original financial documents are available at:
- Tucows' (TCX) Q4 2016 Results February 7, 2017
- 2016 Q3 Consolidated Balance Sheets February 7, 2017
- Tucows' (TCX) CEO Elliot Noss on Q4 2016 Results - Earnings Call Transcript February 7, 2017
Revenue: Quarterly Revenue Increased 9% YOY
Tucows announced on February 7, 2017 that net revenue for the fourth quarter of 2016 increased 9% from Q4 2015 to $48.8 million from $44.7 million for the fourth quarter of 2015.
Revenue: Annual Revenue Increased 11% YOY
Tucows announced on February 7, 2017 that net revenue for 2016 increased 11% to $189.8 million from $ 171.6 million for 2015.
Net Income: Quarterly Net Income Decreased 7% YOY
Tucows announced on February 7, 2017 that for the fourth quarter of 2016 decreased to $2.8 million, or $0.27 per share, from $3.1 million, or $0.29 per share, for the fourth quarter of 2015. Net income for the fourth quarter of 2016 was negatively impacted during the quarter by one-time items totaling $1.0 million related to the Enom acquisition and the Ting Mobile business. 
Net Income: Quarterly Net Income Decreased from Q3
Tucows reported fourth-quarter net income of $2.8 million or 27 cents per share down from their record third-quarter profit of $4.7 million or 45 cents per share.
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Tucows incurred some one-time expenditures totaling approximately $1 million related to the Enom acquisition and the Ting Mobile business and is still expecting to incur approximately $0.5 of additional Enom transaction related costs during the first quarter of 2017.
Noss added that "marketing expenses increased by $500,000 year-over-year, primarily for the acquisition and ongoing support of Ting Mobile and Ting Internet customers. Credit card processing fees, primarily to support the growth of Ting Mobile and Ting Internet, and contact and outside services increased by $200,000 and finally, depreciation and amortization which increased by $200,000, primary the result of our acquisition of the BRI Group in February 2015 and the acquisition of the international reseller channel of Melbourne IT in April of this year."
Net Income: Annual Net Income Increased 41% YOY
Tucows announced on February 7, 2017 that for 2016 increased 41% to $16.0 million, or $1.53 per share, from $11.4 million, or $1.04 per share for 2015.
EBITDA: Quarterly Adjusted EBITDA Increased 33% YOY
Tucows announced on February 7, 2017 that Adjusted EBITDA for the fourth quarter of 2016 increased to $7.3 million from $5.5 million for the fourth quarter of 2015.
EBITDA: Yearly Adjusted EBITDA Increased 44% YOY Meeting Guidance
Tucows reported on February 7, 2017 that their adjusted EBITDA for 2016 was $30.13 million meeting their guidance of $30 million for the year and increased 44% YOY over the 2015 adjusted EBITDA of $20.94 million.
EBITDA: Tucows is Providing Adjusted EBITDA Guidance of $50 million for 2017
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that "we are providing adjusted EBITDA guidance for 2017 of $50 million. This is being delivered with continued solid growth expected in our Ting Mobile business, a bit of growth from our existing domains business and the addition of Enom. I will also note that this is being delivered while investing between $4 million and $5 million in the Ting Internet business on an operating level. I should note that this number is up only slightly from the investment this year which was higher than planned but not at all troubling."
Capex: We Will Be Spending on the Enom Integration, Ting Internet, and Ting Mobile Customer Acquisition in 2017
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that "there are a lot of big moving parts right now; the Enom integration, the huge opportunity represented by the Ting Internet business and some very real customer acquisition initiatives in Ting Mobile including the potential hit of credits around the RingPlus marketing transaction. We may choose to step up and spend in any of these areas. As always, we will keep you well apprised as we proceed. In terms of the transaction itself, it has been 100% financed as we have used our strong cash flows and clean balance sheet to access significant capital efficiently and inexpensively without impacting our planned capital expenditures on fiber in anyway."
February 7, 2017: Ting Mobile Had 4,000 Net Adds in Q4
Growth: Ting Mobile Had Net Adds of 4,000 Accounts and 10,000 Devices in Q4 2016
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Ting Mobile added over 4,000 accounts and 10,000 devices in Q3 to bring our total to 151,000 accounts and 245,000 devices. "Taking a closer look at those numbers, it was another strong quarter of growth in devices per account as more accounts moved beyond just one device. With service on multiple networks, support for just about every old and new device on the market lower data rates and even a generous relief program for early termination fees. It is getting easier and easier for families to bring every member to Ting."
Churn: Ting Mobile's Churn Rate Came Down to Just Under 2.5%
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that the fourth quarter benefited from better than expected churn at just under 2.5%. "Q4 is typically a time for increased switching throughout the category and has historically been the highest quarter for churn at Ting. That 2.5% is a welcome improvement over the 2.7% we reported in Q4 of 2015 and the 2.8% were reported last quarter. After defying seasonality for the last two quarters of the year, it seems that our data rate decrease in August has had an impact on churn. We impacted the top addressable reason why customers were leaving us and they responded almost immediately. We looked forward to a full year with these new rates and increased retention efforts."
Profitability: There Was a Slight Decrease in Gross Margins for Ting Mobile
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that there was a slight decrease in mobile gross margin dollars from just over $9 million in Q3 to just under $9 million in Q4. "I want to remind you that Q3 saw inflated margin as we receive cost breaks from the carriers in July and customers did not start seeing those price breaks until early September. Now that the dust has settled from our decrease in COGS and price drop, I should update a key metric on the business. I've historically talked about Ting Mobile customers representing about $200 a year in billed gross margin, around a $35 bill at a 50% margin, and you'll remember that I took that gross margin number up last quarter. As total usage per account has increased and our costs have decreased that total gross margin dollars per year per account is now around $240. Overtime we expect bills to continue to go up with increased usage and our profit margin to go down within our margins on high usage, but we will likely continue to land around that absolute margin dollar number."
Marketing: Ting Mobile Ran a Pilot Infomercial in November with Moderately Encouraging Results
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Ting Mobile ran a pilot November with moderately encouraging results. "The placements made the phone ring which is a great start. We would like to improve the cost per call but conversion is where we need to focus. We believe that there is enough potential to test further but before we turn it back on we've been doing quite a bit of work, particularly on the conversion side. We have listened to thousands of calls and built training document scripts and tools aimed at closing more deals. We've engaged an outside sales capability to help us optimize and scale quickly through the pilot phases."
"There are very few acquisition channels that have the scalability the television does; so we are determined to give it our best shot and we are hopeful that there is a path to an acceptable cost per acquisition. The next round of testing will take place later this month and I will update you on the next call. Of course, if you're up late and happy to see the infomercial running repeatedly, you will have some early indication."
In answer to a question from Hubert Mak, Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that the infomercial Ting Mobile is trying is uniquely scalable. "Television uniquely -- you're able to turn the dial and as you've heard me lament about our customer acquisition processes for years, you know, the CAC has always been fantastic but it wasn't inherently scalable. So you know, I think that for all of those reasons I've been calling out the infomercial particularly. 
Marketing: Ting Was Once Again the Top-Rated Post-Paid Service in Consumer Reports Annual Survey
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that "in November, consumer reports released its annual survey of U.S. cell phone providers and Ting was once again the top-rated post-paid service outranking major carriers and challenger brands alike."
Expansion: Ting Has Reached a Tentative Marketing Agreement to Migrate RingPlus Customers to Ting
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Ting has reached a tentative agreement to migrate their customers to Ting after RingPlus has announced that it will be shutting down its service. "It is simply a marketing agreement, not an acquisition of any assets or resources. They had roughly 80,000 customers, most of whom were on a free plan. We do not know how many real customers this will produce after an inevitable initial exodus but we know that it will initially inflate gross adds, churn and marketing expenses in the form of credits we are providing. We wanted to share this as it has been made public on their forum and on Reddit, and we wanted you to know that this is a good opportunity but it will take a lot of work, especially at the customer service level and we really will have no indication of success until the next call; the data simply will not be right."
In answer to a question from Michael Cooperman, Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that "we started kind of mobilizing Saturday, so -- but between Friday and the time we eventually do migrate that base, you know, there is people who are finding new suppliers. We certainly have had a number of ports in that are awaiting approval. So that's going on, so whatever -- from the 80,000 there is going to be some number that are going to move before we do anything; so that's kind of the first point. The second point is then that base will all kind of come over to us. So yes, that's correct, mitigated by the first point. And now the third point is -- but only the people who agree to our terms of service give us a valid credit card and sign up for Ting account; and you know, as you know that means really picking a username and a password and providing the address set around the credit card, right. Only people who take those positive steps will come over."
Expansion: Ting Mobile May Get Several Thousand New Customers from RingPlus
In answer to a question from Hubert Mak, Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that it's very difficult to tell what the end numbers will be like from marketing to RingPlus customers. "They were certainly -- of that 80,000 customers, the significant majority -- most of those customers took advantage of the free offering. There were still a solid number of customers well into the five figures who were paying something every month. Now it's a little bit more of a pay as you go service and the plans were all over the place; so we're looking at the usage. But I would say two things; first, this allows us to leverage some of the things we do very well. So particularly there our ability to provide a quick solution to both RingPlus and Sprint in terms of platform, our ability to get the website where it will need to be to receive these people comfortably, our ability to deal with challenges on the communication and social side to sort of all of that customer experience stuff that we do so well. In addition, this will really, really put a lot of work on customer service. So we're going to be sorting through these customers. I think I'm comfortable saying I'm -- you know, it's very difficult to say what we will expect but if we get at the end of the day, you know, it's a year from now and there is an extra 5000, 6000, 7000 regular Ting customers will be quite happy with the approach.
Legislation: Ting Mobile Joined with Netflix and Google in Objecting to a Proposed Law in Virginia that Would Limit Cities Getting Involved in Fiber
In answer to a question from an analyst, Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Ting Mobile "joined with others in objecting to legislation which would have limited cities and towns in the State of Virginia from trying to take steps to be more involved in their cities getting fiber."
"Charlottesville in particular, you know, I don't think there is going to be any impact on the ground in the city in terms of our relationship with the municipal government. I will also tell you that I believe at least what I was seeing trending was that some of those issues in Virginia were going to be fairly and effectively dealt with. So I think there might be a good news outcome in some of those efforts as well."
February 7, 2017: Ting Internet Continues to Move Forward
Charlottesville: Ting Internet Now Passes Over 12,000 Potential Customers in Charlottesville
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Ting Internet added a couple of thousand serviceable addresses in Q4 bringing this up to about 12,000 potential customers.
Charlottesville: Ting Internet Is Getting a 90% Converstion Rate in Charlottesville with Pre-Orders
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that pre-order is proving to be about as good as an order with over 90% conversion. "It is also worth noting that while we start -- started building the network in service and customers in Charlottesville even before we instituted our pre-order system, pre-orders now play a key role in guiding our network expansion there just as we will see in a new town like Holly Springs."
Westminster: The City Is Nearly Finished with Its Next Wave of Construction and Ting Is Now Lighting Up Customers in These New Neighborhoods
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that in Westminster, Maryland, where the city is building the network, the city is nearly finished with its next wave of construction and we have just started lighting up the first customers in these new neighborhoods.
Centennial: Ting Internet Expects to be Servicing the First Customers in Centennial Later This Year
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Centennial, Colorado and Sandpoint, Idaho, are both hard at work on their municipal core fiber networks and we expect to be servicing the first customers in both markets later this year.
Sandpoint: Ting Internet Expects to be Servicing the First Customers in Sandpoint Later This Year
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Centennial, Colorado and Sandpoint, Idaho, are both hard at work on their municipal core fiber networks and we expect to be servicing the first customers in both markets later this year.
Holly Springs: Ting Internet Lit Up the First Customers in Holly Springs
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Ting Internet did light up the first customers in Holly Springs at the start of 2017 and "we're moving quickly to convert all the pre-orders in the first few neighborhoods there into active customers."
Strategy: Ting Internet Remains Comfortable with their Core Assumptions and Metrics on Gross Margins and Adoption Rates
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Ting Internet remains comfortable with the core assumptions and metrics that the company has shared on the Ting Internet business in previous quarterly conference calls. "The variables we will most look at optimizing going forward will be build costs and adoption rates; we do not expect to be changing those variables for your modeling quarterly. Much like gross margin per customer per year on Ting Mobile we will more likely revisit them over the years. Again, we expect to see 20% adoption among serviceable addresses in a year and 50% in five years. At these take rates we'll be paying about $2,500 to $3,000 per customer in CapEx and those customers will be worth about a $1,000 a year in margin. "
Expansion: Ting Internet Expects to Have 85,000 Serviceable Addresses at Completion in the Five Announced Ting Towns
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that just these first five towns should represent about 85,000 serviceable addresses at completion.
Expansion: Ting Has More In-Bound Interest Than Ever Before
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that we "certainly look forward to expanding our footprint further and we have more in-bound interest that we have ever had before"
Expansion: Ting Internet Expects to Announce Additional Towns This Year
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that he expects to announce additional towns this year "but I have no imminent announcements at this time."
In answer to a question from Hubert Mak, Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that "there is nothing imminent but I think you will still see a couple few markets this year and the exact number will really depend on two things; one, watching some cities come out of the other end of their process; and two, how well we do with running multiple builds and multiple installed teams and multiple marketing efforts across markets as we're now taking on for the first time; so we're going to scale up a bit there."
Expansion: Ting Internet Is at Capacity and Is Expanding Capacity
In answer to a question from Hubert Mak, Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that "every quarter two things happen - we're at capacity and we expand capacity. This is a business that's going to be ramping up really for the next couple of few years. So there is really -- there is almost not a day in this business where we're not at capacity and that we're not working on expanding capacity at the same time. You know, if I took anything as points on a line whether it was people working on that business and head office, whether it was number of crew doing installs, number of crews during construction; all of those numbers would be up and to the right."
Expansion: Ting Internet Expects to Spend $30 million to $35 million CapEx Spending for Fixed Internet in 2017
In answer to a question from Hubert Mak, Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that there will be $30 million to $35 million CapEx spending for the fixed internet in 2017.
Installation: Blowing Fiber During Construction Has Received a Good Response with Customers in Holly Springs
In answer to a question from Patrick Retzer, Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that there are advantages to blowing fiber in terms of not upsetting customers during construction. "It's something that our guys picked up on some of their travels in Asia. And you know, we were -- we worked with our contractor in the Holly Springs to practice with that and the thing that probably was most positive to come out of that is that really when -- you know, when we were on your street, getting your street ready for fiber you noticed much less than would have historically or traditionally been the case. So we had a very good response from the people of Holly Springs, just in terms of not upsetting them too much which often when people are laying conduit laying infrastructure, there tends to be a lot of issues and here there is not very much gap between -- we're doing the construction work and we'd love to have you as a customer. So we think that's pretty positive and we were pretty aggressive on social as well in dealing with anybody who did have a question or an issue."
There are also some costs savings to blowing fiber. "What used to take a number of human beings laying fiber in an open trench or a ditch is now done by machine in seconds. So there absolutely is a real cost savings to it."
Expansion: You Can Take the Capex Spend and Divide That by Installation Cost to Come up with the Number of Serviceable Addresses
In answer to a question from Patrick Retzer, Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that "you can take the CapEx spend, you can divide it by the cost per build that we put out which is think about that in the $1,250 to $1,500 range and you can get to the number of serviceable addresses we're projecting, then you can look at the markets that we're in and you can kind of lay them out of the map and you can fill in however many additional cities you want for the rest of the addresses."
Learn more at:
- February 8, 2017: Hugh Pickens Projects The Number of Ting Internet Customers Resulting from the 2017 CapEx Spend
Expansion: Interest in Ting Internet Remains Strong
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that interest rates remains consistently strong. "I do think that a lot of municipal processes are kind of waiting a little bit to see what happens with some of the infrastructure program or infrastructure tax plan. There is a lot of regulatory uncertainty right now, for some that's causing them to maybe try and accelerate, for others that maybe they are a little -- you know, sitting back a little more but the native interest is just as strong as it's ever been and continues to get stronger as people need for fast reliable Internet over fiber increases."
Profitability: Ting Internet is Still Looking at Breakeven in 2018
In answer to a question from Huber Mak, Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that Ting Internet is looking for breakeven here operationally for 2018. "What I said more specifically was towards the end of 2018, so not necessarily in 2018. And that was -- if you remember Hubert, that was the way I kind of flagged it for the Ting Mobile business as well. You know, what I'm looking at there is less about what is the calendar year result and more -- what is -- you know, when does it move from costing money to generating money."
February 7, 2017: Domain Services Has Doubled in Size with the Acquisition of Enom
Acquisitions: Acquiring Enom is Overwhelmingly about Generating Scale and Realizing Cost Efficiencies
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that the acquisition of Enom is overwhelmingly about generating scale and realizing cost efficiencies and most of these will be realized through greater efficiency in the technical footprint and a much lower reliance on licensed software. "As a quick recap, on January 20, Tucows acquired Enom, a wholesale domain name registrar from the Rightside group for a purchase price of $83.5 million. The Enom business has approximately 14.5 million domains under management, 28,000 resellers and approximately $15 million in EBITDA which we hope to be able to expand to $20 million over the next 24 months as we realize the synergies available to us."
Acquisitions: The Enom Business is a Flat, Potentially Even Slightly Negative Growth Business
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that the Enom business is a flat, potentially even slightly negative growth business in terms of gross margin dollars. "This is primarily due to the customer mix being composed of a higher number of traditional web hosting companies in North America and Europe, the two customer profiles that we've been calling out as more growth challenged for the past couple of years. Enom also has historically lower renewal rates than the open SRS business."
Acquisitions: The Strategy with Enom Will be Maintaining and Servicing Existing Customers as Opposed to Growth
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that "as part of the Enom acquisition, we acquired a mature retail business and associative customers which for the past few years has been more about maintaining and servicing Enom existing customers as opposed to growth, it has not been actively promoted and as a result has a flat to declining trajectory. It's something we don't intend to change in the short-term but as we look under the hood and get a better sense of the platform as we will with all of the operations, the long-term plan might be different. Going forward we're not going to be breaking the two retail businesses out separately. We'll report a single retail domain line as we always have but we will provide a sense of how these individual businesses are doing relative to their current trajectories. On the people side, we've already recognized a few places where we will be able to use people and skills more broadly. We all know that the domain's business is a very low margin business and one where you have to be extremely careful of your costs. Accordingly, we've always run the domains business pretty lean, this gives us a singular opportunity to take advantage of the good people we've been able to pick up. We even see some opportunities in people across the Ting businesses."
Wholesale: Wholesale Performance Has Had Steady Growth
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that "in our wholesale channel, total registrations for the fourth quarter were up 19% year-over-year with continued strong growth in open SRS transactions supplemented by the addition of the Melbourne IT names acquired in April of 2016. The number of new transactions grew by 18% and renewals were up and equally healthy 19%. Our renewal rate continued in its historical range of within a point or so of the 75% coming in at 76% in Q4, well above the industry average. Total domains under management expanded 12% from the end of Q4 last year to 14.9 million with a bulk of that driven by the Melbourne IT acquisition. I will also highlight that in Q4 gross margin again increased continuing an ongoing trend as we continue to benefit from the shift to mix in higher margin product."
Retail: Hover Delivered Strong Performance
Elliot Noss told analysts during the 2016 fourth quarter earnings conference call on February 7, 2017 that "on the retail front, Hover delivered another strong performance with gross margin up 13% from Q4 2015 driven by continued steady growth in the customer base which was up 22% from the end of 2015. And I will note for you that our customer growth in Q4 benefited from a one-time pick up of about 13,000 customers from a deaccredited registrar. In addition, our renewal rates remained well above the industry average at 81%."
February 6, 2017: Venture Capital Firm Union Square Ventures (USV) Invests in a Public Company, Tucows, For the First Time
Venturebeat reported on February 6, 2017 that in a blog post authored by partner Brad Burnham, VC firm Union Square Ventures (USV) announced that it had made a substantial investment in Tucows. This is the first time USV is making an investment in a public company, an uncommon practice among top VC firms. It’s unknown at present how long USV intends to hold its Tucows shares, the size of the investment, or from what fund the investment was made. Burnham joined the Tucows Board of Directors on January 12, 2017.
We are investing in Tucows because we believe they have built a great business, but also because they have been a stalwart defender of the open Internet. We are excited to be working with them now because they are challenging the incumbent access providers and the conventional wisdom, by building modern fiber networks in local communities across the U.S.. They are doing this at a time when telephone and cable companies are exploiting their natural monopolies in these communities, underinvesting in their outdated networks, raising prices and using the excess profits to buy back their stock, and buy their way into global entertainment businesses, pleasing shareholders but doing nothing for the communities they serve.
Tucows is doing the exact opposite. They are using hard won profits from the competitive wholesale domain name business to invest in modern fiber networks in cities like Charlottesville VA, Holly Springs, NC, and Centennial, CO. They believe, as we do, that, a modern communications infrastructure is the most important investment any community can make to expedite the transition from a 20th century economy based on undifferentiated manufacturing to a 21st century economy based on highly specialized manufa