Small independent phone companies tell committee rural fiber buildouts face cost, tax and policy hurdles

Kimberly Gates, general manager and controller of Franklin Telephone Company and a representative of the Independent Telephone Association of Vermont, told the House Energy and Digital Infrastructure Committee on April 1 that small, family-owned incumbent phone companies have largely converted to fiber but face persistent cost, tax and policy challenges that could affect future deployment.

Gates said Franklin Telephone has deployed fiber to nearly every road in its service area and has converted about 70 percent of its year‑round customers to fiber, serving fewer than 900 locations overall. "We're family owned and operated," she said, describing crews that must sometimes hand‑string lines through woods and work on remote poles to reach a single customer.

The testimony framed why the topic matters: the committee is weighing bills and reports that could affect prices and obligations for small providers, while federal programs and taxes shape company finances. Gates warned a fixed statutory price cap in H.121 could produce "unintended consequences" for small providers unless exemptions and administrative processes are streamlined.

Key facts and claims

- Franklin Telephone serves under 900 locations across portions of Franklin, Highgate and Sheldon, including seasonal addresses, and reports that 70 percent of year‑round customers are on fiber.

- Of Franklin's Internet customers, Gates said 48 percent take an "economy" package (10/1 Mbps) and 11 percent take a top package (about 200/200 Mbps). She stated the economy package is $70 a month for Internet‑only service and $72 with phone.

- Gates described physical deployment constraints: customers with long private drops, absence of conduit, poles off the road and terrain that forces staff to hand‑string fiber or lash fiber over existing cables. She showed committee members photos and posters illustrating lashing and fieldwork.

- On universal‑service obligations, Gates said Franklin is a designated carrier of last resort in its service area and must serve every location in that territory. She said she was not certain whether that duty legally requires providing service by a particular technology (for example, fiber versus copper) and said she would follow up with the committee with additional detail.

- On backup power: Gates said household battery backup for fiber termination boxes is the customer's responsibility; customers can purchase battery packs that provide about 24 hours of standby power.

Funding, taxation and programs

Gates told lawmakers that Franklin receives federal support through programs administered by USAC and that roughly 30 percent of the company’s income comes from those flows. She referenced federal broadband funding programs including BEAD and said Franklin had not pursued BEAD awards because the company already had fiber to most addresses and the paperwork did not justify the gains for a small number of remaining locations.

Gates described a recent state tax change — she referenced Act 145 (2024) by number — that repealed the personal property tax basis for telecom property and moved valuation toward a fair‑market basis taxed at municipal rates. She said the Department of Taxes had asked for an extension to determine how to calculate fair market value, and she said small companies face uncertainty about how that change will affect their costs and local tax bills.

Concerns about proposed price cap (H.121) and administration

Gates voiced concern about proposed legislation (H.121) that would set a fixed affordability cap — discussed in testimony to the committee as $15 a month — and noted small providers rely on margins to fund construction and upkeep. "The $15 per month doesn't cover any of my costs," she said. Gates described the bill’s 20,000‑line exemption but said small providers worry the exemption requires an application process and waiting period that could be administratively burdensome.

She recommended that affordability be funded through subsidies rather than a mandated rate cap, noting federal programs such as the Affordable Connectivity Program (ACP) and Lifeline provide credits to customers while reimbursing providers. Gates said those programs offered per‑customer credits rather than a single statutory retail price and that she favored continued subsidy mechanisms over a fixed statutory cap.

Operational and competitive pressures

Gates described rising material and labor costs since 2020, including higher prices for metal messenger wires and other hardware used in aerial builds. She said those costs, combined with local tax uncertainty and limited internal capital, constrain the ability of small companies to absorb additional mandates.

She also described competitive pressures in parts of her territory: Comcast serves portions of the area; wireless Internet service providers operate in seasonal lake communities; and she said she is losing some customers to Starlink. Gates said small companies do not run national advertising campaigns and rely on local ties and direct service to neighbors.

Consumer protection and reporting

Gates said she is concerned about additional reporting or complaint‑handling mandates (the committee discussed H.11) because small companies already file multiple federal reports on locations, speeds and pricing. She described the existing customer qualification process for Lifeline and ACP, noting a national database now allows customers to self‑attest and apply without forcing providers to validate sensitive documents.

Committee follow‑up and next steps

Committee members asked for clarifications on carrier‑of‑last‑resort obligations and on the state tax changes. Representatives on the panel asked agency staff to brief the committee and discussed inviting Department of Public Service staff and tax officials to explain Act 145 implementation and the public‑right‑of‑way report due in October. Gates offered to submit additional written testimony on H.11 and the committee requested that written follow‑up.

Ending

Gates closed by reiterating the small‑company perspective: most independent telephone companies in Vermont have invested in fiber but face narrow financial margins, administrative burdens tied to exemptions and tax implementation, and ongoing competition. "Affordability should be subsidized and not mandated," she told lawmakers.