By Lewis Loflin
In 2007, Bristol Virginia Utilities (BVU) was embroiled in controversy over its speculative venture into fiber optic telecommunications, specifically through its OptiNet division, launched in 2002. Promised as a catalyst for economic growth and job creation in Southwest Virginia (SWVA), the $120 million public investment faced significant scrutiny for financial losses, legal battles, and allegations of cross-subsidization. By 2016, BVU’s leadership, including CEO Wes Rosenbalm, faced legal consequences, with Rosenbalm and other executives sentenced to prison for bribery and corruption related to OptiNet contracts. This retrospective examines BVU’s fiber optic saga as of 2007, its immediate fallout, and the long-term impact on SWVA, updated with 2025 insights, highlighting persistent economic challenges and unfulfilled promises.
In 2007, BVU’s foray into fiber optic telecommunications was under intense scrutiny. The utility reported a net income drop to a negative $850,249 in fiscal year 2003, down from $3 million in 2002, amidst legal disputes with competitors like Sprint over cross-subsidization. BVU CEO Wes Rosenbalm claimed these losses were “expected, budgeted, and planned for,” citing delays in cable television revenue due to legal battles and extraordinary legal expenses. However, a 2004 Progress and Freedom Foundation (PFF) report accused BVU of losing millions and cross-subsidizing OptiNet with funds from water and power customers, a practice Rosenbalm denied, calling the study flawed and funded by competitors (PFF Report). The report highlighted that government-run ventures like BVU, despite subsidies of over $1,000 per customer, produced “large negative returns” and were a “drain on taxpayers.”
BVU’s financial strain was evident in rate hikes: a 40% electric rate increase in January 2005, a 22.4% water rate hike in August 2004, a 4% sewer rate increase in July 2004, and a 12–15% rise in municipal cable television rates in May 2004. These increases shifted the burden onto utility customers, raising concerns about cross-subsidization. Additionally, BVU’s use of state and federal grants was questionable—$2.03 million in Virginia Tobacco funds meant for job creation and $1.6 million in EDA grants for infrastructure buildout in unserved areas were redirected to compete in already-served markets, neglecting underserved regions. Rosenbalm claimed this redirection was unintentional, but transparency was lacking, with BVU refusing to provide a list of promised “new jobs” when requested.
Transparency issues compounded BVU’s troubles. In 2004, Virginia State Senator William Wampler (R-Bristol) introduced Senate Bills 280 and 282 to allow BVU to operate with less public scrutiny, a move criticized by the Kingsport Times-News, which argued that if BVU couldn’t compete fairly “in the full light of day,” taxpayers deserved answers. Although these bills failed in January 2005, Wampler introduced a new secrecy bill, further eroding accountability. The BVU Board also granted Rosenbalm authority to spend up to $50,000 without approval (later increased to $2 million by 2007), shielding significant expenditures from oversight. This lack of transparency persisted, with BVU stonewalling requests for quarterly reports in 2007, amid a reported debt of over $50 million—likely higher, given the utility’s opaque financial practices.
Customer service issues further undermined BVU’s credibility. Claims of “3,500 people signed up” for fiber optic services were misleading, as many, including the author, were informed that service was not scheduled or available, with BVU changing its story multiple times. In December 2004, the BVU Board lowered credit requirements to boost its customer base, a move that suggested desperation to meet targets rather than genuine growth.
By 2016, the BVU saga took a criminal turn. Wes Rosenbalm and other executives were convicted of bribery and corruption related to OptiNet contracts, receiving prison sentences for their roles in a scheme that involved kickbacks and inflated contracts. This scandal confirmed long-standing suspicions of mismanagement and misuse of public funds, validating critics who had questioned BVU’s practices since 2004. The OptiNet division, which accumulated $50 million in debt by 2013, was sold to Sunset Digital in 2016 for $50 million, a move that reduced municipal debt but failed to catalyze a tech sector in SWVA. Despite additional investments—$45 million in 2010 federal stimulus funds for LENOWISCO areas and $1.5 billion in Virginia broadband funds since 2021—the region’s information sector declined by 45% from 2010 to 2020, while the national sector grew by 2%.
In 2025, SWVA continues to grapple with the fallout. The BVU fiber optic investment, intended to create high-tech jobs, has instead supported transient call center operations, many of which have closed, leaving only EarthLink in Norton and a few jobs in Scott County. The promised economic revitalization has not materialized, with population declines of 3–5% in counties like Buchanan and Russell since 2010 and an annual outmigration of 8,000–10,000 college graduates seeking better opportunities elsewhere.
A LENOWISCO study foresaw non-unionized call centers’ collapse, warning of offshoring risks (Asia’s $1–$5/hour wages), low-skill reliance (~30% no high school diploma, 2003), and firms exploiting subsidies, like VCEDA’s $5.6 million for Sykes. Non-unionized sites lost ~2 million U.S. jobs by 2015, unlike AT&T’s protected workforce. Education gaps—~50% no diploma in Dickenson County (2008)—worsened vulnerabilities. LENOWISCO Study, sullivan-county.com
| Sector | SWVA (% Decline) | USA (% Change) |
|---|---|---|
| Arts, Ent., & Rec. | -20% | 6% |
| Wholesale | -25% | 3% |
| Construction | -35% | 24% |
| Information | -45% | 2% |
| Mining | -50% | -11% |
Notes: Excluding mining, SWVA experienced the greatest declines in sectors that grew nationally. The region’s mining sector decline exceeded the national average. A total of 10,451 jobs were eliminated across these five sectors, with 16,774 jobs lost when including national mining sector declines between 2010-2020. The 45% decline in the information sector persists despite an estimated $200 million in public investment, likely exceeding $300–$400 million, with significant data withheld.
Ref: Zach Jackson, Virginia Tech
The BVU fiber optic venture, as documented in 2007, was marred by financial losses, legal battles, and a lack of transparency, culminating in the 2016 convictions of Wes Rosenbalm and other executives for corruption. The $120 million investment, intended to spur economic growth, failed to deliver, with SWVA’s tech sector declining despite subsequent investments. The LENOWISCO study’s warnings about offshoring and low-skill reliance remain relevant, underscoring the need for accountability, sustainable economic strategies, and investments in education to address the region’s structural challenges. Originally compiled in 2007, updated April 16, 2025.
Acknowledgment: I’d like to thank Grok, an AI by xAI, for assisting in drafting and refining this article. The final perspective and edits are my own.
