Tag: outsourcing

In the aftermath of the Comcast/TWC merger being effectively denied by the Department of Justice and Federal Communications Commission, we thought it was a key moment to focus on antitrust/anti-monopoly policy in DC. To discuss this topic, we talk this week with Teddy Downey, Executive Editor and CEO of the Capitol Forum as well as Sally Hubbard, Capitol Forum senior correspondent and expert on antitrust.

We start off with the basics of why the Comcast takeover of Time Warner Cable posed a problem that regulators were concerned with. From there, we talk more about the cable industry and whether other mergers will similarly alarm regulators.

We end with a short discussion of what states can do to crack down on monopolies and the abuse of market power. Along the way, we discuss whether DC is entering a new era of antimonopoly policy or whether this merger was just uniquely troubling.

We learned about Teddy and Sally from Barry Lynn at the New America Foundation, who we had previously interviewed for one of my favorite shows, episode 83.

We want your feedback and suggestions for the show – please e-mail us or leave a comment below.

This show is 24 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

Listen to previous episodes here. You can can download this Mp3 file directly from here.

Thanks to Persson for the music, licensed using Creative Commons. The song is “Blues walk.”

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Urban real estate investors take note: FTTH has come of age in the multi-dwelling unit marketplace. (MDU). When looking for new homes, many more renters and owners are now considering FTTH a necessity.

Several studies have established that fiber raises the value of single family homes by $5,000 – $6,000 on a home valued at $300,000. A July 2014 survey, commissioned by Broadband Communities magazine and conducted by RVA LLC indicates that similar results influence MDUs. Clearly, access to FTTH adds measurable value to real estate.

The study examined numerous factors related to knowledge, use, satisfaction, and adoption of FTTH related to MDUs. RVA broke down the results by age, economics, and education attained. While some results were surprising, others were predictable. For example, level of education attained is not necessarily consistent with knowledge of the benefits of FTTH. The study reflects that those with a graduate degree did not have the same appreciation for the technology as those with some college less than a four-year degree.

The level of satisfaction when comparing FTTH to cable, DSL, wireless, and satellite options was not surprising. Of course, fiber-to-the-home far out performed any other technology.

The survey also found that access to broadband has become as important as other utilities: 

Overall, survey respondents indicated that broadband was, indeed, their top amenity. This finding confirms other recent polling and provides finer-grained details: For MDU unit owners, access to good broadband is now the top amenity by a large margin. Renters rated broadband second in terms of amenity importance, close behind “in-unit washer/dryer.” Broadband was valued highly in all types of buildings but especially in student housing and in luxury buildings.

FTTH can influence sale value by 3 percent and rental value by 8 percent. The additional revenue to the building owner far outweighs the initial investment:

For an MDU building owner, outfitting an apartment with FTTH would yield $972 more annual rental revenue and $209 more revenue from lower vacancy rates, the survey shows. Having FTTH at the site would also result in a $120 savings in marketing, administration and maintenance stemming from 31 percent lower churn and more word-of-mouth advertising, according to the survey.

In a May 2014 American Planning Association report, Investing in Place [PDF], researchers asked Millenials, Boomers, and Gen Xers to rank their priorities for urban landscapes:

When asked about high priorities for metro areas, Active Boomers cited high-speed Internet access and affordable housing equally at 65 percent each, which was second only to safe streets (79 percent). Millennials ranked internet service third with 58 percent; safe streets cited first with 76 percent and affordable housing cited second with 71 percent. Generation Xers also ranked Internet service third with 51 percent; safe streets was first (69 percent) and affordable housing was second (57 percent).

These same three metro features also were cited in the same order by three of the four different types of communities — urban, suburban, and small town — and each of the four regions. 

Fiber it quickly becoming on par with considerations of floor plan, natural light, and location. From the Broadband Communities survey:

MDU developers and managers should be marketing broadband, especially FTTH broadband, more aggressively. This is especially true given that broadband is the only amenity (in the list respondents used) that cannot be seen with the naked eye. 

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The big news this week was about the fall of the Comcast/Time Warner Cable merger. We like to think it was because of our incredibly brilliant, insightful (also: “witty”, “pithy”, “charming”…) letter to Comcast.

Once Comcast’s Deal Shifted to a Focus on Broadband, Its Ambitions Were Sunk By JONATHAN MAHLER, New York Times

At the end of the day, the government’s commitment to maintaining a free and open Internet did not square with the prospect of a single company controlling as much as 40 percent of the public’s access to it… it didn’t really matter if Comcast and Time Warner’s cable markets overlapped. The real issue was broadband.

Blocking Comcast Is a Start. But if We Want Better Broadband, We Need Much More by Peter Kafka, Re/Code

‘Fast, fair and open:’ FCC Chairman lays out his big picture for broadband, WRAL TechWire

In case you missed it, here is a transcript of Chairman Wheeler’s remarks to Broadband Communities in Austin. 

“Our idea of rock stars would be the leaders of Chattanooga, Tennessee and Wilson, North Carolina.”

Community Broadband News by State

California

Digital debate: SF supervisors mull connecting the masses with citywide broadband network by Joshua Sabatini, San Francisco Examiner

“Fiber broadband lines are exactly the same as highway and roads,” Brooks said. “It’s a thing all governments need to put in as a government service so that all people and all businesses can go nuts on that system, enjoy the system and make loads of money.”

Brooks said The City would ultimately recoup the costs with businesses “chomping at the bit” to use a fast city-owned broadband service, which would charge them less than other private services like Comcast.

“We are way behind the curve and the way to get ahead of the curve is to just build out a public system,” he said.

Maryland

Boone talks Internet expansion by Dorian Mitchell, My Eastern Shore Maryland

“When you see kids in their dad’s pickup truck in the library parking lot on Sundays, trying to connect to the Internet, that’s what we call a Third-World issue,” he said. “That shouldn’t be happening in this country.”

Boone said the project involves a theoretical “ring” of dark fiber-optic cable, starting in the Fairlee area and possibly extending as far west as U.S. Route 301, that would encircle the existing structures in Kent County. This ring would allow a provider to “light” the cable and beam their services all over the county.

“We’re looking to keep the price at zero,” he said. “We’re not looking to create revenue, our goal is to give it (service) away as much as possible without being in the red.”

Massachusetts

Hilltown officials puzzle over broadband costs by Diane Broncaccio, The Recorder

Michigan

VIDEO: Southern Michigan’s Rural Broadband Revolution

In the 1930s, electric cooperatives were formed to bring power and light to the rural space. Today, Midwest Energy Cooperative is again responding to the needs of those who are unserved and underserved as a result of geography by leveraging the utility fiber communications system to offer a true high-speed internet solution to its members. 

Minnesota

Economic Development and Fiber, Pots and Pans

New Mexico

SF [Santa Fe] launches $1M broadband infrastructure project by T.S. Last, Albquerque Journal

“Here’s the government doing what it’s supposed to do: helping out its citizenry,” he said, comparing the project to streets and highways. “It’s one of these things that this is a lot more important than it may appear to be. Improving people’s access to the Internet will help increase what they are able to do and its effects will be felt for a long time.”

New York

Expansion of high speed Internet can help region stay competitive by Elizabeth Cooper, Utica Observer-Dispatch

Broadband for everyone by 2019! The new state budget included a $500 million allocation for the expansion of high speed Internet, and it’s slated to be complete by the end of 2018.

Oregon

Oregon Changes State Tax Law to Lure Google Fiber by Karl Bode, DSL Reports

Other Broadband News

Smart Cities: It’s More Than Broadband by John M. Eger, Huffington Post

Nothing could be more timely or important as this signal to cities that our future, the future of America in the Internet age, depends on renewing, often reinventing, our cities for the global, knowledge economy.

In every study about economic development, the importance of broadband Internet services is mentioned prominently. Given the realignment of power in the world — from nations to cities to individuals — what the city does or does not do can determine their community’s success and survival, or its demise; and as such, will determine the nation’s success or failure.

Look to the States on Broadband by The Editorial Board, New York Times

Bloomberg’s ‘What Works Cities’ Initiative Targets 100 Mid-Sized Metros by Colin Wood, GovTech

The $42 million, three-year program will provide expertise and time to cities that want data-driven solutions for their biggest challenges.

Broadband and Real Estate by Doug Dawson, Pots and Pans

The numbers behind the broadband ‘homework gap’ by John B Horrigan, Pew Research Institute

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The City of Ammon’s municipal fiber network recently stepped in to provide primary broadband access for School District 93 as the state’s educational network went dark reports Local News 8. Watch the video of local coverage below.

When a judge ruled last year that the Idaho Education Network (IEN) contract between the state Department of Administration was void, an education broadband crisis loomed across the state. As the drama played out, however, local networks such as Ammon’s muni, have come to the rescue to keep students connected.

Ammon Mayor Dana Kirkham described an attitude characteristic of municipal networks:

“I think it’s just something we do in the spirit of collaboration, and I think that’s always important because when we talk about the school district and the city it’s all the same people, and so anytime we can keep costs down it benefits everyone involved,” Kirkham said.

CenturyLink and Education Networks of America (ENA) were providers under the contract voided last year. As CenturyLink and ENA cut off service to schools, forcing them to negotiate their own contracts, they have discovered better, more affordable broadband from local providers like Ammon.  A recent Idaho State Journal reported on several school districts:

The state, under the now-void IEN contract, had been paying Education Networks of America more than $6,000 a month for a 20 Mbps Internet service to Rockland School District. The school district will pay less than a third of that cost for a new 100 Mbps service next year.

The State Journal also discovered that numerous school districts had used fiber optic service from local providers but were forced to switch to slower service in order to obtain the IEN reimbursement. In order to get the reimbursement, West Side School District had to switch from fiber from Direct Communications, a local company, to a slow copper T1 connection from CenturyLink:

Once the IEN contract was in place, the Idaho taxpayers were saddled with paying over $8000 a month for outdated copper service to that same location.

[Direct Communications Marketing Director Brigham] Griffin said Preston [School District] was in the same boat. It had been getting fiber-optic Internet from Direct Communications, but had to switch to copper to have the state pick up the tab.

“Preston School District will now receive double their previous speed for about a fifth of the monthly cost,” Griffin said.

Though it is incredibly frustrating to see how Idaho has hurts its schools while funnelling extra tax dollars to CenturyLink, it is not as rare as you might think. Many states have these kind of “deals” with the large phone companies. We have long covered the depressing story in Wisconsin, where AT&T has successfully lobbied to hobble WiscNet, an arrangement that brings tremendous cost savings to local budgets and better connections to schools. 

This is more evidence for a point we have long made: building better networks does not necessary have to cost a lot more. We spend so much money inefficiently that eliminating these crony capitalism deals would free up significant funds to be spent more wisely.

In Ammon, Mayor Kirkham summed up the situation:

“This is always an argument for local control so whenever you have local control, then you aren’t at the mercy of the decisions being made higher up the ladder and so this is one of those instances where you see that being played out,” Kirkham said. 

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San Francisco has long been considered a modern, glittering, tech capital. For years its leaders have struggled with ensuring residents and businesses actually had next-generation Internet access as AT&T and Comcast only provide the same basic services that are available in most cities. In a recent Backchannel article, Susan Crawford discusses how the City by the Bay is taking steps to develop its vision, its long-term plan, and hopefully a network that will improve connectivity in a city of over 800,000 8.5 million.

San Francisco has developed an Information and Communication Technology Plan, which still needs approval from the City Board of Supervisors. According to the article, the plan calls on the city to take an incremental approach on its path to improved connectivity. They plan to use a similar method as Santa Monica by connecting municipal facilities – many of which are already connected via fiber – and then shedding expensive leased circuits. By eliminating that expense, the city will cut $1.3 million for Internet access and networking services from its connectivity costs.

Last year the City also put dig once policies in place, a decision other communities attribute as one of the keys to a cost-effective deployment. Like Santa Monica, the City currently leases dark fiber to ISPs. They plan to entice more ISPs who want to bring broadband to residents and businesses by expanding that practice. San Francisco plans to streamline the process and work with developers on strategically linking new developments to Internet hubs with dark fiber.

As Crawford notes, the City has created free Wi-Fi in select areas of town with plans to serve public housing and commercial corridors. Miquel Gamiño, San Francisco’s CIO, told Crawford they hope to make Wi-Fi available on a larger scale:

Gamiño’s dream is that San Franciscans and visitors will be connected to that service at all times: “I would love for people to come here, or live here, and feel as if they are just connected, woven into this fabric that exists in thin air,” he says. Consolidating the brand so that every public open network is labeled #SFWiFi will ensure that users perceive the city’s role in providing public WiFi. 

Crawford believes the City is on the right path by investing in more fiber throughout the community:

In the bigger picture, San Francisco will require fiber to businesses and homes. You can’t have a WiFi connection without a wire — that would be like having an airplane but no airports. And the WiFi connections used by both citizens and city infrastructure (“phoning home” via sensors about weather, water, air pollution, transport, energy use, and a host of other indicators of the city’s wellbeing) will be generating — uploading — mountains of data that will need wires on which to travel anywhere at all.

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Fiber and WiFi are complementary, in other words. And that’s where long-term planning will be essential.

For more about Santa Monica’s incremental approach, check out Chris’s interview with CIO Jory Wolf in Episode #90 of the Community Broadband Bits podcast. You can also learn about their strategy in our detailed report, Santa Monica City Net: An Incremental Approach to Building a Fiber Optic Network. 

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Thanks to Jeff Hoel for providing the transcript for the episode 147 of the Community Broadband Bits podcast with Brett Schuppner on the municipal fiber network in Reedsburg, Wisconsin. Listen to this episode here.

 

00:06:

Brett Schuppner:  We’ve had other businesses that outgrew their location in town and, you know, moved to the edge of town, and stayed within our service territory, to be able to get our services yet.

00:17:

Lisa Gonzalez:  Hello.  This is the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance.  And this is Lisa Gonzalez.

In this episode, Chris visits with Brett Schuppner, General Manager for the Reedsburg Utility Commission in Reedsburg, Wisconsin.  The community has its own fiber network, serving residents, businesses, and public facilities.  The triple-play network is popular with locals because it offers fast, affordable, reliable service, with no pricing gimmicks.  Fortunately for nearby communities, the Reedsburg Utilities Commission was also able to expand outside the city limits.  In this interview, Chris and Brett delve in to some of the concerns municipalities face when considering whether or not to extend their footprint.  In addition to financial challenges, there are practical and political concerns that must be weighed carefully.

We have several articles on Reedsburg at muninetworks.org .  And you can also learn more about the network at reedsburgutility.com .

Now, here are Chris and Brett, from Reedsburg Municipal Utilities.

01:21:

Chris Mitchell:  Welcome to another edition of the Community Broadband Bits Podcast.  I’m Chris Mitchell.  Today, I’m speaking with Brett Schuppner, the General Manager of the Reedsburg Utility Commission in Wisconsin.  Welcome to the show.

01:35:

Brett Schuppner:  Thank you.

01:37:

Chris:  I’m excited to have you on.  We’re talking just a few days after Wisconsin had that heartbreaking loss.  You know, as a Golden Gopher fan, I was fully with Wisconsin, and deeply disappointed.  So, my condolences.

01:51:

Brett:  Well, thank you.  Yup, it’s a — it was tough to see it end that way, but it was a great season overall.  So, definitely, they could hold their heads high.

02:00:

Chris:  And it definitely seemed like a great group of kids.  So, I was — I enjoyed learning about them.  So —

Anyway — I won’t wish you too much luck in the future, though.

02:12:

Brett:  OK.

02:12:

Chris:  Um, could you start by describing Reedsburg for us?  It actually isn’t too far from the University there.

02:19:

Brett:  Reedsburg is a rural community about an hour northwest of Madison, Wisconsin.  A population of just under 10,000 people.  You know, we do have quite a large industrial base in town, with some very large industries and manufacturing companies.

02:37:

Chris:  And what does the utility service provide?  I mean, we’re going to be talking about the telecom stuff, but maybe you can just briefly recount all the things the utility does.

02:46:

Brett:  Reedsburg Utility Commission is a 121-year-old electric and water utility.  We started with the telecom services back in about 2003.

02:53:

Chris:  Right.  You were one of the early movers, actually.  And you still are one of the premiere communities in Wisconsin.

03:05:

Brett:  We’re the only municipally-owned telecom utility in the state of Wisconsin offering the triple-play.

03:11:

Chris:  Right.  So you had the — you had fiber-to-the-home back before it was fashionable.  And that’s led to, I think, some of the benefits you were talking about with the industrial base.  How has the network helped out the community?

03:23:

Brett:  Well, with the network, definitely we were able to provide, you know, gigabit services to our schools.  Industries also have gig links between different buildings within town.  And also, we do a lot of VLANing to other offices outside of our service territory, by working with other providers, to do that.  So, you know, there’s definitely a benefit to our customers, to being able to, you know, have that high-speed connection, amongst all their other offices and facilities.

03:53:

Chris:  Now, I’ve been out there — twice, actually — to see the network, and to visit with you folks.  And one of the impressions I got is that there’s a fair number of jobs in Reedsburg that would not be there necessarily without the network.  You have some employers, I think, that expanded more in Reedsburg than they might otherwise have.  You don’t have to name names or anything, but that’s generally my sense.  Is that right?

04:16:

Brett:  Yeah.  That’s correct.  We’ve got some industries that have done some large additions, and, you know, a lot of them have their host servers in Reedsburg, for all their facilities.  We’ve had other businesses that outgrew their location in town and, you know, moved to the edge of town, and stayed within our service territory, to be able to get our services yet.

04:39:

Chris:  These businesses weren’t the only things that were expecting.  You were one of the municipalities that got government stimulus dollars when — after the economy crashed, and we wanted to sort of, you know, boost jobs by investing in Internet access, you got some funds to expand some of the rural areas outside of town as well.  You know, can you tell me a little bit about that project?

05:01:

Brett:  Back in 2010, I believe, they applied for that broadband initiative program stimulus funding, and were awarded that grant.  With that, we were able to construct, outside the City of Reedsburg, we cover about 20 or 25 percent of all of Salk County now, going into neighboring communities and covering the rural area with the fiber optics to the premise.

05:27:

Chris:  So, let’s talk a little bit about life now, because when you and I ran into each other in a Wisconsin Farmers Union show, a few months back, you mentioned that you were talking with the county.  And there’s a lot of people that would be excited to see you expand, although you have the economic reality that it’s really challenging to do that.  So maybe you can tell us about the dynamic that’s developing in the county, and how you’re trying to work with the county to be able to offer these services to more people.

05:58:

Brett:  Yeah.  I guess the people that can’t get our services — there’s a lot of them hear about what we can offer, and the benefits of our fiber network, and, you know, are always asking, are you coming our way, can we get your service?  You know, it’s just so sparse that a lot of it doesn’t make sense.  So, you know, the county actually asked us if there’s ways that we could partner with them to build out more through the county.  And I guess we continue to look at options for that, that make sense for both the county and us.  And hopefully sometime we can figure something out that will work with that.

06:34:

Chris:  Now, I’m about 260 miles west of you.  What kind of a quote can you give me?  [laughs]  Now, if I was in Salk County, and I just had the means to write you a check, are you able to expand to people that are sort of in the right condition, and maybe you — what sort of things are going on into making a decision like that?

06:53:

Brett:  Yeah.  I guess if there’s a need there that the customer’s willing to help support the build, and it makes sense for us, that we’re going to recoup our, you know, investment out there, we definitely look at those sort of scenarios.  You know, some of them end up making sense, and we move forward.  And others, it just isn’t practical for the customer or for us.  It’s just a pure business decision.

07:18:

Chris:  What are some of the things that go into making that decision?  I mean, in — someone who’s not doing this on a daily basis, like you are, I sort of think, well, you probably know what the cost is.  Or, you know, if I was to say, I’ll pay all the capital costs, what other sorts of things, you know, go into it?  Is it a matter of just the difficulty of supporting a customer that’s 15 miles away?  Or — what are some of the things that you have to think about?

07:42:

Brett:  You know, supporting the customer, that isn’t too much of a, you know, issue for us, ’cause, with phones and stuff like that, it’s — you know, we can communicate with those customers easy enough, and respond to them quickly.  You know, it’s just a matter of the up-front capital costs.  If the customers is willing to help support getting that fiber in the ground, you know, that’s the main consideration.  And, you know, the electronics and all that goes behind it, that’s economy of scale there, so a lot of that’s already kind of taken into account on our end.

08:13:

Chris:  So, I guess, when you’re dealing with this, I’m going to guess that a lot of people who want you to expand are only willing to pay a small portion of the cost that it would take, and then you have to decide, you know, how much is it going to cost over five years, or are we going to pay it back in three years, or five years?  Is that sort of the thing that goes through your head?

08:33:

Brett:  Yeah.  I guess we kind of, ideally, look for two-year paybacks on builds.  Because, being municipally owned, it’s not like a private business, where we have — it’s easy to go out and get financing, and be able to finance projects like this.  So, we look at ways that we can mainly cash-flow the projects.  So, that’s where it kind of comes into play, with the customer contribution.  I look at it — like on the electric industry, there.  What’s our electric service cost, to get to a new rural customer?  I mean, they’re going to be paying in the $2500 to — you know, it could be as high as $5000 range, in some instances, for — to get their electric service.  So, why should Internet be any different, if that’s, you know, a need of that customer?

09:16:

Chris:  Well — and I’m going to guess that, on top of that, you know, as an entity that’s owned by the City of Reedsburg, you know, you can’t really take a lot of risks to try and connect people that aren’t even in your city.  I mean, you just — you’re there to basically support the City of Reedsburg.  And it’s great that you’re expanding.  But, you know, it’s one of those things that — I have to assume that if you were to start taking a lot of risks in the county, the — some residents of Reedsburg might say to the City Council, what’s going on here?  Why is this risk on us?

09:46:

Brett:  Yeah.  I mean, you hit the nail on the head on that one.  It — why should the taxpayers, like you said, stick their neck out for other townships — other communities?  I mean, the City of Reedsburg took the initiative ten-plus years ago, and stuck their neck out to provide service and support within the City of Reedsburg.  So if we could do it, why can’t the other communities, if they want similar services?  I mean, we could partner with them, work with them, and provide our expertise, and do it at a lower cost, because of the economy of scale.  I guess that’s the way I look at it, is, you know, either the customer or the other communities need to put a little skin in the game.  If they want a service like — well, like we got, there’s a cost associated with it, and they need to be willing to contribute to that.

10:28:

Chris:  So, a final hypothetical question.  The state of New York has been proposing, and developing, a $500 million match fund.  And I’m just curious — if Wisconsin was to be able to do something like that, and Salk County was able to basically say, hey, Reedsburg, for every one dollar you spend, we’ll spend a dollar, would that make a difference?  Or is that still just — is there still too much risk, even at that rate?

10:56:

Brett:  We could look at each location or situation differently.  But, I mean, that would contribute a lot — take a lot of that up-front, out-of-pocket expense out.  Especially if you look at it — out-of-pocket material expenses.  And then the rest is our labor and equipment expense.  You know, that’s how it could be looked at.  And it would probably work out favorably.

11:16:

Chris:  So that’s — it seems like that would be a pretty decent program then.  I guess my question is, is — for any state legislator that’s trying to figure out how to structure a program, is that decent for you?  Or would you like to see a different kind of program?

11:30:

Brett:  It — I guess it would depend on the details of it.

11:33:

Chris:  It’s better than a poke in the eye, right?  [laughs]

11:34:

Brett:  Right.  I mean, I would definitely make some headway towards getting some stuff accomplished.  It just depends — you know, like anything, it — there’s no — it seems like there’s no such thing as free money.  There’s always strings attached, and everything like that.  And that’s what would really have to be evaluated: what IS attached to that money?

11:52:

Chris:  Right.  And I think one other thing is — sometimes people may not appreciate that — there’s a difference between if you’re going — you know, thinking about running a fiber five miles to connect one home, versus if you’re going to a development of 150 homes.  There’s — every potential project would be definitely different.

12:09:

Brett:  Correct.  Yeah.  ‘Cause you’ve got some areas in the township that — you might only go by a couple potential customers per mile.  On others, you might have ten or plus potential customers per mile.  It’s just difficult to evaluate those situations ’til you really dig into them.

12:25:

Chris:  Well, is there anything else you want to tell us about Reedsburg before we end the show?

12:28:

Brett:  I guess the only thing I’d like to add — and, you know, we’ve mentioned the gigabit services.  And, I mean, the one thing that we’re very proud of is the network that we’ve built from scratch.  And being able to be the first gigabit community in the state of Wisconsin.

12:45:

Chris:  Yeah.  I didn’t even have a chance to mention that.  And I know that, in the past, when I’ve talked with Dave Mikonowicz, it sounds like your customers have really valued what you have.  So, I want to congratulate you, and say that, you know, I’m sorry that I didn’t bring that up earlier.  But you deserve, you know, all the kudos for being such an advanced community.

13:04:

Brett:  Thank you very much.

13:06:

Chris:  So, thank you for coming on the show.

13:08:

Brett:  It’s a pleasure to be here.

13:09:

Lisa:  Send us your ideas for the show.  E-mail us at podcast@muninetworks.org .  Remember to like us on Facebook.  And follow us on Twitter.  We are @communitynets .  Thank you again to Persson for the song, “Blues walk,” licensed through Creative Commons.  And thank you for listening.  Have a great day.

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Thanks to Jeff Hoel for providing the transcript for the episode 146 of the Community Broadband Bits podcast with Ted Deriso on the Mid-Atlantic Broadband Communications Corporation business in Virginia. Listen to this episode here.

 

00:05:

Tad Deriso:  Yeah.  It’s nice having what we call “coopitition.”  Right?  So, sometimes we’re customers.  Sometimes we’re competitors.  But 100 percent of the time, we’re enablers, to help the private sector.  And that seems to prove out time and time again.

00:20:

Lisa Gonzalez:  Welcome again to the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance.  This is Lisa Gonzalez.

Today, Chris visits with Tad Deriso, President and CEO of the Mid-Atlantic Broadband Communities Corporation, an open access network providing wholesale service in Virginia.  The network has been instrumental in connecting community anchor institutions, government facilities, and local businesses.  Tad offers some history on the organization’s business model, describes some of the challenges they’ve faced, and shares lessons learned.  You can find out more about MBC’s network and their history at mbc-va.com .

Now, here are Chris and Tad.

01:02:

Chris Mitchell:  Welcome to another edition of the Community Broadband Bits Podcast.  I’m Chris Mitchell.  And today I’m talking with Tad Deriso, the President and CEO of the Mid-Atlantic Broadband Communities Corporation.  Welcome to the show.

01:17:

Tad Deriso:  Thanks, Chris.  Glad to be here.

01:19:

Chris:  Well, let me ask you first, where do you operate?  And then — not everyone knows what the mid-Atlantic is.  And then, why don’t you tell us more about your organization, the MBC?

01:27:

Tad:  Yeah.  So, we’re a 501(c)(4) nonprofit organization.  Own and operate a — kind of an advanced open access wholesale network in southern Virginia.  So, basically, on the east coast of the U.S., we cover about 26 counties, where our network stretches probably 1600-1700 miles today — route-miles.  And providing wholesale transport — exciting layer 1 services to carriers, ISPs, cable companies, all that good stuff.  So, we’re in the wholesale business.  And, as our day job, we’re, in essence, an economic development engine for our region of the state.  Really using this network to promote our availability of advanced workforce, all the great things we have going on with data centers and other companies now.  Looking to make those investments.  And that’s — interestingly enough, an open access network is a key driver for that.  So, we’re glad to see that vision coming to reality.

02:33:

Chris:  And about how many providers do you have on the open access network?

02:36:

Tad:  Yeah.  We work with 45 companies today.  That is everybody from Level 3, to Verizon Business — your big billion-dollar companies — all the way down to some regional providers like Lumos and Shentel.  And even some small ISPs — basically, mom-and-pop wireless ISPs that do a great deal of service to really help extend that broadband to those areas that, you know, don’t have it — really have no options other than dial-up and satellite.  And that’s becoming a big way to help encourage that in the region.

03:08:

Chris:  Our listeners have heard an interview or two with Danville.  But I want to make sure people have a real sense of — what is it like in southern Virginia, from an Internet access point of view?

03:19:

Tad:  Pretty incredible, when you look at the numbers and access.  So, Danville has a fabulous network — they built several years ago.  And utilized the MBC network to tie into, you know, the major peering exchange, where they can access high-speed IP transit and all that good stuff.  What’s really interesting, Chris, is the change of pricing, both on the capacity side and on the pricing side.  ISPs that used to only have access for T1s or DS3s — and, again, those range from $1500 a month to $16,000 a month — to get their — basically, their connection to the outside world, now, because our network’s built, we’ve had operations for on-net at two of the largest peering exchanges on the east coast: Ashburn, Virginia, the Equinix facility; and Telex, down in Atlanta, 56 Marietta Street.  That’s just provided a massive change in the economy of what is available, both on the pricing and the availability.  So, just to give you an idea, price per megabit people can access at those Internet peering points for probably a dollar — two dollars — per megabit.  And that’s on a gigabit level.  And when you add the cost of transport in there, people are able to get, you know, full gigabit transport connections from four to six dollars per meg.  And that really flips the economics model, when you talk about the enterprise customer in our region.  What are they able to get out of that?  And that’s really turning the tables on having those companies access providers with big pipes at a lower cost, and driving all kind of new products and services in the region.  So, we’re really excited about that.

05:08:

Chris:  You started off life as a coop.  Can you tell us a little bit about the funding that allowed you to get started?

05:16:

Tad:  Sure.  When we first started, as a cooperative, we had some funding we applied for from the U.S. Department of Commerce Economic Development Administration.  Again, this was — remember, back in 2003-2004 — it’d be even before BTOP was a dream [laughs] — in the Commerce Department, through a lot of political support here in Virginia, provided $6 million of matching funds to, in essence, extend an open access fiber backbone to the industrial parks in southern Virginia — about — I think it was around 350 miles for that first build.  We had matching funds that we applied for, and were awarded, from the Virginia Tobacco Commission.  And that’s basically a quasi-state entity that manages the proceeds from the tobacco settlement — master settlement agreement — back in the early 2000s.  And they, you know, invest in economic development projects, and all different kind of things.  So, that first $12 million was, in essence, the start of MBC.  We formed ourselves in January of 2004.  Grants came soon after that.  And then started building the network.

06:25:

Chris:  And then you ultimately decided to transform from being a coop into a different kind of nonprofit.  What drove that change?

06:34:

Tad:  Yeah.  So, it’s a really interesting transformation in our business.  Really, our mission has not changed.  The passion of keeping our local communities — supporting our local communities — never changed.  What was problematic, in the cooperative model where we had, was the fact that, in a coop, you have to do certain things to maintain that tax-exempt status, which was to have members of your cooperative on your board of directors.  You needed to make sure that earnings — or, sometimes they call that “excess revenues” — those are applied as capital credits and paid back to your members — which is basically a dividend.  Those two things were very problematic for us, because, although we had members on our board of directors, they were not members that actually used a service.  They were not broadband providers.  They were independent, you know, business people, economic development professionals, philanthropists, attorneys.  And, basically, that gave us a really easy way to make sure that there was not a conflict of interest.  If we were to have a small ISP, or a regional provider, or a billion-dollar telecom corporation on our board of directors, all of a sudden, people have access to things that some of their other competitors don’t.  And that was extremely problematic from a governance perspective for us.  So, we really didn’t have an interest in having telecom members on our board of directors.

And the other part of that was, dividends, when we actually started being very successful, and having a lot of revenue come in, and “excess earnings,” and found that — that’s fabulous.  We keep reinvesting that in the business.  But, as a coop, that money isn’t really yours.  You have to pay that back to the members.  And we would then be in violation of our grant agreements, if we were to write a check to our private-sector telecom providers.  Which, our grants specifically say that we’re not allowed to inure benefit to any private-sector corporation, individually, as a result of the grant.  So, working with our consultants at KPMG, and talking to the IRS, made the decision to transform from a (c)(12) into a 501(c)(4).  Got that through, and retroactive status.  And all things are great now.  So —

08:52:

Chris:  I can imagine that there was some frustration, where you’re sitting in the office thinking, you know what, I just want to figure out how to get more fiber to more businesses, more anchor institutions, and do this.  I don’t want to be figuring out how to play around with tax laws, to make sure that I’m not, you know, violating any of these grant agreements, and this and that.

09:10:

Tad:  Exactly.  Exactly.  Yeah, it’s very challenging.  You know, we focus on doing our mission every day, and we have things thrown at us that, well, where did that come from?  So — But, yeah, that’s all part of, you know, good governance, and transparency, and things we have to do to keep the organization moving.  So —

09:27:

Chris:  Right.  So, one of the things that I was interested in — I mean, I’ve been following your work at MBC for a number of years — and I recognize that you guys have done a wonderful job at dealing with the middle mile problem, but I learned that you’re looking, in Martinsville, with some sort of partnerships, and other approaches, to try and help them solving more of the last mile problem.  So, I’m wondering if you can tell us more about that.

09:51:

Tad:  Ah, so it’s a really interesting scenario.  We are a middle-mile network.  But we do extend fiber to individual businesses, or schools, or, you know, cellular towers.  So, in essence, we have that last-mile connection.  The difference in our business model is, we do not serve those companies directly.  Right?  So, we don’t provide the retail service.  Martinsville is really interesting because, just a few months ago, we had an announcement.  A company based in the United Kingdom — a company called Hardide Coatings — decided to look at establishing a east coast presence — manufacturing facility.  And did a lot of searching.  And ended up in looking at Martinsville.  One of their big concerns that they communicated to the locality was, they basically wanted to manage and control all of their processes and network facilities in Martinsville, Virginia, from their facility in the U.K.  So they were concerned about, you know, this is not something you put on DSL, or cable modems, or, definitely, not a wireless network.  Wanted to make sure that there was fiber, we could have direct access into their cloud provider, which is an international company.  Worked with them, through some of our customers, and came up with a solution that worked.  And they were just fascinated that — an MBC really doesn’t exist over in the U.K.  But the fact that we could extend the fiber to their business.  And then they can have their choice of 45 different providers.  And it was not an issue of who owns the fiber, and how much they have to pay, and all these kind of things.  We do that as an incentive.  So we extended a fiber lateral at no cost to them.  That basically gives them the on-ramp to our network.  And they ended up, after some research, working with one of our customers to get a 100-megabit connection up to northern Virginia, which ties into their cloud provider.

So, those kind of things are really driving the bus, so to speak, when it comes to economic development.  And as a growth to that, we looked at Martinsville, really, as a unique ecosystem.  It’s still a very difficult place economically, in the Commonwealth of Virginia.  I think the unemployment rate is still around 10 percent.  State is around, I think, four and a half to five percent.  So it just gives you some indication of that.  So we’re playing around with an idea to say, hey, what would happen if we had an open access fiber connection at every single business?  And hope the — also address the residential side, which we’ve traditionally NOT done — through partners and other companies we’re working with that DO have an interest in that.  Would it make sense that we could facilitate some type of project, and see what happens?

So, those are some of the initiatives we’re working on, and — in Martinsville — to see, you know, what happens if you can get everybody connected, and then allow that, you know, service to come on board and do some unique and creative things.

12:52:

Chris:  It’s one thing to say, you know, yeah, we’d like to have a connection to every house and business.  But, typically, the capital costs of building that are so prohibitive that it doesn’t happen.  And so I’m curious if there’s anything that you can share with us as to, you know, how you can lower the costs enough to make it happen.

13:13:

Tad:  The really interesting part is, there is some density within the city of Martinsville and Henry County, so you do have some — you know, some stretches where you may only have, you know, one or two homes every mile.  But, in a preponderance of where things are — and especially in the business parks — you do have quite a bit of density that can make things happen.  So, this group that we’re talking with has some unique construction methods, to be able to do some things.  And we’re anxious to see about putting that into the place, and see how that works.  So, yeah, that’s always the challenge.  Right?  The capital cost — to get it built.  And then, really, long-term, is, well, what’s the operational cost to keep the stuff running that you just built?  And that is, really, something that a lot of people forget to look at when they are building networks.  You know, a lot of times, getting money’s easy.  It’s the recurring money that’s a little tougher.  Even in our perspective, with our mission, it’s easy enough for us to come in there and — you know, we’re managing a very, very large network.  And then, to manage a network that has a bunch of connections to businesses and homes, and working with our local partners, the city of Martinsville, there, you know, is a way to keep the ball rolling, and hopefully make it make sense.

14:35:

Chris:  One of the things that I suspect you have going for you is that, because of your actions and the city of Martinsville and Henry County, every community anchor is already connected to the publicly-owned — or else the MBC-owned — middle-mile open access network.  And so you have revenues from all the anchor institutions that are now being able to, ultimately, not just pay for the existing network but, then, to be reinvested in expanding the network.  And I’m curious if you can speak to how important it is to be able to take the anchor institution revenue, and to be able to reinvest that.

15:13:

Tad:  Yeah.  Very critical.  You know, the interesting thing about the city of Martinsville is, we actually don’t have our own fiber to every school in the city.  The city of Martinsville has their own fiber network, called Mynet — basically a smaller version of what Danville has done.  And that’s been a great resource for the city to do all that.  Where we come into play, is, we basically connect the city to the outside world, and have revenue from that.  So, it’s a nice little partnership.  We’ve done builds with the city, where they own half the fiber, we own half the fiber.  Do some unique things with pole attachments.  And the ability to — where its community anchors or businesses or cell towers in a region — be able to kind of gather up that revenue and reinvest it in new projects, or continuing to pay for your existing projects.  Really important type of things.  And we’ve — because we’re — our scope is so large, with 26 counties — I was really able — enabled us to do some creative things with those “excess earnings” and “excess revenues” that we have.  Because, as you know, as a nonprofit, we don’t have shareholders, we don’t have owners.  We basically plow every penny we make back into the network, back into marketing our region for economic development.  You know, we’re starting to see some good things happen in Martinsville for that.

16:33:

Chris:  Well, let me ask you, as a final question, you know, you built your network with sort of one-time monies.  And you’ve obviously done a tremendous job of turning that into a sustainable enterprise.  What advice might you have for others that have started maybe 10 years after you — with the BTOP programs, for instance?  A lot of them started with one-time money.  They have middle mile networks.  And they ultimately want to enable more last-mile connections.  So, do you have any advice for them, as someone who’s been there?

17:03:

Tad:  Yeah.  Be very strategic about your thoughts about outsourcing.  You know, when we first started, even though we had a $12 million grant, we had two employees — myself and an administrative assistant.  We were very lucky to partner with some great companies that had resources.  And as we continued to grow over time, we added staff to be able to help that.  But, again, not adding, you know, much more staff than we could.  Tracking revenues and expenses is really critical.  Because once that grant money runs out, and those fees to recoup — project management fees — that does become very difficult.  So, I’d say, take a look at your creative way to outsource things.  Partnering with other people that are already doing this, instead of recreating the wheel yourself, is usually a good way to think about that.  And, you know, just becoming a partner with those providers.  We’ve really been able to grow this network without a dedicated sales force.  We’re now at about $8.5 million a year of top-line revenue — from zero in 2004.  But the reason we did that — because we embraced the private-sector telecom providers, who used our network to get to these locations.  And, again, our “secret sauce” of our success was staying true to that wholesale mission.  And that’s really helped, because we’ve got basically 45 customers out there, selling our network.  They know where we are.  They know that we’re a great, diverse network from the incumbents providers.  We obviously do things a lot differently than the big telcos, because we can.  You know, sticking [with] that wholesale model really helped to enable that, and helped the private sector really ramp up their use of the network, and is creating new projects very day.  So —

18:52:

Chris:  Thanks.  And one — actually — question just popped in my head.  I feel like there’s a different reaction from incumbents, in that incumbents are generally more willing to use an open access middle mile network than they are an open access last mile network.  And I’m just curious if you’ve seen any evidence that as you move closer to the customers, it actually may threaten the de facto monopoly that some companies may have, that they’ve been less enthusiastic, or given you a different reaction, or anything like that.

19:24:

Tad:  Ah, somewhat.  You know, it’s always interesting that — we have companies that come to us and say, hey, we need, you know, 50 megs of Internet, or I need to get to XYZ data center.  And they’ll ask our customers for quotes.  And we’ll send that out.  Doesn’t happen too often, but at some times, we’ll send that out to our customers, and that customer has fiber nearby.  And they may use us for part of the connection.  But they can build in and, in essence, own that connection to the end customer.  So, that last mile connection is always something the private-sector guys want to own, because that gives them a little bit of control over the customer.  But, you know, at the end of the day, if a company wants a connection through our network, using a provider, they can get that at a price point that makes sense, and it’s competitive.  It proves out on the ROI models.  So, a provider may build their own fiber, think they’ve got a monopoly.  But we’ve gone in many times — whether it’s a cell tower or an existing business.  And where it — again, where it hits our investment model, we can extend that open access fiber.  And then it’s open for everybody.  So — yeah, we’ve seen a little bit of pushback back and forth, but, you know, interestingly enough, Verizon is one of our biggest customers.  We do a lot of work with the cable companies.  Have enabled them to do a lot of good things.

So —  Yeah.  It’s nice having what we call “coopitition.”  Right?  So, sometimes we’re customers.  Sometimes we’re competitors.  But 100 percent of the time, we’re enablers, to help the private sector.  And that seems to prove out time and time again.

21:05:

Chris:  Excellent!  Well, based on your advice, I was thinking — to the BTOP, a couple minutes ago — I was thinking that you’re kind of a “lean and mean” operation.  But you’re really a “lean and nice” — you’re really a “lean and community-thinking” organization.  So —

21:19:

Tad:  Yeah.  Yeah.  Exactly.  Exactly right.  So, we have 15 people on staff now, full time.  Of course, a lot of outside contractors for, you know, construction and design and permitting and all those kind of things.  But it’s amazing to see it grow, and continue to thrive, and, at the end of the day, help in our mission, which is improving rural Virginia.

21:39:

Chris:  Excellent!  Well, thank you for telling us more about the MBC.

21:42:

Tad:  You bet.  Thank you, Chris.

21:44:

Lisa:  Send us your ideas for the show.  E-mail us at podcast@muninetworks.org .  Remember to like us on Facebook.  And follow us on Twitter.  We are @communitynets .  Thank you to Persson for the song, “Blues walk,” licensed through Creative Commons.  And thank you for listening.  Have a great day.

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LUS Fiber is now sharing its municipal gigabit network with travelers at the Lafayette Regional Airport, reports KLFY News 10. According to the article, free Wi-Fi is available at the airport supported by LUS Fiber.

“Today’s travelers expect to stay connected when they are away from the office or home. With complimentary WiFi, guests can check important email, post to social media and browse the Internet,” said Steven Picou, Executive Director of Lafayette Regional Airport. “We recognize that to deliver complimentary Internet access contributes towards a positive customer impression of the airport, as well as Lafayette.”

LUS Fiber and the city of Lafayette has recently attracted a number of high tech companies and understands the value of first impressions. The airport is the perfect place to dazzle visiting potential employers:

“We know that businesses choose to come to Lafayette for a variety of reasons and many have cited our 100% fiber-optic network as one of those reasons,” said City-Parish President Joey Durel. “As a gateway to Lafayette, we want visitors to experience the ultra high speeds of a Gigabit Internet connection, from the moment they arrive to the moment they leave.”

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