Blandin on Broadband

Today I’m at the FTTH Council meeting in Minneapolis. It’s been interesting. I don’t always sit in a room full of providers. The questions are different; the focus is different. The stimulus funding has been THE topic. Many people reminded attendees that this is a jobs program first and foremost! One person joked that the stimulus funding now takes 90 percent of his time – and that’s before the RFP is even out. Others have talked about how the stimulus funding in many ways has put a stop to any projects that had been in the works as everyone reworks plans to (hopefully) qualify for stimulus funding.

I have taken notes. I think they will be most interesting to anyone who might be looking at deploying FTTH in their community or anyone interested in applying for stimulus funding.

I walked in at the intro…

Randy Young –MTA is looking at stimulus. Looks as if the grants will go to unserved and underserved communities. MTA is working with partners to advance broadband capabilities. They are working with DHS (Office of Rural Health/Minnesota Telehealth Network I assume), libraries, schools and others.

SESSION 1 – The Role of Your Outsourcing Partner in Successful FTTH Deployments

MODERATOR – Mike Hill from Ontrac
Allen Powell, S&N Communications
Walt Donovan, Quanta Services
Mark Frosaker, MasTec

WD – they contract to design and build fiber for telcos, power, cable, gas companies. They provide full services design, engineering, construction, content acquisition, can provide ongoing services. They’ve done large builds (AT&T) to municipal builds.)

FTTH Success Factors
• Partnership between owner and outsource
• Clear communication among partners
• Integrate construction with sales*
• Think out of the box (that’s how they developed new app, micro-trenching)

*this means you need to have your products defined in advance of build.

Anticipating Stimulus (and other funding)
• Feet on ground in DC
• Working with customers to develop grants
• Preparing preliminary plans & engineering

MF – They design build and maintain fiber optic & copper networks to deliver triple play. They constructed the first RUS FTTH project in late 90s. HQ is FLA, office in MN. They work with Frontier, Qwest, and RUS FTTH in MN.

What’s going on?
• Verizon is deploying FTTH
• Other larger providers are increasing
• Rural Telco projects have increased in last 2 years
• Private networks (schools, hospitals) are growing.

Issues to consider when working with a contractor
• Qualification vs price
• VAS vs Price
• Involved contractors earlier on
• Award 100 percent to one contractor
• Partner relationship vs adversarial relationship
• Communicate specific goals and expectations
• Let the contractor work

AP – They are a smaller contractor for out sourcing network builds – mostly out East. They have worked with Verizon in Virginia & Maryland (FiOS drops).

Tips for working with partners
• Your partner need to constantly review costs and make recommendations
• Get community involved – talk with people in advance, handle problems quickly
• Recognize that this is not business as usual. It’s an overbuild!

Best customer experience:

- MF – A job in Nebraska – we thought we underbid but the relationship was strong enough to overcome obstacles and add-ons and finish on time.
- WD – We did a whole wire center, but it went well because we had the whole project, knew the end goal and we able to help reach that common goal.
- AP – Working with someone who wants to partner makes a big difference – and it’s even better if they are partnering with the community of end users.

Horror story

- We worked with someone who did not see us as partners. It became adversarial. We all spend a lot of money; we need to work towards a common goal.
- WD – One customer awards contracts in small pieces, which means lots of contractors, which leads to confusion for customer and end customer.
- MF – Working with folks who are growing too fast, who don’t have relationships with specific contractors so hedge their bets and get too many people on board, which just adds confusion on top of the usual challenges.

Q – Working in rural MN in a community with 5 users per mile – how do you decide to go into that area? How many fibers do you put into the customers home?

A – Well I wouldn’t go there. But if I did I’m go in with 2 strands (maybe 4). You do need to look at the entire build when that is the market.

It’s a common problem that people think that fiber doesn’t work in rural areas – well the take rate can be high enough to make it worth the effort. FTTH deployments by small telcos are the second largest subscriber group. There’s no competition. Also not much gets in the way – especially if it aerial connections. (Though aerial may make less sense in MN.)

Q – Lower density and longer route miles are considered, are you finding the cost lower in low density areas?

A – Yes, especially with aerial drops. The greater the density, the higher the restoration costs. The goal of the FTTH Council is to see those rural areas get fiber.

Q – Majority of cost of FTTH is putting fiber in ground. What’s happening to that cost?

A – We are working with equipment called micro-trenching, which should reduce cost. We’re also looking at use of abandoned cable (not a great solution right now).

Not sure that putting in fiber is greatest cost. The prices have come down; it’s a virtue of volume and relationship with providers.

Cost of materials fluctuate. We’re trying to figure out how to compete or go hungry, so we’re invested in finding improvements.

Cost may not be the biggest issue; you need to have labor involved that will be palatable to end customers.

Q – What happens when you see RFP is only going to look at unit price?

A – You could demonstrate a higher take rate than competitors.

It’s all in the prequalify process. You need to make sure that those submitting proposals have met certain prerequisites. Make sure you are working with companies that are sound.

Q – What would you like your customer have ready?

A – Have good outline of areas where you plan to build, design prints, and intended products.

Some folks provide turnkey solutions – they will only need to know service areas. Knowing ultimate goal is helpful.

SESSION 2 – Broadband Stimulus: Maximizing your chance of success – by Thomas Cohen, Kelly Drye Collier Shannon

It’s going to be very competitive

They just changed the lobbying rules. They had said people could meet to talk about grants (along with written proposals) – except lobbyists. The lobbyists complained. Now no one can go in.

RUS program is well controlled. NTIA has 5 goals (education, awareness, training, improved access by public safety, and stimulate demand).

This is not about broadband – it’s about jobs!

You can find White House memos/updates on ARRA on www.recovery.gov. Remember, this will be a ranking of the best applications. The specific objectives may be brought up on the Recovery site.

They want to see direct jobs result from project.

You don’t need a grant writer, you need someone who has done a business plan.

Once the RFP is out, they will hold workshops and webinars with instructions. You need to follow the rules.

The second round RFP may come out before first round is decided.

This is part of a larger process. The FCC is also working on a National Broadband Policy. The FCC is going to use that strategy to rethink USF. That is probably a big chunk of your operating budget. That debate will occur over the next 8 months. We don’t’ know what will happen – but it may be a precursor to the new and improved USF.

What about the buy American provision? No one can tell definitively. Some people (like Cisco) want an automatic waiver for everything. CWA says you should self-certify and be checked later.

Key Issues to be Decided

RUS
- Definition High-Speed Broadband, Insufficient Access, Rural Economic Development
- Grants, Loans, Loan Guarantees
- Matching funds?
- Scoring system/Handling preferences
- Design-build/Turnkey projects (previously this has been a sequential process)

NTIA
- Definitions Broadband, Unserved, Underserved

Constructing an application strategy
- Follow the law
- Demonstrate credibility & competence
- Demonstrate project feasibility & sustainability
- Obtain support from key constituents
- Anticipate constraints, such as right-of-way and environmental impact issues
- Remember you’re doing business with the government
- About all else – remember the needs of the officials at RUS & NTIA who are approving awards

What should you be doing?
- Start now.
- Project must make business sense.
- Build your team – Business Development, Engineer, Finance, Lobbyists, Lawyer, Vendors & Construction
- Set internal deadlines for preparing drafts of key sections and be prepared to alter when NOFA is released

A potential Outline

Intro – Narrative on Project
Applicant History
- Company background
- Background on key personnel
- Current infrastructure/services
- Financial history
- Background on Partners/vendors/construction entities
- Evidence of eligibility to seek grant
Project Service Area Info
- Current infrastructure
- Demonstration areas is un/under served
Project description and costs
- Project design overview
- Engineering design & infrastructure
- Services (including BB speeds and price)
- Jobs/economic benefits of deployment
- Connectivity to community institutions
- Costs of project, budget, matching funds
- Evidence project would not have been built w/o stimulus funding (NTIA only)
- Evidence project will be completed in 2 years (NTIA only)
Project deployment plan
- Turnkey/Deign-Build
- Schedule for deployment
- ID of personnel in charge
- Permits and environmental statements
Project financials
- Evidence of feasible
- Evidence of Sustainable
Support from community
Scoring Criteria Documentation
Post award accountability

A- In MN Certification for ILEC or CLEC is different. A CLEC cannot necessarily serve an entire community. Can NTIA give them the right to serve a greater area?

Q – No

A- What kind of lobbyist do you need?

They are important all of the way up. Getting your congressional members involved for lobbying for you is not a bad idea. Get them involved early. It’s also important to have community organizers and entities to speak for you.

Q – How do you handle noncompliance?

A- You don’t want to have non-compliance.

Q – Does this open the door the RUS/NTIA to get into your business? Can they try to set pricing to end customers?

A – No. They will expect you to honor your application but will not get super involved.

Q- Do you think they’ll look at traditional service areas (county-wide, cities…)?

A – They will look as to whether you will serve un/under served areas – other than that they probably won’t get involved.

Q – Will they (NTIA) give preference to minority vendors, personnel, owners?

A – The NTIA may. They said there will be an advantage but have not specified – but we’ll have to wait to learn more.

Q – Will receiving grants have an impact on future USF funding?

A – Probably not.

Q- Will they prefer big projects?

A – They may be reluctant to fund big projects at least at the start. It’s too much risk and they can get too complicated too quickly.

Q- Can you get money from NTIA & RUS?

A – You can’t get a grant from NTIA & RUS – but you can apply to both.

SESSION 3: State Initiatives in Broadband and State Policies

Mike O’Connor, BB Task Force
Brent Christensen, Christensen Communications
Joanne Johnson, Frontier
Gary Evenson, Public Service Commission of WI

Background

BC – The MN legislature created the Task Force and hired Connected Nation to do mapping of Minnesota. The Task Force is going to come up with broadband recommendations for the state in November.

JJ – Joanne is an unofficial member of the Broadband Deployment Council in Illinois. (She’s also on the MN Task Force.) IL created a digital divide fund in 2001.

GE – In Wisconsin there is no formal Task Force. Gov Doyle has been supportive with Grown WI initiative. They have a lot of companies pursing FTTH.

How does it work?

BC – MN meets monthly. Public is invited. We’ve had panels of experts present to us. Now we’re writing. We’ve having 3 outstate meetings.

JJ – In 2007, Sen Durbin (he’s from IL) introduced Connect the Nation Act. The Council decided to make recommendations to become a BB leader. They chose 3 topics consumer demand, policy and infrastructure. They had 20-50 people attend meeting and conference calls on each topic. IL just passed a bill that made it easier for providers to cross railroads.

GE – There is a legislative council; they establish study projects. There was one on BB, 5-6 years ago. They met for a few weeks. They heard that BB was important to economic development. They wanted to regulation of BB. Since then the Gov has been supportive of BB.

What’s your plan with the Stimulus Funding?

BC – In MN, we don’t know the state’s role. The Gov has appointed a point person (Diane Wells). We put out a RPF of sort to see what folks were planning in MN. We gave that list to the legislature.

JJ – Usually we meet quarterly. We dedicated a meeting to the stimulus package. There was a promise of support. Ryan Croke says we should aim high as this was an opportunity. They are getting their ducks in a row. The Gov’s office will be supporting projects. IL has 4 percent of the population and deserve 5 percent of money – that’s what they are aiming for; $2-3 million. http://recovery.illinois.gov

GE – There’s $7.2 billion and 72 counties in WI. Hmmm. WI established an ARRA office with staff (borrowed from other departments). They have handed off BB portion to Public Service Commission. They have been trying to collect potential applicants. They we have mapped customer access to BB as defined by customer – http://psc.wi.gov/

MO – Figure out who in your state is coordinating the BB initiatives.

What are the contentious issues?

BC – 1) Government’s Role, 2) Speed, 3) How to pay for it? We need to address these to meet the legislative mandate.

JJ – We’ve been talking about these issues for a long time so that helps, but we have at times agreed to disagree. 1) Speed – so we’ve moved trying to define demand based on applications; 2) Role of Government as provider, regulator, nurturer at local and state level. The big question is – should municipalities be providers? 3) It’s difficult to get anything done politically.

GE – We have a lot of potential issues. 1) Speed. With stimulus we anticipate issues with people who want to cover last mile (people who live out of town) and some want to increase backhaul capabilities for wireless or smart grids. The big guys aren’t going to pursue money. Some companies are building FTTH – but some customers don’t want it. Some folks fear healthcare concerns of wireless.

MO – Essential infrastructure.

Questions – please talk about position in regards to vetting projects.

Iowa has created a study group of legislators (11 more to join); they won’t vet. But they also scored $20 million to cover match of projects in the state.

38 state commissions wrote to the NTIA asking them to work through states – including legislators in WI.

Question – Assume your state will mandate a level of BB – how will that be funding (if you don’t get stimulus funding)?

BC – The MN task force is looking at different levels of service with different requirements; we’re trying to look at what are those levels. We havne’t looked at how to pay for it.

JJ – In 2001, IL required providers to deliver BB to 80 percent of customers. All companies except one met that challenge. (They have 3 years to do this.) One got a waiver. The state decided it was up to the provider to make that happen.

GE – Don’t expect there to be a mandate in WI. Currently the requirement is 9600 bps.

MO – In our neighborhood we’re looking at a fiber network.

Question – Setting a minimum speed is a big topic. Is there any way to move past that to applications? Aren’t you afraid that defining tiers might prohibit entrepreneurs?

BC – A few years ago we wanted a T1 to every home. Today that would be obsolete. The problem with speed in legislation is that it gets dated too quickly. If you don’t use speed – then what are you going to use? So we’re going to use the tiered network and we’re still working on that.

Question – How about the speed that the user wants is the speed the user gets?

20,000 homes are served with FTTH.

Question – How involved are developers letting engineers talk to providers about BB?

Sometimes there are no developers in rural areas.

In other areas there are developers. Now developers think of telecommunications – that’s been a good step. Now when we go into green field we go with fiber.

The question isn’t are you going to deploy fiber – the question is how fast?

SESSION 4 – Public Private Partnerships

Gary Evans, HBC – moderator
Jeff O’Neill, Monticello
Milda Hedblom, TISP
Wally Wysopal, North St Paul

WW – They did a survey 70 percent wanted to pursue FTTH. At the time of referendum, 70 weren’t interested. There was a lot of concern about property taxes; a concept that was hyped by folks from the outside who had come in to reduce changes of municipal network. More on North St Paul: http://blandinonbroadband.org/2009/02/25/ftth-%e2%80%93-not-in-north-st-paul/

JO – Here’s the scoop on Monticello from earlier blog posts:

http://blandinonbroadband.org/2009/06/03/monticello-celebrates-court-of-appeal-decision/

MH – Cities who want to do fiber are going to have to understand their interests. They need to reply on leadership. Cities need to be realistically informed on 1) capacity for management, 2) money and 3) regulation.

Need to know options – do you want to own but not manage, own and manage, own jointly? Who are the potential partners out there?

Questions – What was your engagement (in NSP) with county or state?

WW – The county contacted us 3 months ago to talk about fiber – but they didn’t realize that we provided fiber to many of their libraries. The stat folks weren’t helpful either.

Question – How has the lawsuit held things up?

JO – While being held up, the incumbent has dropped prices and improved their infrastructure. The City has also forged forward. (They used proceeds from the liquor funds.) The competition has been good for customers. The worst that can happen is two great systems in the area.

Question – how do you address a situation when you have lots of locations in a deal? (Different cities, different counties.)

It depends what you have in mind. The biggest problem is how ready a city might able to provide service with the stimulus deadlines. (Is there a switch in place or do you need money from a referendum?)

Question – What is the relationship with HBC & Monticello?

HBC will be sharing revenue with Monticello.

A big thing to consider is – why do you need the service? Is this an essential service? It’s tough to get voters to understand that this may not be essential today but it is for the future – municipalities will need that.

LUNCH

SESSION 5 – US Fiber to the Home Market Update

Michael Render, RVC

FTTH Homes Connected – as of March 2009 4.4 million homes get fiber. Most of those (3.3 million) are from Verizon

Consumer Survey (650 FTTH; 650 other BB users)

- 28% of non-FTTH had heard of FTTH
- 54% of non-FTTH would get FTTH if they could
- Super fast Internet was top quality for folks of a new home amenity
- 2009 research shows that FTTH users work nearly 2 additional days per month at home due to FTTH
- 17 percent of FTTH users have a home-based business

SESSION 6 – USDA RUS Review of Loan Programs

Anthony Tindall, USDA RUS

Last year FY07 they gave”
- Traditional loans $675 million
- Broadband Loans $438 million
- Community Connect Grant $15 million (I think I have this wrong- any help would be great)
- Distance learning $28 million

Budget for this year
- Traditional loans $690 million
- Broadband Loans $400 million
- Community Connect Grant $13 million (I think I have this wrong- any help would be great)
- Distance learning $35 million

2008 Farm Bill Sec. 601 – here are the changes:

- They are changing definition of BB it will be higher than previous (200kbps symmetrical)
- Rural area means any area not located within a city, town, or incorporated areas of 200,000+ population
- Incumbent service provider – is an entity that provides access to no less than 5 percent of households
- Eligible projects – at least 25 percent of households needs to be underserved as defined by “0 or 1 incumbent providers”
- Eligible projects – cannot have more than 2 providers
- You don’t have to have a market survey if expect less than 20 percent of market share

RUS has $2.5 billion – the vision is to expand BB and facilitate economic development.

Historically there’s been an exclusion where if someone already receives an RUS grant in one area – no one else can receive funds to serve that area. Recently a RUS grant went to a large (500 communities) WiMAX project to Open Range. Their area will probably be protected.

SESSION 7 – Working with FTTH Consulting Engineers

Dean Mischke, Finley Engineering
Jason Dale, Compass Consultants (out of Perham)
Gary Larson, Communication Network Engineering (out of New London)
John De Whitte, Vantage Point

DM – Keys for looking for an engineer
- Do they have experience? – they can prevent you from doing the wrong things
- Do they have a broad group of clients?
- They provide a helping hand

JD – it’s nice to get local folks. They know your business; they know your situation.

GL – Project Phases
Project Definition Phase
- Project goal
- Engineer selection
- Tech choices
- Service area
- Budget & funding source
- Timetable milestone
Project design phase
- Analyze tech choices & ID interconnections to public network
- Develop project master plan & design
- Develop plans & specs for each technology to be procured
Project construct and install phase
Project final cutover & in-service
Project final closeout and certification

JDW – The public doesn’t understand engineering.

Find an engineer that is
- Customer focused
- Technology driven

How can engineering firm help with stimulus application
- Help ID project that are eligible
- Verify & develop cost estimates
- ID & develop supporting documentation
- ID benefits of BB to communities served
- Develop a financial business plan
- Writing application
- ID any additional items

SESSION 8 – Monetizing the Broadband Internet Connection

Frank Latini, GRU

They provide access in Gainesville, FL. There’s a college there. They have had success providing services to students. To be more attractive to students, they are looking at improving video. They have a deal now with Disney/ESPN.

DMCA violation used to be music; now TV shows are greatest victim of DMCA. http://en.wikipedia.org/wiki/DMCA So providing TV shows is not a good alternative – the students are already getting it for free.

They charge between $12-18 per bedroom, per month (in dorms/student living). That’s forty percent profit. The landlords add the surcharge on that – and usually do. They can make more money by upselling the students – who need the BB for gaming (and more).

They have tried to work with central game locations to move servers closer to their area – but they are hard to reach. They are going to try to do direct peering with some services (Google, ESPN, maybe gaming).

Reaching a new market (non-student) is a good idea (they will spend more) – but students are the bulk of the populations. We’ve had Mike Render survey students to see if there were good ideas for growth.

Most of the apartments are running very god cable wires – so a move to ipTV makes sense.

Students don’t have money – but the content providers do. Can we position the network to get paid by content providers?

SESSION 9 – FTTH Case Studies Panel

Dave Russell, Calix
Kevin Beyer, Federated Telephone Cooperative
Donny Smith, Jaguar Communications
Russell Leitzen, KMTelecom

KB – they have deployed FTTP to 100 percent of customers (3,350 units in 800 miles) The first ILEC to convert to 100 percent!! (We’re pretty sure!)

RL – serves

DS – created by farmers, teachers & others who wanted to bring technology to the area. They go into areas that are completely unserved.

Question – How did you finance these projects?

KB – RUS loans were approved for fiber to the node and we worked with RUS to convert to FTTH. And cash flow.

RL – Cash flow and traditional means.

DS – Funding from sale of ISP, tradition bank financing and RUS.

Question – What do you think of stimulus package?

DS We’ve been very active with stimulus funding. To reach these un/un served areas in a short time this is necessary. We’ll apply to both RUS and NTIA.

RL – We’re exploring ideas with NTIA but not committed. There are too many unknowns.

KB – We’re looking at serving new areas and will be applying through MTA to NTIA; we may apply to RUS on our own.

Question – How do you differentiate your services?

DS – The construction crews is our first sales opp. We offer prices that are moderately lower and higher speeds.

RL – Symmetrical speeds.

Question – did you run into problems with folks who didn’t want FTTH?

KB – yes, we had 5 people. We talked to them about house resale value. We had a lot of questions about the battery backup.

DS – it’s important that each customer has a good experience because word will spread.

Have you lost voice lines to wireless? Did you offer a special deal? Do you have monthly contracts?

KB – We have month-by-month contracts. We offered a special that involved free installation.

RL – We offered a similar special.

DS – We do free install too. We do contracts (1 month to 5 years). 85 percent choose 5 years – they get price protection. We give no specials.

Question – Have you had resistance regarding paying for power?

KB – We were very clear about it in advance; we offered a deal if you got cable.

RL – we haven’t had an issue.

DR – ONT power consumption is one quarter of what set-top-box is.

What’s your vision of/for FTTH?

KB – I inherited the project but quickly learned that there is no value in building a network we need to redo in 10 years. We wanted future proofing.

RL – Our vision was similar.

DS – We want to provide FTTH to everyone to keep people in town.

Has tech support/maintenance improved?

KB –We did expect a saving with fewer issues and we have seen that. More issues can be handled from the office.

RL – We’re looking forward to that.

Question – How do you deploy in the winter?

KB – We try to bury in the spring/summer/fall. Splicing can happen in winter.

RL – We prime the market to minimize work in the winter.

DS – We have done winter construction. But we don’t like it.

Questions – what are some of the biggest problems?

DS – County regulations right-of-ways. There’s no consistency. Towns are usually good because they want you there.

KB – Keeping up with the cable side of things. The demand is getting to be too much too.
So we have to think about how much we want to grow.

Question – What’s the best way to bury a drop to the home?

KB – We do 100 percent conduit system. In rural areas we direct bury. How do you repair it? We repair conduit system.