Last week I attended the FTTH Council regional meeting in Minneapolis. While I recognized quite a few people there, it was fun to see folks from outside of Minnesota too. Mostly it was fun to see Minnesota communities brag a little bit about the success they have had.

The meeting was attended by several state broadband directors – people who officially or unofficially work to promote broadband expansion in a state or region. There was a balance of community-minded folks and commercial providers and it was interesting to see where there was agreement and where there were differences.

Everyone agrees that where there is economic potential, providers are going with fiber. It is cheaper to maintain – it’s just a matter of upgrade schedules, which may or may not fit the community’s hope for fiber.

There are some differences in how to encourage fiber (or better broadband) to areas without economic potential. Building demand is a great start. But after that, the question is how much money makes is appealing, does one-time investment make a difference or is it a matter of streamlining the process by reducing regulatory barriers – such as permits, rights-of-way and cable franchising.

Three quick highlights:

1. Margaret Anderson Kelliher mentioned that the Task Force will be recommended $200 million for the Broadband Deployment Fund next year.
2. Joe Caldwell from USI (provider in Minneapolis) spoke about broadband as a commodity – “just charge less and provide better customer service.” He was a character! And spoke as if maybe people and providers in rural areas just didn’t get it. UNTIL he heard about the cost differential to serve rural customers – he’s paying pennies per Mb to the Internet backbone; the rural providers are paying significantly more and don’t have the same population density. He was quick to say he wouldn’t go into rural areas. An important lesson for policymakers, providers and communities. Providing broadband in urban areas is not like providing broadband in rural areas!
3. The Courts recently opened the door to the FCC looking at broadband in a different way – through commercial reasonableness lens. It’s a wonky distinction but one that is worth understanding because it can make a difference. I caught Dan Lipschultz from the PUC on video talking about it…

Read on for the full notes…

The day started with a welcome from Senator Matt Schmit

Lighting Up the North: Why FTTH?

Speakers:

• Jim Hickle – Velocity Telephone – They went straight to fiber to businesses in TC area. They have ben successful.
• Kevin Beyer – Federated & Farmers Mutual – FTTH in areas; some through ARRA funds (Western MN)
• Dan Pecarina – Hiawatha – Service throughout 5 counties (SE MN); first community built out in 2005

Why did you decide to provide fiber to the home? 

JH – It was a clear end game. We didn’t have legacy assets. Also we’re involved with business development. It was a differentiator

KB – We had to upgrade our copper. We started testing fiber in 1996. In 1998 we learned we needed to replace our network in the next 10 years. We drew up two plans; one fiber to the node, the other FTTH. They went with the long term investment. It’s future proof.

DP – In 1998 we built an HFC plant. We started from scratch with our communities. HFC is expensive to maintain. Communities wanted fiber. FTTH was cheaper to maintain.

What are the barriers?

•  Franchise Agreements have made it difficult to deploy.
• Rules, regulations and funding is different for each transport (copper, cable, wireless) and depending on whether you’re a CLEC, ILEC… It’s hard to enter new markets when the rules are so different than our existing markets.
• Incumbents are applying for funds for things that don’t really need to be done. It would be better to see RFPs so that we could see what’s happening and what makes sense.
• Working against the incumbents is a challenge too. It used to be that competitors would get customers to sign up for contracts as soon as they heard we were coming. Now we sign up customers as soon as possible.
• The community isn’t always as cooperative as they might intimate. We grabbed a template of Google’s contract, used our logo and asked communities if they were interested in us coming into the area with those terms. The answer was no – despite the fact that these were communities that were pursuing Google.
• Weather is an issue in MN. You can’t build fiber in the snow.

Are construction costs lowering?

Red Wing was the most expensive; 7000 passings on a rock.

The construction is getting better. Materials are great. Equipment is better. But the costs aren’t coming down.

What regulation would be helpful?

The stimulation projects required Davis-Bacon. With the MN Fund we need to deal with prevailing wage. Those are barriers.

We worked with LqP for FTTH. They were good partners. They were interested in economic development. We are hoping to work with counties for the MN Broadband Fund.

What about video?

The Comcast Time Warner deal scares me because of the content – not because of the infrastructure. That means our retail prices may be higher. Margins for video are low.

We weren’t paying for some of the content five years ago. That makes a difference and that gets passed onto the customers. And sports is expansive.

We started pulling out video/channel costs in our bills.

What about broadband?

50 Mbps is the sweet spot.

Does speed really matter with fiber? Why not turn it all on?

You bill the customer for the transport to the Internet – for the backbone.

The farther you are away from the POP (511 Bldg in MN) the more expensive is gets.

We run up to 100 Mbps around the house with just 2 people; we have 12 IP devices. Now take a look at a house full of college students in a town like Winona.

Internet is where we make our money – but we are in the TCs so we don’t pay the same high transport to the POP.

Doing fiber has raised our profiles in the community. Now people come to us for more tech and network support

It would be a benefit to talk to Netflix – or even better to have Netflix join MICE. At least 40 percent of the traffic stems from Netflix.

Advice:

JH: If you’re into broadband – FTTH is the end game. It’s not an easy business. Sometimes the regulators think we do something everyone can do

KB: Understand regulation, understand competition, it will be about $60000 per location and there’s maintenance.

DP: Know the regulation. The competition is fun. Don’t build a video headend.

Danna MacKenzie spoke at lunch

Why Technology Matters…

Jaxon Lang – Broadband Solutions –

Comparing Fiber vs DSL

1. Power
   1. NO power required for POS
   2. 39% reduced from DSL
2. Maintenance
   1. 38% reduction in maintenance
   2. More resilient to elements
3. Customer Retention
   1. 40% lower churn rate with fiber

John George – Global Tech Marketing

Cost per home passed is $700 for large scale and $1600 or lower density. (Did get a question on the difference between urban and rural.)

To connect to home $2.22 Broadband ARPU

Cheri Beranek – Clearfield –

Ask yourself how I can manage my business differently to cash flow?

• Fiber network we look at DB loss – you don’t need to go into the electronics to make improvements.
• We need to create solutions that will employ people too.
• Reduce the cost of deployment by remembering that fiber doesn’t require the same size conduit as cable to copper.
• Every 8 years a fiber is cut – on average. Need to find a way to make it easier to fix – again for entry level jobs and to reduce costs.
• Customer satisfaction builds business.

What are trends for self service?

We need to be careful about self-service that isn’t really qualified or set up to succeed. These again are good jobs for entry level positions. But we need to look at the contractors who are charging us an hour for a 10 minute installation. We need to rethink how the labor happens.

What is useful life of fiber (from finance perspective)? Minimum 20 years.

How All-Fiber is Transforming Rural Life?

Matt Grose – Superintendent Deer River Schools

How are we using fiber in the schools?

• Provide a level playing field
  • 24/7 access to school
  • Distance education
  • Telepresence classes (30 classes so far) including remote music from MacPhail
• 21 century skills
  • Critical thinking and problem solving
  • Collaboration across networks and leading by influence
  • Agility and adaptability
  • Initiative and entrepreneurialism
  • Effective oral and written communication
  • Curiosity and imagination
• Personalized learning
  • One-to-one
  • Online learning
  • Gamification
• Authentic work

What do schools need?

• At least 100 Mbps per 1000 students by 2014-15

Milda Hedblom – Broadband Consultant

Benefits of precision ag require contact streams of communication in the field. The U of M looked into a protocol for ag communication in the field.

The most food – worst broadband correlation. Most food comes from rural areas – Worst broadband goes to rural areas. We need to ensure that rural areas gets the digital oxygen they need.

Mark Lewellen – John Deere

Mobile Telematic Gateway – it makes data calls from the field – helps farmers manage their fleets

Rural Broadband Working Group

• Have met with all five FCC Commissioners
• Asking FCC to add “Cropland” to funding designation

Rachelle Schultz – Winona Health

We text, we email, we use our portal – security is a concern so many apps are not a good fit for us now.

Assisted living has been ripe for helpful apps as well as personal health management

You can get your medical records and track biometrics – you can see your doctor via video now!

Is there a wireless provider today who is HIPPA compliant?

Have you have trouble with tower access? No

John Deeres come off the shelf with AT&T pre-installed. Wow great contract for AT&T.

Increasing Take-Rates and Retention: Marketing for Success

“Three most important things in FTTH? Customers, customers, customers”

Trevor Smith – TE Connectivity

• What we see people doing all over the world?
• Education & customer experience. Tell new people about fiber – give customers an experience they won’t give up.
• FTTH deployment in Spain – there are 4 FTTH operators deploying to 1 million homes a year.
• In Saudi Arabia people need broadband to entertain at home.
• People pay up to $1500 to get broadband in Sweden.
• In the UK home values increase 3-8% with FTTH.
• Take rates takes patience – we see 40-50% after 4 years.

Brian Bissonette – Paul Bunyan Communications

• We have 500 square miles in service area, which includes very rural areas. The Coop started to provide local phone lines in the 1950s.
• Early ads for broadband touted “no need for a second phone line.”

Joe Caldwell – US Internet

• Started in 1995 – with dialup. We have colocation space. IN 2007 we bid to build out Mpls wireless network. 90 percent of traffic that goes through the network (wireless) now is video.
• We don’t make people sign up for a contract. No setup fee. We have two big competitors (Comcast and CenturyLink) and they are expensive and customer service ranking is low.
• Our service is $29/month. Our customers can save almost $600 in a year. We offer a Gig service – it’s $65/month.
• Marketing is really looking at what would make you buy and offering it.

Questions:

What needs and interests are you sensing from customers and what are you doing to meet the needs?

Video is a big application now. We’re just starting to scratch the surface with what will happen with the Internet of Things. Everyone is working on sensors and protocol in their equipment. Sensors will be tracking video, not just data.

CenturyLInk & Comcast are geniuses in a sense. We want to offer TV. Most of the poles in town are owned by Excel. Telephone and cable are also on those poles. The PUC has said “no more” to the towers. So it’s difficult for new entrants.

Then we tried to get a cable franchise from the City of Mpls. BUT it turns out that because of the regulations we would need to provide fiber to everyone in Minneapolis before we could get a franchise agreement.

“If my name were Google I’d own this town. BUT asis, regulation is getting in the way and we can’t change it.”

What about video?

We need video to retain and get customers.

Video is expensive and end customers don’t get it. To change that we need the FCC to step in and/or a customer revolt.

Would you rather get more customers or get current customers to do more?

From the TCS: My cost goes up when you use the Internet. I want you to get online and keep you but I’m OK with limited use on your part. With no contracts we have a commitment to service – but that’s it.

We’re focused on trying to keep our customer base. Our success is where we’re at.

We love to drive more bandwidth – because we make more money when the equipment gets used.

How do you work with communities?

We work with the community. We have hundreds of free hotspots – we have given to digital inclusion fund.

We work with a lot of businesses to meet their needs. We’ve gone to 10 cities that were underserved. We work on education where we can’t go and what it would take to get there.

In Minnesota we’re lucky – folks in other parts of the world are 3-5 years behind. BUT once they get it they move much faster to get broadband.

How can you bring the US Internet mentality to rural areas?

I want to pass as many homes as possible. I’m not sure what I would do with lower density areas.

Open video allows the provider to bypass cable franchising where there isn’t an agreement already.

The Role of Regulatory Agencies in Promoting Broadband Deployment

Margaret Anderson Kelliher – MHTA

In Minnesota the Task Force has produced 3 reports, established the Office of Broadband Development at DEED and recommended the broadband fund. The Task Force is all volunteer.

Curtis Dean – Iowa Association of Municipal Utilities

Around 2000 we got into broadband; now 2 dozen communities with municipal/utility providers – most had a municipal utilities prior to looking at broadband.

Dan Lipschultz – MN PUC

We look at telecommunications. I was a private practice lawyer, I worked with telecom industry; we touched on broadband. What is our role? Until recently our role was limited – we oversaw regulation of infrastructure. The FCC has said that broadband is info service and therefore common carrier services don’t apply – which really limits PUC & FCC roles. But DC Circuit recently said that sections 706 might bring back some authority – it’s commercial reasonableness.

VIDEO

What’s more appropriate role for a city?

It depends on community. It would be building a network – at citizen’s request. It would be investing in a network. Many communities will not have citizen desire and/or political landscape to get that involved. They can make sure they don’t erect barriers to private providers.

We have seen that in renewable energy and solar panels. Soft barriers have prohibited that from happening – for example a city ordinance that says you can’t have a solar panel.

Cities can also be cheerleaders. Sometimes providers just don’t get it and they need strong signals that the community needs a certain level of service.

What best practices have you seen in the state for lowering barriers?

Some of the most successful deployments have been public-private partnerships. We have seen them deploy for a specific need. We have tried to build a coalition of support. League of MN Cities have been helpful and strong advocates.

Policy makers have to pay attention to implementation. It’s so helpful to have the Office of Broadband Development to manage the Broadband Deployment Fund.

What has the PUC done?

Getting into broadband is voluntary and entrepreneurial. PUC sort of policies the marketplace. That’s a role the Commission can play.

What about the State Role?

The MN Task Force has no regulatory role. We are tech neutral although we see that fiber is starting to lead the way in MN. 334,000 Minnesotans do not have access to broadband as speeds of 5 up and 10 down. Broadband is a utility. We are going to recommend a $200 million fund. The estimate to cover MN is $9 million to $3 billion.

Regulation is still a level or two down in broadband deployment – we’re still working on getting what we need. There may be regulations that would help – maybe we need to think about that and plan to move quickly.

The State should at least do no harm.

What about pole attachment and cable franchising?

In MN we have told policy makers that there needs to be modernization in telecom regulation.

The PUC does have regulation on pole attachments– but we haven’t seen complaints. There was a push to do cable franchising at state level. That would probably make sense. It would be a good government efficiency.

Role of federal policy/regulators?

In MN we started to track ARRA projects and growing broadband subscribership. We saw how well it worked and it led to thinking about the MN Deployment Fund. One issue of proposing $100 million fund – we didn’t know the need. We used the MN letters of expression to FCC Rural Experiments to demonstrate interesting in Minnesota.

We want to see investment where a community or provider isn’t able to do it on their own. There is market failure going on. We need to provide an intervention.

Private companies need ROI. One and two-time infusions of money doesn’t really get you very far. There’s a limit on how far the private sector will go for one-time funding.

Preparing to File for the FCC Rural Broadband Experiments

The application is straightforward but you need to be serious.

Carol Mattey &

• ID where you want to apply
• Then the application

Due Oct 14

Will open filing 15 days prior – to give time to upload stuff

We will announce more soon

We are modify auction software for spectrum

Mapping

Be careful with bidding – ask for total amount over 10 years

Mistakes cannot be corrected once the gate is closed (Oct 14)