MN Broadband Task Force April 2017: Making the business case for broadband

The Task Force heard from folks in the field who slice and dice the numbers to help people understand what it will take to deploy broadband in rural areas. They heard from Mark Mrla of Finley Engineering about his work on broadband feasibility studies. When ordered by a rural community, many feasibility studies in Minnesota have become like a work plan. Communities use it to approach providers (directly or through and RFP) and many have then gone on to seek (and get) state broadband funding. ComQuest spoke about their broadband modeling tool that helps communities and providers build scenarios for business case development. They can alter variables to predict outcomes. Dusty Johnson from Vantage Point talked about the economic impact of the rural broadband industry on rural and urban areas.

They also heard from Minnesota economic developers (Cheryal Hills, Executive Director, Region 5 Development Commission, Sheila Haverkamp, Executive Director, Brainerd Lakes Area Economic Development Corporation and Kristi Westbrock, COO, Consolidated Telecommunications Co.). Kristi works with the local CTC but their surveys on the impact of their network indicates that she’s an economic developer too.

They also got a legislative update.

It was an interesting discussion.

Here are full – a little looser than usual. I’ll post more presentations if/when I can. [Materials have been posted on the Office of Broadband Development site. Added 8:50 April 20] I’ve been having trouble uploading all of the video from yesterday. I’ll keep trying but you can find all three parts here:

Mark Mrla, Finley Engineering: Feasibility Studies for Broadband

Best use of feasibility studies – give  options.

Process –

  • High level data gathering
    • What areas do you want to cover?
    • Get list of providers in and around area.
  • Provider questions
    • What’s going on now
    • What’s the plan for the future
  • Get details
    • Get whatever is available: maps, soil types, terrain, tree cover, design preferences, voice-date-video preferences, subscriber locations and counts,
    • We extrapolate or approximate when the study is high level
    • What type of design – wireless, fiber hybrid, other
  • Detail engineering and costs is a different study
  • Approximation of costs using
    • From live projects
    • Research with contractors/vendors
    • From conferences and shows
  • CCG – crunches the numbers
    • Opinion of costs are incorporated into an overall financial feasibility analysis
    • Various funding options are valuable
    • Measure of feasibility (take rate, break even… and timeframe)
    • He is pretty conversation in his estimation
  • The client can share the study with providers or others
    • Funding can take years to get

Nobles County had a feasibility study: 3 options

  • FTTH
  • Fiber ring
  • Fiber-wireless hybrid

The shared the study with local providers. One provider jumped on the idea and liked plan 2. Finley tweaked that solution. We applied for Border to Border funding – and project is not being engineered and construction will start this spring.

It took a lot of work to get Nobles to a point to approach Finley. Then a lot of work after Finley. Then they could apply for Border to Border funding.

Question: do you get pushback from providers?
Yes – providers don’t like the info put into a map

Question: is your process typical?
yes – more for governments – some might ask for higher level – maybe to only look at wireless options or might have their own experience to draw from. Often communities that are unserved or underserved use feasibility studies. It’s good prep work for Border to Border applications.

In Minnesota the feasibility study is a plan for communities that need better broadband. It creates confidence in a community and starts a conversation with the providers. The feasibility isn’t the operational budget – it’s startup. OBD looks at outcomes of investments we’ll be able to circle back to see how on target the feasibility studies have been.

Question: We try to stay technology neutral. Do you ever look at using copper or satellite?
We have looked at other options in the past but by far our customers are not interested in other options in the long-term. Satellite and wireless options have issues – line of sight, limited speeds, terrain. Most clients want long term solutions – to look at that only once. And in most cases, that’s fiber. Fiber will be good for 30-40 years. The equipment may need to be replaced but not the fiber.

Are there standard definitions of success?
Growth of market, take rate. We look at what type of take rate does it take to be successful.

Do people look at success of predictability?
The problems is the feasibility study doesn’t necessarily mean access to funding. Communities need help crafting a good RFP – the feasibility can help with that.

Question: Do you get into long term costs?
Yes CCG does – down to salaries of key employees and equipment replacement costs.

Comment: We were hoping for a 60 percent take rate (Rock County). We’re getting 85 percent.

Question: Any interesting financial models that haven’t been tried in MN?
There have been challenges in MN and creative ways to solve them – such as RS Fiber.

Question: In Wadena we’re have a donut effect going. Got any suggestions?
CCG might have some answers on financial models for a project like that.

Legislative update

Border to Border Funds

  • $60 million for 2018-2019 from Governor
  • $7 million for 2018 from House
  • $20 million for 2018-2019 from Senate

It’s unlikely that the budget will go above the Governor’s recommendation. The low number is the House recommendation. The Senate would like to move their number higher but they are concerned about the target.

Question: How can the Task Force help legislators pick a higher number?
The TF will give public testimony if invested. We did testify already.
We’re doing a lot behind the scenes.
The people who live in the communities (ATT, MHTA) are already working on it. I would suggest people start to lobby.
If people are saying they haven’t heard from the Task Force they are probably in the minority.
Broadband is not as hot this year. There are other issues.
Hot issues that cool – means people lose interest and they feel nibbled to death with people who want to fight about issues.

A lot of bills have been introduced this year. A sign of how important broadband is.

HF 1314 – standards for telemedicine
Has been assigned an omnibus bill. National company wants audio connection to suffice for patient-doctor relationship – currently it’s in person or video.

Economic Developers – Economic Impact of Broadband in Region 5

  • Cheryal Hills, Executive Director, Region 5 Development Commission
  • Sheila Haverkamp, Executive Director, Brainerd Lakes Area Economic Development Corporation
  • Kristi Westbrock, COO, Consolidated Telecommunications Co.

Shelia Haverkamp (Crow Wing County – Brainerd)

Brainerd is working on being tech-ready but we still have a way to go with some communities. We’ve partnered with CTC for infrastructure and Blandin for adoption.

How can we meet the needs of businesses who want to move to the area?

Question: How are you tacking broadband adoption?
4 pronged approach – including workforce

  • How to train k12
  • How to work with Community College ($18 million program)
  • How to attract skillsets (Hackathon)

It’s nice to have the easy connection of broadband in DEED for making adoption and access a priority.

CTC – Kristi Westbrock

CTC is member owned – they invest in themselves in the community – $65 million since 2005.

Take rate expected was 50 percent and they are doing better than that.

Workforce and Tech integration

  • In 15 years, 1.3M Minnesotans will retire
  • There will be 65,000 additional jobs added to MN in the next 15 years
  • Population growth will be the lowest MN has seen in 10 years
  • We must come to the conclusion that there will not be enough bodies to do the work.
  • Automation, machines and robots will be the answer.

Question: Can we use your survey info on our letter to the conference committee?

Cheryal Hill – Resilient Region/Region 5

People in the area (2011-12) decided that broadband was a priority in the area.

We have done work with the Blandin Foundation on adoption. The National Joint Powers Alliance have been partners investing $100,000 a year to build feasibility studies. To pick areas that need service and won’t get contested for state grant funding.

Challenges going forward

  • Need for more data. CTC has done a great job – how can we replicate (or require) it in other stat projects.
  • It’s important to have one voice. In our region, we’ve had trouble working with our Tier One providers and getting info on their future upgrade plans. One Mayor noted that it feels like being hostages.
  • What can the Task Force come up with to better understand the investment impact. The Legislature has commissioned research in other areas. Why not here?

Responses from the TF:

The history of the challenge process: there always was a way to challenge but not in statute. (Like ARRA.) But last year the challenge got put into the statute – it was watered down but put in. The TF is not in charge of the grant process. We recommend to the Governor a plan to get everyone connected. We take that further with some policies. We try to stay out of the lane of the OBD when it comes to judging grant applications. We suggested the OBD make recommendations to the legislature. Many feel this would be better for administrative rather than legislative purview.

We’d love to have a way to get data – first we need stability for the OBD.

CTC stepped up as a model for a study that could be used with others. We are working on the next phase of the process of getting more data.

How can we get we get a rural cooperative voice to the table?
Get someone to leave and replace them.

Are there tools we can use to tell the rural story?
Video is helpful. There’s no substitute for the data and data points. Some Legislators are still not as comfortable with tweeting.

We need to change the conversation. We need to talk about broadband in the role of the nation’s defense (Elon Musk) and education. We need to be more global in our conversation.

We have a small group of legislators that will understand that aspect of broadband. We have others who still don’t understand that wireless connectivity needs wired backbones!


Dusty Johnson – Vantage Point: Economic Impact of Broadband in Rural Areas
(See PowerPoint)

Question: has MN investment had an impact on greater realized benefits in MN?

Question: How does MN compare with other state?
MN is doing fairly well. WI invests too to a much lesser degree. NY is the state to watch; they are investing a lot and I think more state will be doing the same.
Also the federal government is looking to invest $215 million a year.

Mike  VP at CostQuest Associates: How to Price Out Broadband Deployment in the State of Minnesota

Cost Modeling Review – Pricing out broadband deployment in MN

What are other states doing? I have a list. Fewer than a dozen states currently invest in broadband: starting with ME, CO, NY WI, MN.

What’s a cost model – it estimates and allows for varying key drivers.
They look at cost, demand and revenue.

We look at – is is commercially viable for a provider to deploy broadband in a given area.

USF – SBCM models:

  • Similar to FCC efforts, but typically with different goals
  • Can base effort on FCC/CQA CACM model
  • SBCM mirrors the FCC adopted CACM/CAM. Results can be run using either FCC default input collection or modified inputs of the User’s choice.
  • Customization (geo, network design) are not included in SBCM pricing

Question: How do we choose the best model for investment?
Take rate – we tend to be conservative but realistic (44 percent for Mora MN) we base it on competition. We look at lot at Google Fiber. They have not been as successful as they had hoped.

What data is needed?

  • One served/all served nature of 477 data
  • How far should state build out?
  • Are there pockets of urban unserved due to building ownership
  • Does affordability impact the analysis?

Question: Where did $500 million come from?
Mortgage lending issues from the bank.
The Governor really pushed for the money to go here.

Office of the Broadband Development Report

We are working on revising the cost estimate of getting broadband all of Minnesota, which is $800 million to $3.1 billion.

Economic impact is hard to judge because of the reach of broadband and the time it takes for any impact to evolve.

Removing barriers – we work with various departments to help them appreciate the unintended barriers to deployment.

We are finding ways to increase work with tribal communities

The libraries are working on a 5-year plan and they asked us about the role of libraries in broadband work.

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