The following transcript has been edited for length and readability. Listen to the entire discussion here on The Broadband Bunch. The Broadband Bunch is sponsored by ETI Software.
Joe:
Hello, and welcome to another episode of the Broadband Bunch. I’m Joe Coldebella and we are at Fiber Connect 2022 in Nashville, Tennessee. This event, of course, is sponsored by the Fiber Broadband Association. And joining me today is the team to bring the first terabit-ready city in the US, Netly Fiber. Joining me are Jim Hanley and Jack Demers. Gentlemen welcome to the Broadband Bunch.
Jack:
Awesome.
Jim:
Good morning. Thanks for having us.
Jack:
Yeah. Thanks for having us.
Joe:
Hey. It’s really exciting news that you guys are here and you’ve got a big announcement, but before we dive into the Solana Beach project, I was hoping if you could each share with us just a little bit of your background story, and then a little bit about Netly Fiber.
Jim:
Sure. Jim Hanley. I’m one of the co-founders of Netly Fiber, and chief operating officer as well. Have worked in telecom and infrastructure my whole career, right out of college. And hooked up with Jack about five years ago as he was working on the concept for Netly Fiber to basically help change the way infrastructure’s deployed in America. We really are on a mission at our company.
Jack:
Yep. I’m Jack Demers, and like Jim, a co-founder, and long-time telecom veteran, and share the passion that we need to find a better way to build internet infrastructure in the US. And we’re excited to talk to you about the project we completed in Solana Beach and the impact that’s having on the community.
Joe:
So I guess my first question would be Solana Beach. How were they able to win the lottery, so to speak, and become the first terabit city in the US?
Jack:
Yeah. So when we first started the company, one of the big questions… We knew what we wanted to do. We wanted to build citywide open access, privately funded last mile fiber, make that available for all uses for smart city applications, for fiber to the home, wireless, and for IoT. We knew we wanted to do it once and make it available to everyone.
Jack:
So the big question was where? Where do we start? And we had some really smart advisors who gave us a couple of pieces of advice. One was to start in your hometown where you can go in and talk to the city council and say, “Hey. I’m a resident. This is why it’s important to me.” And the second piece of advice was to start with the smallest city you can find because once you’ve worked that city, you can prove it all out, you can get it going, and there’s less bureaucracy, fewer people, and fewer obstacles.
Jack:
So that combination I live in Encinitas, which we’re currently about 30%, 40% done with that city. But the city right to the south is Solana Beach, a smaller city. And that happened to be one that fits the sweet spot for us.
Joe:
Sounds like it. Now, Jim, this is an open-access network. You hear different terms in terms of definitions of open access. What exactly is your guys’ definition of it? Because I know that it’s a little bit different.
Jim:
Yeah. We define it as the physical layer and we think it’s critical to be truly open access. A system needs to allow the service providers to operate on top of that system to have complete control over their offering, their product, and the performance of that product. And so Netly has chosen not to be in the electronics game. We don’t light the fiber. We provide dedicated strands of fiber to all endpoints within a city that we build. And then we enable our service provider, whether that’s a mobile network operator or an ISP or the local utility or the city with their traffic signals or other smart applications. It’s just glass for them. They choose whatever form of lighting for that glass that they want and they can define it.
Jim:
So if some ISP wants to offer 100 megabits over the fiber, they can go and do that. If another one wants to offer 100 gigabits over that fiber, they can do that as well. So Netly doesn’t define the service offering and we don’t restrict or constrain the service providers in any way. So we believe our architecture is really the gold standard to be a future-proof system to offer, again, terabit-ready capabilities today.
Jim:
I know that’s different from how other people approach the concept of open access. We come from a carrier background. We’re familiar with what mobile network operators and ISPs want to have because both of us have that background. And so we were really focused on those service providers as we designed and we developed the concept for Netly to give them whatever they want. And so in talking to a lot of them, we knew that some of the bigger players, even the incumbents in the marketplace, we believe are going to eventually someday come around and use Netly’s fiber infrastructure. And so we had to think about them, keep them in mind as we actually built out this system because the idea is to build it once and then really never have to touch the streets again. Once you put this utility-type infrastructure in place, you’ve done all that.
Joe:
And it sounds like at least to me that the idea is to also be one that promotes competition and a win-win for ISPs as well as for consumers. Is that the idea?
Jim:
Absolutely. And the idea is to create competition as well as innovation. The type of electronics, the type of offering that a company can provide, and a service provider can provide, is determined oftentimes by the electronics. And so if Netly is choosing that in defining, “Hey. We’re going to go with Brand X,” in some sense, we define what the offering is for everybody in the marketplace, whereas Netly lets the service provider pick and choose whatever they want. They can innovate. They can come up with… We don’t know what people are going to need in the future, but a lower latency solution, a higher bandwidth solution. There’s going to be other things that you can do with this glass in the future, and we don’t want to be a constraint in any way on that. And that’s why our definition of open access is I think more flexible and it enables a greater level than an innovation of the future.
Joe:
Awesome.
Jack:
Might help, Joe. We come from a wireless background. And in the wireless space, there are your tower companies that add a lot of value to the system. They basically build physical infrastructure towers and make them available to the service providers to offer their services. So tower companies don’t tell T-Mobile what antennas to put up. They don’t tell Verizon Wireless what speed to offer or what technology to use. So they just provide the physical assets.
Jack:
So that’s what we do at Netly. We build an edge fiber center. It’s a state-of-the-art co-location space, centrally located in the city, and a conduit system throughout the city, and then fibered all the endpoints. And we allow the service providers to rent space in our edge fiber center, operate their electronics, provide their electronics on the other end and offer whatever service they want.
Joe:
Okay. And so that’s the point that I’d like to get onto next is that you’re a terabit-ready city. What exactly does that mean? Because you hear the term smart city bandied about as well and it seems like you guys are like Mensa. It’s one step higher.
Jack:
Yeah. We believe it’s important to do it once, do it right. I think we’ve said that already, and forgive us for being repetitive on that, but it is critical that we’re going to cut down your street, we’re going to put in conduit, we’re going to be in your front yard. We want to do it once and for right and be out of your hair. To us, that means fiber, and that means dedicated strands so that you can do whatever’s necessary.
Jack:
So we’ve gone to the point where we’ve now worked with Corning, who is just instrumental in helping us in the early days to really figure out the right way to do this, and we’ve now certified and proved that the system we’ve built, those strands to your house are terabit-capable today. Now, most of the electronics that work today are used for subsea cables and really high-capacity links, but you could take those electronics, put them in Solana Beach, and be offering terabit service today because the glass is capable of that. Now we know no one needs terabit service today, but we suspect if the internet continues to grow, which we think it will-
Joe:
Yeah. So far so good, right?
Jack:
So far so good. Someday, that might be a requirement, and my grandchildren will be having terabit internet service on the infrastructure we put in the ground last year.
Joe:
Now, that’s great because obviously, we’re in Tennessee with Chattanooga being the first gig city. So I think this is just the natural progression. And I think you’re exactly right. I know that at the conference, we had a gentleman from Meta speak and I think that he was like… I look at him as a hitchhiker. He’s waving his head and saying, “Hey. Listen, you know what? Down the road, there are some big things happening. If you want to pick me up, we’re going to go on this crazy journey.” So I think that it’s awesome that you guys are… It’s like you hear the term future-proof, but I almost think a better term is future-ready because we don’t know what the future is ahead of us. So it’s one of those things where-
Jack:
Yeah. We are using terabit as a proxy to say, “Yeah, it’s future-proof.” But it’s really in our foreseeable future, what we can think of, 30, 40, 50 years. If anything, we know we’re not great at predicting the future.
Joe:
Yeah. That’s very true.
Jim:
Yeah. But it’s not hyperbole, though. I mean, when you look at the trends, I mean, Internet’s been around for about, call it 30 years. When you look at the bandwidth needs or the bandwidth consumption, it’s like a log graph, and it’s similar to a Moore’s Law concept. If you take that for the last 30 years and you take it out the next 30 years, it’s terabit speeds that you’re going to be at. And people always have questioned this. We all joke about it as industry insiders how people used to sit around and say like, “How could you ever use a megabit? That seems absolutely insane.” And a megabit is a nightmare today.
Jack:
It’s unusable. It’s an unviable service.
Jim:
Yeah. And so I was getting goosebumps listening to the speaker from Meta yesterday because he was imagining the future, which is going to have telepresence and VR and all, and you’re going to need symmetrical links. You’re going to be pushing as much information as you’re going to be pulling. We’ve been in a pull world for the last 20 years for the most part, and it’s really going to change. And none of us know how that is, but we know that we have glass and a system that will support that into the decades. I mean, our city partners, they don’t want to think that you’re building something that’s good for the next 10 years. They think in decades. And so we’ve really tried to adopt their mentality on thinking about this as utility infrastructure and how are you building something for multiple generations. We talk about this as a Netly Fiber system is for your grandkids’ internet, and that’s really what we shoot for.
Joe:
And I think it’s just the natural progression because we were with copper wiring for 70 years, and this is just the next step along the line.
Jack:
Absolutely right, Joe. So the twisted pair copper for the phone company was done for voice. The coax, which happens to be in the cities we build in, that’s the best internet choice today. That was done for television, for entertainment. We live in the internet age. The Internet belongs on fiber. So as we deploy this last mile of ubiquitous fiber, all sorts of innovation will come on top.
Joe:
So I mean, it’s awesome just listening to all the different things that you guys are doing. When did this particular project start? Because how long does this take for a city to flip on the switch? Because I’m sure it was just that easy, right?
Jack:
It absolutely was simple. Yeah. We just ran down to city hall and, “Yeah, go for it.” No. We started the company in 2017. We actually broke ground on the first city, Solana Beach, in call it early 2020. So it’s a good two and a half, three years.
Joe:
In terms of planning and getting everything, your ducks in a row, so to speak?
Jack:
Yeah. All the capital required, the government approvals. We are a regulated utility in the state of California. So getting the CPUC approval, the California Public Utilities Commission, getting our project investors lined up. And of course, we can’t just build a system and hope for success. This type of infrastructure requires contracts and financing that backs it up.
Joe:
Okay. And so it’s also one of those things as well. Do you think since this is the first project, it probably took the longest because it’s one of those things where everything’s a new pathway?
Jim:
Yeah. Now that we’re up and running, we can launch a new city in months, not years. So it’s building out the human infrastructure, the partners. We partner with real industry leaders across the board. And so now that we have those in place, as Jack mentioned, we’re already about a third of the way through our build in Encinitas. We’re about ready to launch two new cities this year. And we have a pipeline of additional cities that we’ll be looking at. Our hope is to be able to launch a new city every quarter or every six months throughout California.
Joe:
Okay. And so those city sizes are about 10 to 15,000 or is it slowly expanding as you guys-
Jim:
Generally, we’re bigger than that. So I think that we’re targeting cities with about 30,000 homes, 60,000 homes. I mean, there’s really no upper limit, but generally, we will combine neighboring cities. So we’re typically looking for a 100,000-home footprint. That might be four cities, might be three cities that are contiguous.
Joe:
Oh. That’s fantastic. And then, so this is all privately funded, is that correct?
Jack:
Correct. Yep.
Joe:
And then you just have partners like Corning as well in terms of… What’s their feedback on this? They were super excited as well.
Jack:
Yeah. So we were lucky to work with the folks at Corning who said, “We’ve been telling people for 10 years that they should be doing things differently.” And they’re working in an old, entrenched industry where people have been doing things the same for decades. It’s hard to get that to change. So the fact that we were fresh and starting from scratch, they really loved it and leaned in to say, “Okay. If you’re going to do it, here’s how to do it.”
Joe:
And that must be gratifying. So when you get those guys to raise their hand and say, “Yes, this is it,” because you’re exactly right. Everyone looks to Chattanooga, which I love. I’ve done a lot of interviews lately with those folks. But it’s like, that’s almost the first iteration. And it’s like, “All right. Now that’s the north star but listen. We need to go deep, deep out in the space.”
Jack:
Yeah. And we’ve come from big telco experience. And you have legacy systems and processes and the way things are done really restricts what you can do in those environments. And we started from the ground up. It’s a fiber system. There’s no copper anywhere in our system. You walk into the edge fiber center and it’s all glass. It’s pretty cool.
Jim:
And that dedicated strand architecture is really one of the unique elements of what we’re doing. And that’s what really popped for Corning. Of course, they like to see people use more fiber. But the concept of creating fiber scarcity or rationing fiber, which has historically been so common in the industry, Corning was like, “Yeah, this is the right way to do it because you’re never going to run out.” Fact that we have multiple dedicated strands to each endpoint in a city, it’s hard to imagine how you can’t serve all the needs in the future. And that hasn’t been done. And that’s why Solana Beach is the first terabit-ready city, because we know we have dedicated strands to every endpoint there.
Joe:
Okay, because that’s what I definitely wanted to dig into next, pun intended, in terms of the build that you guys undertook. So it’s definitely all underground. There are no poles?
Jack:
No poles. All underground.
Joe:
And so what was the reasoning behind that? I guess it’s one of those things where dig once?
Jack:
It is definitely a little dig once. These are dense suburban cities. We happen to be fortunate. They’re in Southern California. They have beautiful views and it’s high property values. There shouldn’t be aerial. Aerial is a legacy from 30, 40 years ago when they were trying to get electricity or phone service on the cheap. Most cities we’re working in have aerial moratoriums. You can’t put up poles.
Joe:
Oh, really? Oh. Wow.
Jim:
Or they’re on a mission to underground the utilities. They’re partially undergrounded already, and they have a 20-year plan to try to get everything off the poles.
Jack:
So if you’re building for 50 years and the poles are eventually going away, why would you go on the poles just to put it up there and then have to redo it? And then it gives us a little bit of an advantage in that we’ve done the hard work. It’s in the ground. It’s ready to go. So making that available to others so they don’t have to do that hard work.
Joe:
Awesome. So I guess my next question would be have there been any major challenges? Or I’m sure it was just super simple in terms of… Something happened, I guess when you guys first started in 2020. Did the pandemic play a role in this?
Jack:
It’s funny. It was scary for a week or two. Luckily we were already building and in construction. So we were deemed critical infrastructure by the state and the federal government, and we were able to continue to operate while everyone else was hunkering down. We were out, still building. It was very fortunate.
Jim:
And so plant construction is outside. So we were helped by the fact that 90% of our work was taking place outdoors. And so our employees and our partners could all be safe. Typically, when you’re doing heavy, heavy equipment, you’re not on top of each other anyway. You’re not particularly close. And so we were able to maintain safe work environments for all of our people.
Joe:
And it’s one of those things where the pandemic was a horrible thing, but was there a little bit of a, I don’t want to say, but were you one of those things where the fact that this happened and that the internet became so front and center, that it was almost… Not gratifying, but one of those things like, “Hey. Listen. You know what? We’re on the right path.”
Jack:
Yeah. When we started in 2017, ’18, we were talking… We know a lot of very smart people in the industry, and we’re talking to them about that. And they’d say, “Well, why are you building fiber? Isn’t everything going to be wireless? We don’t need fiber. Do we?” And the pandemic changed that instantly. After the pandemic, I never get a question about why fiber. It is, “Absolutely. We need fiber. We need better internet.” So pandemic was a huge shift in… I’m sure history books 10, 20 years from now will be writing the impact it had on the internet and the importance of the internet. And clearly, the government funding is triggered by everyone waking up to we’ve been behind as a country in fiber deployments because of our past regulatory structures. And now, we can’t afford to live in that environment. We need to make those investments, and get fiber everywhere.
Joe:
And then I guess, taking it a step out, what’s the feedback you’ve been getting from potential partners as well as the city itself?
Jim:
Sure. So we have in Solana Beach, we launched with a tenant, a service provider called Ting Internet. Very active. They build many of their own cities. And then they’ve also partnered with companies like Netly to build cities for them. So they’re our best customer, they’re our number one customer, and they are really the face of what we are building. Netly for the most part is really behind the scenes. We’re the internet plumbing. We put it down there. We’re not trying to establish a brand. We’re not out there with signs and everything like that. Our goal is to make Ting the most successful internet service provider and anyone else who uses our infrastructure.
Jim:
We want all the attention to accrue to them. So we promote them as we’re building because we say, “Hey. Ting is coming,” not, “Netly is coming.” Netly is just doing the work. Ting is what the residents and the consumers are going to experience and see. And so we really are focused on ensuring that our service provider partners get the big pop from what we’re doing.
Joe:
Awesome. And then I guess my next question would be what’s been the feedback from government officials in terms of whether have they been excited along the process? Has it been one of those things where stakeholders are super important?
Jack:
Well, we chose a different path than most. We are a regulated utility. I think I mentioned that before. So we have the right to be in the city. But clearly, we don’t want to force our way into the city. We want a good, positive relationship with the city. So we meet in advance with the city, to make sure that they’re excited about us coming, and that they understand the importance of open access. And as we were talking before we get started here, Joe, I mean, that’s a common sense sort of thing. “Hey. We’re going to put in infrastructure, we’re going to do it once and right, and make it available to everyone. So your residents get better service. They have competition for their business. The city itself can reduce costs. And the city of Solana Beach is running their whole city on our fiber now, and it can enable advances and things that you, the city have been wanting to do and haven’t been able to do because of the high cost of capital to deploy this fiber.”
Jack:
It’s already there. So now we can work creatively to come up with ways to structure that so that projects that were unfeasible before financially are now feasible.
Joe:
Awesome. All right. So as we begin to wind down the episode, we love to ask all our guests two questions. And the first question is our Back to the Future question. So I’m going to give you guys the keys to the DeLorean. You get to go back in time with 1.21 gigahertz. And if you could whisper in your ear or someone else’s ear to make the process a little bit easier, what’s something that you guys would say?
Jim:
So I’ll go regulatory here because I think that part of why we’re here today is a breakdown in what has happened in America. And so I would probably want to get the ear of FCC commissioners and things of that sort and talk about the fact that the internet is going to become possibly one of the most important utilities in society. And if it’s not supported as a utility and encouraged and facilitated as a utility, America, the country that invented the internet, the country that invented optical fiber communications, will wind up 30th in the developed world or below in the deployment of these critical capabilities, and that America doesn’t like to lose, but we in fact have been losing. And it was because of a real lack of foresight.
Jim:
I’m an economist. I’m a big believer in free markets and things of that sort. But when you have a natural monopoly, it makes sense to invest in that correctly and encourage a gold standard, but it’s a natural monopoly. So there should be a single fiber for every location in society. And with the amount of money that we’ve invested in infrastructure over the last couple of decades, we’ve spent way more than that to get way, way less than that. And so I think I would probably try to be a little whisper in someone’s ear to try to encourage a little bit more regulation from our leaders to keep us out of having to even be having… We wouldn’t exist today if that were the case.
Joe:
Right. And then Jack, if I could ask you the crystal ball question if you could look into the future, and I’ll just leave that as an open-ended question, where do you see us in three to five to seven years?
Jack:
Yeah. I wish I had a great answer because if I could predict the future, we’d be in a much better place I think financially. But for sure, a few trends, and the internet is here to stay. The internet, even though we’ve been talking all about fiber, really the internet is wireless. You’re not using wires there. So the last little bit is wireless. It’s really extending that fiber closer to the users so that that wireless connection gets better and better. And we know that once this infrastructure is in place and it’s made available, incredible innovations will come on top. We spoke about Meta. They kind of stole the thunder yesterday. But those are the things that are coming, this augmented reality, this high, rich, graphics-immersive stuff that allows for better education, for better communication. I know it’s coming. I can’t tell you what it is. But I know it will need more bandwidth and I’ve underestimated bandwidth requirements my whole career. And with Netly, we’re trying to reverse that, which is to make sure we are ready for the next 30, 40 years.
Joe:
I love the Netly story. Where’s a place folks can go to learn more about your organization?
Jack:
Yeah. Please check out our website, netlyfiber.com. We’re also on LinkedIn and you can hit up Jim or me pretty easily. You can find us.
Joe:
Jim, Jack, this has been an awesome visit. Really loved learning about everything. Thanks for joining me. I would love maybe a year from now, we could circle back and see where you guys are at with other cities. That would be awesome.
Jack:
Come to Solana Beach. Come to Encinitas. We’d love to host you.
Joe:
That sounds like a great invitation. All right. This is going to do it for this episode of the Broadband Bunch. Until next time, thanks for listening. See you.
