Unpacking the Evolving Landscape of Broadband: Insights from David Strauss - ETI
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May 31, 2023

Unpacking the Evolving Landscape of Broadband: Insights from David Strauss

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.

Pete Pizzutillo:

Hello and welcome to another episode of The Broadband Bunch. I am Pete Pizzutillo, and I am joined today by David Strauss. He’s the principal at Broadband Success Partners. Hey David, thanks for joining us today.

David Strauss:

Thank you, Pete. Great to be here.

Unveiling David Strauss’s Telecom Journey

Pete Pizzutillo:

We had a chance to meet with David at Metro Connect USA, and he had a couple of pretty insightful comments and sessions. I wanted to unpack all those. Before we get into that, David, it’d be helpful to understand how you ended up where you are today.

David Strauss:

Well, great. Thanks for asking. Pete, I actually entered telecom back in the 90s in the wireless sector, both at McCall, which became AT&T Wireless, and then was part of the leadership team at Sprint PCS in the mid to late 90s in the New York metro area. Then I moved out of telecom and reentered it back in 2006 as VP of Marketing at Lightpath, so my entry into the cable sector. And then I helped Comcast business launch its Metro Ethernet services. Then a few years selling into the space at Juniper Networks, and then launched Broadband Success Partners with my partner in October of 2017.

International Perspectives and Market Resilience

Pete Pizzutillo:

It’s quite a journey, with a lot of different hats and perspectives. One of the things that we got to talk about a little bit is your ability to look at what’s going on internationally as well as what’s going on domestically. So what are some of the things that you’re hearing, taking a step back at a global level, trends that are pretty hot right now in everybody’s mind?

David Strauss:

Yeah, no, thanks for that question. Yeah, so having just attended TMT World Congress in London a few weeks back and then followed right thereafter by Metro Connect, yeah, I heard, well, bottom line, I mean, despite what’s going on macroeconomically and some of the headwinds associated with that, telecom there and here remains robust and resilient. And there’s still a very active market in terms of investors. The way they’re investing may vary a bit and relooking at deals and revaluing deals. We are seeing, in the work that we do, investors coming in who are taking minority investment positions, maybe more so. Again, that’s through the lens that we have on the market, which is, I guess, relatively narrow. But yeah, I mean, it’s still obviously a strong sector, as you know.

Pete Pizzutillo:

Is it strong enough to call it recession-proof?

David Strauss:

Well, I’m not an economist, so I’m not going to speculate on that. I mean, of course, as in anything, peaks, and valleys. But I think frankly one of the things that the pandemic proved to us is the reliance, or even greater reliance on broadband, schooling at home and working from home, and so on. So it’s some say it’s a utility. And so if you take that view of things, of broadband, then maybe you wouldn’t go so far as to say recession-proof, but it remains strong and will continue to. I mean, the reliance on it by consumers and businesses is obviously been proven time and time again.

Insights on Fiber, Government Subsidies, and Market Potential

Pete Pizzutillo:

Yeah, I wholeheartedly agree. We’ll come back to this conversation a little bit later on, especially about your comment about the utility because I have some questions about that. One of the things that we’ve seen is that kind of fiber has won the discussion. I think if you go back three years ago, there were a lot of conversations still about cable and Docsis and fiber, fixed wireless. Given the focus from the BEAD, obviously, the infrastructure build pointing a lot of emphasis around the fiber, it’s really impacted some folks, and we’ll talk about cable in a second, but in the fixed wireless space, it seems like they have to take a different approach, that there’s some impact there. I mean, does fixed wireless in your perspective have a place in solving this digital divide moving forward?

David Strauss:

Well, it certainly does. And to the point you just made, there are some folks out there that have said fixed wireless is on a serious decline if you will. But the fact of the matter is, and we’ve seen this, we’ve done 56 technical due diligence engagements, and more than a dozen of them have been fixed wireless focused.

In some cases, there’s a desire to fiberize certain portions of that network where it makes economic, financial, and demographic sense to do so. But if you look at the less dense areas, for example, where you don’t have 30 or more homes per mile, as an example, it doesn’t make necessarily economic financial sense to build fiber. So fixed wireless is a very real and appropriate solution. It won’t deliver the speeds, the high speeds that you get with fiber, but it’s a more than adequate solution for many.

But to your point, the government subsidy money will, in fact, alter the equation, right?

So in fact, it makes more financial sense to go into less dense areas with fiber when you have the BEAD money, for example. I will say, we’ve seen examples of fixed wireless in dense urban markets. We supported M/C Partners who had owned and continue to own Everywhere Wireless and acquired or invested in SilverIP, and that’s in Chicago, MDU is in Chicago. The same thing is happening in Los Angeles and a number of other major metropolitan areas.

And I recently actually just spoke to somebody who had or has Everywhere Wireless as a provider and their primary provider for broadband in downtown Chicago and is quite satisfied with it. So fixed wireless is far from dead.

Fixed Wireless in a Changing Landscape

Pete Pizzutillo:

Yeah, no, and it’s interesting. I do think it’s going to be a dark horse in this race for a couple of reasons that we can get into later. But some of the things that we’ve seen in the fixed wireless is some consolidation happening because you have the traditional folks trying to, the startup, the bootstrappers if you will. And then there are people that are rolling that up and kind of cashing out because it’s hard to compete, but also diversification so that they’re now trying to get to fiber to the home as well. Have you seen any of that behavior?

David Strauss:

Well, I think the consolidation, I think the example I just provided is an example of that. I also should point out that when I’m referring to fixed wireless, and not referring to what we’ve seen from Verizon and T-Mobile, which is the numbers are actually very impressive in terms of the home solutions that they’ve launched over the past year or so. I’m referring to what I’ll call traditional fixed wireless. But yeah, I mean, it continues to hold its own. But I do think we’ll see a bit of a shift perhaps in the states anyway with some of the government funding causing more fiberization.

Cable’s Evolution and the Future of Fiber

Pete Pizzutillo:

Speaking of shifts, there’s been a lot of discussion around the cable industry. So last year, we were at the cable tech show and the launch of Docsis 4.0, and there’s a lot of, within that market, there’s a lot of enthusiasm for that solution or technical approach being able to meet or compete with fiber. But there are also a lot of conversations around fiber in the cable business. So what are your thoughts on how cable’s going to evolve or has evolved?

David Strauss:

Well, I think that evolves is the perfect word and will continue to be. But the cable plant is alive and well with the evolution from 3.0 to 3.1. And one of my colleagues, Jay Rolls, who had been the CTO at Charter Communications has coined the phrase 3.5 doesn’t actually exist. However, that’s meant to connote changing the cable plant with mid splits and high splits in order to get greater performance out of the plant. And in the work that we do, we’re often looking at what are the various upgrade paths for the cable plant, and in advance of possibly going to fiber.

As far as 4.0 is concerned, that landscape is still evolving. It’s like having a conversation about mobile and not mentioning 5G. You can’t have a conversation about cable without mentioning 4.0. But what you see in the marketplace is you see some of the smaller MSOs embracing fiber, and in fact, one of the tier ones has done that as well, Altice. But if you look at Comcast and Cox and Charter, when you consider how much they’ve invested in their cable plant, they will continue to do that. And I think if you look much further down the road, you’ll see more and more fiber.

But unlike what I actually heard at the event in London recently, where in Europe, some would say that cable is dead. And there are other reasons for that. It’s not because of the technology itself, but it’s how the cable plants were built there in the first place and how fiber has evolved. In the States, cable is alive and well. I mean, maybe we’re all a bit biased as we come from that space, but the fact of the matter is the technology is very strong. There’s no doubt that if you’re looking at a greenfield situation, fiber is certainly the way to go. Fiber is simpler in a sense, easier to maintain, and in terms of ongoing operating expense, is a far more favorable solution, but the cable will continue to have a strong presence in the market.

Pete Pizzutillo:

Yeah, no, I appreciate that. And just to clarify what you were saying about the European perspective was cable is dead, not fiber is dead, right?

David Strauss:

I meant to say, if I said fiber, I meant to say cable is dead.

The Rise of Open-Access Networks

Pete Pizzutillo:

Yeah, that’s interesting. But I think also the European perspective seems to be a little bit ahead of the US in general. Well, maybe in this industry, not other industries. I don’t want to open that can of worms. But the way they look at some of the approaches, so open access is one thing that we were going to talk about. So they’ve also been on that model, and there are different flavors of that model, and without unpacking it, but what are your thoughts about how open access, the shared Middle Mile and shared resources have their place both in the US? And how does that contrast to what you’ve seen internationally?

David Strauss:

Well, yeah, no, great question. We actually have had the opportunity to work on a number of those networks, if you will, and look at them from a technical due diligence perspective. We actually advise BlackRock in their recently announced JV Gigapower with AT&T, and that has made quite a splash, that announcement, in terms of open access networks in the US, though there are others already out there, SiFi being one of them. Another that we worked on was Underline in Colorado Springs, which is a different flavor, to your point, very reliant upon the cloud, actually, for elements of that solution.

But you’re absolutely right. I mean, it is certainly in place, established in Europe and elsewhere. I mean we’ve looked at V.tal In Brazil having done tech due diligence there. That’s a very large open-access network. We’ve also had the opportunity to look at a large open-access network in Australia.

I think, actually, that what we’re seeing in the States, one, it’s maybe a bit too early to tell. There’s clearly a logical argument to be made for embracing open-access networks in the States. It remains to be seen how that’s going to play out. One significant difference between what we have in the States versus elsewhere is the government environment and the regulations associated with open-access networks. And I think that’s probably the most fundamental difference, in that there is more sort of government public sector involvement in Europe, for example. So we will see.

Balancing Affordability, Maturity, and Market Viability

Pete Pizzutillo:

We’ve interviewed most of all the open access providers out there in different models, and they do get into the minutia of how they’re specialized. But really we are believers in that, from affordability and sustainability approach. We need to find ways to share this infrastructure to get looking down the road.

And I think part of the criticism, and I think you mentioned this about the Gigapower deal, is if open competitive access is really the litmus test for is it an open access network. But I would also say that there’s some maturity and aging that needs to happen on a network before it can have multiple providers. I mean, there’s a financial impact. There’s a technical impact. I mean, scaling things up and having 14 ISPs. That’s hard for people to go from zero to 14.

So adding one and learning and growing, and adding two.  I’m hopeful that there are more and more conversations coming. And I do think the US government is starting to push certain considerations around open access.

David Strauss:

Right, right. Yeah, I mean, frankly, it’s interesting because, as you know, there are certain markets. I think Phoenix is an interesting example where you have multiple fiber providers, and you have a number of non-fiber providers as well. How are each of those businesses going to be profitable? How are they going to get the share of the market they need in order to maintain and sustain their business and grow their business? That’s really an open question. So you’re right in that having an open access network with multiple, perhaps a dozen, ISPs hooking into that perhaps is a more rational approach to the market, though we haven’t fully seen that as of yet.

Navigating the Digital Divide

Pete Pizzutillo:

One of the things that came up in Metro Connect was internet exchanges and their availability across different geographical locations. And Hunter Newby has done some research, and we’re going to interview him shortly, about where these axis exist. And what he’s trying to put his finger on is that some of these states just don’t have the infrastructure to support sustainable or affordable internet or digital infrastructure required to provide internet for all. If you take a step back, and I feel like is there a national broadband strategy, or is it lacking? And if it’s lacking, aren’t these just kind of random acts of funding and hoping that the market figures it out rather than some adult supervision to say, okay, here’s how we move in this, this is how we constructively and affordably move to solve this problem?

David Strauss:

Well, it’s an interesting question, and I’m sure there are other people far more qualified than me to answer that. But from where I sit, it doesn’t seem like, that’s an interesting word choice, random acts of funding. I mean, the fact of the matter is $43 billion of BEAD money, plus the Middle Mile money on top of that, is going to make a very, very radical difference in serving underserved and unserved areas.

Obviously, at the moment, they’re sorting out the national broadband map. And given the way our country is organized, the different states with their state broadband offices together with the NTIA, and Department of Commerce, we will make these decisions. I mean, first, the funding needs to get released beyond the funding that’s already been released around five-year planning. And so I do think there’s a very sort of disciplined and concerted effort, if you will, to go about this in a rational manner.

Though each of the states is probably going to have a somewhat different approach, again, I think they’ll learn from one another. We’ve had a chance to speak to about half a dozen states. Some of them are further along than others, and they need help. They need outside help. And we actually hope to help in that regard from a technical assessment standpoint. But that aside, I don’t view this as random. I view this as a very deliberate attempt to bridge that divide, frankly.

Pete Pizzutillo:

No, it’s helpful. And I’m not suggesting that, but it’s just from the outside in, it’s unclear.

David Strauss:

Yeah, it’s early days, early innings. I mean, the fact of the matter is it’ll be some time before that financial impact is felt in a very real way in some of these unserved or underserved communities.

Shifting Investment Priorities

Pete Pizzutillo:

So talking about funding a little bit, we talked a little bit about the public funding side, but the event last week at Metro Connect was interesting. It kind of gives me an insight into how investors are thinking about the health of the market and showing their hand in terms of how they’re making some adjustments.

Part of what I took away from that event was that the tenor on how investments were being spent on the private side was shifting towards more of a capital chase’s return to steal a line from some other people. And so 24 months ago, when we realized there was this digital divide and that there were big blank areas that are not getting served or underserved, the mission was to solve that problem. There’s not a whole lot of return in that. If there were, people would have solved that problem already.

So my fear is that the private money is now shrinking towards the higher-density areas to improve that infrastructure. One of the things that we talked about the other day was around the importance of edge and that because of the future applications of the internet in terms of autonomous cars or telehealth, there’s a really important emphasis on low latency. So you’re investing more at the edge. More capital means more return. You’re not going to invest at the edge in the middle of Montana somewhere. It’s going to be on the edges of Chicago.

So I feel like the money is now kind of recentering around the return areas.  That will pull money away from the areas that we thought we were serving. Now it is putting more onus on public money to serve those areas. But I don’t know that the public money is getting pulled away from the high-return areas. So I feel like the public money is this peanut butter allocation across the country. The private money is now kind of hiding and trying to protect its investment. Did you get any sense of that?

David Strauss:

Well, my sense of where the private money is going is really shaped by the deals that we work on, 32 last year alone. And they weren’t all in NFL cities, by any means.

The fact of the matter is there are broadband assets, fiber, non-fiber, fixed wireless, coax, and copper networks throughout the country, as you know. And there is still interest from PE firms and infrastructure funds in those assets, even though they may not be in particularly dense urban areas.

I mean, that’s the view that I have, again, based on what we have seen. For example, there’s a case in upstate New York where old telephone companies are being acquired and upgraded. Those are far from NFL cities. And though there’s a keen interest in investing in them and upgrading them to serve those communities. So what I’ve seen, anyway, differs from the picture you just painted actually.

Aligning Goals for Community and Investor Benefits

Pete Pizzutillo:

David, about the public-private partnerships. In your view, what makes successful partnerships? What should the private companies be thinking about? What should state and municipal leaders be thinking about in terms of approaching or structuring these relationships?

David Strauss:

It’s a very good question. As you noted, they essentially have different goals in terms of one to the public and serving the public, serving underserved and non-served areas. First is the profit motive and profit goals. So they have to find common ground where it’s an investment that makes sense both for the community and for the investor themselves. I’m not in the middle of those discussions and negotiations. So I don’t know that I have a very highly informed view of that. But that amount of BEAD funding has obviously captured the attention of not only the states themselves but also the private investors. So I think that itself is going to fuel these partnerships, which will be good for consumers and businesses around the country.

Investing in the Future

Pete Pizzutillo:

I mean, I think it’s a requirement. And I think there are a lot of experienced, smart people on the private sector side. And the municipalities are, and you mentioned the broadband offices, there’s a lot of immaturity in those offices. That’s not a slate on the state municipal; they’re just new. The learning curve is steep. So trying to find folks that can enrich the stateside understanding, even at the federal level, I think is helpful.

Is finding the common ground? What does that business case analysis look like? If we’re going to talk about the next-generation applications and just call it gaming or telehealth or digital communities, are private investors considering those components as kind of good returns of building up a digital infrastructure, a digital economy for these different locations?

David Strauss:

Well, I think, yeah, I think absolutely. When you look at the Internet of Things, AR, VR, and the things you just noted, from an investor perspective, they need to be highly informed about where those applications are headed and when they will start to have critical mass because we’re certainly headed in that direction. The question is when and at what levels. I think the investment community will invest accordingly. The networks need to be built in such a fashion and upgraded as necessary to handle those applications. To your earlier point about ultra-low latency, obviously, not every network that’s out there today is built with those applications in mind. So there will absolutely be an investment.

Let’s come back to the public-private partnership piece. I read recently that you’ve got $43 billion or so of BEAD monies.  But recognize that there are matching funds required from the service provider and that the service provider may get additional funding from another source. That could cause that $43 billion of BEAD money to actually look something closer to $65 billion. So bear in mind that there is a bit of a forcing function because of the matching requirement. So I think that’s important to note vis-a-vis the creation of these partnerships.

Broadband as a Utility and the Evolution of Investment Mentality

Pete Pizzutillo:

Yeah. That is important. Let’s go back to your comment earlier about broadband being a necessity. If we were talking about electrifying the entire United States, we wouldn’t say, no, we’re not going to provide electricity to this region because we wouldn’t get enough money back from the kilowatt-per-hour rates that we would expect. But electricity is a fundamental platform for lots of things like running businesses or electric cars, that type of thing. So what I’m noticing is while we’ve agreed that broadband is a necessity, is an essential utility, I don’t know that our decision-making and investment mentality is matching that of a utility yet.

David Strauss:

Interesting. Yeah, I think it perhaps is evolving in that direction. I think one could get others who are far closer to that in a very interesting debate or discussion around what you just said. But I do think more and more you do hear folks who are in this world refer to it as such. But you’re right. When you look at the traditional utilities, electricity, water, etc., there’s a whole regulatory environment that has grown up around that. That doesn’t necessarily exist within the broadband world. So it is different.

But I do think that people do embrace it as a need-to-have. The utility mentality is why folks got behind the infrastructure bill on a bipartisan basis. I mean, when you look at the economic-financial health of this country, the productivity, and the quality of education — I mean, many aspects of life, Pete, are influenced by the quality of broadband that you have. So I understand what you’re saying. But more and more it’s viewed as a utility.  I guess that’s what I would say is the bottom line.

Balancing the Cost of Broadband as an Essential Utility

Pete Pizzutillo:

Yeah, and I agree. As inflation continues to rise and the cost to deploy broadband rises and we move into a recession where people can’t afford $75 per month for broadband, and the Affordability Care Act covers it, was it 10 bucks a month? If it’s really an essential utility, then our expectation of paying 75 bucks per month, should be lower because everything else is costing more. But are we building systems that are affordable and sustainable enough to meet what a utility rate would be?

David Strauss:

That’s an interesting question. Yeah. I don’t know how much I can add to the thought process around that. There are examples that actually go back much more than a few years. Comcast has Internet Essentials. The other MSOs have similar programs to provide affordable internet access to folks that otherwise couldn’t necessarily afford it. So there is movement on that front. And there is, as part of the infrastructure bill, as you just noted as well. But I understand your point. I just…

A Glimpse into the Future of Broadband Accessibility

Pete Pizzutillo:

Yeah, I’m using your crystal ball. And that brings me to my next question, and I appreciate your optimism, and I’m not trying to be cynical. I’m just trying to-

So two years from now, looking back, I mean, what’s your thought? Have we made progress? And if so, what were some good things that you think we’re going to get done? If not, where do you think areas that we might fall short? Yes, this is asking you to pull out your crystal ball.

David Strauss:

Yeah, I understand. No, and I’m happy you put at least a two-year horizon on that. I do think coming back to the BEAD funding, in two years’ time, we will have started to feel the impact of it. We will see how that money is released, when it is released, and how it actually results in the further building of networks. But in two years’ time, maybe I’m being overly optimistic, but I do think that more of this country will have the broadband service that it needs. If we do go into a recession, we’ll be out of it by then, hopefully. And thus, the private sector will also continue to play an active role. And I do think we’ll be in much better shape.

When you’re executing something as massive as the BEAD program, there’s obviously a risk. We might fall short. Nothing like this has been attempted before. And so not everything will be perfect. But absolutely will be in a better position than we are today. I think I’m safe in saying that. Not everything will go perfectly, as I said, but we’ll be in a much better place.

Pete Pizzutillo:

No, it’s great. I agree. We’re heading in the right direction, and we’re arguing over some details. So David, thanks for joining us.

David Strauss:

My pleasure.

Pete Pizzutillo:

How can our listeners learn more about you and Broadband Success Partners?

David Strauss:

Sure. Yeah, no, thanks. So listeners can visit our site at www.broadbandsuccess.com. Can reach out to me, David Strauss, at DStrauss@broadbandsuccess.com. I’ll also give you my phone number, if that’s okay, (917) 806-5567. Again, we specialize in technical due diligence, both for the investment community, as well as service providers.

Pete Pizzutillo:

That’s great. And that’s going to wrap up this episode of The Broadband Bunch. Thank you all for listening. If you’ve made it this far, you’re probably like David and me and into all things broadband. So if you get a chance, check out our website at broadbandbunch.com. We have weekly episodes and resources, and we would love it if you want to share your story with us. Again, David, thank you very much. And thank you to all the listeners.