The following transcript has been edited for length and readability. Listen to the entire discussion here on The Broadband Bunch.
Craig Corbin:
Hello everyone, and welcome to another edition of The Broadband Bunch. I’m Craig Corbin. Thanks so much for joining us today. Never before has the need for broadband connectivity been greater, with a growing digital divide and bandwidth demands exacerbated even further by the COVID-19 pandemic, long gone are the days of viewing broadband as anything less than essential – perhaps the essential utility of the 21st century. Our guest today, Heather Gold and Karen Jackson have authored a paper entitled, Expediting Broadband Deployment: Creating Incentives for Investor-owned Utilities. Heather Burnett Gold is CEO of HBG Strategies, a consultancy engaged in broadband education targeted at enabling fiber deployment in underserved communities. Heather most recently served as President and CEO of the Fiber Broadband Association and is a 30 year veteran of the industry. Karen Jackson is President of Apogee Strategic Partners, a Virginia firm specializing in the development and implementation of technology and innovation strategies in information technology, cybersecurity, autonomous systems, education, and smart communities. She also serves as Interim Executive Director of the New College Institute.
Fiber Broadband Deployment Research
Craig Corbin:
It’s exciting to be able to dive into the research that has been done to put this paper together regarding opportunities in broadband deployment. What was the impetus for this from an experience standpoint? Both of you have tremendous background in the industry, how did that all coalesce into this work?
Karen Jackson:
Prior to starting my own firm, Apogee Strategic Partners, I was the Secretary of Technology for the State of Virginia. That’s where Heather and I came to know each other, around broadband, and around the whole theory behind broadband. As the Interim Executive Director at the New College Institute, which is in a rural area of Virginia, I was approached by an IOU (Investor-Owned Utility) that wanted to do work in this space, and they asked if I would be willing to take on the project through the New College Institute as one of their research projects.
Karen Jackson:
I said, “Sure.” And immediately picked up the phone and called Heather so that we could put our heads back together as I knew we came from a very similar strategy standpoint, as well as a philosophical standpoint about broadband deployment. So, I called her up and we took off on the project. We learned a lot and it’s been a lot of fun getting back into the broadband conversation. Even years later, some of the issues are still the same, but there are a lot more opportunities now because people recognize that broadband is no longer a luxury, but as an essential utility.
Craig Corbin:
The current situation with the global pandemic has served to shine a spotlight on just what you’re talking about. The fact that broadband has become an essential part of survival, not only for individuals, but also for municipalities all across the country with regard to long-term economic feasibility.
The Fiber Broadband Divide
Heather Gold:
The pandemic really highlighted some of the issues surrounding the digital divide – most notably access (or lack thereof) to the world economy, to remote healthcare, and especially to remote learning and education. It has really exacerbated the need for kids to be connected to their schools so they can continue their learning, as well as the need to have access to government services. People knew that it [broadband access] was critical for economic development, but these other applications have really become even more prominent with the pandemic. That’s why Karen and I were really excited to be called in to sort of look at this in a way that a large entity that operates in a lot of rural areas could help in ameliorating the broadband divide.
Karen Jackson:
Tagging onto what Heather just said. Prior to the pandemic, it’s always been easy to think about the fact that broadband was becoming more of an imperative, but there were always higher priorities. There were always other things that competed for scarce dollars. There were always other conversations that need to be had, that kept moving broadband access to the back burner. With the pandemic though, all of this has had to move it to the front burner. State governments, the federal government, everybody has had to come to grips with just how integral IT and broadband is to our daily lives. It’s undeniable. The time of being able to say that this is an optional conversation, or the time to push it back to the back burner, those days are gone.
Funding Fiber Broadband Infrastructure – The Middle Mile
Craig Corbin:
Funding for expansion of broadband networks is vital in that conversation. A big part of that broadband expansion discussion is around the middle mile infrastructure. Talk about that and how it plays a huge role in this particular research work.
Karen Jackson:
The whole middle mile conversation has always been something that has been a bit of an enigma. Back in the day, when we originally had these conversations, it was all about where does the fiber lie on somebody’s balance sheet? Is it for internal use, or is it actually a saleable or a tradable or a usable asset for other things? Now, as we’ve evolved, there’s not just the need for the middle mile to reach the last mile, but in the terms of the utilities, they’re actually needing the middle mile for their own applications. So smart metering, smart cities applications, all of those things depend on high bandwidth, and consistent and reliable availability of broadband. The ability to get from the backbone to the middle mile to the last mile is an imperative. If you can get an affordable middle mile, it makes the capex and the equation for the last mile then so much more affordable as well.
Karen Jackson:
So we look at things like Mid-Atlantic Broadband in the Commonwealth (of VA). The Tobacco Commission has spent hundreds of millions of dollars building an open access middle mile backbone. The reason for that was the fact that with the density so low on the last mile side, there was no way the affordability was going to work with a tariff in a traditional middle mile model. The IOUs have a lot of infrastructure in place that they’re able to leverage like poles and rights of way, to drive that cost for the middle mile down. They are well positioned to be able to help answer that call, and to be able to push the connectivity out into areas that otherwise wouldn’t necessarily be affordable, and certainly would take much longer to build out if we had to wait and do things from scratch.
Broadband Bandwidth Standard Inadequate
Craig Corbin:
From an essential utility standpoint, Heather, a huge part of that is providing appropriate minimal bandwidth. Because quite honestly, what is considered currently acceptable in many realms isn’t even remotely appropriate for being able to accommodate what you need to do online today. Talk about that if you would.
Heather Gold:
Karen and I both feel passionately that the 25/3 (25 Mbps downstream/ 3 Mbps upstream) standard is wholly inadequate. We should not be funding anything at that standard. As people’s needs grow, it should definitely be at least a 100 Mbps down and up. That is easily addressed with a fiber deployment, because the IOU’s will be deploying sufficient fiber, not just to serve multiple end-user customers in multiple communities, but also to support the advanced applications they need. It means that whatever network they put in will be sufficient. I wanted to follow up on the middle mile discussion, because one of the things is that when we did the last Recovery Act (2009), there was a lot of money given out for middle mile in some of these locations. What we have found in going back and speaking to entities is that there’s still maybe only a single provider. There’s no competitive recourse if that is the only provider serving your community and so the costs are really, really high.
Affordable Fiber Broadband – Open Access Middle Mile
Heather Gold:
We were fortunate, Craig, that the same time we were working on this and coming to our conclusions as to the best avenue for IOU’s to impact broadband, is that the Benton Institute put out a paper which spoke to the need for competitive open access middle mile, and what an impact that can make on the ability of a remote location to put in fiber all the way to the home. They used some examples that were 600 times cheaper once there were competitive options for the middle mile, which made it worthwhile for remote communities with a very few numbers of homes to raise the money and deploy their own last mile network. It’s an entire ecosystem that sort of feeds off itself. It’s one place that the competition model truly does make an impact. All of us understand that competition may not work in some of these remote rural locations because there’s not sufficient demand to support multiple providers. In a middle mile segment, certainly there is sufficient demand because of the aggregation of several communities onto one pipe.
Craig Corbin:
Karen, another big part of the equation with regard to expansion of broadband networks obviously is the funding. There are many components to that. There are some who would look at the current setup and feel frustrated at how organizations and groups that are well-organized and better financed tend to get to the front of the funding line more often than those who could use it even more.
Karen Jackson:
Heather and I have spent a lot of time discussing the funding programs and historically looking at the funding programs and the way that the different states have handled funding for broadband. It seems really to be just what you said, those who have their act together, those who can hire a consultant to put together a nice plan, all seem to head to the front of the line. The problem with that is that we continue throw money at islands of connectivity without a truly comprehensive strategy that would allow for conversations around middle mile, that would allow for conversations around last mile build out in a much more holistic fashion. Because if these islands get built, they may be built at different speeds. They may be built with different providers. Chances are, they will be built with different providers, different agreements, different speeds, and different upgrade and maintenance projections and policies.
Karen Jackson:
We want to get the connectivity out to the rural areas but doing it in such a patchwork fashion is only going to mean that the future is going to be patchwork as well. Without a comprehensive strategy, without a comprehensive upgrade strategy, it’s just going to be almost impossible to make sure that the rising tide benefits all boats. Because it’s been done, and all of these agreements don’t relate to one another. To me that is very short-sighted, and I think we’re throwing band-aids quite frankly on the problem, because in part it’s easy to say, “Well, look what we built, look at the people we helped.”
Karen Jackson:
But, 5-10 years from now, when those people are on the other side again, and still not able to sustain a network, and are still not part of a bigger network that somebody is looking after the care and feeding of and make sure that it’s being upgraded and cared for. I’m not sure that we’re doing ourselves a big service by building in the way that we’re building, and just throwing money at those that have the plans. For those that don’t have the plans, there is not a whole lot of trajectory for them to be able to get the help they need to actually get broadband service. In some cases, it’s not going to be those that can bubble sort it to the top. There’s going to have to be a strategy to do all the other places as well. Right now, the funding is not geared to help those folks out at all.
Comprehensive Broadband Deployment Strategy
Craig Corbin:
You touched on a couple of things that I think are important. One is the concept of potentially throwing good money after bad, that’s a great concern, and then the two, the need for a comprehensive strategy. What do you think the chances are that we get a comprehensive strategy in time, so that for example, the $20.4 billion of RDOF funding is spent wisely.
Karen Jackson:
That is potentially a loaded question. I’m not holding out hope. I mean, there have been attempts at the federal level to do broadband mapping ever since they’ve been there, there’s been a controversy about the accuracy of the maps. Some states have better maps than others when it comes to accuracy. But again, it’s so easy to say, “Look at what we’re spending, and look at how many people we’re connecting.” That makes a great PR piece. I’m not going to hold out any hope that we’re going to see a sea change of how this money is doled out.
Karen Jackson:
I would hope that at some point, at the local level, instead of individual towns or counties, we start to see regions, or we start to see states that start down this path. I’m not holding out a whole lot of hope because the system is what the system has been for a really long time. It’s an easy PR win to say, “Look at what we gave this community. They’re going to get broadband, and we’re going to call it a win.” I’m not going to hold out a whole lot of hope for a sea change.
Fiber Broadband Deployment Costs
Craig Corbin:
Heather, I’d like to get back to something that you referenced earlier. That was the research from the Benton Institute with regard to the difference in the cost required for construction of middle mile facilities, and how that impacted or potentially would impact.
Heather Gold:
What they were speaking to is the difference in the cost of middle mile services to the community if there is a competitive open access middle mile option. The example they used was Mass 123, which is a middle mile network in Western Massachusetts. I actually have a friend whose daughter’s hometown of Cunningham has built off of that middle mile network. The community was very small, and they were able to put in fiber to the home in a very cost-effective way. I’m not sure the town cited in the article was Cunningham, but the town in the article only had about 400 homes, and they had budgeted X number of dollars to connect them all. Then they looked at the middle mile conductivity, and it was going to be the same price to get the middle mile accesses to build out all the homes.
Heather Gold:
You can start to see how the economics of the middle mile option is so important. That’s why Karen and I really felt that going to the Investor-Owned Utilities, which can put extra costs over and above what they might receive in revenues from this network into their rate base makes a lot of sense. It also makes sense because for them to deploy fiber because, as Karen said, they already have the poles, they know how to string it, they have the rights of way and that both shortens the time, (which we all know time is money in fiber builds), but it also makes it cheaper and quicker for them to deploy.
Craig Corbin:
Unfortunately, until this research is embraced and utilized, it doesn’t do any good and that’s the challenge. I’ll ask both of you as we begin to wind down, your thoughts about what it’s going to take to have organizations embrace this information and to make it reality.
The Fiber Broadband Conversation
Karen Jackson:
Acceptance is an interesting concept. There is an awareness, as I said earlier, and an interest on the part of the IOUs to not only do the right thing, but to connect their own customers for their own uses. There’s an automatic, built-in, I’m not going to say revenue if they’re using it for their own purposes, but there’s a usage there. It’s not just going to be build for the sake of building, or build for the sake of the consumer. They actually have a business reason for the build-out. I think everybody now is kind of tired of talking broadband being a problem. I know I am and I’m sure Heather is too. The whole COVID piece has really highlighted the fact that this conversation’s gone on way too long.
Karen Jackson:
This is a 20-year-old-plus problem that we still are now talking about. I think I met Heather around the year 2000 and sometimes we laugh at each other because they’re the same conversations that we were having then that we’re having now. I believe the pandemic is going to move the needle, but I’m concerned about what happens when the pandemic is over, and do these conversations just get buried by lobbyists and others that don’t see that there’s a problem with the model. A lot of these companies are, and most of them are stockholder-owned and they have a fiduciary duty on that side, but I’m just concerned that we’ve turned a corner for now, and it’s important for now, but real change takes a long time. I really think that 20-plus years on a topic like broadband is too long.
Karen Jackson:
I’m hopeful that we’re able to leverage things like IOUs, but states and policy makers are going to have to be willing to change laws, and change policies, and change regulations to allow for additional competition in these markets and allow for more participation by non-telcos in the middle mile space. I don’t know that Heather and I have the intestinal fortitude to have this conversation for another 20 years, but otherwise I think the conversation is just to going to keep going and we’re not ever going to really truly get to a steady state where everybody has what they need.
Heather Gold:
I agree completely with Karen that we need more statewide and regional broadband network planning, just like what would happen with a new highway system. So that resources are going to the areas that need it most urgently, rather than the areas that are more organized to get it first. The company we were doing the research for asked us to look at the operating statistics in each of its service area states. And we found that the states that were doing better quote unquote in broadband rankings, in other words meeting more the needs of its citizens, were those that actually had broadband and a broadband organization in place, and some sort of funding mechanism in place, and were able to help communities through the hurdles.
Heather Gold:
We also found that there are a couple of states, West Virginia and Virginia most directly, that have changed laws so that Investor-Owned Utilities can build the middle mile broadband infrastructure and put the costs that aren’t recovered from revenue into the rate base. By and large those costs – we don’t know what they are, and we didn’t research them but we highly suspect that those costs – will be a lot less than a cold build from some new entrant in the market. It seems that that is a much more reasonable way to get people that have the facilities in place to utilize them for a fast build and are encouraged to do so.
Craig Corbin:
You can read Heather and Karen’s research paper, Expediting Broadband Deployment: Creating Incentives For Investor-owned Utilities, here at hbgstrategies.com and here in the current issue of Skinny Wire.
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