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.
Brad Hine:
Hello everyone in Broadband land. Welcome to another episode of The Broadband Bunch. I’m your host, Brad Hine. We are coming to you from Dallas, Texas at the site of Connected America, put on by Total Telecom. I’m sitting here today with Gerry Lawlor, CEO and co-founder of Hexvarium. Gerry, welcome to the show.
Gerry Lawlor:
Thank you. It’s a pleasure.
Brad Hine:
As I walk around the booths here, one thing that always stands out to me is maps.
Gerry Lawlor:
Yep.
Brad Hine:
It was very easy to see that Hexvarium uses maps to do a lot of what you do. Tell us a little bit about Hexvarium and what brought you here.
Gerry Lawlor:
Thank you, Brad. But yes, broadband is a big geospatial problem. That’s for sure, right?
Brad Hine:
Right.
Gerry Lawlor:
And so maps play a huge part in it. And at Hexvarium, our goal is to help people kind of solve the risk equation of that geospatial problem. We all know it’s a large infrastructure. There’s no perfect playbook that applies equally everywhere. What I’m building in one place can be very different than another. I think the industry is standing on a cliff. All the easy stuff is done, and it now faces all the hard stuff, frankly. And there’s a lot of pressure to deliver a solution, right?
Brad Hine:
Right.
Gerry Lawlor:
But one key question I always ask myself every day is, “Why do we still have this problem? Why do we have what we can deem unserved or underserved or not enough speed or capacity to different people in different places?” We’ve solved this already. We have technical solutions that can deliver the capacity that people need. Yet we still have a huge problem.
Brad Hine:
Right, right. Your tagline in your booth is “Building Broadband for Investors and Communities”. And I would say even building those broadband networks smarter, using all the correct data that we need to make better decisions — where to build; how to build; who to build. So who is your audience? Who are your targets in the industry right now?
Gerry Lawlor:
Yeah. Honestly, our target is anyone who’s ultimately wanting to spend money trying to solve the problem. And that can span a lot of different people in a lot of different places. Generally, our main customer base is the private equity investor groups as well as anti-municipality and/or operators who are looking to spend money to build. We generally see that people are struggling to answer key questions in the right order to make confident investments. We think that people tend to look at an area of 30 thousand, 50 thousand locations spread over whatever kind of geography it is.
And they walk in with a set of preconceived notions and biases as to what they need to achieve to be successful, particularly from an engineering perspective. People look at an area and go, “I’m only going to invest in this if I can achieve $1,500 or less per passing,” or some benchmark number that they throw out there. They spend a tremendous amount of time and money engineering a solution to see if it can fit that cost structure. And ultimately, now that we’re predominantly working in places outside the top 25 major metropolitan markets in the country, that gets difficult. It’s a much, much harder equation.
To me, it’s akin to taking the engineering square peg and trying to hammer it into the round hole, which is that community that needs a solution. And we think that’s problematic. It’s one of the reasons why folks are having a very hard time reaching a decision point with confidence to say, “Yes, this is the right amount of money to invest. This is the right pool of capital we can get from multiple sources,” right? One of the other key things that we see missing is fundamentally no one balance sheet can bear the burden of building broadband. It’s a shared risk.
Brad Hine:
Oh, well put.
Gerry Lawlor:
Not even the federal government’s balance sheet could bear the entire burden of solving this problem.
So ultimately that is, to me, then a risk equation as to how different sources of capital can come together to be able to answer this problem and to be able to deliver a solution. If we keep going, if everybody just stays in their sort of capital swim lanes, we’re never going to solve the problem.
So that’s what we’re hoping to try and answer for folks, that they can look at an area critically, stress test all sorts of different assumptions very quickly simultaneously. And then even when you arrive at a conclusion and you arrive at a point where you’re comfortable making investments and you start that process and you start construction, you start building, we continue to ask these questions because the moment you start, everything changes.
Every assumption just goes out the window. Now you’ve got to continue to assess. Should we be putting our capital into this area? Are we seeing demand from another area we weren’t expecting it? Are we not getting the take rate that we thought we were going to get? Should we keep going? How do you manage that risk on an ongoing basis?
Brad Hine:
Excellent. So tell us a little bit about how you came upon the name Hexvarium and how that relates to your software.
Gerry Lawlor:
So yeah, everything we present, we present it in what we call hexbins, which is effectively the entire world. There was an open-source program that came out of Uber where a group of folks developed a serialized hexagon logic for the entire planet to understand geospatial areas. And they zoomed down to some quite minute sizes, even down to inch-scale type stuff, right?
It’s an open-source capability that the industry now uses. And so we based our geospatial logic on the use of those hexbins. We also present them in a 3D fashion where we can show scales of risk effectively, right? So not all hexagons are equal effectively.
And it goes back to the most efficient collaboration is the building of a honeycomb or a honeybee and bees when you look inside a hive.
It is a very efficient use of space. So I’ve always had this notion. The best form of collaboration is building and managing the hive. So the Latin word alvarium means honeycomb. So we kind of mashed together hexagons with alvarium, and that’s where we came up with Hexvarium. Also embedded in the middle of it are the three letters, V-A-R, for var, which is a term used in the financial industry to calculate value at risk. You have something of value. What is at risk? Is the value of that thing going to go up or is it going to go down? And I may have thousands of things that all have intrinsic values that I’m trying to understand the collective risk of.
So to us, each hexbin is its own pool of risk. We understand spatially what sits inside that hexbin. We have a lot of data that tells us who is inside that hexbin. And we have data that tells us who the owner of every piece of property is in the country. Is it their primary residence? Are they an older couple, or a younger family? Is it a rental home versus their primary residence? Is it single-family versus multi-dwelling? All these different factors-
Brad Hine:
Demographic data.
Gerry Lawlor:
All those things, to us, we just look at them as risks. And the risk isn’t a negative thing where most people think, “Oh, risk always means something has to go wrong.” It’s ultimately the value of that risk. How do you value consumers? Right?
I think a lot of people in this room who build broadband don’t look at the consumer first. They look at engineering typically first. So to me, if you walk into a market, you’re trying to build a business and you arrive at a solution of sorts without ever considering, who am I selling this to? Are they able to buy it? Are they able to afford the thing that I’m trying to sell?
So we think there’s a misconception as to what questions need to be answered when it comes to solving this problem. We believe that a lot of it is that people don’t really understand the geospatial realities of everywhere they’re looking. And our goal is to help them solve that and help them see the opportunities through different lenses. Right?
Brad Hine:
Excellent. So you’ve incorporated geospatial with the hexagon that you mentioned, layers of demographic data in a certain area?
Gerry Lawlor:
Yeah. We have about 2.5 thousand different data sets that we bring in. It’s immense. We get a lot of public data and a lot of private data. And there’s no one data source, which is kind of the panacea to this problem or the answer that everybody looks for. It’s how we’ve put them all together. And what it allows us to do is very quickly ask a lot of simultaneously correlated questions. What happens if my take rate in this one area of town is 5% lower than I expected, but my drilling cost is 2% higher? Is that still economically viable? What happens if my crews are building slightly slower than we expected, right? One thing that we don’t see on any platform is a time dimension to this investment.
Right, because nobody gets to build a fiber network overnight. It always takes a long time, right? Under every circumstance. And we don’t see anybody really calculating that time risk into the… They take it at a point in time and they go, “Okay, here’s the thing we’re going to build at this cost.” And off they start marching. They just don’t continue to ask the questions. “Should we keep going where we’re going? Are we not getting the demand that we expected? Are we even building on the right side of the street?” There’s too much bias that people bring into this equation, frankly.
Brad Hine:
Right, right. So just really quick, again, geospatial demographic data, we’re talking about costing analysis and economics of the cost of all that-
Gerry Lawlor:
Costing analysis, economics, competition, time.
We’ve developed our own competitive scoring methodology, again, down to every little hexbin, where we can look at how many providers are there, what technologies they’re providing and utilizing, what price points they’re selling services at both promotionally as well as on an ongoing basis.
We have it on a 10-point scale, 10 being very good for a new entrant. So it’s inferior services at high prices effectively with people not achieving speeds that they expect down to a scale of one being very competitive. And we then discount or add basically scoring methodology based upon what speeds people are actually achieving versus what’s been offered to them or what’s been marketed to them. Or are they paying in one hexbin? Are they paying more for the same services that somewhere else they’re paying less? And we have a lot of logic that allows us to very accurately determine who’s in every house in terms of the existing services.
And then we use that to help determine what demand will look like. Can we identify bigger users in a community than lesser ones? So when you start thinking about different technologies, fixed wireless versus fiber, do you have to build fiber to everybody?
Are there other ways of delivering the services? And again, in time, I might use fixed wireless to get to you today, but the moment you get a better broadband connection, your usage is going to increase. So I must have a plan. Is this technology going to sustain your needs over time?
And how do we plan to bring fiber to you later? And then I can reuse that wireless capacity to reach somebody else and so on. So all these factors play a huge part, and they’re all spatially driven.
And it’s always trying to figure out the geography, the terrain. Should I be going above ground, below ground, and all these different factors? They all need to be looked at and stress tested, frankly, all at once.
Brad Hine:
So clearly, you’ve been in this industry for a while. I mean, you have geospatial experience, financial experience, broadband experience. What’s the sequence of events that led you here?
Gerry Lawlor:
Pretty unique. It’s funny, I came over for a golf scholarship to college.
Brad Hine:
Where are you originally from?
Gerry Lawlor:
I’m originally from Dublin, Ireland. I came over in ’95 and ended up in a small university outside Charlotte, North Carolina. And I started my career in the late ’90s. Then NationsBank quickly became Bank of America back in ’99.
I was a typical young analyst working on the trading desk, running around. I was basically a glorified coffee boy for the first few years, as you are when you always start out. Bank of America then moved me to New York in early 2001. And I was trading Fannie Mae, Freddie Mac debt effectively. Right?
So we’re structuring callable debt obligations for Fannie Mae and Freddie Mac and whatnot. I then did many years in and around Wall Street, either building exchanges or clearing houses, risk management systems, or trading products and securities in the overall global financial space. From 2008 to 2010, I helped start a unique clearing house. This is awfully boring stuff, but I found myself basically in the front seat of global financial prices.
I got a front clear view of the whole meltdown that was occurring. And we developed a technology to allow people to manage risk through that period.
And we spent a lot of time working with the Federal Reserve and all sorts of different entities. We had all of Fannie Mae and Freddie Mac’s five trillion worth of swap liabilities. And we were helping the Fed revalue those four times a second.
Brad Hine:
Four times a second.
Gerry Lawlor:
Four times a second, yeah. Five trillion notional value of swap risk revalued for every 250 milliseconds. And basically, the question was how much capital is needed in this very instance to support this risk as the world is frankly melting down around everybody? It was huge, and it became a really critical part of trying to unwind everything that was going on at the time.
It was an extremely stressful time. I had just gotten married. I and my new wife decided to just walk away from our old Wall Street lives. She was also on Wall Street. And we moved from Manhattan to a very remote place in Washington stakeholder Orcas Island.
We literally did a complete 180 with no plan, no telecom background or anything at this point. I was then the COO of a risk management company that was headquartered in Australia. And I was trying to operate that from Orcas Island. And my broadband connection has really bad rural DSL.
Brad Hine:
We’ve all been there.
Gerry Lawlor:
Barely could get a Meg out of it. And I found out my local electric co-op, Orcas Power & Light, was building some fiber to help manage their substations and their network telemetry. And I started working on a plan to get connected to it just for myself. But then I found that there was a bigger problem. We needed for me, frankly, for myself selfishly, to survive in such a place. I knew I needed it. And then I quickly saw the community also needed it.
So I put together a business plan and financial model for the co-op to stand up a subsidiary to invest in building out a hybrid fixed wireless and fiber network around the 20 islands. And then I started that company and ran that company for them. In that timeframe, we purchased 700-megahertz frequency from Paul Allen, who was a very generous resident in the community. He was a very nice neighbor to have.
Brad Hine:
Nice to have him as a neighbor.
Gerry Lawlor:
Yeah, very nice neighbor to have. And at the time, two, three months later, he ended up selling the rest of his holdings to T-Mobile. We had purchased just our county from him. And we were going about our business to build out this thing. We’re like, “God, this is really hard. Building LTE networks is no walk in the park.”
On top of trying to develop fiber and everything throughout the community, we were submarine cables. We had to do it all. So we ended up creating a unique relationship with T-Mobile, where collectively we built out the fiber and wireless network in this community. It formed the basis. The business and our work were successful enough that T-Mobile then asked me to come build out their national business. And basically, in this rural corner of Washington, it formed the basis of now what is the fastest-growing ISP in the country in T-Mobile’s fixed wireless business.
So I joined T-Mobile before the Sprint deal that ultimately closed. They made the decision to get into it before that deal was announced. And I went about building up a team. We had to create a unique geospatial tool to help identify whom it could serve and whom it couldn’t serve. I took a lot of what I figured out in the islands to what we were looking at nationally and looking at the T-Mobile network and how to target people correctly. I hired a unique team of people from the Air Force that did geospatial intelligence, and I brought in a lot of my old colleagues from the risk world and finance. We started developing different capabilities. And so this all started as we were looking at these different problems. How would we go about solving them?
Brad Hine:
Right. So version one of Hexvarium was born, so to speak.
Gerry Lawlor:
Effectively, yeah, in the San Juan Islands when I just wanted to make sure the co-op didn’t spend too much money because it was a tight budget. And we had to make it work. It was affectionately called Rock Island because we had to take a lot of rock, so it was challenging but very interesting.
Brad Hine:
You’re listening to the Broadband Bunch podcast. We are at Connected America, put on by Total Telecom in Dallas, Texas. We’re speaking to Gerry Lawlor, CEO and co-founder of Hexvarium. Your name is familiar to me, and I’m a child of the ’80s. So any relation?
Gerry Lawlor:
Yeah, right. I’m not quite the king. I wish. It’s hard to be an Irish man to be called Jerry, the King Lawler. Right?
Brad Hine:
Yeah.
Gerry Lawlor:
Technically, I’ll leave that to the Brits.
Brad Hine:
Yeah. Right.
Gerry Lawlor:
But yes, I’ve enjoyed the few moments across my whole life where people have always been like, “Oh my God, are you related to the King?”
Brad Hine:
Right. Visions of Andy Kaufman. That’s a great ’80s reference.
So at this point, Hexvarium is just getting started, do you have any stories you can relate to us?
Gerry Lawlor:
So the way we started out, our original intent was actually to keep it quite proprietary. And we were going to raise a fund ourselves and go build a network. We operate networking parts of California. So we’re an ISP, like so many others. And our original intent was to be a bigger ISP and build more networks and basically use the capabilities to express the investment thesis of the fund.
So the fund would use the tool to identify opportunities and deploy risk and manage it accordingly. And when we went to market to raise that capital, we were showing potential investors our capabilities, how we would manage the fund, and how we could make it successful. And to the person, everybody was like, “This is the problem that exists where we don’t understand the real cost. The real risk is far bigger than just a 500-million fund or a billion-dollar fund. This is a multi-, multi-billion-dollar problem. And the whole industry needs this.”
From the biggest operators to the smallest operators, these decisions are not being made very clearly. And with good understanding, you need to get this thing out to a much bigger audience of people. So that’s when we pivoted away from wanting to be a larger operator and moved towards a SaaS model where we could get the capability in front of more people. And we’re moving quite quickly in doing that.
We have customers from private equity folks to operators, to large construction entities that are trying to help their customers answer questions, to hardware vendors that are trying to sell more fiber equipment. And they’re using it to help their customers answer the questions that they want, which is, how do I build a successful sustainable broadband network in an area where nothing stays stagnant? And I’m going to end up having to spend a whole lot of money quickly, and I got to make sure we’re doing it correctly. Right?
Brad Hine:
Right. So with my geospatial brain and kind of thinking through all these broadband projects from the very beginning phase all the way through construction to going live, to then maturing the network, do you have a vision beyond just startup and feasibility, you tracking data all the way through the process?
Gerry Lawlor:
Yeah, so we actually have a four-step process that we go through. Three steps we consider kind of pre-construction, so a lot of analysis, a lot of refinement of that analysis, and a lot of stress testing of your assumptions to build up your confidence and clarity of what you’re about to go tackle. And what comes out of that is effectively a permittable-engineered build plan combined with an actual go-to-market strategy of which consumers to engage with in what areas and how to effectively sell to them.
One of the simple mistakes I always bring up to folks is when everybody wants to build broadband, they run to a community and they make some big announcement and they basically scream from the treetops, “Hey everybody, we want to build gig fiber in this area.” Undoubtedly, 30 to 40% of that community is going to put their hand up immediately and say they want that as fast as they can get it.
The reality is that they are probably the hardest 30 or 40% to get to in that community. So in large part, we see people mismanaging consumers’ expectations. So we want to make sure that you talk to the right people at the right time, and that’s part of the plan as well.
What comes out of it is an engagement plan in line with a construction plan. And then the key is you keep asking these questions. We then continue, we tie into your project management systems and your construction systems and your onboarding, any customer engagement platforms, your CRMs, and whatnot. And that allows us to keep questioning our own assumptions. The reality is that the moment you start construction, nothing stays consistent. Right?
There are going to be surprises. One of the key goals is to keep monitoring the risk as you are going forth to help avoid stranded capital and make sure you’re putting your money in the right place at the right time to get the greatest return. We do a lot of digital divide analysis. One of the issues we see is money is having a hard time coming together.
Because there’s not a good mechanism to explain to a variety of investors, investors being actual private capital investors, to municipalities and local governments, to an electric utility, to somebody receiving funds through some program bead and whatnot. All those folks have a hard time working together because there’s no tool that can really explain the multi-dimensional realities that they all face. And it’s an ongoing question that must keep getting asked and answered and that money has a hard time doing that. And that’s one of the key things that we want to be able to do for folks. Right?
Brad Hine:
Well, I certainly wish you all the luck. It’s great to meet you today.
Gerry Lawlor:
Thank you. You, too.
Brad Hine:
I appreciate you joining the Broadband Bunch podcast. If our listeners want to get in touch and learn more, how can they reach out to you or your website?
Gerry Lawlor:
Yeah, hexvarium.com, H-E-X-V-A-R-I-U-M.com, or I can be reached at G-E-R-R-Y, at hexvarium.com, anytime.
Brad Hine:
Fabulous. Well, thanks again for joining us today.
Gerry Lawlor:
Thank you.
Brad Hine:
From everyone at the Broadband Bunch podcast, we hope to see you around. Please don’t be a stranger. Bye-bye.
