In this episode of the Broadband Bunch, recorded in Washington D.C. at the Broadband Communities event focused on High-Speed Broadband: Driving America’s Growth, we speak with Steve Ross, the Founding Editor and now Editor-at-Large a Broadband Communities Magazine and Masha Zager, Editor-in-Chief of Broadband Communities Magazine.
WHAT IS YOUR PERSPECTIVE ON THIS CONFERENCE REGARDING DRIVING AMERICA’S GROWTH THROUGH BROADBAND?
Steve Ross: Well, so far in the conference we've seen a lot of very, very good novel material on funding, good new twists in existing programs. And there's always a way to build a network if you at it, you have control. And the other thing that's impressive to me is people looking to take the next step, which is, "How do you use the thing?" There's always a certain number of people that want it, don't have it, need the broadband, and will know how to use it once they get it. There's another group of people that has itched for better broadband because they go to a McDonald's in the next town, or they go to a library in the next town to be able to get it.
But there are quite a few people, something on the order of 30 or 40 million, that don't know how to use it. And many of them have to use it. Hard to apply for a job today without being able to be online, perhaps even find a job without being able to be online. But also there are quite a few people that have never been online. And at the most, they have a cellular phone, not necessarily a smart phone, and that's the best they can do. And so how do you teach them? How do you motivate them? How do you get their political support? Down the road, how do you make a little revenue from them, because that's why you build these things in the first place?
MAPPING BROADBAND ACCESS – THOSE WHO HAVE IT AND THOSE WHO DON’T
Craig Corbin: And you notice Steve, you just touched on something that's extremely important with regard to the number of people who don't have access. And of course, one of the challenges, I think, in that conversation, is knowing exactly how many people don't have. And of course, the mapping topic is one that is vital in that conversation. And we're finally, I believe, beginning to get some traction, and making that reality a true mapping of the United States.
Steve Ross: We are getting some traction, but we're not getting good maps yet. There are two efforts going on right now. One is at NTIA, which is in the Commerce Department. And they have gathered, under NDA, meaning it's confidential, public is never going to be able to get at it, a lot of customer data from a lot of companies in a lot of places, and they're trying to figure out how bad the national broadband map is from that point of view. Over at the FCC, which had originally taken over the National Broadband Map from NTIA, but didn't get any extra money to do anything with it, the FCC also now says, "The map is terrible." And I can explain why, if you'd like me to, but the map is terrible.
So as of the end of September, the FCC issued a new draft regulations. It said, "We want much better data from the carriers. The data has to include not only your current customers and where they are, but also all the people that you could hook up, who wanted to become customers if they, in a normal cycle, a few days, or a week, and they would have their broadband." And so if they're within a week of broadband, it should count. But there is, first of all, it's going to be nine months before they collect the data. The data doesn't feed into the FCC's official application, which is called the Form 477, which is an annual report. And that's been the basis for the maps up to now. And it is unclear whether any of this data will actually see the light of day.
Now the interesting thing is, we just published in the current issue, we said, "Well, we've been playing around with the data that we have, and we've gotten good at it. We know what we're doing. Most of our reports are based on County-level data." And I can get into that, "And we've been able to get very, very good conclusions from that, but not good regulatory issue-type conclusion." But, there are 1.7 million census blocks in the United States that are designated rural, and actually have people in them. So I loaded all the data into my big i7 server and sucked random forests on it, sticked random forests on it. And a random forest is artificial intelligence. We call it a machine learning program actually. And for a year, I'd been doing data runs.
By the way, for the amount of data we have, it actually takes two and a half days for by big server, with an SSD and all the good stuff on it, to actually plow through the data and do a data run with the information we have per census block. And it's not at all ready for publication, but as I said in our current Bandwidth Hawk column in the October issue, "My computer now knows more about broadband than the FCC." And I get from that two things, two key things. First of all, if the editor of a very small magazine can get competitive information above and beyond what the government thinks it's giving out, and what the carries they're giving out, obviously each carrier's competitor has done the same thing. Don't be ridiculous. Of course, they've done it. So they know that all of this is baloney. This is just anti-competitive.
The second thing we discover is, there are almost certainly fewer broadband customers then wall street has been led to believe, and that the FCC has been led to believe. And the reason for that is that the Census Bureau likes to make major roads, and railways, and water features as boundaries of census blocks. When it comes to railroad right of ways, and major highways, the major roads, the major highways go from one census block to the next census block, but they're on the borders, and that's where the trunk line is. So the trunk actually serves two census blocks, not one. And we think that in reality, there's an extra 2 million who aren't counted because the people who are counted are double counted.
Craig Corbin: That's staggering.
Steve Ross: Yeah, that staggering. Instead of about 14.5 million rural customers, rural premises that lack broadband, it's really probably 15.5, 16.5. We don't know. It's not ready for publication because of minor changes in the starting data produced major anomalies in what the computer thinks is real. And remember, we're not about making a point, pissing people off, criticizing in an empty way. My readers need this information to make money, to know where to build stuff, to understand the risk of building stuff. So we can't give them half-baked data. So we have half-baked data, but the FCC has basically raw data.
Craig Corbin: Just the raw ingredients, if you will.
Steve Ross: Not even. They have raw data with some of the ingredients.
BROADBAND FUNDING REQUIRES ACCURATE DATA
Craig Corbin: And you touched on something earlier, how this impacts not only the constituents in all these areas, but Wall Street. And that's a very important component in the conversation of funding for future projects. Talk about that.
Steve Ross: Well, Wall Street comes in a bunch of different varieties. And I was just out at the Federal Reserve on Wall Street, two blocks north of Wall Street, just last Thursday. When you're talking about a publicly-held company, a national carrier that has stock sold to the public, and they're raising money, partly from operating cashflow, and partly from raising bonds, Wall Street really punishes these people. They say, "Well, your profitability is going to go down least for the next six months, so we're going to cut the value of your stock." Okay. And quite frankly, I'm very understanding of that. I empathize with that. There's a lot of people on Wall Street who will keep major carriers from ever making a business case in rural areas. I have no problem with that. I think that's perfectly acceptable.
What I do want them to do is, if they can't make a business case, get out of the way. In other words, the national carrier should not be restricting other carriers to be in the area. But the other part of Wall Street is not the same thing. The other part of Wall Street is, the hedge funds, the private investors, the investment desks at national banks that fund the local banks, that send money to local banks. And these people have not a clue what broadband is all about. They don't have a clue of what broadband is all about because the New York Times doesn't cover broadband. When it does, it talks to analysts who worry about the stock price, so they miss the rest of it entirely. Washington Post rarely covers it. Small business-to-business publications like us, we cover it. They don't read it.
I do some speaking down on Wall Street. I do some speaking around the country at regional banks. I hold workshops on broadband. In fact, doing one here tomorrow, right here in our own conference. And because we build the financial models for this thing, at every single event, without question, someone from a hedge fund will say, "What do you mean that without fiber you can't really have 5G?" "Because 5G fiber is needed to take the signal back haul back to..." "We didn't realize that. We thought 5G was going to replace fiber."
Now, you would think in a modern day and age, people know how airplanes fly. Most of them actually fly. They don't fall down even, though heaven knows what keeps them up. You would think that people would understand that when they get on this smartphone and they make a cellular call from the East coast to the West coast, maybe a half of 1% of the distance traveled by that call, by that signal is actually in the air. The rest of it is through a wire, usually a glass wire. 99% of the time with a glass wire for intercity communications. They don't know that. And the fact that they don't know that literally is tragic. Literally is tragic.
And part of our mission is to get people to know that. But that's really not our primary audience. We don't have a lot of hedge fund managers subscribing to the magazine. More than you might think, but not really that many. We don't have a lot of regional bankers subscribing to the magazine, unless they're also community activists. And then we have quite a few. So there are simply a lot of people out there who control the money, not necessarily 'Wall street', but control the money, who really have not a clue what this is all about. And that's a serious problem. And because of the effect of stock price, some major carriers were always against rural broadband. The big one is gone. The big one was Time Warner Cable, and they're gone. But others... And quite frankly, I don't care. They can't make a business case. Why should I make them make a business case? I'm a capitalist. The government does not own a magazine I work for. I have investments on Wall Street. I think it's fine.
Stay out of the way of other people that want to. And that means do away with restrictive regulations restricting who can own or run a broadband carrier at the state level. There are 20 States that have particularly restrictive regulations, and their rural losses in jobs are triple the percent of the rural losses in States that let communities do whatever they think they want to do.
Craig Corbin: And that has to change.
Steve Ross: That has to change.'
EVOLUTION OF THE BROADBAND COMMUNITIES MAGAZINE
Craig Corbin: That has to change. We are visiting with Steve Ross, the Editor-at-Large of Broadband Communities. That has been a publication, which has evolved over the years. Talk a little bit about how that has changed.
Steve Ross: Well, it's changed a lot. What happened was, Broadband Communities started as a magazine called Broadband Properties. And Broadband Properties was a magazine for private cable operators. These were the people that wired up apartment buildings with broadband, typically cable TV. And very often, they would then sell the building subscribers to a major national carrier, and make a nice piece of living and then go off. In 2004, that entire business model was regulated almost out of existence, because Verizon said, "We're willing to put in fiber optic in major cities, but not if we have to lease it to our competitors. They can buy it. We'll put some in with them, whatever, but we're not going to lease our hard-earned network and hard-built network to people that are going to compete with us."
And the FCC, I think, reasonably correctly, in 2004 said, "Okay. Fair enough. We understand what your problem is and let that happen." So Scott Degarmo saw an opportunity. He had been doing a little consumer magazine on broadband, and running into a worthy competitor in Martha Stewart, and decided, "Maybe a business magazine would be better." And he had had about 25 years of experience in business publications. I had worked for him off and on over the years. I was just retiring from Columbia University, and he said, "Would you like to edit it?" And I said, "Sure. This sounds like fun. Sounds like a challenge. I don't know that much about it." He says, "You know a hell of a lot more about the technology than anyone else does, so learn."
So the very first thing I did, I was just a few months into running the magazine in the late 2004, early 2005, and I took courses in outside plant and inside plant at Southern New Hampshire Tech. Each one's a 10-day course. You can do it on weekends. You can do it 10 days straight. They're very, very flexible. Mainly aimed at the copper technicians that were being hired by Verizon to start doing fiber. And I knew more than most, but I didn't know much. This was an eye opener. I says, "Oh, this is going to be even more fun than I thought." So we had a ball.
We got up to the recession a few years later, and most of our advertisers disappeared, either merged or went out of business. People weren't building. It's a very capital-intensive industry. And the consults said, "Well, fire your editors and a reprint press releases and stay alive." So we looked at one another and said, "We are the editors. We're also the owners and we're grandparents. What would our grandkids..." So we had a few pay-less paydays. Not many really, just a matter of months here and there. But we did much better, and came out of the recession much faster than the country as a whole because we put all our competitors out of business. And some of your listeners might remember Telephony Magazine, 100 years old-
Craig Corbin: Absolutely.
Steve Ross: Drank the Kool-Aid, gone. Lightwave went from being a every other week tabloid to an occasional special issue and a podcast, oddly enough, that because Steve Harvey is a wonderful bright and great guy. So we just prospered. So that's why. But that's the history of the magazine in a nutshell. And we're not really about to change our business ethics.
Craig Corbin: And when you look at the events, the regional events, the national events that have really become a must-attend for so many organizations that are looking for... You talked about learning.
Steve Ross: Yeah.
Craig Corbin: They're coming to these events looking to learn very key information as they evaluate their future.
Steve Ross: And they're also coming, and they are. And of course, there are sources, and there are readers. They are also learning about the risks, and they are also learning, realistically, what they can do and what they can't do. We built the financial models that pretty much the whole world uses. We put them in the public domains. Some of our exhibitors, actually, the backend of their software is our models. And we think that's wonderful. We make a little bit of business from helping people that really need help with doing the models. But for the most part, it expands the business. It expands the broadband business. And so it expands our reach by doing it.
We did a lot of the research that Congress relied on in 2018, to pass the $600 million that became Reconnect, and the 1.75 billion in the Farm Bill that hasn't become anything yet. It's going to get given out by RUS, but they're not sure whether it should be part of Reconnect or how it's going to work. The rules are ever so slightly different. And I've been honored and recognized by the people who run the major statistical agencies, and the federal government. I actually gave them a speech. There was about 100 of them, and I gave them a speech last June.
We've won eight editorial awards. So we were the second, in 2016, the second best original research by a business magazine in the entire country. And for a magazine our size, that was extraordinary. And they understood broadband. Anyone that judged it had to understand about broadband. So, you have a feeling yeah, you're not just making a living and drinking a lot of coffee at conferences, but it's really a lot of fun to be around these people.
APPROACHES TO BROADBAND FUNDING
Craig Corbin: And you're having a direct impact on what's going on across the country. Now you made a mention of the RUS program. And there are so many variables in the multiple programs that are there. A lot of people don't understand that it's not just one approach.
Steve Ross: That's correct. There's not just one approach. Also is not just one award. You can get money at 2% when your local bank can't put it out. A treasury bill pays almost 2%. So it's basically a program that says, "We're going to make the investor risk, which is the federal government, not much different than a treasury bill." So that's pretty good. The biggest one... I want to come back to the very beginning of the podcast question you asked about the maps. One of the restrictions is Congress wanted the money to go to the truly un-served. So they said if more than 10% of the customers in your area are already getting 10 x 1, 10 megabits per second down, one megabits per second up, you're not eligible for this money.
However, you could put together a mosaic of areas around the few hotspot, and you can actually send fiber, or copper through the donut holes where you can't serve to get to the other side where you can serve. And all of this makes a lot of things possible if the mapping data is good. But if the mapping data is cumbersome, you're not going to apply for it. So we're doubling down, trying to get good mapping data. That's why.
Craig Corbin: If you had a crystal ball, and the process of making the mapping a truly viable resource, how quickly can that information be used to directly impact opportunities in the States that you made mention of, that currently still have the roadblocks for expansion?
Steve Ross: My guess is one year. And I think the political energy behind restricting communities, and electric co-ops, and small regulated, what they call title two, tier three local exchange carriers, the idea of screwing them over, that's over. That's over. State legislatures even in recalcitrant States are simply much more willing to go. I saw it in 2018. I dealt with quite a few Senate and House staff members on both sides of the aisle, who were looking at our data, were fascinated that we pointed out risks, and we pointed out potential flaws and all that thing.
And they would try to wrap their heads around the idea that we were really interested in making business cases, and warning people away from bad business cases. And while we love rural broadband, and we love curing the urban digital divide broadband and all of that stuff, my readers, they were all altruistic in some sense. But basically, they're in it to make a living. This was a shocking concept, and thou shalt not bankrupt thy readers because thy readers will be grievously angry. And they're no longer your readers.
Craig Corbin: They will. Exactly. They will go down the road.
Steve Ross: So, that kind of monetary push pushes things forward very fast, because all the ingredients are there. So I give that a year. The other thing is that rural areas are very often served by a mishmash of little carriers. You might have a municipal-owned carrier, or a university-owned carrier, and there's a few hundred of them. You may have a small local exchange carrier regulated as a telephone company. You might have some data companies. So that might be... You might have an electric co-op. So there might be seven or eight little operators in and around. And any one of them would go nuts trying to run a modern fiber system. But why can't they all band together and run one?
And I'm not at all saying that they should become the same corporate entity, although sometimes that might happen, and it might eventually happen. And I'm not saying that it's easy. There's a lot of legal pitfalls, which if you really want me, I can get into a few. But the simple fact of the matter, by doing that, you could save 20 or 30% on building and operating a network. And that is so much money to save, as we look at our own models. And I keep telling people on Wall Street and hedge funds, I says, "You see what's going to happen? They could save all this money. They could save all this money. So why don't you do this, and why don't you push this? And why don't you look for investments of this area? You save 20 or 30% in building a system and deploying it then and you cut the risk to some of this stuff." Then they said, "Ooh. That's a lot."
Craig Corbin: And it is a lot.
Steve Ross: And then they point out all of the potential legal problems of, priority in RUS mortgages that exist already on your property, from the way you told your stories. Going back to the FCC and say, "Ooh, you're going to have to share spectrum. And so you still have to meet the legal requirements that you agreed to when you got the spectrum and bid successfully on it. So what's the FCC going to say?" And it says, "You know, if they really care about rural people, citizens of the United States, and making the economy work better, they're going to say, "This is fine."" Because it's too much money.
The modern broadband networks, building them, marketing them. The margins are pretty good. The business case is pretty good. It becomes a much simpler business when you get a linear video out of the way-
Craig Corbin: Exactly. And that's happening rapidly?
Steve Ross: And that's happening very rapidly. And it's happening very rapidly, not only because people want it, but because the carriers want it. This is very surprising.
BRINGING BROADBAND COMMUNITIES EVENTS TOGETHER
Craig Corbin: And it's interesting, but that is something that we've seen evolve so rapidly. We are visiting again with Steve Ross, the Editor-at-Large of Broadband Communities here at the Driving America's Growth Conference and Expo 2019. And as we wrap up our visit, just curious about all that goes into lining up your moderators, your speakers for an event like this, because there is a multitude of folks that you have, and phenomenal content. We've already had some great sessions thus far. Talk about the process of putting this event together.
Steve Ross: Well, we do it all ourselves. It's a very small staff. There's only about five of us. And Nancy McCain is our Chief Event Wrangler. The editors deal with people like Jim Valor all the time. Foundations like... But also the companies that report. And so we know where the hot buttons are. And not only do we arrange the conference, but we also update it and change it as exciting things happen. So the program gets changed quite late into the process because we think of it as like putting together the articles in a magazine, except it's live. That's how you do it.
Very big publishing companies have staffs that do it for all the publications in their stable. A lot of professional organizations, and some big companies use outside conference arrangers. And so, everything's a little bit stale, a little bit static. When it comes to broadband, things move too fast. It's not as if we're reporting the latest thing on Shakespeare scholarship. Shakespeare scholarship, by the way, exists. There are conferences. Move slowly.
Craig Corbin: It's nice to be nimble with the ability to make those changes.
Steve Ross: Exactly. Exactly. We're small, we're nimble, we have a lot of fun. By the way, that's one reason small carriers could sometimes outfox the big ones. So we've had a lot of fun with that over the years as well, because the small carriers know their own neighborhoods better than the big ones can possibly know their own neighborhoods.
Craig Corbin: And I know that I speak for all that are attending this event, that they are most appreciative of what you, your staff have done in putting these events together, because they truly do make a difference. And that's, I know, rewarding to you both personally and professionally.
Steve Ross: Absolutely. And also, it makes us money. And you're an exhibitor, it makes you money. Which in turn feeds back to making us money. When you do good, you do well, in the long run. You can always cheat for a while, and get away with it for a while, but you got to pay attention to ethics and all that sort of thing. And I might add, a lot of publications, a lot of politicians, and a lot of companies do that. Otherwise, we would really be in a pickle.