In this episode of The Broadband Bunch, we speak with Michael Morey, President and CEO, Bluebird Network, about how communities can accelerate the delivery of and create more sustainable broadband programs.
Pete Pizzutillo: Bluebird Network is bridging the gap between NFL cities and smaller municipalities, so you see the range of thinking. There are cities that are on the leading technical edge, and fully understanding the impact of broadband and are driving economic development through partnerships with service providers. Then smaller municipalities maybe unsure of the path and are distrusting of providers. How can municipalities become fiber-friendly? What does that mean?
Michael Morey: There are a lot of facets, and there are several different customers within a single municipality. There are residential customers, business customers, governmental customers, banks, medical, and all these entities have different needs and focus. What tends to happen is because the votes are driven by the citizens, towns tend to focus on trying to get fiber into residences. Sometimes that focus on just the residences can be a disadvantage. When I talk to governmental officials, I try to talk about how to create flexible environments and to encourage fiber builds to all community segments by all types of providers.
The more flexible in your approach and the more supportive you are of the various people in the industry, the more fiber-friendly you are. The less flexible you are and the more that you try to get involved in the ‘business of communications’, the less fiber-friendly you become. Meaning, if you're running for public office, the natural thing when people say, "Oh, I don't have broadband," is to say, "Well I can fix that. Our city, we'll just get into the communications business. We'll just do it for you." It sounds so easy, right? But it is really hard. It's hard to be a good government. It's hard to be a good communications provider. Doing both is super hard.
When I see municipalities get into the business of being a communications provider, most are not successful where they are actually trying to sell to the customers, bill them, collect the bills, build the infrastructure, finance it, etc. What I mean by “successful,” is an entity that provides good quality service in a way that's profitable so that the community isn't having to subsidize those efforts.
I don't think you are going to see communities that stay in the communications business over the long-term be successful. There are great ways to support the communications industry. I've seen models where there are communities that have the need to build fiber for their own use. You see utility companies, you see governments, they have to get fiber between all of the lights or the meters for their own information. If you're going to dig up the streets and put fiber in, why not put more in and make that available to communications providers? That can be a model that makes sense for what I would call a “communications-friendly government.”
So, a company like, Bluebird, could be planning to go through your community, but you've already put fiber all over the place and you're making it available to me at a very inexpensive price to allow me to use that fiber. Then I can put the equipment on either end and I can solicit the customers and I can do the billing and I can put the services on. The cost structure is significantly lower and that's an amazing way to do it.
Michael Morey: There are consultants promoting the former model, meaning be the communications partner, be a carrier-neutral communications company, as opposed to being a fiber provider. That is not Fiber-Friendly. I could speculate there's more money in managing that type of approach over time for the advisors, but I don't think it's in the best interest of government to do it.
I have also seen pitfalls with putting their own fiber in. One of those pitfalls is that you put this fiber in, you rent it out to companies like Bluebird Network to use and you make a good amount of money. But what happens is, if you don't take the money that you make out of that and reinvest it into expanding the fiber infrastructure, then you fall behind and run out of fiber availability. Municipalities build fiber networks, it works great, companies rent fiber, the fiber gets used primarily in the densest parts of those cities, they run out of capacity and now it's not available.
It can work great. But what tends to happen is that governments will combine building out their own fiber with a very high right-of-way fee charge for a company to build their own fiber. They do that to try to encourage you use their own fiber, but then the fiber runs out and the right-of-way fees are very high. A company like mine says, "Well, I'm going to skip this town." They had a great idea. They were going down the right path, but then all of a sudden, they didn't implement it correctly and then it actually became a disadvantage or a disincentive for somebody to build in their area.
Michael Morey: Right-of-way fees and franchise fees are perhaps the biggest communication-unfriendly thing. If you want fiber providers to build into your area, make it as inexpensive as you can. A right-of-way fee is typically a fee per foot of fiber built that a company has to pay every single year just for the right of having that fiber in that area. A typical right-of-way fee could be $2.50 cents per foot, per year. If you build a mile, a little over 5,000 feet of fiber, just for the right to let that fiber stay in the ground, not to serve a company, a customer, not to put equipment on either end, not to construct it, none of that. It costs you $12,500 a year just to let it sit there and do nothing. Plus, you had to pay to put it in there. It might've cost you $50,000 to a $100,000 to have put it there. Well, why would I want to put fiber in a place that's going to charge me that kind of money?
You could together with another fiber company and put this fiber in the ground to share the cost. However, there are some communities with laws that if there are multiple parties with interest in the fiber, that you have to pay the right-of-way fee two times. That same mile of fiber, now we have to pay $25,000 a year just for it to be there.
Pete Pizzutillo: Explain the logic there, if you believe in the value of broadband into your community and the value that it's going to bring, this is simply just choosing revenue over potential capabilities or services to your citizens.
Michael Morey: You hit the nail on the head. It is thought of as a revenue source and the people who are passing those laws do not realize that they are trading off community benefits for that revenue source. They think, "Well, this fiber thing, it's a valuable resource to be able to get fiber in here." Well actually, it's only a valuable resource if you can make money doing it. If you can’t make money doing it, then it's not valuable. I just think that is short-sighted.
Michael Morey: Typically, you can build fiber almost anywhere except when they have laws where you can't cut a street because maybe the street was paved recently. That's when you're talking about in the ground. But one of the less expensive ways to deploy communications is in the air, either through fiber put on polls or wireless communications. To do wireless communications, you need to be able to get up in the air. You need to be on a pole. You need to be able to put your antenna someplace. Right now, we have a lot of communities that are putting in place or have put in place laws that make it very, very difficult to get up in the air. A lot of it has to do with what it looks like, "Oh, I don't want to have a tower in my area because it will look unsightly."
I understand that, but it's another trade off. If it's difficult for me to put something up in the air. I know of a 2nd and 3rd Tier city, cities that really want to increase the communications in their area, and they have a wireless communications company that is working hard to put gobs of bandwidth up in the air through 5G. They are trying to increase the throughput of data in that city, in those two cities that I've been contracted to lay the fiber to those locations, but my contract is delayed because they can't get the zoning and the ability to put those antennas up where they need them to provide the service into those towns.
Pete Pizzutillo: If you look at just the architecture of 5G with the small cell towers. That's the only way to get it there.
Michael Morey: Absolutely. There are some states that are putting in place ordinances and laws that make it easier for wireless providers to put gear up in towers, make it tougher for municipalities to make it hard on them. But it's slow going. As quickly as you have some law put in place that makes it easier for communications, you get another law that gets put in place that makes it harder.
Michael Morey: One of my favorites is Marshall, Missouri. Marshall has built fiber to all the businesses and many of the residences throughout the area. They have a very reasonable pricing fee for companies like Bluebird to utilize their fiber. When they run out of capacity, they replace it and upgrade it. Bluebird, we have fiber that runs to and from the city. We haven't built any fiber in Marshall, Missouri. We just buy the fiber from Marshall. We turn it up quickly and we are very happy with their programming.
Anybody in Marshall can get gobs of bandwidth anytime they want for very reasonable prices. It's one of my preferred ways of dealing with a city. But if you're not going to build the fiber yourself, then I have two suggestions. Number one, get your fees and your approvals as low as possible. Anything you can do to eliminate red tape or cost will cause more people to come to your town.
If, after that, you still don't have people coming to your town, then instead of getting in the business yourself, make grants available that are flexible grants, not grants that have so many restrictions on them nobody wants to do them, flexible grants that incent you to build into those areas.
Pete Pizzutillo: I have seen communities getting into a version of the open-access model, I'm curious about what your thoughts are in terms of what's the current definition of open access and how you see municipalities potentially leveraging or staying away from that type of model?
Michael Morey: I'm more of a fan of open access than I am a fan of government becoming a retail provider of services. It's the lesser of two evils. But when you do open access, what's happening is, that you're depending on some other service provider; essentially it's an off-net service provider to me. It's another service provider. I'm depending on them to meet my service-level agreement and the quality requirements that I have.
If they're a super good service provider, they're really good at it, and have competitive prices and have the products available that I want to buy, then I would buy from them. But you typically don't find that. I mean typically it's tough for a government to meet the kind of private industry.
Remember our customers, in addition to being those governments and those hospitals and those banks that I talked about, our customers are also other communications providers like the top wireless providers. If we aren't perfect, they don't want to buy from us. If we use somebody who isn't perfect, they don't want to buy from us.
Pete Pizzutillo: We hear that municipalities, as they mature and they get to a certain subscriber rate, their ability to deliver customer service expectations becomes a challenge.
Michael Morey: Find out if your city is charging right-of-way fees and find out a way to reduce them or eliminate them, number one. Number two, if you already are providing some kind of fiber, make sure that you maintain the supply of that fiber. If you have requirements for construction that slows down wireless deployment, find ways to reduce those requirements or those. If you are looking for a way to encourage communications in your community, don't decide to do it yourself. You will wish you hadn't.
Get the people who know how do it and find ways to encourage them to do it rather than you getting into the business. That's what I would say.
Michael Morey: If you think about the major Tier 1 cities, like Kansas City, St. Louis, there are a number of companies that are building fiber there. Almost all of the major companies are building there. There might be eight or nine companies building in each of those cities. It tends not to be that difficult if you're a business to find a great company to work with. But the moment you step outside of those areas and you go to places like Springfield, Illinois or Springfield, Missouri or Jefferson City, Missouri, these 2nd and 3rd Tier cities, they start to find that there's usually a telephone company and a cable company and that's it. Usually customers in those areas find things they don't like about both. If only there was somebody else.
Bluebird’s expertise is densifying or overbuilding 2nd, 3rd and sometimes 4th Tier cities in the Midwest. Then tying those cities to those major markets like St. Louis, Kansas City and Chicago. Because when you're in a Springfield, Illinois or Springfield, Missouri and you're getting on the internet or you're making a phone call or you're doing a video call or making a cell phone call, typically those communications need to get to one of those Tier 1 cities before they can be connected. Bluebird really makes the specialty of connecting 2nd, 3rd, and 4th Tier cities to all of the major communications centers in the major markets, like all of the data centers, all of the carrier hotels.
In the cell tower industry, we call the places where the cell phone calls come to mobile telephone switching offices or MTSOs. We try to make sure in those major markets we hit all those places so we can connect the rural locations to them. Then the other piece that we do is we do have a great underground data center in Springfield, Missouri. One of the nicest places for you to protect your data any place in the Midwest. Companies who get onto our network, we could either build fiber to them, they can build fiber to us or they can get on our network by coming into our underground data center. That's a good overview of what Bluebird Network is and what our expertise is. Go to www.bluebirdnetwork.com to learn more.