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January 5, 2023

Serving rural communities with a blueprint for success

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. We are at Calix ConneXions 2022. This is Pete Pizzutillo, and I am joined by Carl Meyerhoefer, he’s the Vice President of Business Development for Conexon. Carl, thanks for joining us.

Carl Meyerhoefer:

Thank you. Thanks for having me.

Pete Pizzutillo:

Yeah. Before we dig into some of the awards and some of the other things we’re going to be talking about, maybe just a little background about yourself and Conexon.

Carl Meyerhoefer:

Sure, absolutely. So engineer by degree, been in telecommunications for over 30 years, always centered around fiber deployments and projects. Worked for a variety of different manufacturers in my career, some pretty well-known entities like CommScope. And actually, most recently I was working for Calix before I joined Conexon. Have a little bit of experience with all of the different elements of a fiber build, whether it’s cable and connectivity from a CommScope or the blinking lights, electronics, and technology from a Calix, and now joined Conexon and really believe in the mission that they have, to serve rural America. And I’ve found that they’ve got a very unique approach to that and gives me the opportunity to be more in the services business and also connect with their Connect business is now also an ISP.

Pete Pizzutillo:

Okay. Thanks for that. And you guys were an award winner, so one of the Calix Impact Partner awards. Just tell us a little bit about how y’all work together.

Carl Meyerhoefer:

Sure, absolutely. Yeah. We’re very honored to be a key strategic partner with Calix and very excited about the award that we received. We’ve had a very long-standing, strong partnership with Calix over the years. Calix was a company that supported Conexon in the earliest years and we’re a part of the projects that connect on started in the very beginning. And they are really an element of what we consider our blueprint of success. And that blueprint of success means we found a methodology that we believe works really well for rural deployment. And if you follow that blueprint of success, it’s going to increase your likelihood of success in the future.

Pete Pizzutillo:

Where are some examples of you guys deploying that blueprint?

Carl Meyerhoefer:

The first project that was done is Co-Mo Electric. That’s where one of our founders, Randy Klindt, started and that’s where he got introduced to Calix and that was where Calix supported him in that deployment. And that project was so successful, it became an icon in the electric cooperative industry. Other cooperatives came out to see what Randy and the Co-Mo team were doing and learned from that. And that’s ultimately how Conexon was born. And that were so many cooperatives coming out looking at Randy’s project, Randy saw a need in the market to help these cooperatives, other cooperatives mirrored the model that he created at Co-Mo. So he formed Conexon, and then now we work with electric cooperatives that take that model that was created at Co-Mo and franchise it to some extent across other cooperative platforms.

Pete Pizzutillo:

And there are a lot of co-ops here that we’ve already spoken to a couple of. For folks that are in the early stages… Without giving away the secret sauce, what are some of the things that they all should be thinking about?

Carl Meyerhoefer:

It all starts with a feasibility study. And what we do is we work with the cooperative and we’ll go and model their network and the cost associated with it. We’ve got quite a bit of experience. We’re working with about 75 electric co-ops now. We’ve got a tremendous amount of data and knowledge on what it takes to build out a fiber network and deploy services. So we have what we feel to be a very accurate cost modeling capability. And we build about 1,000 miles of fiber a week. So we are, we believe to be one of the largest fiber deployers and builders in the country right now. So we’ve got a lot of data, a lot of information.

Really, the first step for the co-op is to take a look at a feasibility study, let’s see what the business model shows. And then we evaluate funding opportunities. Obviously, there’s a lot of potential funding in the market. So what we do, we’ve been pretty successful, as an organization, in securing funding. Probably secured upwards of $2 billion for ourselves and our clients. So in some of these more rural areas, having that additional subsidy and funding is really important to make these projects feasible.

Pete Pizzutillo:

On funding, there are a lot of different vehicles out there, different stages of maturity. You guys definitely had a hand in a lot of the RDOF funding, and we’re starting to see some peeling back of some of that funding right now.

Any insight into the municipalities that are looking for some help and now they’re seeing some of that potential dwindle? What’s some insight into why you think some of that’s happening right now?

Carl Meyerhoefer:

It was a little bit unfortunate what happened in the RDOF auction. We’re seeing some of those participants either being disqualified or backing out of their commitment. And unfortunately, that turns out to be a missed opportunity for others. But on the flip side of that, it does open up those census blocks and make them now eligible for some of the future funding opportunities. So we’re going to look to capitalize on some of that and go work with those communities that maybe felt like they had a solution to their broadband problem. Maybe those census blocks are now back up for funding. So we’ll work with those communities and see what we can do to look at some of the future funding programs and what might be eligible going forward.

Pete Pizzutillo:

So hope is not lost, it’s just delayed, I guess.

Carl Meyerhoefer:

That’s correct. And we’re seeing different stages of funding. We’ve got the American Rescue Plan funding, which some of that is being administered right now. Each state is coming up with its specific funding programs. So we’re watching those roll out and participating in those. And then obviously there’s the big BEAD funding that’s going to be behind that. And the timing of that is still a little bit uncertain, but certainly, the state broadband offices are using maybe some of the American Rescue Plan funds to get organized and situated so that when the BEAD money trickles its way down to the states, they’re ready and prepared and have programs in place that can administer.

Pete Pizzutillo:

You’ve been with Conexon for a little over a year and prior to that with Calix, so you’ve been to a couple of these events, I would say. What strikes you as the biggest evolution from say, five or six years ago?

Carl Meyerhoefer:

I think the shift towards software. Big software focus here at Calix and the shift towards data-based decision-making, which is super important. And I think another shift is we’re starting to see a bigger presence of those alternative service providers. Calix has been a company in the past that has had a strong customer base in Tier 2 and Tier 3 telco markets. But I think if you look around the show today and you look at the mix of the attendees, you’ll see a lot of municipalities here, a lot of WISPs, a lot of electric cooperatives. So I think their customer base mix is changing and you’re seeing a reflection now of the digital divide really being attacked.

Pete Pizzutillo:

Yeah, and I think that’s interesting too. There are some privately funded organizations here as well, right? So you’re bringing in some of that PE mentality that I think is drawn to the software platforms that Calix is leaning into. That data-driven thinking, reducing OpEx, automation wherever possible. I haven’t had a conversation here about any kind of GPON or any other piece of equipment. It’s all been around the data and some of the managed services.

Are you guys looking at that, the BARC, and some of the Arlo stuff? Is that included in some of the projects that you’re working on?

Carl Meyerhoefer:

It is. It’s definitely something that we’re continuously in discussions with Calix about on the ISP side of our business. We offer two of the software suites that Calix has now for a few years. Our team is evaluating BARC and some of the newer solution sets. But yes, it is something that we’re looking at. The addition of those kinds of software elements and managed services, I think just brings value to the service provider as well as the subscriber.

Pete Pizzutillo:

Yeah, and I think having tool sets and differentiation for co-ops that are traditionally learning how to be competitive in certain markets, I think is interesting.

Are you helping culturally, I mean, how do you deal with that? Is that part of what you guys do to help them figure out how to grow? I mean, that’s a big part of this whole concept here. What’s that like?

Carl Meyerhoefer:

No, absolutely. I mean, typically our clients are utilities. So they’re not in a competitive environment. They’re not really used to operating in a competitive environment. So those that choose to be the ISP themselves, there’s absolutely a culture change or shift that needs to take place. Thinking about a competitive business and how you operate it, and really more emphasis on marketing that hasn’t necessarily been an emphasis of a cooperative in the past. So yes, there is a culture shift and we are working with them on that.

Pete Pizzutillo:

And just going back to the funding, what are some of the areas of concern that you have that there’s a lot of… Just like RDOF, right? There was the opportunity, high expectations of all the solutions coming, there are all these different levels of funding. What are some things that are going to stop us from actually being able to realize those expectations?

Carl Meyerhoefer:

I think that we would really like to see a strong, heavy emphasis and maybe even exclusiveness to fiber deployments. I think that as we’ve seen in the past, some of the other technologies that have been funded really mean you’re going to end up having to fund them again sometime in the future. So we believe that fiber is the end game, and it really should be the only thing that is funded through some of these programs. Unfortunately, not all broadband offices feel the same way, but we really believe that if this money is used to fund fiber specifically, that’s truly the way you start closing the digital divide.

I think also the timing is going to be really important. As this funding gets trickled down to the states, the state’s being organized, the broadband office being organized, having a good plan in place to be able to execute on some of the disbursement of the money, I think that’s going to be really important. And we’re seeing different states at different stages and different levels of emphasis on that.

We’re always keeping our eye on it and looking for some of the programs that we think to work best and are really most effectively executed, I think this is going to be interesting. Because we see some that are taking a lot longer and maybe they’re not realizing that the program they put in place requires way more resources than they have to be able to implement after they get this swell of applicants. So we’re also working with broadband offices to help educate them: what we see around the country that other states are doing what, what’s working in programs, what’s not working in programs, and hopefully being able to influence some of the programs going forward so they can most effectively deploy these funds.

Pete Pizzutillo:

Yeah, it’d be interesting if there’s that collective learning happening at the policy level, right? I mean, because like you said, there are different lobbyists driving different technologies and different agendas, but holistically, stepping back and saying, “Okay, what is working? What’s not working?” and shaping the short-term policy.

Carl Meyerhoefer:

Well, you also have to define what you deem as working, right? And what we think is important is what gets deployed. At the end of the day, it’s not how you spread the money around to make everybody happy, but what type of programs are being structured in a way that actually gets fiber deployed and service to residents. So that’s how we measure the success of a program how quickly and effectively the money can be used to actually get service to the residents as it’s intended.

Pete Pizzutillo:

And that’s an interesting point. I mean, what’s your thought on the private monies coming in and the influence in that? I mean, are they making a difference, and is it a meaningful difference?

Carl Meyerhoefer:

Sure. I think private money does make a big difference. Now, I think what we tend to see is a lot of that private money though is heading more towards, I guess a category that I would call unhappily served. So there’s some overbuilding that’s taking place. Maybe some of the areas don’t have super strong service, but some level of service. And that’s really all dependent upon densities. So our business operates in the lowest-density environments across the country. We are truly a rural consultant and broadband provider, so those business models don’t tend to be as attractive to some of that private money as maybe, “Let’s overbuild a Tier 2 city,” or something like that.

Pete Pizzutillo:

Yeah, that’s a great point. All right, so a year from now we come back. How’s the world changed for you guys in this market?

Carl Meyerhoefer:

Well, for Conexon, we’ve doubled in scale and size every year. I think I mentioned earlier, we’re deploying about a thousand miles of fiber a week, so we’d like to see that number double as well.

Pete Pizzutillo:

Wow.

Carl Meyerhoefer:

So for us, it’s about just growing the infrastructure in those rural communities and partnering with electric cooperatives, and getting the job done. And hopefully, we’ll have a little bit more visibility a year from now on the BEAD funding and what stage that’s going to be at. We’re just excited about the opportunities that are out there today.

Pete Pizzutillo:

Yeah, no, that’s great. How can the listeners learn more about you and Conexon?

Carl Meyerhoefer:

You can contact me directly, but certainly go to our website, conexon.us, and we’ve got a lot of great information on there. We also have a conference that’s coming up here in San Antonio. You can see that on our website as well, here in November. That’s a conference that’s going to be exclusive for electric cooperatives and the communities that they serve, where we’re going to have, I think it’s about 20 electric cooperative CEOs that are up on stage talking to their peers about projects, lessons learned, and how the projects they’ve deployed are really positively impacting their members and the communities.

Pete Pizzutillo:

All right. Great. I hope everyone gets a chance to check that out. And thanks for stopping by. And again, congratulations on your Impact award from Calix.

Carl Meyerhoefer:

Yeah, thanks so much. Thanks for having me.