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, continuing to bring you stories, stats, and samples from the world of broadband. Today is day two at the Fiber Connect 2023 Conference, which is put on by the Fiber Broadband Association. We’re on-site at the Gaylord Palms Conference Center in beautiful Orlando, Florida. With me today, I have a new friend of the podcast but a longtime journeyman in the broadband industry. Please welcome the founder of WDM Ventures, Bill MacNamara. Bill, welcome to the bunch.
Bill MacNamara:
Thanks, Brad. Nice to be here, and thanks for the opportunity. Yeah, WDM Ventures is a company that I’ve had for a few years, but I really went back to it over the last couple of months. So I’m providing financing, consultation, exit planning, business planning, and basically all the things I’ve been doing since I sold my WISPs 18 years ago and got into the finance side. And I work with wireless internet service providers and direct fiber guys now. We’ve seen obviously a big transition of the WISP going to a kind of combo delivery system where it makes sense to bring in fiber, put up the defensible zones, and try to get the funding that seems to be prioritized to fiber at this point in time.
Brad Hine:
Yeah. Well, obviously the big topic, and you’ve hit it right off the bat, so thank you so much, is the money coming into the space. And everybody’s still curious about exactly where it’s all going. But I’m sure you’re a very popular guy now because your main focus is to help some of these folks get started if they don’t have capital, get running, and help them get over that hurdle so that they can start being more successful and being more relevant in the market and giving rural broadband operators a chance.
Bill MacNamara:
Yeah. And that’s been my main focus. So maybe start kind of at the beginning for me. So back in 2003, I built a fixed wireless company called Big Sky Internet up in Butte, Montana. And the following year I worked with a guy out of Sedona and built Canyon Broadband down in Paceon, Arizona. And we were true pioneers back then because the technology was new. It didn’t work as advertised a lot of the time. And so we had a lot of challenges. It was expensive. But I believed in it. I thought it would turn into a utility, and it has. And so after doing that for a couple of years and running out of available funds to keep growing because the demand for my product was there. But it was expensive. CPEs were $800.
Brad Hine:
Wow.
Bill MacNamara:
Access points were $15.000 or $20,000.
Brad Hine:
Wow.
Bill MacNamara:
So it was really a matter of having access to funds to grow that business. I’m bringing all the other wireless guys into the equation. We all had that issue. So I was blessed in that my partner in Canyon Broadband was a high-wealth individual who liked the space. And so we decided to sell our operations and go into the financing side. So we built Agility Solutions, which was our first debt fund, which was a $10 million debt fund that we used to finance other WISPs.
And we did two other funds. I did a leasing company and built a finance arm for convergence called Inet Capital. We sold that portfolio to Alliance Funding Group where I worked for the last year and a half. And I’ve wanted to get back more to my roots of helping the tier three, tier four, and tier five operators. The tier ones and tier twos in this space, be it fixed wireless or fiber, have access to funding.
It’s the smaller rural guys who really struggle to put up the defensible area of where they’ve gone in and been the pioneer. And those are the guys I want to help and help create value for their product, be able to give them the financing to provide the service that’s demanded now by the public and to allow them to become a fiber operator if they want to if it makes sense.
At the end of the day, I’ve always been a cashflow-based lender, and so it’s a matter of sitting down with the operator and looking at what they can. I’m the first one to tell them, “If you can go to a bank and find less expensive money than mine, well then do it. But if you can’t, let’s sit down and write a model that makes sense that is affordable for you and allows you to grow your business and allows me to make the return I need to have access to that money,” because I go out and raise them with private individuals and things like that.
And so it’s a model that’s worked really well over the years. And so I just wanted to get back more to my roots, because those are my people. Those are the kind of guides that I enjoy working with who appreciate what I do and allow us to be successful.
Brad Hine:
Well, amen. And kudos to you for being in the space and being able to give those opportunities for world broadband growth and the phrase that we all hear, connect America. Connect all those folks in the areas that are unserved and underserved. So hearing about your journey and stepping back in the past a little, maybe I’ll unpack a little bit of that. But I’m curious for our listeners, when you started these wireless broadband companies, how many employees would you have at these companies? And what were the main tasks going on up until the point where you felt you were able to sell it off and have someone else acquire it?
Bill MacNamara:
Well, that’s a great question. So I had a business partner in both of these. He did the technical side, built the networks, and worked with the vendors in that. I ran the financial side and did the sales and marketing. So I tried to stay ahead of him and make sure we had the demand for the product that he was building. And it worked really well. So up in Butte, when we first went up there, we worked with the local government and the local economic development council and said, “Hey, we really think that by bringing this to Butte now, it’s good for the community. People can get educated. They can do what they want to do online.” And remember, this is really early on. We’re delivering 256K and 512 Internet service, and that’s high-speed wireless broadband at the time.
Brad Hine:
Yeah, it’s something that you just mentioned, getting in touch with your local government. A massive topic here at Fiber Connector is public and private partnerships. So that’s great that you were establishing that back in the day for anyone who’s starting their own rural broadband. That’s step number one.
Bill MacNamara:
So we went to the EDC up there. They actually gave us a little office to operate out of in their building. And so we then went out, and we looked at the technology. And we secured the sites, and we actually had 400 subscribers that were ready to buy the service before we put a shovel in the ground.
Brad Hine:
Fabulous.
Bill MacNamara:
And so our goal was to get to 500 before we started building out, and we did. And so we built that. Out of that 500, 440 of them actually bought the service. And that’s how we got started. We held town hall meetings and asked the public to come in so we could inform them about what we were doing. We’d serve them coffee and donuts, and they’d come in and we’d have these conversations. We’d have demo booths set up.
I remember there was one older woman who was a quilter. And she was telling me her experience in the morning was, “I get up, and I go to the dial-up modem. And I log in, and I go to my quilting page. I hit the design I wanted, and then I went to make Ralph’s breakfast. And when I come back in about 35 or 40 minutes later, it’s just finishing up at the bottom of the page and tiling at the bottom of the page.”
I was like, “Well try this.”
She put in her web address and it popped right up, and she was like, “Shazam!” She couldn’t even fathom it.
Brad Hine:
Wow!
Bill MacNamara:
And she was great because she went out and probably sold 50 to 75 subscribers on our services through her network.
Brad Hine:
Wow.
Bill MacNamara:
And that was really how our business grew.
Brad Hine:
Word of mouth.
Bill MacNamara:
It was word of mouth.
Brad Hine:
Yeah.
Bill MacNamara:
We’d have these town hall meetings, and we did interviews with the local paper and bought some radio space and billboards because we wanted people to know who we were. And it just grew and grew and grew. Then we did the same thing down in Arizona with a different investor. And we decided that the operation side was not for us.
We looked at it and said, “We’re helping these communities, but I think we can help more communities if we get on the finance side.”
I remember I went to a high-speed Internet conference with Mark Davis, who was the GM of CommSpeed in Prescott, Arizona. And we all met in a hotel in Reno, Nevada. There weren’t many of us. And everybody had the same issue. It was like, “Gosh, I’ve got all this demand for our service, but we don’t have the funding to keep expanding at the rate we do.”
And one of the things that happened to us in Butte was we were charging $500 for an installation and $50 a month for the service. Those first 500 paid it gladly and paid the $50. What was really nice back then was you could get a contract, and these people would sign a three-year contract for service. But then sales fell off the cliff, and it was like, what’s going on? So we threw a town hall meeting, and they all came in and they said, “We can’t afford $550 the first month.” It’s a working-class town, in Butte, Montana.
And so I said, “Well, let me think about what we can do.” So we went back and put our thoughts together and decided that if we could find somebody to borrow the money from that was the key. We had spent our pool building the network and everything else. And so we did find an investor, and he was willing to do it. So we put the equation together. And so I went back a week later and met with the people. And I said, “Here’s what we can do. We will remove the $500 fee, but the monthly recurring is going to go to $75.” And over 200 people signed up that day. That delta allowed us to pay the financing fee and then add a little more profitability to the business.
And then after three years, that fell to the bottom line as straight profit. It went off the cost. So it accomplished a bunch of things. It allowed us to continue to meet consumer demand and not what our profits allowed us to grow. So meaning that if we had a demand for 200 subscribers, we could maybe add four or five a month with those high costs to our cash flows.
So this allowed us to grow exponentially. And it created more value for the company because now our ARPU was trending up. It went from 50 to 75, and we all know these companies are valued on their recurring revenue. And so it was a win-win for everybody. The community loved it because we could continue to grow and take it to people who were on fixed incomes, lower incomes, and things like that. And this was way before the government ever got involved in broadband and such. And before banks were financing it and providing financing for good businesses.
So that’s what we did. And then we took that model to the market, and it was basically a pure cashflow market, the model that we took to the market that allowed us to work. If you had a small wiz, we’d sit down and put the equation together and decide if we think this could work. Why don’t you go out and see if you can market it? If you can, we’ll back you on it.
And so what we ended up doing was a master lease program where we’d work with you, the ISP, and say, “What does your growth curve look like over the next 12, 24, and 36 months?”
And they’re like, “Well, we can only afford to add 5 or 10. We have a demand for 25 or 30.” And so we’d finance them. So we’d write them a small schedule and give them the 30 radios. Once they installed 25 of them, they’d show us the increase in cash flow. And we’d say, “Okay, now let’s buy you 50.” So these guys grew from 100 to 200 to 500 to 1,000 and just grew exponentially until they were financeable. So we were kind of that initial funding for a lot of guys that got them to where they could go to a bank.
Brad Hine:
That’s fabulous. So I appreciate the business lesson too. For our listeners, folks wanting to hear that step-by-step process from somebody who’s had your experience that is absolutely huge.
So now we’re stepping forward in time here closer to where we are now. There’s always some government money, local county, and state, but we’ve seen some large programs come out, CAF, CAF II, RDOF, a lot of these things here and around, and obviously now BEAD, B-E-A-D. How have you seen the market change, and what do you have your site set on now? You mentioned not just fixed wireless, but you’re looking at fiber projects too.
Bill MacNamara:
Yeah. Well, obviously with the government getting involved and this becoming the true fourth utility, it’s a huge sea change in the industry. And so now we have a lot of money coming in, both public and private financing come in. So for me, on the consulting side, I get more attraction these days, because you’ve got to have a good business model. You’ve got to be able to show somebody that not only do you have the wherewithal and the experience based on what you’ve done up to this point, but that your business model is executable. Because there’s a lot of money out there that likes this space. The fixed wireless guys, once they hit 60% fiber, their multiple increases dramatically. The value of their business goes up exponentially.
So it’s a matter now of trying to position yourself to either keep growing and go after that money, as we’ve seen some of the bigger guys do in the fixed wireless space, or paint a good target on your back. Get your business to where it’s attractive to an investor or a growing ISP whether it is fiber, wireless, or whatever. But be it just an investment group.
We’re seeing so much more activity in this space. And so that’s what I’m seeing out there. And the jury’s still out on how BEAD’s going to all come together. This is state-run, and it appears, from what I’ve seen, that there’s a huge bias towards fiber. Colorado just announced that they were going to support fixed wireless as well because they thought there was an application for it. I think they were the first state to come out and say it.
Brad Hine:
Right.
Bill MacNamara:
And for me, it’s kind of about time because there is an application for it. So it’s an extremely interesting and fun time. I walked the floor yesterday. And I couldn’t believe how many exhibitors were here. And just the buzz and all the different general contractors and construction companies to that. What we’re seeing a lot more of now are the OSS/BSS platforms. I came out of the cable billing space, so that’s a huge interest to me. And I think there’s a big need for it. There are some good platforms out there, but there are some others coming on that I think are going to do quite well. What we’ve seen in this industry for a long time is a lot of homegrown platforms.
Brad Hine:
DIY.
Bill MacNamara:
Yeah. And investors, what I have seen, are not interested in buying a software company. When they want to get in this space, they want an ISP with recurring revenue. They’re not looking to fund a software company, even though they’ve got a good product that works well in their application that they think everybody would want to use. Everybody loves what they’re doing, but they’re more interested in growing the network and growing the recurring revenue. And so a lot of these guys have to decide what’s next for them. And if they want to bring in this outside money, the investors are like, “There’s an off-the-shelf product that does that. Why are you wasting time? Why are you wasting energy on software when there’s such a huge demand for your broadband product?”
Brad Hine:
Right. Something we hear a lot of. The ecosystem of an ISP, whether they support voice, video, and data or just data, just internet, that ecosystem locally in their own knock or in their own data center, can get complex quickly. And if the software doesn’t speak to each other, you have other issues because then you’re creating silos, even in some of the smaller ones. Take a WISP, for example. Say there are 15 or 20 employees at a WISP. You get segmented. You’re not sharing information freely and easily. And before you know it, it affects your business practices, your ability to finish projects quickly, and just general communication and data sharing.
Bill MacNamara:
Exactly. That’s one of the things that I’m seeing that the investors are saying, “This is what I’m interested in investing in.”
Brad Hine:
Okay.
Bill MacNamara:
You talked about the various services that some of these guys offer. So you’ve got guys who are just dedicated broadband providers, right? They’re like, “Hey, you can stream what you want. You can do your Wi-Fi, your calling, and all this.” Then, I’ve financed companies that go in and do MDUs, condominiums, and HOAs. And you’ve got such a diverse age bracket in there. So if you look at a subscriber who is 70 and older, they want TV content. They’re freaked out by streaming and all this other stuff. That’s like, “God, I’ve got how many remotes in front of me.”
My mother, for example, still buys Dish. Even though we’ve got her set up with everything else, those are her channels. And at 86, she’s not going to change.
Brad Hine:
Not a YouTuber yet.
Bill MacNamara:
No. And so you’ve got to know your audience.
Brad Hine:
Sure.
Bill MacNamara:
But if you go into a South Florida condominium and there are 600 units, you’re going to have people from their 30s to their 80s.
Brad Hine:
Okay.
Bill MacNamara:
And so a lot of these guys, in order to get these contracts, have to have content. They’ve got to have a phone jack that somebody can plug in a rotary phone, right? That’s how grandma calls the grandkids every week.
Brad Hine:
Right.
Bill MacNamara:
So it’s really interesting from that perspective. But the cool thing about it is they’re bringing fiber to every door. So they’re ready for the future. And those are the projects that are really fun because you just see a huge transition. We just did one in central Florida for a client. We took fiber to 600 doors and had a bulk rate for the broadband. And then if you wanted content, you could get content. If you wanted a phone line, you could get a phone line in that. But it brought it to everybody.
Brad Hine:
Wow.
Bill MacNamara:
Those are the projects that I believe are kind of what the BEAD program is all about. We want to take this to everybody. Give everybody the option, and let the ISP give them the services option. But make sure everybody’s got a solid connection.
Brad Hine:
That’s great stuff. I appreciate those stories, those project stories too because we want to have insight into what’s really going on in the day-to-day for consultants and experiences like yourself. But as we wind down this episode, do you have some general thoughts on Fiber Connect today since the last time you attended? And what are you looking forward to in the next five to seven years of BEAD money?
Bill MacNamara:
Oh, geez. I think we’re all kind of waiting to see what happens.
Brad Hine:
Yeah.
Bill MacNamara:
There’s a ton of money that’s coming out of this program, but it’s getting funneled through the states. And NTIA has its agenda.
Brad Hine:
Of course.
Bill MacNamara:
Right? Then it’s passed down to the states, but then the states have the last call on it. As I mentioned earlier, a lot of states have said this money is going to fiber projects only. Then you’ve got other states that are saying, “No, we’re going to open it up.” And I’m a centralist in this because I fund both sides of the equation. I see both technologies working really well. If you look at the products that are out there now, you can deliver a gig via a wireless connection.
Brad Hine:
Right.
Bill MacNamara:
Right? And so I’m all about the economics. Does it make sense to take fiber up that road where the density really doesn’t pay for it today? And maybe 50 years from now, that’ll be a neighborhood.
Brad Hine:
Yeah, it’s unclear. Why spend the money, right?
Bill MacNamara:
Yeah. It’s fiscal responsibility, and I think we could manage it a little bit better than it’s being managed right now. And so it’ll be interesting to see how the states do when they start deploying this funding. And it’s hard for the little guy.
Brad Hine:
Right.
Bill MacNamara:
The way the rules are set up, it is hard for them to come up with the deposit money to park in a bank account. Where I help a lot of these guys, especially the fixed wireless guys that are transitioning to fiber, is to fund in front of that hopeful BEAD money.
Brad Hine:
Right.
Bill MacNamara:
But then you’ve got to make sure you’ve got a sustainable business model if it doesn’t show up. So you’ve got to be responsible in the way that you do it. So there are a lot of challenges out there, but there is a ton of opportunity. And that’s what I’m excited about. It really does kind of remind me of when I got started 25 years ago in this space. We were pioneers out there in Butte. We were putting them up on the mining derricks. And we were begging, borrowing, stealing, and doing anything we could to get connectivity.
Brad Hine:
Well, that’s great. And I appreciate you hammering home fiscal responsibility. I know that we hear conversations that some of the money coming out will not be enough. We want to make sure that we spend that first phase money as wisely as we can and get the biggest bang for our communities and get folks connected or get them a better connection.
I appreciate you coming by today. It was great to meet you. I’m glad we ran into each other on the show floor yesterday. And so if our listeners want to get in touch with Bill MacNamara and WDM Ventures, how can they do that?
Bill MacNamara:
The best way is to call me. I always have my phone.
Brad Hine:
Okay.
Bill MacNamara:
My phone number is 928-970-1340, and my email is bill@wdm-ventures.com.
Brad Hine:
Excellent. That’ll do it for another episode. Thanks so much again.
Bill MacNamara:
Hey, my pleasure. Thank you so much for inviting me. I really enjoyed this.
Brad Hine:
I look forward to speaking with you again in the future and getting some updates and your perspective on the market.
Bill MacNamara:
Sounds like a plan. Thanks, Brad.
Brad Hine:
Great. For now, so long from everyone with the Broadband Bunch. We’ll talk soon.
