Transcript: Community Broadband Bits Episode 181

This is Episode 181 of the Community Broadband Bits Podcast. Hudson, Ohio, City Manager Jane Howington joins the show, describing how the community took matters into its own hands after incumbents refused to build a next-generation network there. Listen to this episode here.

Jane: Many of our businesses were either not expanding here or looking at expanding elsewhere or moving elsewhere because they were getting that frustrated.

Lisa: Hello and welcome to episode 181 of the Community Broadband Bits Podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. This fall Hudson, Ohio launched its publicly owned Velocity Broadband service for local businesses. In this episode, Chris interviews City Manager, Jane Howington. Jane describes the sorry state of the community's connectivity and how they had approached incumbents but could not convince them to invest. According to Jane, city leaders were concerned Hudson would lose its ability to attract and retain employers. Jane describes the city's business plan and strategy. 

As you will hear, Velocity Broadband is already having significant success. For information on municipal networks and telecommunications, the Community Broadband Bits Podcast is the place to go. We offer a unique perspective with no annoying commercials. Please consider making a contribution at muninetworks.org or ILSR.org. Any amount helps out. Now here's Chris and Jane Howington, City Manager from Hudson, Ohio, talking about the city's new Velocity Broadband.

Chris: Welcome to another edition of the Community Broadband Bits Podcast. I'm Chris Mitchell. Today I'm speaking with Jane Howington, Hudson City Manager in Ohio. Welcome to the show.

Jane: Hi. Thank you very much.

Chris: Jane, I'm excited to have you on the show. We started talking about doing this interview, and since then you've actually launched the service. Before we get into that, why don't you tell us a little bit about the city of Hudson?

Jane: Hudson is a delightful community in northeast Ohio, fairly historic. It's at the southern tip of the Western Reserve, which was developed historically from the land grant Massachusetts colonies. Hudson was the first and original home of Case Western Reserve University. Case Western's moved up into Cleveland, and their facility here, their campus here is now a private high school, boarding school. Hudson is about 24,000 people, population. It's centered north of the Akron area and south of Cleveland area, so we get a lot of corporate executives and transplants from both the Cleveland metropolitan area as well as the Akron area. We're a very walkable community, historic downtown, and we have a lot of small to mid size businesses here who have had trouble with being able to get an adequate and reliable broadband infrastructure for their businesses. That was one of the impediments that we felt like we needed to solve for our population.

Chris: That's interesting. I had no idea that Case Western had started off there, and of course I've long known Lev Gonick, who had been there CIO and was influential in the One Community Project that came out of Case Western originally. It's an interesting connection. Now you have cable and DSL available throughout the community, but as you were saying, I think it was not sufficiently reliable for some of the businesses and others. Can you tell me more about that?

Jane: We have a couple of the major providers, such as Windstream and Time Warner, that are fairly prevalent throughout the community. One community has a couple of strands in this area and so on. The problem that we were seeing was our businesses in particular but our residents in addition were not able to have the access, and the speed, and the reliability. It was very typical that when school let out mid afternoon, early to mid afternoon, a lot of the businesses' Internet connections would either slow down or just drop off because the kids would be getting home from school and getting on their devices. Everything is shared with the strands and so, so it became a real problem with businesses that deal worldwide now and use a lot of virtual technology in order to have their meetings, their conferences, their orders, and so forth.

Chris: It's actually interesting to hear that because I know that for many years we heard that on cable systems, which themselves were shared, but we have heard that more and more, that congestion problem developing on other services as well. The cable service is shared at the last mile, but often people don't realize that DSL is often shared as well in terms of getting maybe out of a neighborhood or out of an entire community, so you can have that massive congestion happening on any kind of these more legacy-type services. I just wanted to throw that out there because I think people are so used to thinking of cable as being a shared medium but DSL is not. It really depends on what side of the network you're looking at.

Jane: Absolutely. We're hearing actually a lot of residential customers are now, citizens, are now saying the same thing, because you have houses. Some people have their home office there. Then the kids come home and they're on four or five devices. If somebody downloads a Netflix, it's just that's it. There's no other room.

Chris: Was there another aspect of the prior situation that you felt the city needs to address that you were going to explain to us?

Jane: Yeah. The second issue that came up here was the issue of customer service and I guess accountability. Businesses, and I'm going to rely mainly on businesses in this conversation, but businesses were reporting that they weren't getting the service, their systems would go down or be cut out, and they wouldn't get response from the providers. They would be going for periods of time without Internet access or they'd be asking for upgrades and they'd get promises, but it would be six months or eight months before anything happened. Really, what we found was that the companies, that they weren't really willing to invest in infrastructure to make this system here in Hudson more reliable. What we did about a year ago when we were hearing a lot about this, we did a survey, both the business community and the residential community, to find out exactly what the issues were.

That was done last December and January. Out of that we found that there was just a huge pent up demand. Many of our businesses were either not expanding here or looking at expanding elsewhere or moving elsewhere because they were getting that frustrated. When we got the results of that, we reported it back to Council, and Council said, "Well, we think we need to move forward with seeing what we could do to provide a solution to this."

Chris: After you did the survey, and I'm always curious about this sort of thing because I feel like surveys can reveal such interesting details, what did you decide to do next?

Jane: We hired a company, Magellan, and they were the ones that came in and did the survey so that there was some integrity in the survey outcome. Then we went ahead ... Council said, "Let's sketch out a business plan and see what solutions are out there." We used Magellan to do that business plan, then to start looking at options, what else could we do. There were three options that really came out of it. The first one was you went to the providers and said, "Our people are having problems. Can you invest more infrastructure in Hudson?" The answer to that was no. The second solution was, maybe since the city owns the power company, maybe we could just, and we own our poles, maybe we could run the fiber and then we could lease it to the private companies, so that we had some control but it was still private competition. The third option was that the city would actually become a service provider for fiber and broadband.

Chris: It's worth noting then and something we didn't cover, is that you already as a city have a history of providing utility type services. Can you tell me a little bit about, I understand you have a distinction between what you think of as a utility and what you think of as a service?

Jane: The city provides water, we provide sewer, we provide water. They're utilities and they're regulated through PCO, and PA, and so on. They're either, depending on where you live, you either can get that utility or not. Where I live, I don't have water available, so I have a well. If I had city water going by, that would be what I'd have to use. I didn't have a choice. That was the utility. The service, we consider broadband a service because it's something that's provided, but people aren't compelled. They don't have to take it. They can use anybody else or nobody. That's where we see the differentiation between the service we provide in broadband or the utility we provide in water, sewer, and power.

Chris: The discussion skipped ahead a little bit of what you ultimately decided, but you decided to go with the third option, where the city would both put fiber on the poles and deliver a service. You've come up with a great name for that. It's actually we have a local company here that does great work in Minnesota also that goes by the name ... Why don't you tell us what it is?

Jane: Velocity Broadband. It's high speed built for Hudson. I should just say, just to back up a little bit because I think maybe people wonder why we just picked this option, and we didn't. This is our last option. Council wanted us to try and work with the other providers. The other providers didn't want to invest further in the community, so the Council then asked us to negotiate with the providers and see if they would lease space if we put the infrastructure in. We couldn't get commitments from that, so it was really we ended up going into becoming a service provider with Velocity because if we don't do it, nobody will.

Chris: That's a great distinction. I think a lot of communities have gone through that, where they've really tried hard to work with the incumbent providers because as a city manager, and you could probably spend hours telling us all the things that the city has to do, nobody wants to add on to that list if they don't have to.

Jane: Correct. I was worried about that. Our employees have been just spectacular with making Velocity the hit that it is and the quality service that it is. It's nothing short of spectacular, the amount of work that our crews and our staff have done to make this project a success.

Chris: I think from my point of view, from someone who doesn't work with cities but thinks about the best way to solve these problems in the long term, I often think that public ownership is tremendous in terms of its potential to have the kind of outcome you're describing. But I also recognize that cities have to make very difficult choices. It's very common that cities want to work with the existing providers first, but in our experience and particularly with the two providers you have, they're just not very interested in working with cities. They'd rather just do their own thing and hope that they can maintain a limited competition environment in which people have to take their services. Now you've definitely stepped up. One of the things I'm interested in is I think you've decided to take an incremental type approach. We've seen others do that, and frankly, we don't know of an incremental approach not succeeding. Can you tell me how you're rolling out the service?

Jane: I have also seen many different models in my career in city management, and I think that the model that ... The approach we're taking is probably the best approach. It's really based off of a business model. If you're an entrepreneur in your startup business, you're going to have an offering and you're going to start building in revenue while you're doing the expenditures. We determined that we would take our business areas ... We're phasing the business areas in so that we started off with a business area very close to City Hall, because we had existing fiber already run here, and we lit this area up. Probably our biggest investment right upfront was the Data Center and all of the stuff that goes with that. But very shortly after we finished the Data Center, we were able to light people up in the office park here so that we start our revenue stream. 

While that revenue stream is generating, we're moving our Engineering to our second phase of a commercial center. We're already signing people up. Those people are going to start getting lit up in December. At the same time, we're moving our Engineering phase into a third area of commercial and business activity. As we're moving, we're also increasing our revenue stream. Our business model shows that after ... Nine years was the projected analysis. After nine years, the Velocity service would be debt free and positive cash flow. After three years, we're going to have positive cash flow outside out of our debt retirement. That was all projected on 50 businesses a year going onto the broadband. We've been in existence since Labor Day. We already have almost 20 businesses on right now, and we have another 90 that we're engineering for.

Chris: Wow, that's what you want to hear.

Jane: I know. That's only in phase, that's only in this next phase. Our major downtown center is our third phase. We're starting the Engineering now, moving into January. The reaction has been like people are being offered water after walking through a desert.

Chris: I'm curious if you're hearing from residents as well that are saying, "Look, we really want to have this in our homes."

Jane: Yes, we're hearing a lot of that. We have an awful lot of people that have home offices here. Now they're seeing the success of this and really wanting us to get into the residential areas. We're really trying to be cautious. We don't want to get over-extended and not be able to deliver a quality product. It's very hard to do residential areas. It's not hard when it's a very compact, dense area just like businesses, a business park or something, but when you get into the subdivisions, the residential demand, like that old cable business land, as you get into the less dense areas, it's going to take you longer to get cable because the infrastructure was more expensive to get out there. 

We actually are looking at a couple other models of residential. We're experimenting with trying to run our cable through existing electric wires as one model. That way, we would be able to provide service without running a lot of cable. Then there are some areas where we think that wireless is going to be the answer to some areas.

Chris: Right, and that could be a solution for a few years, and then over time you may be able to expand back fiber at low cost as part of other projects maybe. I think you don't have to try and figure out how to do it all at once. The goal is to give people some options and keep improving things year after year I think.

Jane: Yes, absolutely. I think you're right. As we reconstruct our roads or we do water line replacement or whatever, fiber is going to, or at least conduit is going to be placed underground wherever we can so that it'll be a little bit of a jigsaw puzzle for a while, but ultimately all the pieces will fit together.

Chris: If I was to talk with you in three or four years more at a time period that you might suggest, how would we know if you have succeeded in this effort?

Jane: There's probably a couple of ways. One, you can look at our business plan and see if financially we're meeting or exceeding the business plan in our cost projections. Probably the most successful one would be how many people and businesses have signed on and are still using our system. It's the customer satisfaction. I mean that's the whole reason we're in the business right now of providing the services, is that our customers and businesses were not getting what they needed.

Chris: I'm curious, are you seeing any benefits to anchor institutions, schools, fire stations, anything like that? Are you able to connect them as well as part of this effort?

Jane: All of our municipal buildings were already connected. We had run in fiber for our municipal facilities for redundancy and emergency control, so that was all done. We already have the schools tied on to that system, or we're tied on to their system, but they've asked us to put this system in place as a backup. Some of our anchor institutions are already looking at this as the backup. Many of our major institutions, our major businesses, are talking to us about this because most of the major businesses, they're tied on to the Internet through T-1 lines. Not that they just want to give up their current system, but they're all starting to think, "We need redundancy too, and this would be a better way to get redundancy."

Chris: Right. Thank you so much for coming on. Let me ask if you have any final words in terms of thoughts on the project, because I really appreciate you sharing it with us. Let me just give you one more chance to share anything.

Jane: Yeah, I think the only thing I'd really want to add to that is that the model where the city becomes a municipality or even the county becomes the provider of the service is not as common a model as the other models that we talked about earlier. I've been to some conferences and seen some information, but very little is presented with the governmental entity becoming the service provider. I think that's really helpful for other communities that feel the need to get into this, but I think that they really need to work with their eyes open because I've seen an awful lot of communities that try and put all of their eggs into the infrastructure basket before they have any revenue generation, and they're never able to get it off the ground.

Chris: What would you recommend that another city manager would do then? Would it be to just start slow or would it be to do more research beforehand? I'm not quite sure how I might take that.

Jane: I would take it as making sure you do more research, that there are a lot of options out there. Some of them are fairly new, like this one. If you just follow what your neighbor's doing, it might not be right for your community. What I'm trying to say as a takeaway is just because it's been successful in this initiative, it doesn't mean every other community will be, doing the same model that we have. But on the other hand, there were several models that we chose not to take because they wouldn't have been successful with us.

Chris: Right. I think there in Ohio you have the Dublin model, which might be better for some communities, and some might be better with Hudson. I think different communities just have different assets, they have different core expertises, and quite frankly, they have different challenges.

Jane: That's correct. Medina County, they have the open network. I think they have two providers on it, so there's not that much competition with that. There's another community closer up to Cleveland that's looking at doing this, but they don't have the power company, so their model is going to have to be entirely different than ours.

Chris: Thank you so much for coming on and telling us more about Hudson, about Velocity, and these thoughts for other communities.

Jane: Thanks for asking. We're more than happy to talk to anybody that's contemplating this kind of thing.

Lisa: That was Chris visiting with Jane Howington, City Manager from Hudson, Ohio, talking about their new municipal network, Velocity Broadband. Check out our stories on Hudson, Ohio at muninetworks.org. We've got several. Follow Chris on Twitter. His handle is @communitynets. You can also follow muninetworks.org stories on Twitter where the handle is @muninetworks.org. Send us your ideas for the show. Email us at podcast@muninetworks.org. Thank you to Arne Huseby for the song Warm Duck Shuffle, licensed through Creative Commons. Thank you for listening to episode 181 of the Community Broadband Bits Podcast (music).