Transcript: Community Broadband Bits Episode 60

Thanks to Jeff Hoel for providing the transcript for Episode 60 of the Community Broadband Bits podcast with John Bowcut on the success of Spanish Fork Community Network. Listen to this episode here.

00:16:

Lisa Gonzalez:  Hi, and welcome again to the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance.  This is Lisa Gonzalez.

In this episode of our podcast, Christopher Mitchell introduces us to John Bowcut, Director of Information Systems and Network Director of the Spanish Fork Community Network in Utah.  Spanish Fork began working on its publicly-owned network in 1999, when both business and residential customers expressed their need for better telecommunications.  Since then, it has saved substantial public dollars and brought more reliable and affordable connectivity to the community.  Spanish Fork also uses its network to share local live and recorded events via its local station.  The community programming has proved to be one of the most popular features of the Spanish Fork Community Network.  Here are Chris and John, talking about the network and its place in the community.

01:06:

Chris Mitchell:  Welcome to another episode of the Community Broadband Bits Podcast.  Today, we're talking with John Bowcut of Spanish Fork, Utah.  He's the Director of Information Systems and the Spanish Fork Community Network Director.  Welcome to the show.

01:21:

John Bowcut:  Thank you.

01:22:

Chris:  So, I've been in Utah -- mostly southern Utah.  And I flew through Salt Lake City once.  It's incredibly beautiful.  I don't know how anyone gets any work there done.  But perhaps you can tell us a little bit about where Spanish Fork is located and the size of the town.

01:38:

John:  We're about 50 miles south of Salt Lake City.  And it's a nice little community.  You know, it started out really as a farming community, and it's grown into a lot more than that.  And so, we have about 35,000 residents.  And there's about 10,000 homes in Spanish Fork.

01:57:

Chris:  The city has its own electric utility.  Is that right?

02:00:

John:  That's correct.  We've actually had an electric utility since the early 1900s.  So that's been something that the city did years ago.  And it was really the city council who got together and realized that electricity was going to be a vital utility to any community.  And so they started their own electric business, to bring electricity to the residents of Spanish Fork.

02:23:

Chris:  And does that electric network extend beyond town?  Or is it just within the city proper?

02:28:

John:  It's pretty much just the city proper.  It goes a little bit outside.  And there's some, you know, bordering areas that we service.  But it's mostly just the city.

02:38:

Chris:  And now, the utility has built its own cable network.  Does that have the same boundaries then?

02:44:

John:  Well, we actually have a state law in Utah that requires -- that says that we cannot go outside of our city limits.  So, for us, we cannot service some of those other communities -- that use some of the other services of Spanish Fork, but they cannot receive our cable service.  In fact, when we built our head-end building, right across the street had not been annexed.  And there were two homes.  And they were literally right across the street from our building.  And they walked over and asked us for service.  And we could not, because of state law, deliver any services there.

03:15:

Chris:  Ah, that sounds like a painful situation.  It's not rare, unfortunately.  I wish it was the first time I'd heard that story.

03:24:

John:  Yeah.  No, I'm afraid so.

03:26:

Chris:  Um, well, let's go back in time -- a fair amount, because the cable network is not a recent addition.  Why did you build a cable network, and when did it all start?

03:35:

John:  Well, you know what, it really started with that -- the vision of the council that started the electric business, because it would have been difficult for us to do without the fact that we already had an electric business.  But in the year 2000, the city council faced the same kind of problems that, in the early 1900s, the council faced.  We realized -- they realized -- that Internet was going to be an absolutely vital service, a vital utility for our residents.  And there was no high-speed Internet in Spanish Fork in the year 2000.  And that just couldn't be that way.  We had residents that were coming to us saying, this just isn't working, you know.  We -- I can use a dial-up modem.  But they could get in their car and drive the 10 miles to Provo, which is the larger city just north of us, and retrieve their files, and drive back in the time it would take to download them across a dial-up modem.

04:30:

Chris:  The famous "sneakernet!"  Although usually it's just people walking around.  But certainly driving is another ...

04:37:

John:  They had to drive around.  Yeah.  And we had businesses that were telling us that, look, we're going to have to move out of your community.  We -- you know, a small mom-and-pop real estate agent, who can't get on the MLS -- the multi-listings.  And -- unless they want to spend $1,000 a month for a T1 -- which was ridiculous.  I mean, they couldn't afford that.  So, for us, it was built -- there was just this pent-up demand, and people just saying, you've got to help us.  We have to do something.  And it kind of started because the electric department had already started to put in some fiber optic cable.  And they were going to connect in all of their electric substations, and they were going to connect some of the city buildings, and what not.  And so they had -- they had actually started to install that fiber optic ring, when the City Manager, Dave Oyler, said, you know, we really -- maybe we can do something else with this.  And that was -- that pent-up demand, and the fact that we were already in the process of putting in some fiber optic cable, was kind of the perfect storm that we needed to really get this launched.

05:42:

Chris:  And that's a time when there was a number of other networks that were already operating.  Almost entirely cable networks.  There were only a few that were thinking about doing a pure fiber network.  And so, at that time -- and, you said about the fiber ring -- I presume that you added a cable, then, to get to most people's homes, in combination with the fiber.

06:04:

John:  Right.  And when we looked at it -- you know, we built an ad-hoc committee of residents and business people and the local school district and churches.  And we brought them all together and said, should we do anything?  What can we do?  What would you like us to do?  And it was a resounding, you MUST do something.  You MUST help us.

06:25:

Chris:  Very clear direction from the people.  That's always helpful.

06:26:

John:  It was very, very clear.  It was -- you know, they just knew it had to happen.  We had to do something.  So -- we looked at all the technologies.  We looked at fiber-to-the-home.  In the year 2000, fiber-to-the-home was about three times more expensive than hybrid-fiber-coax.  We looked at a copper solution, you know, doing VDSL.  And visited different places around the country that were doing different technologies.  And really settled on the technology that we felt was tried-and-true.  And we went with the hybrid-fiber-coax, with -- at the time, with very small nodes.  I mean, the node size is what would -- when you're designing it -- will determine the type of Internet that you will be able to offer.  And most hybrid-fiber-coax is -- most cable companies had built their systems for cable television.  We wanted to build one for high-speed Internet.  And we made our nodes about 150 homes passed, which was a fraction of the size of most nodes in those days.  And the technology that we deployed -- we really wanted something that was tried-and-true, that was really going to work for our customers.  And I think we succeeded.  It's been a very nice technology for us.

07:34:

Chris:  I think that's a really important point.  Because we often -- I mean, particularly those of us that really love fiber, and see the potential for fiber moving forward -- we tend to talk about cable networks as though they were all the same.  But there really is a tremendous difference, based on how it's engineered.  Not just on node size but on a number of different factors that make a big difference in terms of how the actual end user will experience it.  And so I'm really glad that you made those points.  It's a really valuable contribution.

08:07:

John:  Yeah.  And it really is.  And we ran 12 fibers to every node.  You know, we're in a position now where, when we start doing node splits, the technology has caught up to where we can split a node twice without actually moving anything, putting any additional infrastructure, just lighting up some additional fiber, and replacing the actual node modules.  So it gives us a lot of growth potential, especially with the new technologies that have been keeping up.  So, the ability to deliver Internet was why it was built.  I mean, I'm a network engineer by trade.  And so, when we were building it, we were building it for Internet.  Yes, we offer cable television, and we have added phone service.  But we built it for Internet.

08:49:

Chris:  And the interesting thing, that I just saw as we were doing a little bit of research, was that you issued 15-year debt, and that was in 2000.  And so we're very close to the end of that term.  How are the debt payments going?

09:03:

John:  Yes, we are.  Um, which is an exciting time for us.  So -- We pay about $670,000 a year in debt service.  And that debt was bonded in 2000, so it will be up in under two years.  We'll be through with the debt.  And we get an additional $670,000 for the city council to use however they want.  So that's a very exciting time.  Now, just coincidentally, that's about the time I'm eligible for retirement

09:32:

Chris:  [laughs]

09:32:

John:  But that is purely a coincidence.  But it has -- and so, for us, that's a big deal.  So, we're getting very close.

09:40:

Chris:  And so you mentioned the node splits and that sort of thing.  So, you foresee being able to use this investment for a while longer still, without having to put a substantial amount back into expanding the network, then, is what I'm understanding.

09:56:

John:  Well, I mean, it will be more in-place expansion.  We do have a lot more capability.  We just, of course, offered -- we just expanded our offering from the 12 meg starter tier -- so, we have 12 meg down on our starter tier, one and a half up.  And then, we just expanded that into our 20 meg down and our 5 meg up.  And we have our 55 meg down and our 10 meg up.  And this is all residential stuff.  But, quite honestly, we have, you know, about 50 customers who took us up on the 50-meg service -- the 55-meg service.

10:30:

Chris:  Um hum.

10:30:

John:  You know, the "sweet spot" for this network is 20-meg service.  And that's what people are purchasing, and that's what they want to -- that's what they want to pay for.  Um, you know, we're going to launch, any week now, 111-meg service.  But, again, there just isn't going to be a huge demand for that.  You know.  And so, you can go gig-E to a house.  But the reality is, if you have to pay for it -- if they can get 20-meg service for $38 [per month], that really meets their needs.  And so they aren't buying these higher tiers from us.  Yet.  We know that will change.  And then we can do the node splits.  We can do -- DOCSIS 3.1 is coming, which will, again, give us some additional bandwidth capabilities.  We split the nodes and we could offer 2-, 3-, 4-, 500-megabit-per-second service.  And we can start doing that within a year.  And the cost -- the capital expenditure -- is reasonable, as opposed to going fiber-to-the-home, and tearing out all that coax.  Which we could do.  I mean, we put in conduit.  We didn't do any direct-bury.  So, we really look at it as, we built a network of conduit.  And if it becomes the right solution to do fiber-to-the-home, we can do that.  And we're in a better position than most cities, since we do have this network of conduit.

11:47:

Chris:  Right.  Actually, Cedar Falls just went through that.  So you not only have yourself in a good position, but the experience of others who have been there.

11:55:

John:  Yeah.  Absolutely.

11:56:

Chris:  You know, actually, I was just -- to follow up on what you were just saying, I was just speaking with Danna Bailey, the communications person for Chattanooga's Electric Power Board.  And she was saying, when they were talking to people about why they wanted to make this investment, they kept saying, the point is not that you need 100 megabits tomorrow.  It's that, at some point, you're going to need it.  And when you need it, we'll deliver it.

12:21:

John:  Right.

12:21:

Chris:  And I think that's the key point.  Some people look at community-owned networks and they think, oh, well, it's not delivering a gig.  Well, the fact is that, right now, what we need right now is not necessarily a gig.  And, in fact, when most people talk about a gig, what we're talking about is that the network should not be slowing you down.  And as soon as the network starts slowing people down, in Spanish Fork and other communities, they invest.  And so, you know, as you need more speed, it's available.  As opposed to, on my Comcast, for instance, you know, they pretty much make decisions on -- using criteria than what my neighborhood in St. Paul is concerned about.

12:56:

John:  And that's absolutely true.  You know, we make decisions on, you know, serving our community, that I'm not convinced that Comcast, our direct competition, makes their decisions based on the same thing.  I'm pretty sure they don't.  And so, that's one of the significant differences.  And that's a mindset difference that permeates clear through your network design and everything you do for your customer.  You know, in our community, our prices tend to be substantially lower than what Comcast is offering.

13:27:

Chris:  Right.  Well, that's -- and that's one of the reasons that, I think, you've identified in the past, in interviews and articles, talking about your tremendous success.  How many people in Spanish Fork subscribe to your service?

13:40:

John:  Right now, we have -- about 80 percent of the residents take a service from us.  Whether that is, you know, multiple services -- but at least at least one service, about 80 percent.

13:51:

Chris:  That's really incredible.  I mean, to have built a network that has captured 80 percent, when you're competing against such powerful entities as -- it's a testament to doing something right.

So, one of the things that we're always curious about is how the presence of the local government has impacted finances for local government.

14:12:

John:  Yeah.  And it really has.  The -- there's a couple of things.  There's the obvious -- the direct fact that we make about a million dollars a year, after we pay all of our debt service, after we pay all the employees, and we pay for everything else, there's about a million dollars of retained earnings that we have.  Now, a lot of that gets reinvested into the plant.  But it does allow for the city council to make decisions of what they want to do with that money.  And, of course, after the bonds are paid off, that money just goes up by over half a million dollars.  And so that's really -- because this is owned by the city council -- it's owned by our community -- they have the ability of doing whatever they want with that.

So that's the most direct.  But the more indirect things is the fact that we connected up all of the city buildings, which allowed us to, you know, put in a voice-over-IP phone system for our city, which saves us a substantial amount of money and just a lot more features than we had with our old Centrex system.  It allows us to develop software and to have interconnectivity that was just dreamed about before we had this fiber connection to each of the buildings.  It gives us control for security on our electric substations.  We have monitors that -- we can monitor that.  We have a network operations center that is -- that -- the calls for both our utility -- for our services -- our three services -- but also other utilities.  If they have problems with those, they can get a hold of a real person at night, and allow the electric department, for instance, to be able to concentrate on getting the power back on, while somebody else takes the phone calls.  And all of that is provided just because we built it anyways, for our utility.  And it is available.  And it is used by the other utilities, and by the city.  So -- and we provide, of course, Internet access for the city of Spanish Fork -- uh, for free.

16:05:

Chris:  When you say it's reinvested, I look with interest at your recent decision to offer phone service.  You know, Google, in trying to decide what services it wanted to offer, in 2013, looked at telephone service and said, naw, it's too complicated, there's too little money in it.  Now, you came to a different conclusion recently.  And I'm curious if you can walk us through why you decided to offer phone service.

16:29:

John:  Well, when we originally looked at it, in the year 2000, we thought about phone service, of course -- that "triple-play" offering.  But at the time, the voice-over-IP really wasn't mature yet.  And so, we would have had to invest on, you know, an old-school switch, and that type of technology.  And really didn't feel comfortable with it.  And wasn't sure that we were going to get an ROI.  At least, I couldn't make the ROI work on it.  And so we postponed it.  Um, I think the decision to do that came from the fact that we realized that we really could do this at a substantial savings for our residents.  And that's important for us.  Again, you can look at it -- and you can look at it from Google's perspective, or from Comcast's perspective, and say, yeah, but there's not a huge amount of money that's going to be made from that.  And that's true.  We had to keep the ROI good -- it had to be positive -- but that just meant we had to be careful about how much money we spent in delivering this service.  So, you know, we didn't buy a million-dollar switch and do it that way.

And this is one of the cases where we actually partnered with another company.  And so they do -- they are actually a CLEC, and they're behind us.  And, you know, we're the forward-facing to all of our customers, but we have a CLEC behind us.  And that was done to keep the capex [capital expenditure] down.  Really, essentially, we want to -- you know, they already had a switch -- a softswitch.  They already had some technology and capability.  And we just wanted to keep our capex down.  And we're able to offer a, you know, a phone line, for $14.95.  And, you know, really deliver it for under $20.00.  I mean, I know that the CenturyLink in our area will claim a $15 phone line, and then when you're done, you're still paying thirty bucks -- or **.

18:07:

Chris:  [laughs]

18:07:

John:  So, with us, our goal was to keep it under $20, once you put all the fees and taxes and stuff that we have no control over, it's still -- we still wanted it to be under 20.  And it was done as a service.  And it's our least penetrated.  I mean, we all know -- I think we all know -- that landlines are slowly dying.  That, you know, the cellular business is taking over.  And that's fine.  And -- but that's one of the reasons that we had to keep our capex down, is, we knew that this doesn't have, you know, a 20-year payback on the investment on the phone side.  However, it does save our residents a lot of money.  And, again, the ROI was actually very good.

18:49:

Chris:  Right.  It's really -- I mean, we talked a little bit about the amount of money that goes into the local government treasury -- that keeps pressure on the tax base low.  But to be able to offer these services at a lower cost really keeps a lot of money in people's pockets, which is tremendously important for supporting local businesses, making sure that people feel they have enough money to go out to restaurants, and that sort of thing.

There's so many thi- -- there's so many games that these big telephone companies play, in terms of these fees.  And I've seen that so many times, where you have a telephone company that promises to keep your price the same for five years, or six years, or however long.  And you find, no, that's just sort of part of the price, and they tack on these miscellaneous fees, that they just invent, you know, in a different part of the bill, and say, oh, that wasn't covered.  So, ...

19:39:

John:  Yeah.

19:39:

Chris:  ... I think, people, I'm sure, really appreciate being able to have a bill that they understand, from you.

19:45:

John:  Yeah.  And it is -- it was critical to us.  And, again, you know, Chris, it is something that we look at, every time we make a decision, is, how does this help our residents?  And I'm not convinced the other companies do that.  I mean, when we look at it, we say -- we save our residents about $420,000 a year on phone service, because they purchased their service from us instead of from the incumbent provider.  That's significant to us.  You know, we look at as Internet, and we say, well, we save about $2.5 million a year for our residents, if they had to pay the same price for the incumbent provider.

20:23:

Chris:  Billy Ray, in Glasgow, Kentucky, just, in a recent interview, he made the case that it's almost as though an armored truck, you know, just tipped over and dropped $2.5 million in the community every year.  It's pretty significant.

20:36:

John:  Yeah.  It's VERY significant.  And it is critical to what we do.  And, sometimes -- sometimes, for some reason, it -- people don't look at it.  But it's -- the truth is, the way the Internet is, and how important a utility it is to people, you're going to buy it from somebody.  If you don't live in our community, you're going to pay what the incumbent provider charges.  And to come up with the numbers I did was that -- it was very simple.  We know what the competition charges.  If you had to pay their prices, instead of the prices we charge, you'd -- you know, the community would be paying, you know, $2.5 million more per year for the same service.  Actually, for less service, because customer service is something that we do and the incumbent provider doesn't fully understand.

21:22:

Chris:  And you do other things, too, in terms of local programming.  I understand there's an entertaining story, demonstrating the power of your local programming.  Can you share that with us?

21:33:

John:  Yeah.  I know that's been a real surprise for us.  I mean, when we sat down in a little hotel room in Georgia and came up with the idea of the Spanish Fork Community Network, we wanted to have a channel that we could do -- you know, that we could go out and film things that are going on in our community and put out there.  And we saw what Noonan, Georgia, was doing.  We were very impressed.  And we wanted to do some of those things for us.  I don't think we fully understood how important this was going to be to our community.  And it was quite shocking.  We know that, because if it goes off the air, we get the phone calls.  So -- And what we do is, we just go out, and we just film everything.  We just want to put our people, our community, our traditions, our heritage on the television.  You know, there's been a lot of growth.  And our town has grown up and turned more into a bedroom community for the larger community just to the north.  And there's, you know, less agriculture.  And there's a lot of changes.  And we wanted to inform all of those new residents about the traditions and heritage of Spanish Fork.  It was critical to us.  And so, we just go out and we just do everything.  You see live broadcasts of our local parades, city council, planning commissions.  We do all the -- a bunch of high school sports, live and then also on tape delay.  We go out and do Little Kicker soccer.  So when you're, you know, six year old is in a soccer game, you can go home -- 'cause you had to miss it 'cause you had a meeting -- you can go home and watch it at night.  They're watching on television the live broadcast of city council, and, you know, they'll see a subject that they're interested in, and they just jump in their car and drive down to the city building and come in, so that they can speak.  As long as they hurry, before the issue is **.

23:15:

Chris:  Right.

23:15:

John:  We didn't envision that.  I mean, that's one of those things that we all just smiled and went, wow, that's pretty powerful.  We didn't realize we had that much power.  But it has been.  And even the replays.  You know, we had a situation where they were bringing in some windmills.  And, you know, we had all kinds of city meetings to get people involved in these windmills.  And make sure they understood where they were going, and how big they were going to be.  And, quite honestly, it's hard to get people to come out to these meetings.  We had like four or five meetings.  Well, we do a bit on channel 17 on these, and somebody sees it, and all of a sudden it becomes an issue.  And they actually got the windmills moved.  But they got them moved further away from the residential areas.

24:01:

Chris:  Now, you do a lot of the unique content.  But does Comcast also have a channel that the city council meeting is on, for instance?

24:09:

John:  They do not.

24:10:

Chris:  Oh, wow!  So they just don't do that at all.

24:12:

John:  They do not.

24:14:

Chris:  Wow!  OK.

24:15:

John:  It is exclusive to our system.  So -- and most of our content is local, exclusive to Spanish Fork.

24:21:

Chris:  OK.  Is there anything else that we should know about Spanish Fork before we end the show?

24:28:

John:  My point would be that, you know, it takes a city council that is willing to take some risk and is willing to look forward.  And that happened in the 1900s, when we built our electric department, and it happened again in the year 2000.  And it continues to happen with every city council that understands what a great asset it is for the community, and how much it does, and how important it has become to our community.  It really is everything we need it to be, and is growing still, and our take rates are still going up.  And we're just very proud of what it does for our community.  And, notice, it isn't, we're very proud of the amount of money we make.  It's, we're very proud of what it does for our community.

25:10:

Chris:  Right.  And, I guess, to some extent, it bears noting that there's been a tremendous amount of opposition in other parts of Utah.  And so this overwhelming support comes in a state not very welcoming to these sorts of investments.  Or am I wrong in making an assumption there?

25:28:

John:  No, you couldn't be more right.  And what we have to do, of course, is to follow the legislature and make sure they're not doing things that are going to hurt us.  And, quite honestly, they've been quite good.  We explained to them -- and they -- that we are successful, and you don't have to do all these things -- you don't have to do anything with us.  Leave us alone and we will continue to be successful.  If you mess with it, you could really cause a lot of problems in our community.  So -- but, so far, we've been good.  And we follow it closely.  And we protect our community network.  And it takes a vigilant effort to do that, because it is a very conservative area in Utah, and there are people that really would rather we didn't.  And they look at the failures of others and say, well, why aren't they failing?  Well, we've already been audited by the state legislature.  And they said, oh, yeah, it's not smoke and mirrors.  These guys really are successful.

26:19:

Chris:  Thank you so much for coming on the show and sharing your experiences.

26:22:

John:  You are very welcome.  I wish I had more opportunities where I can just blow the horn of Spanish Fork -- and all the municipal networks, and the success, and what we do for our communities is huge.

26:35:

Chris:  Great.  Well, it's very good to talk with you.  Thanks for taking the time.

26:38:

John:  Chris, it was good to talk to you.

26:41:

Lisa:  That was Chris talking with John Bowcut.  Find out more about the Spanish Fork Community Network as sfcn.org .  If you follow the "Spanish fork" tag at muninetworks.org , you can read more about how the network serves the community first, by offering economical landline service, and about its foray into telecommunications.  Thanks again for listening to the Broadband Bits Podcast.  Feel free to contact us with your ideas for the show.  E-mail us at podcast@muninetworks.org .  You can also follow us on Twitter, where our handle is @communitynets .  This show was released on August 20, 2013.  Thank you to the group Break the Bans for their song, "Escape," licensed using Creative Commons.