This is Episode 164 of the Community Broadband Bits Podcast. Dave Spencer, Chief Operating Officer of NoaNet, returns to discuss the details of the different services NoaNet offers in Washington. Listen to this episode here.
Dave Spencer: Netflix wants to promote as fast a connection as possible, and so they come to carriers like us and say "Hey, would you peer with us?" It cuts down on latency and jitter and all those bad things that nobody likes.
Lisa Gonzales: Hello and welcome to Episode 164 of the Community Broadband Bits podcast, brought to you by the Institute for Local Self-Reliance. This is Lisa Gonzales.
In July we introduced you to Dave Spencer, Chief Operating Officer of NoaNet, the open access wholesale fiber network in the state of Washington. The network, owned by a coalition of municipalities, has operated since 2000 in both rural and metro areas. That interview sparked your interest and we asked Dave to come back to provide more details on the administrative side of NoaNet, who uses NoaNet, and what services NoaNet provides. Now, here are Chris and Dave Spencer talking about the network.
Chris Mitchell: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell, and today I'm talking again with Dave Spencer, the Chief Operating Officer of NoaNet in Washington state. Welcome to the show.
Dave Spencer: Thanks Chris, nice to be back.
Chris Mitchell: It's really great to have you back. We're having you back so quickly because there is a lot of interest in NoaNet, the Northwest Open Access Network, and people wanted to know a little bit more in detail, so we're going to be diving into that. Maybe we could just start, for those who haven't gotten around to our previous discussion, and you can give us a thumbnail sketch of what NoaNet is.
Dave Spencer: Sure. We're a municipal network in the state of Washington, we've got about 3000 miles of network all over the state. Predominantly we have access in every county, all the counties in the state have access to our network and as a regional network we sell to a lot of different types of customers and serve a lot of different areas.
Chris Mitchell: I think one of the things that I wanted to talk about is your municipal network, but you're also a creature of other municipalities. In some cases we know of communities that have formed non-profits to work with other communities, but in the case of NoaNet you're not a nonprofit, you operate on a nonprofit basis but you're actually a municipality in the eyes of the law. Maybe you can tell us how that is?
Dave Spencer: We're formed by public utility districts, which are locally controlled and rate-payer-owned nonprofits. When they formed NoaNet, they banded together using a law called the Interlocal Agreement in Washington that allows publics to join together to provide a service that benefits the various publics. In this case they formed a nonprofit mutual corporation, it's kind of a unique corporate structure in the state of Washington. Through the Interlocal Agreement, NoaNet is a nonprofit mutual corp, [which] can have authorities greater or lesser than public entities forming it. As a result, any opportunities or restrictions or any of that afforded to public utility districts are the same that are afforded to NoaNet.
Chris Mitchell: One of those things is that, when we talked originally, you noted the benefits of when you were starting so long ago, fifteen, seventeen years ago-
Dave Spencer: Yeah, fifteen years ago.
Chris Mitchell: Right, you were at a formative time for the web, and you embraced open access because you wanted to make sure that you were encouraging investment and not inadvertently providing a disincentive for others to invest in areas where you were investing as well. That also means the state law requires you to operate on an open access basis moving forward as well.
Dave Spencer: That's correct, we felt that in rural areas, given the high cost of infrastructure, especially broadband infrastructure, fiber-optic builds, all of that [is] very expensive. If we were going to make that investment, we would want to have it open to all providers that wanted to come in and serve these rural communities. As part of that the state legislature passed the law that allowed the public utilities and NoaNet to serve broadband but only on a wholesale basis. With that combination of state law and open access by design of the fiber-optic network serving these rural areas, we've been able to grow the business from zero in 2000 up to the business we have today in 2015.
Chris Mitchell: One of the things that we got questions about is who your customers are. We've talked about the schools, the anchor institutions, and I know that you provide connections to cell phone towers and things like that, but I was curious if you could go a little bit more in-depth for some of the variety of your customers.
Dave Spencer: As a wholesaler we sell to companies that serve the end user. The end user may be schools, or government entities, or hospitals, or residences for that matter. We sell to those companies that provide that service. If you think of the large telecommunications companies, either competitive or incumbent, they are customers of ours.
Chris Mitchell: So those would be Level 3, and CenturyLink, and Charter, maybe Frontier. I know that a lot of times operators are loathe to name their specific customers, but that's the kind of companies I think you're talking about, right?
Dave Spencer: Correct, correct. We're in that camp, our customer names are under nondisclosure agreements, but yes, those types of companies. You throw in the cable companies in there, that need interconnection between their facilities. We started as, what was called back then an interexchange carrier, meaning that we would transport traffic from one serving area to another, to connect these telcos or cable companies together across their various investments in this state.
Chris Mitchell: Would you typically do that over a dark fiber basis, where each of your customers would have their own fiber? Or would you be providing lit services, where you might be combining multiple streams of traffic together over a single fiber?
Dave Spencer: The latter. We generally don't do dark fiber, we provide a lit service that can be segmented for the various types of products and services that these customers want. So just to give you a feel for that, sometimes it's wavelength services, we run a fiber optic network that has multiple wavelengths or channels if you will, and it could be that the customer wants a Point A to Point B 10 gigabit wavelength. When we first got started, we had a state of the art ethernet and internet protocol based network, but to get the first customers in the door everything back then was the traditional telco traffic called TDM, time division multiplex, and that's a service that goes from Point A to Point B at various capacities. We would sell those to connect properties. Our products have evolved to what's called ethernet, and there's a carrier-based standard there that we adhere to that connects properties in a dynamic allocable capacity around the state. Of course moving on up the stack we get into the various internet products, either the internet itself or protected and private internet networks along the lines of in TriNet, for connecting various sites around the state.
Chris Mitchell: Wow, that's a lot of technology that I think a number of our listeners would be really excited about and some other listeners might be thinking "Is it really that complicated?"
Dave Spencer: Yeah, yeah.
Well, even just moving up the stack more we've found that there's a lot of ways to move bits, but now the emphasis is on the applications, the bandwidth-intensive applications that run over top of the services we've rolled out - voice, video, security, surveillance, virtual storage, virtual servers, all of those sorts of products that are over the top of basic internet service.
Chris Mitchell: How do you roll that out as a wholesaler, is what I'm a little confused about.
Dave Spencer: We have both facilities based and non facilities based customers. When I say that I mean customers that have their own infrastructure, maybe their own fiber networks, but need us to connect those together; and internet service providers that have no facilities, that simply resell our service as a retailer. For those customers, and really for both facilities and non facilities based customers, they can buy the services from us and then package them up and resell them to their customers, either businesses, residences, they can aggregate them, they can sell them in a variety of ways.
Chris Mitchell: If I'm an entrepreneur in Chelan, Washington, and I'm going to offer services, fiber services, as a small company to residents and businesses in Chelan over the Chelan fiber network. I don't know if I can say Chelan again, but I'm pretty sure I could figure a way out-
Dave Spencer: Yeah, you're doing good, Chelan.
Chris Mitchell: Then am I contracting with Chelan for those services, or am I going directly to you?
Dave Spencer: Correct, you would be contracting with Chelan, although you may utilize NoaNet, it's up a ways. Chelan PD has invested tens of millions in a state of the art fiber to the home project and they serve quite a bit of the county.
Chris Mitchell: Not just that, but we can't let it get away without noting a lot of it's gigabit, they're really advanced.
Dave Spencer: Yes, they are, it's very impressive. We interconnect to the Chelan network, so a service provider entrepreneur can lease circuits from Chelan PD to go to the home or go to the businesses, and that serves them in the county. If they want to get out of the county they can contact NoaNet or other providers that serve the Chelan area and get back to say Seattle or Portland or some of the big internet hubs to interconnect with other upstream internet providers or video services. Maybe they're caching with Netflix, something along those lines.
That's how it works, and it could be too that NoaNet comes into the area, because we've got a contract with say the service cell tower, and then we'd come in and lease circuits from Chelan ourselves and serve those towers that way. Our package service, if you will, to the cellular carriers.
Chris Mitchell: One of the things that you mentioned was something that I had in the back of my mind, which is do you do things like caching to help all the customers that you have, or is that something that they would arrange on their own? For like an open connect service from Netflix to do that caching?
Dave Spencer: We do that ourselves and pass it through. So, peering is the industry term, is caching video services locally. When I say local, I mean within the state of Washington. For example, and this is no secret, of all the internet traffic Netflix consumes at least a third, streaming video is the killer app right now. If you think about it, Netflix wants to promote as fast a connection as possible, and so they've come to carriers like us that are aggregating across the whole state, and said "Hey, would you peer with us?" In other words we want to put servers in your facilities that hold our video content and then have you distribute from there, [so that] when a resident hits play and starts streaming a video, that it comes from Seattle instead of coming from Santa Clara. It cuts down on latency and jitter and all those bad things that nobody likes.
Chris Mitchell: Right.
I would think that's the kind of thing that would be a win-win, because you have to give up a little bit of rack space in an area where you have a lot of space dedicated to just for that purpose, but then you don't have to pay all that cost of getting traffic, peering with another network where you have to pay for transit. Netflix benefits from the features that you mentioned, so it seems like a win-win. Am I missing anything for that?
Dave Spencer: No, that's exactly right. Obviously the peering works both ways, that's why they call it that, it's beneficial to Netflix, it's beneficial to NoaNet. Just as you say, there's economic and customer experience benefits on both sides of the equation.
Chris Mitchell: Because in peering, you get into this whole vocabulary that seems to shift based on who you're talking with. I think most people use peering to mean settlement-free peering where there's just an exchange of traffic without any monetary exchange.
Dave Spencer: Correct.
Chris Mitchell: Whereas others might say we're exchanging traffic, but one side has to pay the other. That's what you want to avoid, I think, mainly paying someone else, right?
Dave Spencer: That's correct. It's frankly a hot topic in play now, of course with net neutrality they didn't necessarily address how the peering agreements work. But for us, we prefer the settlement-free route where we can provide that service on our internet and not have to worry about extra fees back and forth.
Chris Mitchell: That's where we've seen some arguments from some large residential suppliers that they feel like Netflix wanting to put equipment in their network is something that they should be able to charge Netflix a lot of money to do.
Dave Spencer: Sure
Chris Mitchell: That's something that I think NoaNet could choose to do that, but you see the mutual benefits as being preferable.
Dave Spencer: We do. We have the understanding that Netflix is just part of the internet and the internet is going to be used for more and more applications through time, the internet of things. Obviously streaming video, possibly the end of broadcast television if you believe some people. That's just more internet, we'll make more, that's the product we offer.
Chris Mitchell: You're very happy to, I'm sure!
Dave Spencer: Yeah, exactly.
Chris Mitchell: Ramp up the bit factory!
Dave Spencer: Exactly.
Chris Mitchell: I'm curious about how the fee schedule works. You mentioned that you have a number of services that are sometimes are called white label services, where companies can provide your home monitoring for making sure you're not burglared. I think I just may have invented a word, I don't know if that's a real word. Your video product, you have a number of other products that are available for resale. Are those typically one-off, fees, or is there a percentage? How do you charge for them?
Dave Spencer: That's interesting, and it's a dynamic model for us right now, frankly. We've been experimenting with a subscription program where instead of selling X capacity bandwidth and then selling X number of phones and having access control, meaning locking and unlocking doors remotely, and video surveillance for X number of devices and everything has a price, which is certainly one way to do it and we have done it that way. To what's called a subscription service where dependent on the number of employees, there's a fee per employee for the types of services that are needed, and then we right-size the internet connection to have the best possible customer experience.
For example, we've got a large state park that has conference facilities on it, so we provide them a connection but also provide the virtual desktop, the phones, the WiFi, all of that. It's a complete customer experience that they pay a subscription for, as opposed to just buying a la carte, 100 MB of internet or 5 defset phones, or what have you. It's a work in progress, but we've got some traction on the subscription program, and really it's just a bundle of various services that is priced based on the number of people that are going to be utilizing the services.
Chris Mitchell: Is there anything else that you think we should cover on our second, our follow up interview?
Dave Spencer: There is one area, we've talked about the various products that move bits and the various over the top type applications. NoaNet also provides network coordinated services and this is the set of services where we monitor networks 24-7, if there's problems we log trouble tickets, we work on restoration, we coordinate with service providers. We have a number of the PUDs that subscribe to that service, in addition to that there can be an engineering component to it, an outside plan, a design and build component to network coordinated services. In a way it's a broadband business in a box, the munis can come to us and say "Hey, we don't really know anything about running a broadband network, but we see our municipality really needs it, what can you do?" We can say, "Well, we've got this product, we're coordinated services, we come in and manage it for you, for a fee of course, and interface with the retail service providers."
Chris Mitchell: Right, I imagine that's preferable to every public utility district, for instance, having some person at 3:30am sitting in an office somewhere waiting in case something bad happens.
Dave Spencer: Exactly, it brings depth and breadth to the mix. If you're thinking about a startup and you really don't have any business, and you maybe have an IT person that you want to bring in the fold, which is great, but you're exactly right. At 3:30am the network goes down, and it's very technical, it's nice to have the backup of a company that provides that 24-7.
Chris Mitchell: Thank you for being available to come back on and tell us more about the details of how NoaNet works.
Dave Spencer: It's my pleasure, Chris.
Lisa Gonzales: Send us your ideas for the show. Email us at email@example.com. You can follow us on Twitter, our handle is @communitynets. If you use Facebook, search for the Community Broadband Networks page.
Once again we want to thank BKFM B-side for their song, "Raise Your Hands," licensed through Creative Commons.
Thank you again for listening.