Transcript: Community Broadband Bits Episode 170

This is Episode 170 of the Community Broadband Bits Podcast. Chris interviews John Bowcut, director of information systems and network director for the Spanish Fork Community Network on how the 14-year-old municipal coax cable network is upgrading to fiber. Listen to this episode here.

 

John:  Fiber is the future, and that technology is where you want to end up.

Lisa: You are listening to episode 170 of the Community Broadband Bits Podcast from the Institute for Local Self-Reliance. This is Lisa Gonzalez.

Earlier this month, the community of Spanish Fork, Utah announced it would make fiber upgrades to its 14-year-old municipal coax cable network. We have followed Spanish Fork for years as it has successfully served approximately 80% of the households in the community.

This week, Chris interviews John Bowcut, director of information systems and network director for the Spanish Fork Community Network. John and Chris have spoken before, but this time the conversation focuses on the upgrade, why they're making a change now, how they're funding the upgrade to fiber, and what new services will be offered to subscribers.

Now, here's Chris speaking with John Bowcut from Spanish Fork, Utah.

Chris: Welcome to another edition of the Community Broadband Bits Podcast. I'm Chris Mitchell, and today I'm speaking with John Bowcut, the director of information systems and the network director for the Spanish Fork Community Network. Welcome to the show.

John:  Thank you, Chris.

Chris: Well, I'm really excited to have you back on. It's been just a little bit over two years since you were last on in episode 60 and telling us about your excellent cable network there in Spanish Fork, but why don't you just give people a refresher? Where is Spanish Fork, and what have you been doing?

John: Well, Spanish Fork is a community of about 30,000 people. It's about 50 miles south of Salt Lake City in Utah. We got into the broadband business back in 2001, and it was really started by, our local community had no high-speed Internet at the turn of the century in the year 2000 and the residents were just clamoring for a solution. This was when we really created some groups and talked to local businesses and started building the Spanish Fork Community Network to deliver high-speed Internet to our town.

We looked originally at the possibility of doing fiber-to-the-home, and actually I went and visited some communities that were further along with that either in VDSL or some other technologies and decided that we couldn't afford it at that point. It was about three times more to do a fiber-to-the-home solution than it would've been just to do a hybrid fiber-coax.

We started in about 2000 installing a hybrid fiber-coax here in Spanish Fork. We started it with our first customers in July of 2001, and we just had tremendous success with our community network.

Chris: Yeah, I'll say. Sorry to jump in on you.

John: No, no, insert anytime you want.

Chris: When you say "tremendous success," you're not kidding.

John: Yeah, it has been, and it's been quite surprising. When we did our original business plan, we needed to get between 20-30% penetration rates. Well, those are really, really easy. As soon as we turned on a service in a node, which was about 150 homes per node, we'd turn on the service and we would grab those numbers almost immediately. Right now, we're sitting at about over 80% of the community, of our town, takes a service from us. Most of them take more than one, but some only take one, so it's above 80% of the homes are actually connected to the Spanish Fork Community Network.

Remember, this is fully owned and operated by Spanish Fork City, and we compete directly against Dish, DirecTV, and Comcast. It's not a monopoly situation. We just go out there and compete directly with these other large companies and had really good success. A lot of it is based on just really good customer service, but it is also tapping into that hometown feel. We've had a lot of success in our community just by tapping into that, and people understand, this is our network. It's been just a tremendous ride for these 15 years. It's been a lot of fun.

Chris: Yes, I'll bet. You started off doing the cable television and Internet service, and then a little while later you added the telephone. It's been a while doing that, and then remind me, you do have an electric utility that is part of the city as well, right?

John:  That's correct. In fact, that was critical to our ability to do this, because we actually used an electric revenue bond to build the original system. The bond rates that we got when we went out and bonded for the project were based on the ability for the electric department to pay. That really helped us get the rates that we needed.

Yeah, we got into the electric business in Spanish Fork at the turn of the previous century, so it would've been in the early 1900s is when Spanish Fork got into the electric business, and then we just capitalized that and really leveraged that to get into the broadband business in the 2000s.

Chris: Well, do you think you're ever going to be able to pay those bonds off?

John: Yeah, I think we will, since we made our last payment last month. We've actually paid off our bonds, and we still owe the electric department a little bit of money that we have most of it in retained earnings that we're going to be paying back over the next few years. Yeah, we made our last payment. It was a big day for us. It was a 15-year bond, and it is now paid off. It was about $7.5 million is what we originally bonded for.

Chris: Well, congratulations on that. I find it interesting, we saw a similar thing in Cedar Falls where, as they were paying down their debt, they decided that they would begin the transition from their cable network to a fiber-to-the-home network, and that is what you have announced. Why don't you tell us why you've decided to go fiber-to-the-home rather than copying Comcast and just doing a DOCSIS 3.1 solution or something like that.

John:  First off, fiber-to-the-home was always in our plan. It's always been in our plan, and in fact one of the main visionaries that brought this network to Spanish Fork is the city manager, Dave Oyler, who has been the city manager for Spanish Fork for over 30 years, so you have just a great amount of continuity.

He saw the vision of it, and each year he would ask me, are we ready to do fiber-to-the-home yet, are we ready to do fiber-to-the-home? After a while, it's like, Dave, not quite yet, but we're going to get there. This was always the plan. From our standpoint and from my city council standpoint and administration standpoint, this is just the next step.

Chris: You have a few people who are drooling over having a city manager with that kind of an attitude.

John: I drool over it. It is a tremendous advantage. Not only attitude, but just the vision of understanding what this is going to do and has done for our community. He could see it from the very beginning. Quite honestly, I think he had to convince me a little bit. I was already working for Spanish Fork City, and he had to kind of convince me, hey, this is going to be an amazing asset. I'm a believer. I believe. It has been a tremendous asset to have the administration, to have Dave Oyler, supporting us the way he has.

Chris: Let's get back to the question of why not just upgrade the cable network a little bit more? Why actually go to the full fiber network?

John:  First, it was always our plan to do that, because we understand that fiber is the future, and that technology is where you want to end up. If you just keep kicking the can down the road, you can do that, and there is some gain from doing that because the prices come down on fiber and on the electronics and whatnot, but there is a point where you really just have to bite the bullet and a lot of that is just financial for us.

We paid off our bond, and so, for us, now is the time to just take the money that we were paying on the bond and just turning around and just applying that to the next step, which is fiber-to-the-home, and that's our plan.

Chris: You don't actually plan on having to bond again to finance this?

John:  No, the intent is to take approximately $1 million a year and go out and build this throughout the town. The full build-out really starts July, which is when we get our new budget, July of next year, of 2016. Our plan is then to just to take that money and start building it, and quite honestly we couldn't really build it much faster than that anyways.

That's one of the questions that Dave Oyler asked me was, can we just go out and bond and build it faster, and it's like, it really would be difficult, just in the weight of carrying an existing system that is very successful but we have lots of customers that we have to take care of, and then also go out and start building this fiber-to-the-home. We really feel like about two nodes a month is the maximum that we're going to be able to convert anyways. We can afford to do that, so we can do that with the money that we're currently making on our system if we don't have to make our bond payments.

We were making our bond payment and had been making that bond payment for the last, well, over ten years, so we haven't been subsidized. We broke even in year four, and that included all the O&N and the bond payments. For us, this is really pretty easy, to just turn around and say, we're going to take that money and we're just going to feed it back into the last step, which is the fiber-to-the-home.

Chris: One of the things that I saw was a little bit of a discussion, and I'm really curious about it but, is it true that this changing from the coaxial technology to the fiber-to-the-home is going to be aided by conduit policy that you've been pushing for the last 20 years, basically, trying to get conduit in the ground?

John:  Yeah, and when you say "we," I can't take credit for this one, Chris, I'll tell you. Dave Oyler, before I ever worked for Spanish Fork, before anyone even had talked about doing a community network, a municipally owned community network, put in place a program where we were putting in a communication conduit. That was actually being put in in the '90s. In fact, we've had the city contact us and ask, well, how could we do this, what should we do, and the first thing is, you've got to start putting the conduit in the ground.

We have this immense network of conduit. As I've said many times to my city council, that is one of the real values of what we've done, is that you have this network of conduit. We can put anything in that conduit. Now we're going to prove it, because we're going to stuff fiber-optic cable in the same conduit where we have coax.

Chris: With the conduit, then, I guess I'm curious, is that just down main streets? Is it down residential streets? Is it conduit that goes all the way up the side of people's homes where you have the customer premises equipment? Is it all three?

John: It's all three, Chris. It is a full network of conduit that goes all the way up and down both sides of the streets where it's underground or when it's overhead, then it just goes in the back of the houses on poles. Obviously, that's not in conduit, but all the underground which is about two-thirds of our town is all done with conduit, and there's no direct bury and we will have the ability of running the fiber-optic cable just through that conduit exactly the way it is done now with the coax.

Chris: I guess you're going to be leaving the coax in, because from what I understand in the plan, people that are going to continue taking the most basic service, they'll actually remain on the coax for some time, right?

John:  Yes, and this is a little unique in what we're doing, Chris, in that we are actually going to keep our cable television on the coax. Remember, we are limited by state law, we can't go outside of our city limits. I have over 80% of the homes already connected, and so really you're only talking about the new growth is the main thing that we would do it. We already have a coaxial plant in there, so our plan is to move the telephone service and the Internet services, especially the higher-tier services, over to a fiber-to-the-home situation.

Eventually, all of the Internet may be on that, but initially at least the starter tier, which is, we're trying to make people understand or help people understand that the starter tier is really just for checking your Facebook and your email and that kind of thing, instead of trying to stream ... As you get up into the upper tiers, those are going to be automatically converted over, and we're going to keep all of our cable television over on that coax. We will maintain that coaxial plant.

Like everybody, though, we are shedding customers when it comes to cable television. We're seeing the younger crowd that is just not connecting or they're just deciding to go with their Netflix and other services. For us, the whole conversion to a full IP delivery of our cable television is daunting, it's expensive, it's a lot of tech, there's a lot of people who have problems with that technology, it's hard to deliver it. For us, we think the best solution is to just go ahead and maintain a coaxial plant for the delivery of cable television.

Chris: You had mentioned the state law that limits your ability to serve those who are even, as I recall it, directly across the street from your head-end, unfortunately. With the fiber network, does the state law still apply, or is that really related to the television product?

John:  It is still applying, and we have comments on our Facebook pages and we get telephone calls and emails from our surrounding communities, and we just can't deliver the service. It's against the law for us to deliver the service in Utah. We have to tell them no, and we'd love it if the new FCC rulings and rules would make a change to that, but really from what we see it's got to be challenged and we're not sure where that challenge is going to come from in Utah. It's hard. It is a very conservative state, and we're just not sure how that's all going to play out. We'll see over the years.

Chris: Well, I think there's probably going to be more motivation. This is one of the greatest disparities that we'll see in the nation. You have UTOPIA delivering gigabit services now for a long time. You have Provo with Google, you have Salt Lake City soon to be Google, you have you. The people who are just outside of those areas, particularly ones who are just outside you or UTOPIA who are not allowed to get it, I got to think they're going to be writing to their elected officials maybe once or twice a month.

John:  Yeah, I hope so. Certainly, if I could, that's what I would do. It's a little out of our hands. We would like to service the communities around us and we'd like to move into those areas, but we really need the pressure, I think, to come from them more than from us to be able to do that.

Chris: Right, yeah, absolutely. That's how democracy works.

John:  We hope.

Chris: Let's talk a little bit more. I just want to ask about the speeds, because I noticed that your new packages, you are still retaining the characteristics of the asymmetrical. Your upstreams are lagging behind your downstreams, and I'm curious why that decision was made for those packages.

John: Actually, the packages you're seeing are, we just did a speed upgrade on the old coaxial plan, so what you're seeing is that. The speeds will be symmetrical on the fiber-to-the-home solution. This is a little bit different in that you look at Google, Google's plan is you're going to have this "one speed fits everybody" type of a thing.

For us, we had to be very aware of our community network, and so we'll continue to have multiple tiers. We do have our starter tier which is currently 12 Mb down, and it will stay the same because it's going to stay on cable modem. Then your plus tier, which is currently 60 Mb down, but is asynchronous because it is on a cable modem, is actually going to go to a 100 Mb up and down on the plus tier. The premium tier will be the full gigabit service. You'll be able to get a gigabit service for $68, and that's synchronous up and down 1 Gb.

Chris: Wow, that's remarkable, and that's very close to the pricing that Chattanooga uses as well. Obviously, you're right around the same ballpark that Google is. It seems to be the standard more or less. There's a few communities who have come in under and a few communities who come in a bit over, but that $70 for a gig seems to be something we're seeing pop up a lot of places.

John: I think it's a good price point. I think the difference for us is, we're not going to force everybody to go there. With the Google, at least in Provo, they have their little bitty service and then the next jump is the full $70.

Chris: Yes.

John: For us, the financing is going to be a little different because of the number of customers that will actually take the premium service isn't going to be as great, because you do have a 100 Mb service at least for the next couple of years, right, but as we all know those needs are growing.

Chris: Whether you're looking at Sandy, Oregon or Longmont, I believe ... No, maybe Longmont might be doing the same thing as Google, but a number of these places do still have at least two tiers, so you're in pretty good company there.

John:  I think that's the right solution. I do.

Chris: The thing is, I always get hung up on what I think is interesting, the speeds and the technology, but ultimately why this matters is the impact on the community. I'm curious if anything's changed in the last two years. When we had talked before, you were talking about savings in the community because of your network on the order of $2.5 million per year, which is remarkable. Is that still what you're seeing?

John:  It's a little higher than that. My last calculations were closer to $3 million per year in savings. Really there, we're just saying, if we weren't here and you were happy to pay the price for a Comcast service, here's what the difference would be, and we've seen some price increases on the Comcast service in our area. It's actually improved a little bit from where we were.

As the community network, though, it's bigger than just price. Price is obviously important, don't get me wrong, but it is bigger than that. We have our own cable channel. We deliver just a tremendous amount of content. I'll tell you, they're looking at putting in a rec center here in Spanish Fork, and they had a public meeting last Tuesday night. A couple of the people who came in said, well, I was watching this at home and then I heard how the conversation was going, so I ran down here so I'd have a chance to talk.

Those are the kinds of things you can do for your community that are very unique and are really a super asset, and we've had a tremendous amount of success with those kinds of things in our community network.

Chris: Right, well, I remember you saying that Comcast actually does not have the public channel that you do for the community.

John:  That's correct. We've now actually delivered on Youtube for free, and we actually have a website where people can go. We do deliver that for everyone, but, yeah, Comcast obviously does not carry the channel. It's exclusive to our cable system.

Chris: Have you seen any examples of economic development of either businesses moving in, or you know of businesses that are looking around and thinking, wow, I've got a really good deal compared to my competitors?

John:  That's happening more and more. It's hard to quantitatively measure that, because it is one part of a complicated question when they're looking to move into your community. I've always felt that it's very difficult to say, we can say we brought in "x" number of millions of dollars in sales tax or property taxes because of this. It really is difficult to do that. At least it is for me. Maybe other people have a better algorithm than I have for it. On the other hand, it is something that we tout every time when we talk to these businesses. We do get feedback from them, that they say, yes, that is something they are looking for, is the ability to deliver fiber-to-the-business.

Now, we've been doing fiber-to-the-business since the very beginning, so we have a number of our larger businesses here in town, and we don't have a lot in Spanish Fork, a lot of big businesses, but we do have some that we deliver high-speeds, either in transport and/or in Internet access to those business here in town. Most of our business customers, though, are mom and pop shops, and so we service those on a cable modem network that will be converted over to a fiber-to-the-business network.

Chris: How are you going to decide which nodes to convert first? Are you doing a popularity contest, or is it just technical considerations?

John:  No, it's a dart board. I've got a dart ... No, and they asked, because we already had our launch in our first node just a couple of weeks ago, and people ask me, why did you pick that node, is that where all your employees live, and I'm like, we actually don't have any in that particular node. It was picked for some different kinds of reasons.

The first node is picked for certain characteristics that exemplify what we wanted. It needed to be typical of most of our installations in our community, and so we wanted something that would give us a good feel for how the installation is going to go. We wanted to be able to use different kinds of technologies. Those technologies might fit better in certain kinds of circumstances, so those are the kinds of decisions that went into play when we made the decision on the first node.

The following nodes will be based on the fact that this is, one, where's the best cost savings for us to move to the next. It won't probably be random or anything like that, it'll just be a matter of growth from there on out, but it'll be happening so quickly. If you're going to do two nodes a month, it's going to be happening very, very quickly. We think we can appease most of the people just by the sheer speed of the growth.

Chris: Excellent. Well, is there anything else that we've missed that we should learn about what's been going on the last few years or what's about to happen?

John: It's an exciting time for us. Our city council is firmly behind the project. We talk about the administration being behind it, but you really have to have the city council there in understanding what's going on, and we have regular update meetings with them to keep them informed. We have a lot of excitement in our community, and you want to see that excitement. It is a little bit of just controlling the excitement, because it isn't going to happen overnight, but on the other hand you don't want to dampen it too much because that excitement obviously is important to your success.

Yeah, we continue to grow, we continue to be successful, and now we really feel like this last step is just going to reap the rewards of the success that we've built.

Chris: Excellent. Well, congratulations, and I'm excited to learn what happens next.

John:  Thank you.

Chris: Thank you for coming on this show.

John:  You're very welcome, Chris. Anytime.

Lisa: That was Chris talking with John Bowcut, director of information systems and network director for the Spanish Fork Community Network in Spanish Fork, Utah. For more information on Spanish Fork, follow the tag at muninetworks.org. You can also check out their site at sfcn.org. Please continue to send us your ideas for the show. Email us at podcast@muninetworks.org. Follow us on Twitter. Our handle is @communitynets. We're on Facebook. Search for Community Broadband Networks. Thank you again to BKFM-B-Side for the song "Raise Your Hands" licensed through Creative Commons, and thank you again for listening to the Community Broadband Bits Podcast.

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