Transcript: Community Broadband Bits Episode 176

This is Episode 176 of the Community Broadband Bits Podcast. Chris speaks with Fletcher Kittredge of GWI about the "Maine model" for community fiber networks. Listen to this episode here.

 

Fletcher: What we were saying about the whole self-reliance thing and I think it's a recognition that as a rural area, the economics are not such that Google's going to come here any time soon.

Lisa: Hello, this is the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. You are listening to episode 176. Maine has been a busy spot for municipal networks over the past year. For the first time ever, a Maine community, Rockport, invested in a publicly-owned fiber network. As a partner, Rockport collaborated with local ISP GWI to offer retail services over the city's infrastructure. Rockport is not the only community in Maine to invest in better connectivity in the past year.

This week, Chris talks with Fletcher Kittredge, CEO of GWI. Fletcher describes some of the other projects GWI is working on and also describes what has become known as the Maine model. There is a community-minded philosophy behind this dark fiber open access approach.

Each week we bring you interviews with guests that you will not find on other podcasts. Our shows are one-of-a-kind and commercial-free. Please take a moment to support our work with a donation at ILSR.org or MuniNetworks.org. Now here are Chris and Fletcher Kittredge, CEO of GWI.

Chris: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell and today I'm speaking with Fletcher Kittredge, the CEO of GWI in Maine. Welcome to the show.

Fletcher: Hi. Thank you for having me on.

Chris: I'm very excited to be talking with you. I've been following your work for quite a while. Why don't you start by telling us a little bit about GWI. What is it?

Fletcher: We are an internet service provider. We started over 20 years ago, first providing broadband. I am from Maine, but actually had gone to school and worked at a research lab in Massachusetts, in Cambridge, and it happened to be the one that was building the original backbone for the internet. By the time the internet commercialized, I had been doing this for about 10 year and saw it as a way to get home, have a job in Maine. We started up about 20 years ago and we have been doing internet access for Maine since then.

About 10 years ago we started doing our first fiber work. We got a BTOP grant back about six years ago, which led to a large open-access middle mile network in Maine. Maine has a lot of dark fiber open access middle miles that anyone can use, and that's really sparked a lot of the development of Gigabit Fiber Networks in Maine.

Chris: That's called the three-ring binder, right?

Fletcher: It's called the three-ring binder. It is actually a special company was set up to build that, to make sure that it was true open-access. That creates a level playing field there. The company that builds it is not allowed to offer service to end-use customers, but there are over three dozen providers now that use it for middle mile service in Maine. That's brought the communications world to us in a way that we didn't really have it before. Like many rural areas, we suffered for lack of competition. This has not only given a middle mile, very high-speed backbone, but it's also created the competitive market.

Chris: If I remember correctly, Fletcher, when that was proposed, the incumbent providers threw a bit of a hissy fit and, in particular, from our audience's' interest, I think, some of the claims were that it was unfair because the University Maine system was a main part of it and tried to get them to take a backseat or not be involved in it.

Fletcher: The University of Maine was in part of it, but not in the way you'd normally think. They didn't put any money in it. They are actually a customer of the company that was set up. In the depths of the great recession, the reason for that is the University of Maine didn't have any money to invest in it. What the University of Maine's involvement was, and it was very important involvement, is they really did the technology design behind it. They designed the route, they were instrumental in coming up with the key ideas of creating a very competitive market. The university, like anybody else who is a consumer of telecommunications, felt that they have suffered from it being a monopoly, so they didn't have a role and right now they use it, like everybody else in this state. They do it on a commercial basis. They buy service, dark fiber on the network.

Chris: We actually, at the Institute for Local Self-Reliance, we have an office in Portland and so I should say the first time that I heard about GWI it was as a consumer, more or less, and a subscriber, because people that I know that could take service vastly preferred your services over the available options from the incumbents. I think we want to direct the conversation a little bit to what you're doing to invest for the future. You've been very associated with what's coming to be known as the Maine Model. I'm wondering if you can tell us what that is?

Fletcher: I don't think anybody really thought this all through, but it seems to be working very well. It's a model that is open-access, dark fiber, usually, built off a three-ring binder or connected to the three-ring binder in some way or the other. There's a strong municipality role. The sad thing that I see is that there's a lot of investment in networks all over the place, which is inefficient because it's built for one big consumer and not the idea that it wouldn't be shared with someone else. The idea of sharing it with other people is not really thought through.

What I mean by that is, here's an example: Suppose a hospital, which has a lot of money and potentially could save a lot of money through using a fiber optic network. It decides to build a network that connects all of its offices together. What's happened in the past is that when that happens, the hospital just builds fiber for itself and it doesn't think about the possibility of strengthening the community it's in by building that network in such a way that all the residences and all the businesses along there can get inexpensive Gigabit access.

Chris: Conceptually we often talk about this as a sense of being like if the university system built their own roads and you only had university buses and university cars on those roads and citizens had to use other roads that were built for them only and businesses had to build their own roads, it would be quite inefficient.

Fletcher: Absolutely. Because we have the three-ring binder, which is this very-high strand count, there's lots of dark fiber on it because it's available very inexpensively. One of the principles behind the three-ring binder is the huge subsidy that the private partners and the public partnership ... Remembering the BTOP grants, those were very frequently the full 80% went as a subsidy. Up to 80% of the capital costs were subsidized and lots of places, even though there's that heavy subsidy, it's not reflected in the price the consumers end up paying. The three-ring binder, the agreement was that the pricing would reflect that subsidy.

Chris: Let's look at it this way: If I'm any community in Maine, what does the model look like to me? What do I do and what do I get?

Fletcher: If you're a community on the three-ring binder, what you can do is build a dark fiber network in your community and immediately get many providers who will use that dark fiber network to provide service because they're already using a three-ring binder and it's very simple and cost effective for them to use the dark fiber in your community. The problem with open-access networks is the potential for small, rural communities, if you build an open-access network, what if no providers use it? What if you have a network and there's no one who's willing to offer service on it?

In an urban area, where there's lots of businesses and it's really lucrative, you can count on the fact there will be providers. You can't necessarily count on that in an urban place. That's an important aspect. You get not only the knowledge that one provider will do it, but that you'll immediately have a competitive market, that it won't be a monopoly or duopoly or something like that, but there'll be many providers who will offer service.

Chris: We've recently seen a number of announcements that more communities are doing this. Can you tell us what's going on in terms of what communities are embracing this?

Fletcher: The early ones took advantage of that idea of sharing with people the big anchor tenants needed and building a network, combining that with a three-ring binder, to inexpensively get a fiber optic cord in their town. First one was Rockport and the local college there needed a fiber optic network. They were willing to act as anchor tenants along with the University of Maine and so they basically signed a lease in advance and the town used the money to build fiber optic in the core for very inexpensively. The out-of-pocket was I think something in the order of $60,000, which they were able to fund from some money they had left over in TIF funds.

Chris: The Tax Increment Financing district money and we actually talked with Rick Bates in a previous show.

Fletcher: Another one is South Portland. Essentially the same idea, but the difference was the town itself was the anchor tenant. It needed to connect its municipal buildings together and they figured if they were going to go ahead and do that, they'd do it in the form of getting out a dark fiber lease and then saying that if you want to win this RFP to build this dark fiber for the town then you had to agree that you would create an open-access network and do some revenue sharing with the town, since you were getting them as anchor tenant.

Chris: I want to come back to South Portland in a second, but I'll let you finish up the recent announcements before we do that.

Fletcher: Then there's Islesboro and Islesboro's an island. They were realizing that they had awful broadband and that if they didn't get better broadband, their town might literally disappear.

Chris: Actually, just so you know, we actually spoke with Page Clason as well in a recent episode. We've been sort of tracking down all these folks before you had a chance to talk about them.

Fletcher: Then there's the town of Sanford. Sanford saw what was going on. They, like Islesboro, were feeling isolated from the network because the three-ring binder actually bypassed their town. They're building a ring off of the three-ring binder to make sure that it was connected now, so it becomes a fourth ring. Then they're building a network immediately to serve the big municipal customers and the big commercial customers, but that network is being designed in such a way that it can offer services to residential customers as well.

Chris: Actually, that's a point worth emphasizing because in a number of cases we're familiar with dark fiber networks being mainly for businesses, but in all these cases you're talking about these networks extending to people's homes as well.

Fletcher: This is a very important underlying principle that I just can't stress enough. This is infrastructure. The economic definition of infrastructure is the shared resource that acts as a single input to multiple outputs. Basically, it's something that lots of people use. It makes no sense to run fiber down the street and not have it designed in such a way that every premise, building, residential on the street can be served by that fiber network. It makes zero economic sense. It may be a little extra work for a hospital or someone like that to figure out a way to do that and what the demand is actually going to be and all that, and that is actually what we've been doing for towns is when they say they want to build something, we'll say, "This is what you need if you want to serve your entire town," and in the cases where they say, "Look, we know this is a good thing, but we just can't justify any additional expense now beyond building a network that's just designed for us, is we will step in and provide the additional capital.

These networks are generally owned by the town; every one of these is a little bit different, but in some cases the town will own their stuff and we will at the same time build our stuff and we'll own what we pay for and that town owns what they pay for. But in all cases it's open-access. Network providers always want to have a monopoly because you can make a lot more money when people don't have choices and they have to use you, but I've been around this business for 30 years and I know monopolies are really bad for the people using the network.

Chris: I like that you avoided the term 'consumer.' I try to avoid that as well because many of these people are, in fact, producers, so it's more subscribers and people who are on the network. They're not consumers. I like that you caught yourself right there.

Fletcher: Yes. Most of our money comes from businesses, so it's certainly businesses and municipalities and government and education and all those things. We've reached the point in economic development where everyone has to use the internet. There's very little activity that can go on without it and it's absolute vital utility, so having government money go to replicate a monopoly which is bad, sometimes, maybe you need to do it. You may need to do that, but you shouldn't pay to have it done. If someone is going to offer service to an area, they're playing their money and the only way they'll do it is if they don't have to share it with other people, that's one thing, but if the government's going to pay for it, we think it ought to be open-access.

Chris: I want to draw you back to South Portland, where you're working with them and you're going to own the network. I was just curious if you have a preference, whether it's because of capital available or for long-term needs, whether you prefer if the local government owns the network or if you prefer to own the network, knowing that in either case it will be a dark fiber open-access network.

Fletcher: I would say we're completely agnostic. It really depends on the details. There's a point of indifference. What we care about most is that we can get access to the network on fair terms, so there's not a situation set up where someone else has a competitive advantage against us because they have the access to the network, either in terms of price or in terms of other things that happen. So many of the network barriers are actually not the price, but other stuff that happens where someone can get it faster or higher quality or something like that.

Chris: You have a history of using the incumbent telephone companies' loops, so you're familiar with this.

Fletcher: Yes. We have a history of being in a situation where we have to buy a key resource from someone who doesn't want to sell it to us and is only doing it because regulation requires it. They're really resentful of that and there's all sorts of nasty stuff that happens because of that. When we set up Maine Fiber Company, the people who owned the three-ring binder decided to make sure there was an absolute level playing field. We were awarded the grant, but we transferred it to another company called Maine Fiber Company that was set up just to sell dark fiber. The idea was the way you get a motivated seller is you don't want to have to buy from your competitor because there's always at least the appearance of conflict of interest.

Maine Fiber Company was set up to be someone who would want to sell to all providers equally because it itself wasn't allowed to sell to end customers. All that Maine Fiber Company itself could do is sell dark fiber, so it can't offer lift services and it sells to people who in turn ... If you think about its economic motivations, it is to provide the best service to carriers. I think it would be in its interest anyhow, but the rules are it's not allowed to give anyone favorable treatment.

Chris: As we are winding down the call, what I'd really like to get into is a last piece of ... You're a very technical person, so if I'm a home user and I'm taking service from Company A on dark fiber, let's just say it's you, and for some reason I want to switch to your competitor. What do I have to do in the dark fiber model to make that switch?

Fletcher: In the dark fiber model, you have to tell the first provider that you don't want to use his service anymore and you probably want to get your new provider lined up before you do that. The drop to your house would be moved from one provider to another.

Chris: Where would that happen? Back in the CO, effectively?

Fletcher: That depends. These networks are supposed to last for a minimum of 20 years and they really ought to be designed to last for 30 or 40 year, because that's the useful lifetime of the fiber. We don't know ... You probably know, there's two types of network architectures now at the physical layer, active and passive. We try to design things so that we don't know in the long term whether right now most people are using passive, but active has advantages and it could be in the long run that that's a better network. What we've tried to do for these towns is design the network in such a way that their investment will work with either active or passive.

In the passive case we would make the switch in a field terminal, which we refer to, and I think this is a lot of people in the industry do this, as an LCP, a Local Concentration Point. In the active case, you'd probably do it back at a more central location. LCPs are then in turn connected to a star. You have little stars where fiber goes to the LCP and then all the LCPs are then connected back to a central location. In the active case, you do it there. I hate to say it's one of those 'it depends' answers, but we think that's a really good thing that it's an 'it depends' answer because it reflects the fact that these things are future-proof.

Chris: We're running out of time, so is there anything else that you want to tell us? I know there's so much more that we could get into, but as we wrap this up and hopefully we'll have you back in the future.

Fletcher: I want to point out a key feature of the Maine Model, which actually is self-reliance. We're real big on the whole self-reliance thing here, in this part of the world, and I think it's a recognition that as a rural area, the economics are not such that Google's going to come here anytime soon. If you look at all the big fiber to home announcements, they're all for wealthy, rapidly-growing cities, usually in the South.

Chris: I was going to say, that don't get a few feet of snow at a time.

Fletcher: Not that there's anything wrong with that. We know here in Maine we're going to have to do this ourselves and there's some really interesting work done in companies besides GWI. We're not alone in this. The advantage of creating a competitive market, there's really interesting work done to try to set it up so the community can pay for the thing itself in a way that's cost effective. The cost of networks is going down over time, but also, I think the abilities for actual the community afford to do its work is also increasing all the time, so there's lots of work around automation and big data that I think is going to become visible over the next year, but we'll really allow communities to fund these things themselves, in a way that's cost-effective and eventually they get payback, even rural communities.

Chris: Great. We're looking forward to that happening and I think that the approaches that you're taking are going to help us move in that direction a lot more quickly. Thank you and thank you for coming on the show.

Fletcher: Thank you for having me.

Lisa: Thanks for listening to Chris interview Fletcher Kittredge, CEO of GWI, the Internet Service Provider in Maine, working with the City of Rockport and other Maine communities. Be sure to check out our mini-stories on activity in Maine at MuniNetworks.org. Follow us on Twitter. Our handle is @communitynets. Send us your ideas for the show. Email us at podcast@muninetworks.org. Thanks to Arne Huseby for the song Warm Duck Shuffle, licensed through Creative Commons. Thank you for listening to episode 176 of the Community Broadband Bits podcast.

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