Transcript: Community Broadband Bits Episode 233

This is the transcript for episode 233 of the Community Broadband Bits Podcast.  rit Fontenot and Anthony Cochenour of Bozeman, Montana, explain how Bozeman Fiber is a nonprofit, open access, community network. They go into detail about the funding behind the project. Listen to this episode here.

 

Anthony Cochenour: There were a number of trusting moments along the way and I'm happy to say that since then we've been able to meet and exceed all the expectations that have been set, and so I think that definitely gives us a good leg up for the future.

Lisa Gonzalez: Welcome to episode 233 of the Community Broadband Bits Podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. We followed Bozeman, Montana's fiber-optic network initiative for the past few years, now, as it developed from vision to reality. The open access network is already serving local government facilities, and public schools, and businesses are also being connected. In this interview, Christopher talks with the city's economic development director, Brit Fontenot, and Anthony Cochenour, president of Bozeman Fiber, the nonprofit entity created to manage and operate the network. Christopher, Brit and Anthony share an update on what has been happening with the network since our last interview, that was during episode 142, back in March of 2015. The guys talk about the nonprofit open access model, and the city's current role. They also discuss how the community obtained funding for the project and what it was like rallying local banks to contribute to the project. Now, here's Chris with Brit Fontenot, the city's economic development director and Anthony Cochenour, president of Bozeman Fiber.

Christopher Mitchell: Welcome to another edition of the Community Broadband Bits Podcast. I'm Chris Mitchell. Today, I'm speaking with two folks from Bozeman, Montana, catching up on a network that we previously discussed. First of all, we have Brit Fontenot, who is the city of Bozeman's economic development director. Welcome back to the show.

Brit Fontenot: Thanks, Chris. It's a pleasure. Thanks, a lot.

Christopher Mitchell: We are also welcoming back Anthony Cochenour, the president of Hoplite Industries, and now the president of Bozeman Fiber. Welcome back.

Anthony Cochenour: Thanks, for having us, today, Chris.

Christopher Mitchell: I definitely think people have to listen to the previous show to get all of the flavors about what Bozeman is like for people who might not be familiar and exactly where this project was, the origin of it. For a brief reminder, what is Bozeman Fiber?

Anthony Cochenour: Bozeman Fiber is an open access and not for profit wholesale fiber network based here in Bozeman. Total network size is about 24 and a half total route miles. I believe that today we passed just under 3,000 structures with an emphasis on commercial services.

Christopher Mitchell: Brit, I'm curious if you can just remind us, I think this is a show, we mostly talk about municipal networks. Bozeman Fiber is not owned or operated by the city of Bozeman. How does it work?

Brit Fontenot: The city of Bozeman neither owns nor operates the Bozeman Fiber Network. It's a private, Bozeman Fiber is a private organization, raised private capital in order to construct and operate the network. City of Bozeman's role in this construction, and in this model, this open access model has been to hopefully provide some leadership from our elected officials and the value of having an open access network in our community that provides several opportunities. One, to lower cost for the end user for fiber services. Two, to facilitate competition in that market. Three to expand the reach, and to expand the opportunities for our local businesses. As an economic development driver in a community like Bozeman, the fasted growing community in the state of Montana with a very important technology, and growing over that technology sector, who can utilize and leverage this new infrastructure.

Christopher Mitchell: Anthony, I want to come back to you, to talk a little bit about that nonprofit model. Can you just tell us, the question I always have is what if a decision as made to sell it off, for instance, how would that be made? Who would make that decision?

Anthony Cochenour: A lot of thought and effort went into structuring the leadership, and governance of Bozeman Fiber, and I think unlike a lot of other not for profits, they kind of go for that 501C3 status for various reasons. 501C4 status at Bozeman Fiber obtained from the get go, we're actually a nonmember base, not for profit. The board is truly there for governance. There's no ownership. There's no individual stake that takes place there, and so the leadership is actually spread across a combination of K-12 and higher education, healthcare, economic development, technical interest from the private sector, and then we do at least always maintain room for at least one at large community at large board seat, so that way it's not all tack, it's not all education, healthcare, economic development that we can represent a much broader set of interests, and needs across the community.

Christopher Mitchell: When the board makes decisions, are they unanimous decisions? Do they have a vote? I'm just curious, and ultimately is it the board that makes all these decisions? I just want to press in, because I think, usually -

Anthony Cochenour: Sure.

Christopher Mitchell: We're talking about networks in which the city council is the ultimate authority, but here it's a board of folks that are representing community anchors, and businesses, and things like that.

Anthony Cochenour: Certainly it is run like any other corporate board, a governance board that you would see. There are structured meetings, there's a great deal of background work that goes into prepping for these meetings. There is open discussion, there's debate. Happily so, there's a great deal of alignment and agreement, and I think, the number of things that the board would openly disagree on, we could probably count on one hand, over the last two years.

Christopher Mitchell: Now, one of the things that we were just discussing in the pre-call was whether or not anyone's trying to copy you. Brit, I'd like to come back to you to ask if you could just give me a sense of, when you said the city was involved in this as a, certainly in a convening role, what are some of the unique value adds that the local government contributed to make sure that Bozeman Fiber would be successful?

Brit Fontenot: I think they provided the vision, and the leadership in order to raise this issue to a level where community anchor institutions saw the value in becoming a part of the network. Let's face it, those anchor institutions, which in our case are the city of Bozeman, the county, Gallatin County, and our school districts were taking a risk with us, with Bozeman Fiber at the time, I shouldn't say us, but with Bozeman Fiber, because this hadn't been done in this manner in the past. They saw, the state commission was instrumental in approving the plan, the portfolio that the Bozeman Fiber organization eventually used to put the financing together for the network builds, and of course signing on, signing on to a long-term contracts, 10 year contracts with Bozeman Fiber provided dark fiber in order to distinguish between the dark fiber anchor tenants, city, town and schools with the lit fiber network where we have service providers on the network who are providing services to our, at the moment, to mostly to our businesses on our commercial corridors, in our downtown in another area called our Cannery District, and then in the future our midtown district. The city had added, has provided that leadership, they were a part of the group that selected, or at least were requesting certain board members be present to represent these various interest groups across the community, and have been very much a partner in getting the organization up and running. Since then, the city has taken a bit of a backseat role since Bozeman Fiber has shown that it can construct a network, it has shown that it can deliver services with, in other words, how do we, as a city, invest in an infrastructure that continues to facilitate the outgrowth of a fiber network? Not just for the benefit of Bozeman Fiber, but for the benefit of the business community who can potentially use a number of services with proper infrastructure in order to get their needs met via fiber-optic networks.

Christopher Mitchell: I want to turn to the open access nature of the network. I think, Anthony it makes sense to come back to you, and talk about this. How many ISP's do you have active on the network, already?

Anthony Cochenour: Currently there are five ISP partners that we have signed up, and if memory serves with the latest lineup we have about four more under negotiation at various stages of negotiation. Our original goal, our minimum was in the four to six range our stretch overall in terms of ISP partners to bring diversity and competition within the 10 to 12 range. I'm pretty confident the next 60 to 90 days we'll be in the 10 to 12 ISP partner range. Fortunately, I think it's been the draw of the open access piece. The fact that Bozeman Fiber is truly neutral across the board, that has been one of the selling points for the partners that are new to the direct fiber services space.

Christopher Mitchell: Can you give me a sense of how many of the providers that are operating on your network, or may soon finalize the agreement? How many of those are sort of local to the region versus larger, more maybe based in the coastal areas, companies that are not from Montana, or the region?

Anthony Cochenour: Right now, I think, we have one that's decidedly out of Montana that has actually made their first direct foray into Montana, because of Bozeman Fiber. That's exciting. Right now, as the majority of the partners are in the small to medium size space, and are also within the region. We include Wyoming within the region, that particular marketer is included as well. Some of the negotiations as you would probably guess with two or three of the larger providers that you could probably name, they are large organizations, negotiations take time, changing, thinking and showing the value that we bring to even them, takes time as well. So far so good. Things are remaining quite positive in terms of overall perception of Bozeman Fiber's mission how we've executed against that, is quite favorable.

Christopher Mitchell: Terrific. You mentioned that you were passing thousands of structures, can you give us a sense of the breakdown of commercial versus maybe like schools verses any residential areas that you might be touching.

Anthony Cochenour: Kind of at high level I would put it at about 70% commercial and about 30% residential. You know that varies a bit based on how far off the backbone you go, in terms of kind of mapping that out, or if you measure that at about a 100 feet, it's probably a much higher percentage of commercial, if you go on up to about 500 or 1,000 feet you probably have much more of an even blend between commercial and residential.

Christopher Mitchell: You've been operating for a few months, so I'm always nervous about asking outright for take rates, if you want to share it, that's fine. I think the key question is just whether or not you're hitting targets for customers as well as for service providers.

Anthony Cochenour: I would say so, and certainly it's early having less than 60 days of full run rage on commercial operations, it's tough to pull out hard stats there. In terms of the net interest, if you look at the take rate from a traditional sales point of view, the interest in the pipeline are certainly there to both be exceeding our sales goals, and I think it's actually encouraging for these early ISP partners, as well. Again, kind of putting on that, taking a for profit look at what is the wholesale, sales side look like? Pretty favorable and then positive, I'd say.

Christopher Mitchell: Brit, I want to come back to you, and talk a little bit about the potential expansion. I am always interested in what it takes to make something go citywide, and I know that there may be many steps between here and there, but from the city's perspective, what sorts of things can you do to make it easier for Bozeman Fiber to expand?

Brit Fontenot: One of the things we can do is put a policy in place that is forward thinking in regards to where this network can grow. I looked through the architecture of the original Bozeman Fiber Network we were out to all the schools scattered around the community, and so that was by design, because those areas are often surrounded by either the existing or future subdivisions, which include potential for fiber to the home opportunities. Although, the original phase one plan is really just enough of businesses and economical development, and that's where we're focusing, that's where Bozeman Fiber is focusing its interest right now. The city is working on a policy that includes several layers, one of them is a dig one policy. How can we ensure that we are doing what we can to preserve our infrastructure, not digging streets up every time a provider may want to go get a conduit in the ground, but having the city invest in some multi-duct conduits in appropriate areas, so that those assets can be preserved, while at the same time facilitating not only Bozeman Fiber, but other service providers into that same router, into that same duct, so that's one way. Then, of course, the other way that I think is important is to take a look at our own capital improvement plan at the city, where our roads being considered for reconstruction? What sidewalks are we looking at replacing or improving? What trials can we look at that go in directions in areas that we can use those construction times to put conduit in the ground that may not necessarily connect on day one, but look to connect to the backbone of Bozeman Fiber at some point in the future, facilitating even more use of the network by more and more customers. Truly just tried to take a broad look, a long view of what we're trying to accomplish by providing connectivity initially in the business district, and I mentioned the downtown and the midtown, and where we leveraged our tax income finance districts to deploy multi-duct conduit for the purposes I just described, that's now being leased by Bozeman Fiber, and potentially other tenants of the conduit to facilitate the network, the construction of the network, but also future connectivity in other locations.

Anthony Cochenour: Again, another thing I would tack on that I think we've lost sight of even within the Bozeman Fiber board, because it's been such a busy couple of years, is one of the milestones that we achieved as a community led by this effort, both private sector efforts, and what are now many of the Bozeman Fiber supporters, and the city of Bozeman has a one dig policy. That was happily embraced and passed unanimously by the city council that really makes it such that if there's a public works project going on there's now mandated coordination and collaboration that goes on between public and private sectors to basically say, "Hey. We're going to have the street open. We're going to have a trench open, if you have any desire to be here, come on down." Taxpayers have already paid, essentially, in one form or another to open that trench, for public works project, if there's direct easement involvement or proximity to easement that takes a great deal of the cost out of the private sector endeavors for anything, for anything you would need to put in the ground that would be permittable, is now just part parcel for how we operate as a community. As we look around the nation, one dig is not unique, by any stretch of the imagination, but certainly not as common as we would like. I'm happy to see that, that's one of the positive outcomes that we've had through this, what's almost now, a four year effort.

Christopher Mitchell: That's good to hear that, that's happening. I think, one of the reason you don't see this as often is that people talk about being in favor of it, but then when you're actually trying to implement it, you find that people at public works don't want to change what they've been doing, or that there's some hurdle along the way, it kind of falls by the wayside. I'm glad you were able to persevere.

Brit Fontenot: It's not say we haven't had our struggles, I mean, it's not, there are definitely some challenges associated with changing the way people think about their relationship to infrastructure, and what is even infrastructure. Convincing our public works department, who has been extremely helpful, and then again, in many facets of this project, that plastic pipe is really what we're talking about here, and it's no more or less, it's been a challenge, but we've had benefited with some of the work that's been done in Lincoln, Nebraska and some of the efforts that they've taken under, and David Young has been a very good resource for us, to try to understand how it can be done, and done successfully. I would just, the final piece of that, Chris, on the city side is the financial model. First of all you have to have the willpower to want to invest in this piece of infrastructure, because you believe that there's a community benefit, there's a real community benefit to actually putting that pipe in the ground. Then, you have to come up with the money to do it. Having the financial model that pays back, if you will, for that infrastructure improvement in some meaningful way has been another challenge for us at this early stage of the city owned conduit portion. We don't have it all figured out, but we are a long ways from where we were when we first started, as Anthony said, four years ago to having a really robust policy, but also commitment, which is almost just as difficult as the policy itself.

Christopher Mitchell: When you talk about the financial model, let me just check in, because now Bozeman Fiber, I believe was financed largely with local loans from banks in the region, in the area. I think that's terrific, I want to see if we have any tips in a couple minutes for people that might want to try to do something similar. How is the, to the extent that there are charges associated with dig on through other city activities, how are those financed?

Brit Fontenot: Let me just be clear with what I said a second ago, which is the financial model for licensing the city owned conduit to providers, that's the part that I was referring to when I said, we're trying to find the sweet spot between the investment of the plastic pipe, the construction costs associating with that, with the return on, for the fees to license that same conduit, whether that be Bozeman Fiber, or any of a number of providers who may chose to license that conduit for their own use. That's the model I was referring to. In terms of the dig one policy, there are some examples, particularly out of the Lincoln area where you can incentivize the construction of additional conduit simply when pipe is going in the ground that another organization might be deploying, and then paying the delta between the cost of the pipe and the cost of construction, you can reduce your construction costs dramatically if you pull four conduits instead of two, for example.

Christopher Mitchell: I guess I'm curious, Anthony, do you have any tips for people who might be looking to try and unlock local financing from banks in the way that Bozeman Fiber has?

Anthony Cochenour: Certainly, I think first and foremost it doesn't happen without relationships, and being able to communicate the value, the community value, and not necessarily just the dollars and cents, but what it means to a school, to healthcare, and so on, and economic development, of course. The second piece is understanding, kind of the difference and focus between large national and international banking institutions, and local, and regional banking institutions is that these banks, these eight banks that came together for Bozeman Fiber, have a vested interest in seeing the community grow. I mean, these are over 60% of home loans are written here in the region, as I understand, are written by the eight banks. That helped to back Bozeman Fiber. If you look at their stake in it, people build businesses they buy homes, they buy secondary homes. They may be opening other businesses, the banks of course can directly benefit from taking a step back and deciding that what may otherwise be considered especially if you're couching in a venture capital sort of like what may otherwise be considered to be a high risk venture with potentially some uncertain outcomes. There's huge certainties in life as we all know. Rather, that they look at that as we're making this investment, risk being what it is for community benefit, and indirectly, of course from a commercial perspective the banks will benefit if they continue to do the right thing to keep the customers happy and being relevant in the community. That one piece, that community benefit piece was absolutely key. If I am caught in the leadership at the First Interstate Bank, and some of the members of the Glacier Bank board that are represented here in Bozeman, when leadership of those organizations have that light bulb turn on, that was transformative I can very distinctly recall a conversation among what are now the Bozeman Fiber board members and expressing the fact that had the absolute willingness to go tell the story, to go make this pitch to some of the local banks, and at the same time expressing concern about the ability to tell a story that is probably not often told. Certainly, the story has not been told until we told it here, and walking out of that first meeting, there was that awkward silence after we delivered the pitch, and we kind gave the talking points, the bullet points. The light bulb went off at that moment, and from there it was just nothing but the positivity of the, I think the 12 local banks that we have. Eight signed on, and I can tell you we did not have to pitch all eight very hard. We pitched three directly, and from there it was a ground swell. You don't see competing banks come together in the way that these banks have. That in its own right has been amazing. I guess the point there the negative of wisdom is to be able to understand the focus of those local and regional banks, be able to communicate on their terms, and equate what you may be trying to do with community projects, to how it may directly or indirectly benefit those banks in the future, because certainly there's a lot of great PR, that they get out of it. There's a lot of feel good stuff, but at the same time they're also planting seeds for future growth in a community that they're directly invested in.

Christopher Mitchell: I hope that those words help others to duplicate that, because with the Institute for Local Self-Reliance, we care a lot about local businesses, local banking, and that sort of thing. I think there's potential out there. I hope others are able to unlock that same success. I think my final question, I'll ask to you first, Brit and then I'll come back to you Anthony. Is there anything that surprising to you, in terms of where you are today? What the outcomes really have been, you might not have expected two or three years ago, when you were working on this?

Brit Fontenot: Yeah. I'm not surprised by how much effort it took. We knew this was going to be concerted, hard, roll up your sleeves, everybody get it, pitch in kind of effort. That wasn't part of it, what was really surprising was the commitment by the board, and particularity Anthony, surprising in a way, not like, oh people are going to start to lose interest, but at every step of the way our board has been there, has been there to take the calls, has been there to have meetings. These are all professionals in our community, who have other responsibilities, and have other demands on their time. I was just really surprised at how committed our team was to getting this done, and they maintain that level of commitment, today. I guess, the other surprise, for me, was the demand. I knew that there was demand out there, what continues to surprise me is the level of interest that novel community is taking on, not just the business community, but the others in the residential areas of our town. The demand that's out there, I mean, I knew that there was the level, enough demand to make this project pencil out, but I think there is even more than we had anticipated. Those are the two things that I guess that surprise me the most. Both of them positive.

Christopher Mitchell: Great. Anthony? What would you add to that?

Anthony Cochenour: I would probably go back to the financing piece. I think I had probably more than my fair share of at bats with venture capital pitches, and things of that nature. It was a positive, I can say surprised, but really a shock that we had the model as right as we did so early on that it was just very plan and obvious to the banking community that ultimately came together to fund us. That I thought, had you asked me six months before that, and privately, or in a group setting I would have said, funding would be our number one challenge. In fact that was arguably one of the easier things that we did a long the way. That was certainly a surprise.

Christopher Mitchell: Let me just pause for one second to let the few people unclench their teeth when they hear that, because I think that's certainly not the experience for most people working in this area, but please continue.

Anthony Cochenour: Certainly, not, and not typically my experience outside the not for profit space, and the commercial arena. I would say the other surprise as well, it's a happy surprise, having the challenges along the way that any large construction project, any large capital project will have, like any even commercial providers run into permit issues, or unexpected things when you're digging, and so on. The willingness for anchor tenants, and other community member to come together, so the other side of this, of course, the finance discussion is you have to have that business plan, you have to have that portfolio that says, "Hey, guys, and girls in the banking community, or in the investment community, here's what we plan to go do, and here's how we plan to go do it." We had an entire audience worth of anchor tenants that collectively signed in no less than 30 years worth of fiber contracts.

Christopher Mitchell: Wow.

Anthony Cochenour: I would say with relatively low effort, but again, I think it's a reflection that relatively low effort that went into winning those audiences over. It was really just a reflection of the value that Bozeman Fiber was trying to bring to its mission. That for me, would have been the second largest hurdle, had you asked me months before, how do we get these anchor tenants on board, and signed up, so we can execute the loan documents? I think those two things being working out as well as they did were absolutely pivotal, but again it comes back to being able to articulate the mission, and the value, as well as having the relationships, because of course there were a number of trusting moments along the way, and I'm happy to say that since then we've been able to meet and exceed all the expectations that have been set. I think that definitely gives us a good leg up for the future.

Christopher Mitchell: Thank you, both for taking the time to update us. I have no doubt that we'll be coming back to you in the future to get some more lessons learned, and check in on your progress.

Brit Fontenot: Thanks, Chris.

Anthony Cochenour: Thank you, as well, Chris.

Lisa Gonzalez: That was Brit Fontenot, Bozeman's economic development director, and Anthony Cochenour, president of Bozeman Fiber. As the project continues to progress, we'll be sure to share updates. Learn more at MuniNetworks.org, just click on the Bozeman tag. Remember we have transcripts for this and other Community Broadband Bits Podcast's available at MuniNetworks.org/broadbandbits. Email us at podcast@MuniNetworks.org with your ideas for the show. Follow Chris on Twitter, his handle is @CommunityNets. You can also follow MuniNetworks.org stories on Twitter where the handle is @MuniNetworks. Subscribe to this podcast, and all of the podcasts in the ILSR podcast family on iTunes, Stitcher, or wherever else you get your podcasts. Never miss out on our original research by also subscribing to our monthly newsletter at ILSR.org. We want to thank Admiral Bob for the song Turbo Tornado licensed through Creative Commons, and we also want to thank you for listening to episode 233 of the Community Broadband Bits Podcast.