Transcript: Community Broadband Bits Episode 235

This is the transcript for episode 235 of the Community Broadband Bits Podcast. Lee Brown and John Williams from Erwin, Tennessee, join Christopher Mitchell to talk about the incremental build out of a Fiber-to-the-Home network. Listen to this episode here.

Lee Brown: The great thing about municipal broadband is it allows each community to decide what's right for them. We're in the greatest place of all time is being able to make that decision to do what's right for your community.

Lisa Gonzalez: This is episode 235, of the Community Broadband Bits Podcast from the Institute from Local Self-Reliance. I'm Lisa Gonzalez. We wanted to interview folks from Erwin, Tennessee for some time, now, and this week we're lucky to have them. The community, population around 6,000, has been building out a Fiber-to-the-Home system incrementally for the past few years. In addition to improving connectivity for residents and local businesses, the network has improved operations for the municipality's other utilities. Today, Christopher talks with Lee Brown, general manager of Erwin Utilities, and John Williams, fiber engineer. Lee and John, describe how the community had carefully considered what was best for them, before pursuing a fiber network. As it turns out they had considered fiber for a while before the circumstances were right to deploy. They started with a pilot program, and the network continues to grow. John and Lee offer Erwin's rational for the incremental approach, and share the way the network has improved services for all utility customers. Not only those that take Internet access services. Now, here's Christopher talking with Lee Brown, general manager, and John Williams, fiber engineer from Erwin Utilities in Erwin, Tennessee.

Christopher Mitchell: Welcome to another edition of the Community Broadband Bits Podcast. I'm Chris Mitchell, and today I'm speaking with two gentlemen from Erwin, Tennessee. We'll start with Lee Brown, the general manager of Erwin Utilities. Welcome to the show.

Lee Brown: Thanks, Chris. We appreciate being able to be part of this, today.

Christopher Mitchell: We also have with us, John Williams a fiber-optic engineer for Erwin Utilities. Welcome to the show.

John Williams: Hey, Chris. Thanks a lot of having us.

Christopher Mitchell: Great. I'm very excited to get an update on what's going on with your incremental approach to building out a great network, but before we dive into the telecom, Lee I'd like to ask you to just tell us a little bit about Erwin. When I look at the map, it looks like you're in a pretty beautiful area of the country down there.

Lee Brown: Absolutely, Chris. Erwin is a small rural town nestled in the Tennessee Blue Ridge Mountains in Northeast Tennessee. The Appalachian Trial passes through here, we get a lot of visitors that hike the trial, annually. We live in a somewhat remote, yet accessible area, and we have very small amount of property for development and industrial development. That's one of the reasons that we decided we would make our investments in fiber to help promote the economic growth of our community. Erwin's a small town, population of just over 6,000 in Unicoi County, Tennessee. The county population is just over 18,000.

Christopher Mitchell: When I look back at the history, it looks to me like getting into fiber-optics is something that your utility has contemplated for a long time, before you pulled the switch a couple of years ago. What made you originally interested in it?

Lee Brown: Chris, this goes back to 1999, the town of Erwin approached us, and asked us to look at providing a cable TV solution. We did at that time, we contracted for a feasibility study to be done, and looked at the possibilities of providing a Fiber-to-the-Home option, as well as a hybrid fiber coax system, and a traditional coax system for cable TV. The conclusion was that investments in anything other than fiber would be a bad choice, but the investment at that time was estimated to be a little bit above $20 million, and had like a 24 year pay back, assuming a 50% take rate. Something also notable, only 20 percent of the homes in our area had a computer at that time. The conclusion was let's wait for technology to improve, and the price of technology to come down. Again, in 2010 we revisited the possibilities of providing fiber, we were looking to possibly receive some of the stimulus funds to help build out our fiber network, and again, we had an updated feasibility study done, and again, we're still above 20 million dollars, and actually, the study said we had to borrow about 27 and a half million dollars, assuming a 17 year pay back, and a 45 percent take rate. At that time we'd seen numbers increase to 72 percent of the homes had a computer, but the conclusion was it was too much risk, let's wait for things to improve. In 2012, we put up our first fiber for our own operations. We put up a backbone and connected 45 SCADA locations in a six county schools. We connected all of our electric, water and wastewater infrastructure and put in a new SCADA system that was desperately needed for the utility operations. In 2014, is when we really got started, and our board decided we'd make a leap of faith, and let's build out a Fiber-to-the-Home network. Our estimates to build this out in 2014 was around $9 million. The decision was made that only broadband and voice would be offered. No cable TV. Our survey's also revealed that 80% of the homes had computers and used the Internet. We decided the time was right.

Christopher Mitchell: Let me turn to John, and I'm curious as a fiber-optic engineer, when you came into the picture.

John Williams: I started working at Erwin Utilities in April of 2012. Right when we were getting started on the backbone, and we put that in, and put in a pretty good capacity, so we weren't sure what we wanted to do. We wanted to have extra fiber there available, so we can use it at a later date, and hooked up our SCADA system, and did quite I bit of work on that, to kind of automate a bunch of different names, and bring a lot more information in that we just didn't have before. Then, like Lee said, in 2014 really tried to shift our thinking, and what can we use this more for? Really what we were looking at is how can we do Fiber-to-the-Home, but things are changing so much faster. I mean, just in the last 10 years, more video and things like that going over the Internet, and Internet was kind of the main driver behind everything, so that's kind of where we shifted our efforts and kind of focused in, how can we do this, and we did our own plan, and our own business plan, and our own design to kind of come up with what we thought would work, and do it as a phase approach, too, because we didn't have to build a video head in, because we weren't doing cable. That gives us an advantage of really the only thing we have to build is the fiber, so let's build a little piece at a time, and then it kind of helps spread over that cashflow that we have to put in, and invest. We can put it in over time, and just makes it a little bit easier, a little bit easier pill to swallow.

Christopher Mitchell: I'm always interested in the incremental approaches because I feel like not enough communities are aware that they don't have to do it all at once. We've seen some tremendous success from some communities that have built it in a phased approach. Did you look around at some other folks to model your approach after, or did you just try and figure out something that would work based on your own circumstances?

John Williams: I guess, I had some experience in operating a system before, anyway, and kind of had the engineering operations aspect to it, and saw a lot of different ways that as a small utility, I think one of our biggest advantages is the efficiency we can do on a small scale, so if we already know what we need to do, and what kind of workflows, and processes we have let's really refine those. Then if we start out small, it was just an easier sell to make. It was not quite as big of an investment, and then it gave us the opportunity to kind of learn as we went, too, because every day that goes by you learn something new, and make it better. We kind of came up with it ourselves and just kind of compared what we did to what some of the other local utilities, and there's quite a few in Tennessee, what they've done, and just kind of merged, and melted and came up with our own plan that we felt that really worked well for us.

Christopher Mitchell: Lee, do you have anything to add?

Lee Brown: Chris, one thing we have heard some stories of other fiber build outs that maybe didn't go quite as well. Trying to mitigate our risk, and just put together a palatable plan for our board of directors, we felt like the phased approach was the best thing to do. Trying to convince them and get them balled in on making a million dollar investment was a whole lot easier than convincing them to buy in on a nine million dollar investment. As John pointed out, we've learned so many things from phase one to where we're at today, and each one of those results in savings of dollars spent. If we'd had gone in and done a full build out, we'd be stuck with what we did from day one. It's really worked to our advantage, and our customers, and ratepayers advantage as well.

Christopher Mitchell: How did you end up financing the one million dollar costs for the first phase?

Lee Brown: Actually, we have been able to pay for what we've done thus far out of operating revenues, and we not incurred any debt, at this time.

Christopher Mitchell: When you say, operating revenues is that from sales of dark fiber and things like that, or what kind of revenues?

Lee Brown: It's from electric system revenues, the electric system owns their fiber-optic network, and leases that back to our fiber division. We also get the benefits of instantaneous outage reporting for our customers that take our fiber service, and it's a great advantage for our electric system to be able to receive these notices, instantaneously, when the customer’s power is out.

Christopher Mitchell: Right. To be clear, I think as someone who's regulated by TVA, you're not allowed, and presumably don't want to subsidize any telecom services with electrical revenues.

Lee Brown: That is correct. The fiber divisions paid its own way as far as utilizing and paying rent, and allocations for its use of the fiber. We also use it for electric systems operations. Water, wastewater operations, as well.

Christopher Mitchell: That's one of the questions I'm not sure John, or Lee, which one of you is better suited to answer this, but I'm curious if you could talk a little bit about the water and wastewater benefits from the fiber-optic network. We all have a sense already of all the smart grid things you can do from a lot of other utilities, but we don't hear as much about the water, and wastewater side.

John Williams: Really the first thing that we did was when we put the backbone in, there's, actually most of our remote sites are full of water, and wastewater, and there's everything from tank level controls, and there's actually a lot of controls that need to take place across the system, so there may be a tank up on a hill, a pretty good ways away and maybe a few miles away in some cases of what that tank needs to tell a pump somewhere else to turn on, based on a level, and when we started most of that took place just by these electrodes, or it would go over just some copper wire that's going down through the woods, or it was over on a old phone line, and different things like that. We were actually able to convert all that to pressure transducers, measure all the tank levels, and give real time inputs, and then we redid all the controls as well. Now, all of a sudden we have just this massive amount of information for the water system, and the wastewater system of, hey, here's how much water is actually being pumped and here's the difference between the previous days. They've been able to really take that and run with it, and find leaks, and do all kinds of improvements, just because they have so much more data. Then, going into the future, where we have more fiber, now, the possibility of doing AMI and what we'd like to do is have water meters and electric meters kind of work together, so you get information from both of those and that gives us even that much more data about our system, and the more data you have to work with, the more decisions you can make that are good, because you're not just stabbing in the dark.

Christopher Mitchell: Thanks, John. Lee, do you have any additional thoughts on that?

Lee Brown: Just the ability to bring back good data consistently has allowed our water and wastewater operation folks to make informed decisions. Be able to identify leaks when they occur, and pressure zones, and begin to start to look for those, and make those repairs before they wait for leaks, or possibly months before they come to the surface of the ground. Also, being able to use the information that's collected to make improvements in our wastewater system, and collectively overall reduce the infiltration, and end flow in the wastewater collection system, and try to bring us in full compliance with our state to regulatory permits. It's had a lot of benefits for all departments.

Christopher Mitchell: Let's talk about the pilot area, John, is it correct that you had about 300 potential customers and over two thirds of them signed up pretty quickly it seems like?

John Williams: We're actually on our third phase, we just finished building it out and we're connecting customers, now. We initially built out past about 1200 customers with a goal of getting 300, so a 25% take rate. We kind of planned on that after about two years getting 25 and we actually hit that a month or two ago. We're at 25% now, and still adding customers, and that initial phase, and something interesting that we found is ever since we've been doing it almost two years, new people that move into a home in that pilot area, or any area that we've got fiber built out to, we're getting about a 55% take rate. Any new customers that we're picking up just in general for electric that the take rate is much higher than what we anticipated. That's a really good sign for us going into the future.

Christopher Mitchell: That's just doing a high quality Internet product and telephone. Have you had any interesting revelations about not offering cable service?

John Williams: Really, I think over the last year it seems the biggest thing is Wi-Fi, we provide Wi-Fi as part of our service.

Christopher Mitchell: You mean like a remotely managed Wi-Fi product, specifically?

John Williams: Yeah. Exactly. When we first started it was, people just wanting Internet service, and have a few devices, and now the customers that we're really getting signing up they have so many devices and they are really using it to watch TV. I cannot tell you how many times customers have completely changed their habits when they switch to us, they'll switch away from the cable company and drop cable, cut the cord all together, and then use our service to stream things. Of course, all those things are wireless. It's kind of almost now, it's like I feel like we have to have that to be able to serve our customers for what they want to do. It's just amazing how many devices are in their homes. They are really using it to watch video on.

Christopher Mitchell: Yeah. I guess, I'm curious, Lee, as the general manager of the utility, as you've been connecting more customers and doing these incremental expansions has offering telecom changed the utility in anyway that's surprised you, your relationship with your customers and ratepayers?

Lee Brown: We just continually receive great feedback from our customers as far as their attention to their needs, their level of customer service that's delivered to their home on the install, or any time they have a problem, which is rare. If they have any needs in the future the attention that they get is a quick response. I think it's only worked to our advantage to build and further strengthen what I would consider would be a good relationship with our existing electric wastewater customers. This only strengthens it, and will really work to the benefit of all in the future.

Christopher Mitchell: Do you have a lot of people that are trying to get on your good side to make sure that their neighborhood is the next one you expand into?

Lee Brown: Hardly a day passes that somebody doesn't ask when are you coming to my house? Our goal is to try to complete our build out at the end of the calendar year of 2018. That's still a little ways out to a lot that has to be done between now and then, but we feel like it's an obtainable goal. Yes, some are going to have to wait, but the way the system was designed we really cannot pick and chose where we go with the systematic plan in place, and we're going to see it through. It's worked really well, thus far. One of the other great benefits that we may have not talked about by using a phrased approach is it allows your install to concentrate in one area, so being in this one small area, he doesn't have to drive far to do his work. If we had deployed system wide, we could be scheduling installs from end of the system to the other the same day or having to jump around for service calls. At least right now, as we're building, and learning and expanding, we're fairly concentrated, and we think there's a great benefit. Plus the cost savings system logistic being in the same general area.

Christopher Mitchell: Are you seeing people generally taking the base package? It looks like your, if my information's correct, you have the base package of being a 25 Megabit symmetrical service and people can go much faster. Do you see people going for faster speeds often?

Lee Brown: I'd say about 90% go for that base speed package.

Christopher Mitchell: That looks like that's considerably below, it's certainly considerably below what I'd be paying my cable company, I tell you that.

Lee Brown: We think our service is a great value for what we offer.

Christopher Mitchell: Right. Is that about $50.00 for both television service and the 25 Megabit service, or correct me if I've got that wrong?

John Williams: 25 Megs service is kind of our base, it's $50.00 and then there's no rental of any kind. That's kind of everything you need, and that's the wireless managed product and everything is with that. Then, you can upgrade that to a 100 Meg service for another $20.00 a month, and then phone lines are $25.00 a month and there is some tax associated with that, so you have to add those to it, but our base kind of package is just 25 Meg Internet.

Christopher Mitchell: Great. Now, let me ask you one of the things that, and I'll pose this to you first, Lee, and John feel free to weigh in, but is that when you start doing telecom you open yourselves up to be attacked by the cable and telephone companies, the big private companies that are trying to make sure no one else is competing with them, and I'm curious what your experience has been. I presume you have not escaped unscathed from the battles in Nashville, and wider even about whether cities should be doing what you're doing.

Lee Brown: Occasionally we see some efforts from our incumbent providers to offer some deals, or some different things that might try to attract or retain their customers, but the service that we offer and the past experience that they've had with their incumbents, we don't have to do a very big sales job to try to win our customers over. We've had something that I've never remembered happening in our area is just recently the cable TV company had somebody going door to door to try to sign up folks, or get them on a deal. I have no idea how successful it was, but we've not noticed any loss in our customers.

Christopher Mitchell: John, I know that responding to some of the political attacks that the incumbents sometimes offer, particular Comcast, and AT&T, I'm not even sure which incumbents you have there, but in Nashville AT&T and Comcast have been very aggressive in trying to attack municipal networks. We had covered a story picking up on a local news story that suggested that you went to Nashville, but I understand that, that was incorrect. We were perhaps an early purveyor of false news, unfortunately, and that story we covered.

John Williams: Yeah. No. We had a local, our local newspaper had called and it was kind of talking about that Nashville meeting, which really was kind of more about municipalities expanding outside of their electric footprints, and of course right now we're still working to complete the build out inside of our footprint. I think he was more questioning what Chattanooga, and some of the other folks, and Wilson, North Carolina with the FCC about how they're FCC is pushing to allow them to go out, and then the state is forcing them to stay within their service area. There's about 900 customers inside Unicoi County that we don't serve electric, so how does that, is that something that we would want to look at doing once we finish our build out. Currently, today, we couldn't do that, but I think it is something that really interests us a lot is being able to serve those people, it's a real rural area, and very mountainous part of the county. A good portion of them have no access to high speed data at all, if the law loosens up a little bit, I think it would be great, so we could have the potential to go in there and really help some of those people and give them a good service. In a lot of ways they'd have a better service than a huge percentage of the whole country does.

Christopher Mitchell: Great. I'm curious just, and this is my last question is, do you feel pressure from the Bristol region, or I think Johnson City is doing some stuff with trying to connect with some businesses? I don't know how far you are from Morristown, but you feel some pressure from some of those areas that have had this service for a while?

John Williams: I don't really feel any pressure, I think this is the great thing about municipal broadband is it allows each community to decide what's right for them. We've looked at this for many years, and finally the time was right, and we acted. Everybody's system, or demographics, their customers-per-mile a lot of things go into making the decision to deploy a Fiber-to-the-Home network. I just really feel like we're at the greatest place of all times is being able to make that decision and do what's right for your community. If it doesn't make sense, then you just don't do it. The time was right, and their board decided we needed to move forward, and we've done it in a very systematic planned approach and we feel like we're going to be just tremendously successful in the future with Erwin fiber.

Christopher Mitchell: Great. I applaud that sentiment, Coming from the Institute for Local Self-Reliance we love it when people are making their own decisions, locally. Is there any last thoughts, you wanted to share that we didn't get to cover, in terms, of the network?

John Williams: Just a few weeks ago, we had a new signup at the time of the install, our installer, Craig, was out getting a lady connected up, and she said, "Thank goodness you all came," she said, "I've called the cable company and they came out to hook me up a couple of weeks ago, the technician showed up and he said, "I'm sorry to tell you, but I cannot hook you up, you're too far away from the mainline." She asked the cable technician, "What should I do?" He told her, he said, "If I was you I'd call Erwin fiber to get hooked up with them." Our competition is sometimes our best sales person.

Christopher Mitchell: That's great. I certainly commend that spirit. Thank you, both for joining us on the show, and sharing more about your phased approach. I think it's something we're going to see a lot more of from communities moving forward.

Lee Brown: Absolutely. We put a lot of effort in trying to figure out how to do it correctly, and we've had a lot of our peers reach out to us, and ask us to share lessons learned and we're always glad to do that.

Christopher Mitchell: Wonderful. Thank you, John.

John Williams: Hey, thanks a lot, Chris. I really enjoyed being on the show.

Lisa Gonzalez: That was Lee Brown, general manager, and John Williams, fiber engineer from Erwin Utilities in Erwin, Tennessee. Learn more at MuniNetworks.org where we've been following Erwin's progress. Remember we have transcripts for this and other Community Broadband Bits Podcast available at muninetworks.org/broadbandbits. Please email us with your ideas for the show, send a note to podcast@muninetworks.org. Follow Chris on Twitter his handle is @CommunityNets. Follow muninetworks.org stories on Twitter, too the handle is @MuniNetworks. Subscribe to this podcast and all the podcasts in the ILSR podcast family on iTunes, Stitcher, or wherever else you get your podcasts. Never miss out in our original research, you can subscribe to our monthly newsletter at ILSR.org. Thanks to Admiral Bob for the song Turbo Tornado, licensed through Creative Commons, and thanks of all to you for listening to episode 235 at the Community Broadband Bits Podcast.