This is the transcript for episode 246 of the Community Broadband Bits Podcast. Christopher Mitchell interviews Eric Lampland of Lookout Point Communications at the Iowa Association of Municipal Utilities. They discuss the importance of due diligence and feasibility studies. Listen to this episode here.
Eric Lampland: The first thing, however, I would suggest that you do is to know who you are as a city, to know exactly where you stand in your own personal knowledge about this kind of activity.
Lisa Gonzalez: This is Episode 246 of the Community Broadband Bits Podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. We're bringing back Eric Lampland to the show this week. For those of you who are regular listeners, you'll recognize Eric's voice from Episodes 80 and 128. He's the founder of Lookout Point Communications and his firm has consulted for a number of communities and other entities across the country. Eric has also worked with us on research projects. In this episode, he and Christopher have a discussion about feasibility studies. When communities decide it's time to make changes to improve local connectivity, they typically need to engage a consulting firm to provide a feasibility study that's unique to their situation. As you'll hear in the interview, just knowing where to start can be confusing. Eric and Chris tackle some of the questions local communities should consider when they're ready to take this step. What should they look for in a quality consultant? What should they ask for in a feasibility study? And what are some common challenges they face? For any local community where investment and better connectivity is a possibility, this interview is worth a bookmark. Learn more about Eric's firm at LookoutPt.com. Now here are Eric Lampland, founder of Lookout Point Communications, and Christopher talking about feasibility studies for local communities.
Christopher Mitchell: Welcome to another edition of the Community Broadband Bits Podcast. We're back at the Iowa Association of Municipal Utilities Conference in Iowa where I've recorded some interview in the past and we're starting that off again this year. Our guest today is Eric Lampland, founder of Lookout Point Communications, and we're going to be talking about feasibility studies and what cities should be thinking about it, although I really think that this could apply to businesses also, people who are thinking about starting businesses, some of the thoughts you should come in too. Eric, let me ask you. You've long been a critic of feasibility studies, and we're going to talk for a little bit soon about what should be in a feasibility study, but what has a feasibility study been to date?
Eric Lampland: In general, the model for feasibility studies has about two major components to it. One is a survey of the community to find out if you've got public support. And the second is what you would really call a feasibility, which is putting together the financial details of whether or not you can create a sustainable network. You have at least those two normal things. Most often, it also has components to it that include things like what is being done nationally? What business model alternatives might we pursue?
Christopher Mitchell: Who's already in the community? What are their price points?
Eric Lampland: Exactly. Right. The competitive nature and so forth, but when you take a look at those core functions in most feasibility studies, that is what people ask for. It isn't necessarily what they always get.
Christopher Mitchell: Right, and I think that's what we're going to really delve into: what people should be thinking about, what they really want. I want to make a point before we get there though, and that's I think feasibility studies are looked at by people who are critical of municipal networks as kind of like a joke, and they look at them and they say, "Well, yeah you pay someone to come and do a study and they're always going to tell you, 'Yes you can do it,'" and to some extent I think that you and I would agree that there are some consultants that we would not like the way that they've done their feasibility studies in the past. I think different people have different ideas about this. In fact, I don't know if I've ever run into two different consultants that totally agree. But I think that we would both agree that the current status of feasibility studies, although not as bad as critics have claimed, has not met communities' needs in many cases.
Eric Lampland: Or actually, it's a range of issues. In some cases, they meet more than what the community really needs, and that takes us into something we've talked about and that is, if the community really, really is seeking the knowledge about whether they have public support, that's fine. Just do that survey. It's less expensive. You don't need all the rest of the material and you can just go ahead and do that. Unfortunately what happens with some feasibility studies is that they ask for something that might have the qualities of a survey perhaps with some national information and then most importantly some feasibility. In all too often cases, the latter part is poorly done. It's something that's rushed together on people's basic ideas that they had when they did something a year earlier, and those numbers go together, and then yes, you're right. I think they deserve to be criticized by whether or not the telco industry does it or whether other people do it. It's not a business case that would stand up to any real scrutiny.
Christopher Mitchell: I think a lot of communities, as they're starting to get into this, they hear the term feasibility study and they think, "Oh, that's what I need," when what they really need, I think is someone who's knowledgeable to kind of hold their hand and help them, to educate them, to make sure that they learn the things that they need to learn, to make sure that they are gathering the information that they need to do, and that they're thinking about the things that they need to think about. Let's talk about those sorts of things. A community that recognizes it needs to take some kind of action, which may not necessarily even be building a municipal fiber network. It just may be some kind of action. Where should they start? Or where should a consultant start in an ideal world from your perspective?
Eric Lampland: I think you start by simply admitting that that's what you're trying to find out. I've been a consultant now for 20 years and we have a joke in consulting and that is that people hire consultants because they don't know something, but they know exactly how long it's going to take and how much money it's going to cost. When you actually enter it with a little more humility, you say, "I'd like to buy some number of hours and I'd like you to come and educate us about what's important." Many communities have come to us and asked what belongs in a feasibility study, so we've created a few papers that walk people through that general process, but even with that kind of ammunition that they have, the understanding of what's involved is hard to necessary to get impregnated into the minds of the people who are conducting that study.
Christopher Mitchell: Something that you and I have talked about frequently is you need to create a vision. Like I said, you may not know that you want to do a municipal fiber of the home network or a public/private partnership. You really shouldn't have made your mind up about that at this stage of the game. You should be thinking to yourself, "At the end of the day, we're going to solve this problem," and that problem is not going to be not having gigabit fiber. That problem is going to be something like having a good business climate in terms of telecommunications access, having low-income access, having choice and price competition for specific markets, not just in general, but maybe for residents, or for businesses, or for both. Those are the sorts of things I think you want to be thinking about right? That's the vision you want to construct.
Eric Lampland: Right. I think your points are excellent.
Christopher Mitchell: I learned it by watching you.
Eric Lampland: What I often advise clients is that what they're really looking for is not feasibility at the start. They're looking for strategy, and if you think about trying to develop a strategy, that may include cost elements ultimately and whatnot, but in most often the case is that you want to know what your choices are and then you want to be able to select amongst those choices with some intelligence. That might mean that you come down to three choices, but unfortunately what we see today is that feasibilities in sort of a template-d way that we were talking about before go from city to city. They ask the exact same questions. They don't have the exact environment at all. And they don't have the same needs really. It's interesting to see those feasibility study templates be tossed around.
Christopher Mitchell: Well, that's one of the things I've suggested to some communities which is to say, "If you're just looking for a feasibility study in general and you're not going to do the hard work of developing your vision, read someone else's feasibility study." Not just anyone else's, but there's enough of them out there. If you're a large city, read someone's like Seattle's or San Francisco's. If you're a mid-sized city, look at a mid-sized city's feasibility study because fundamentally they're probably going to be pretty similar to yours.
Eric Lampland: Yes, I think that's right. There's a complaint that we have amongst consultants that some consultants, and we won't say who, do sort of a cut and paste job. The piece that is true also about feasibility studies is not only are these template-d feasibilities passed around, but the price is also passed around, so that price becomes something that people lock into without any awareness of what is really entailed in actually getting the work done.
Christopher Mitchell: I think it's worth noting that no consultant that I'm aware of, and I've talked with a number of them, will admit that they do cutting and pasting or the extent to which they do some cutting and pasting. So it seems to me there is a general sense that that's not the way you want to do it. I mean there's nobody who's out there saying, "Actually I do cut and paste and I think it's great," so it is worth noting that there should be some kind of very specialized look at a community for its particular challenges and assets. Fundamentally this is something that we come back to at the Institute for Local Self-Reliance again and again. We don't think states should have one size fits all rules because communities are different. Because communities are different, they should have unique expertise in terms of developing. One of the things that you and I have talked about before and we've seen is that there's a downward pressure on feasibility study prices and I think that this -- we'll get into some of what's delivered. It's not like if you go out and you say, "I want a feasibility study," you know what you're going to get in the end because different entities, different firms, even different firms and different models will come out with different results. So, I want to turn in a minute to what kind of results one might expect, but there is a sense right now that when you are putting in a feasibility study against other consultants, one of the primary determinations of who's going to get is who's the low bidder? That, to me, seems a little bit inappropriate, like mismatched incentives.
Eric Lampland: It's particular foolish when you think about what we're trying to accomplish. If, for example, we go the entire route towards the fiber to the home build, you may be talking about many millions of dollars of expenditure.
Christopher Mitchell: Right, on the order of a thousand dollars per household.
Eric Lampland: At least, right? At least. Two thousand dollars perhaps per household that's connected. If you wanted to say, "Well we're going to have 50 percent of our community connected," take 50 percent times a thousand and 50 percent times two thousand, you got a pretty rough number. Now, you'd like to get a little closer when you ultimately do the business case, but those kinds of simple things can be done.
Christopher Mitchell: Right, so I mean you're talking about a community that could be borrowing tens of millions of dollars and they're like, "Well, we could get this feasibility study for $15,000 -- $20,000 cheaper."
Eric Lampland: Yeah. In fact, we're currently doing the detailed design on a community that made that exact kind of a decision. There were three bidders. Two of us, including myself, came in about $500 apart. Underbid both of us by about $10,000 and of course they selected the cheap one. I then was brought back in to do the detailed design work, and the feasibility study was deplorable. It was just -- the data was wrong. The information wasn't complete. We basically really had to redo the work from -- everything from what services were being offered to the proper number of households in the community and so forth. Well, the point being that they didn't get a cheap deal on that. They actually spent more money because at the time that they actually were correcting this, they were paying higher dollars to get that information.
Christopher Mitchell: This actually reminds me of a conversation we had back in Episode 174 where I had on folks from Vantage Point and we talked about how when you come out of the feasibility study with better information, you're actual next rounds of bidding, in finding consultants or people that are going to do the work of building the network, your cost there will go down because you have better information. This idea of we're going to save $15,000 up front is more like saying, "We're going to spend a lot more money later."
Eric Lampland: Yeah, and there are a number of different cases where that's absolutely true. We, for example, always on a feasibility study try to do the outside plant design work on an Esri GIS System. Why? Well, because we know in the next round we're going to use it and in fact in the next round we're going to use it, and then eventually in the operations of the networks we're going to use it. So we set good foundations right at the beginning, but to do that costs money.
Christopher Mitchell: Right and this is where I think we should be very clear that you shouldn't, as a city, go and just go with the highest cost because that may also not bring you the desired result. You want to go with a feasibility study and work with a consultant that will meet your needs. I don't think you would say that you're the best consultant for every city. Cities, as they're developing their vision, I think they should be thinking in a certain line. If you're really opposed to the city being a service provider then you may want to go with a different consultant than if that's your preferred outcome. Again, we don't think you should be making those decisions but you can be honest about which way you're leaning and you may want to pick a consultant based on someone who has had good results with that kind of direction and ideally someone who is not pigeon-holed in that area but does have some experience with it.
Eric Lampland: It's always difficult to go about hiring a consultant to confirm something that you really don't understand. We had a case in point where the political decisions in the community indicated that they wanted to connect businesses. That was the primary goal and laying fiber to connect those businesses was the best idea. Well, it didn't take much more than a couple of weeks into the competitive analysis to realize that in that particular community, every single fiber seller from level 3 to AT&T to Verizon to you name it was in that city already selling that fiber to those businesses. It may have been a good idea but it would have never flown.
Christopher Mitchell: Right, that wouldn't have been a very wise use of their resources.
Eric Lampland: Well, it turned out it wasn't.
Christopher Mitchell: Right. Let's talk about what a community should be getting out of the feasibility. So obviously one is refining their vision. They're going to go from coming into it thinking, "We want better broadband." And they're going to come out of it thinking, "We want to achieve these concrete goals and this is how we're going to do it," but it's not just having a written roadmap. There's certain things. You mentioned the Esri mapping, so what do you need to know at the end of this process that we're calling a feasibility study?
Eric Lampland: Well, what I think of is that the individual components, you can liken to certain tactical pieces of work. Get the Esri layout done in town so that you know exactly what that layout cost you.
Christopher Mitchell: When you say the Esri layout, you mean like where all the fiber goes, where the hand holds go, like which side of the street it's on, that sort of thing?
Eric Lampland: Yes, but on the first go around you want to lay that out at least in a fairly general way on an Esri system because it gives you an accurate cost that you want to look for when you're trying to determine sustainability. You don't get down to the real knits and grits detail of an outside plant piece. That is a next level cut on it because it's significantly more expensive. You can do an Esri layout for most communities for something under $30,000 unless it's a very large community, but when you do the actually walk out, in other words, where are the rocks? What easements can't I get past? So on and so forth. That can be many hundreds of thousands of dollars. You don't want to be doing the second until you make a good decision on the first, but you want enough so that you can walk forward and not have to redo all the same work again and re-lay out different kinds of assumptions, but those are tactical pieces. What you really want after you get done with this is you want a strategy, and a strategy will say when do you do tactical pieces. You know?
Christopher Mitchell: Mm-hmm (affirmative).
Eric Lampland: You can I have written papers on a community that did its own city hookups at first, added ISP connectivity later on for aggregation to-
Christopher Mitchell: Right. Santa Monica.
Eric Lampland: Santa Monica, Telco centers and that kept expanding and expanding and expanding. That's an approach. It may not be an approach for everybody, but it's an approach. It took them ten years to do that. On the other hand, you take somebody like our favorite Chattanooga people. They spent about six year planning before they did anything.
Christopher Mitchell: I did an incredible, I think -- I really enjoyed it is what I'm trying to say, a 70-minute discussion with Harold DePriest about all the things they did before they built their network and I think it's really crucial for people to know how they were so successful.
Eric Lampland: Good planning is really important.
Christopher Mitchell: There's a little avenue I want to go down, a little alleyway perhaps, and that is Chattanooga, Santa Monica, they had people who already wanted to get into this. I've sometimes met with cities who are very interested in this or their CIO has been tasked with being interested in it, and when I talk to them, they're kind of like, "Yeah I just need someone to tell me what to do because I don't really want to get into it myself," and this and that. In my mind, it's kind of a recipe for problems. I think, to some extent, you as a consultant need someone who's there and is eager to learn about this, and they're going to really be the ones to take charge. You can't be doing all the work as a consultant.
Eric Lampland: Yeah, not only can't you do all the work, you don't know the community and you need somebody to share those issues with you, but there's another thing that's on the other side of that too. If a community comes to you and you can get a very quick read that they're not really interested. They're doing something for some management person of maybe even the council.
Christopher Mitchell: Right you've got someone on the council that really wants to and the other people are just kind of like, "All right. We'll humor him a little bit, but we're never really going to go forward with it."
Eric Lampland: You do one of those things and you never do a good product because you need to be working with people that in fact are engaged. If you think that you're going to work your tail off and nobody's going to care, the motivation to really, really do a super project lessens.
Christopher Mitchell: Right.
Eric Lampland: It's just humanity.
Christopher Mitchell: Okay, so backing out of my alleyway. You were listing the sort of things that you want to come out of it with, and we certainly have identified and have a sense of where you're going. I think we've just noted you want to have a sense of who's going to be responsible for carrying it forward. You want to have a sense of the mapping, the layout. Even if your plan is, "We're going to do an incremental type thing that might take 15 or 20 years," you still want to come out with this layout that will show you where everything will ultimately go so you can engage in planning.
Eric Lampland: Absolutely to that last thing. The first thing however, I would suggest that you do is to know who you are as a city, to know exactly where you stand in your own personal knowledge about this kind of activity. If you really find that you really don't know much and maybe you've been asked the question by a council to go do this, probably the best thing to do is to do some education, maybe get a consultant to help you with that education and maybe do a survey of the community to see where those people are.
Christopher Mitchell: Right, this would be kind of a light feasibility study and probably coupled with going to some sort of events, regional events or other events where you can see speakers. You can talk to people.
Eric Lampland: I had an early mentor that gave me the advice one time. He says, "If you want to know something, get around the people who are doing it, and they'll teach you." So if you're a city and you want to know how to do this, get around the people who have done it and they'll teach you.
Christopher Mitchell: Right, yes. I think that's really important for also when you're talking about what consultant you're going to go with. If you're just maybe contacting some of the cities that, or just looking at the results from other cities, I feel like you're not really doing your job. You're going to be picking a consultant. When you're about to pick that final consultant, you really want to talk to the cities that worked with that consultant recently. One of the questions that I always encourage people to ask is how did the consultant act when things went wrong because something's going to go wrong. There's going to be a hassle, and you want to be working with a consultant that's going to be with you to try to figure out how to get past that road block.
Eric Lampland: Yeah, that's a really good point. However, I will tell you a piece of human nature that we run into all the time. Oftentimes we follow some of the consultants that aren't as skilled and they've done a less than good job. We ask the city how they chose that particular consultant and often times it's because they talked to other people who had that consultant and they get good references.
Christopher Mitchell: Yeah, I can think of a city where I actually know where the network did not work out as planned. Part of the problem was the consultant had made some errors in the feasibility study, not that it necessarily wasn't feasible, but they didn't even recognize these problems were looming below the surface, and they had no sense that their consultant's obligation. Their consultant did a bad job and they should not have been blindsided by those problems.
Eric Lampland: Yeah, absolutely. I think it's just sort of normal that when somebody comes to you and asks you for a reference about somebody that has worked for you, the natural sense is to defend you decision, to think that you picked well, and that you got something positive out of it, even though you may in the heart of hearts know that that wasn't really the case.
Christopher Mitchell: Especially us Midwestern folks, it's hard to talk negative about some of these folks. One of the things that I've found is that even consultants that I think would fit into the group that we find might be cookie-cutter sometimes. There are cities that have been very well served by them, so it's not the case that there's some group of consultants that's always doing a bad job. If that was the case, I would be talking about them. I'm not afraid to come out and say, "Don't hire a firm ABC. They're terrible." In fact what I find is that different consultants work for different places, and I wouldn't say that there's a firm that I would say, "No, never use them under any circumstance."
Eric Lampland: Well, I have a few of those, but-
Christopher Mitchell: I'm sure that you do.
Eric Lampland: They'll remain nameless for this. I think that even amongst the consultants that I've known over the last 12, 13, 14 years that I've been doing this. There are consultants that have particularly strong strengths here and there, strengths beyond mine, and I have strengths beyond theirs. Amongst the consultants, we know each other, and we know who's good at what, and even with some of those consultants that don't do what I consider to be a really, really good job, they do some good things. It depends on what you're looking for, but herein is the actual problem. If you're a city that doesn't know, then how do you pick?
Christopher Mitchell: Let me just suggest one thing, and this is a thing that I'll say. I'm not going to try and have too much of an ego about it, but I'll sometimes talk to cities that have been working with consultants. They've been going down this path for a year or two, and when I meet them, they'll be kind of like, "Oh, who are you? What do you do?" And I'm not saying that I'm famous. I'm definitely not. It's a small pond. I'm kind of a moderate-sized fish, but if you've Google-d municipal broadband or municipal fiber and you're thinking about that, there's no way that you cannot have come across me. So when I hear someone that says, "Oh, I've never heard of the Institute for Local Self-Reliance," or "These reports are interesting. I'm surprised we didn't come across them." If you haven't come across our work, then you're not doing any due diligence frankly.
Eric Lampland: Absolutely.
Christopher Mitchell: That's a concern.
Eric Lampland: Absolutely. I couldn't agree with you more Chris. There are some basic things that you should do. You should know what conferences occur around the country and who holds them. You should know the magazines that get done, and if you don't know the Institute of Local Self-Reliance, you haven't done your homework.
Christopher Mitchell: So as we're wrapping up, let's try and just nail down a couple of items. One is, what is cost? What are some realistic costs for things you have to do?
Eric Lampland: About 6, 7 years ago, feasibilities used to cost around $70,000 to $80,000 to get done.
Christopher Mitchell: For a moderate-size community.
Eric Lampland: For a moderate-size community. With a certain amount of price competition, that price has come down to closer to $50,000. The difficulty with $50,000 feasibility studies is that you can't actually do all the work of a feasibility study for that amount of money.
Christopher Mitchell: Right and let me just say that this is one of the reasons a lot of feasibility studies are ugly.
Eric Lampland: Yes.
Christopher Mitchell: Because feasibility studies, to make them look better you're looking at 3 to $5000 worth of graphic design. That's 10 percent of the project and a lot of firms are just going to, I think good consulting firms especially are going to say, "We're going to put that money into better analysis, not into making it look nice."
Eric Lampland: Yes, and you know you may be talking about $20,000, $25,000 for doing the outside planned evaluation. That's a very important number because it usually represents about 70 to 75 percent of the total cost of the project, so you want to get that number right, but when you take that and you take your $3,000 and you talk about $50,000 you're done saying that this person who's going to work for you for about 3 to 4 months is only going to take home about $20,000 worth of income.
Christopher Mitchell: Pre-tax.
Eric Lampland: Pre-tax. Pre-benefits, pre-tax. And consultants get paid by the hour so they have to curtail what they would really like to do to meet your budget, and that's something that is a disservice to you.
Christopher Mitchell: So let's turn to technology then. What sort of things, technologically, especially for people I think that recognize they have a problem -- they're not technologists. They may not be surrounded by any technologists that they know. What do they need to be thinking about?
Eric Lampland: Probably the first thing that you want to be able to do when you're evaluating consultants is to ask them about technology that they -- what they think about it. What you're looking for there is not just specific things like, "I can plug this box into that box."
Christopher Mitchell: "Ah, technology. I'm for it."
Eric Lampland: Hah, technology, you're for it. Good. But you really want to understand does that person understand the technology deeply enough to know where the trends in the business are. Right now we're going through a very significant change in the technology markets. The architecture is in fact changing. If you've got a person that is going to come in and do a feasibility study for you for typical bonding of 20 or 25 years, you're probably going to change your electronics 2 or 3 times during that period of time.
Christopher Mitchell: To be clear then, I mean what we're talking about is if you build a network that is sort of built as you would build a network five years ago, your locking yourself into five, seven, or even longer potentially if you drag it out years before you can upgrade to the stuff that people are building today if they're thinking properly.
Eric Lampland: Absolutely. You can think of the existing legacy providers because they are actually caught in that problem. They built their networks 20 and 30 years ago and they're trying to maintain that same capital investment for as long as they can continue to get a revenue stream off of it.
Christopher Mitchell: The reason Comcast isn't doing fiber isn't because they think fiber is dumb. They're doing it because they have a massive investment in Coax, and they're trying to figure out the best possible use for it because they have it.
Eric Lampland: Absolutely. In fact, Comcast always builds with fiber today when they're building in green field because fiber is actually cheaper to build today than the coax networks that preceded them. If you don't get the technology right, how in the world do you expect to get the budget correct? Because what you're pricing is the technology that you're implementing, and that budget is not a budget for next year. It's a budget that probably has at least a ten year horizon on the electronics or the optics that you are planning to use. If you're building with yesterday's technology, you might get two to three years out of that technology versus seven to ten years out of that technology, and what changes for you are the services that your customers are asking for. If I'm asking for one and a half megabit service in rural America, it's because I've got a technology that's not capable of giving me a hundred megabits or a gigabit or whatever the case may be. You run into the same issue if you're building a new network.
Christopher Mitchell: Right. Well, this has been a really good conversation. I've had a really good time. I think we've covered this pretty well. There's so much more we could talk about, but I'm trying to keep the show at a reasonable length, so thank you Eric for coming back.
Eric Lampland: Christopher it's always good talking to you. Thank you.
Lisa Gonzalez: That was Christopher talking about feasibility studies for local communities with Eric Lampland, founder of the Lookout Point Communications Consulting Firm.
Christopher Mitchell: Hey everyone. I just wanted to thank you for listening and helping out to create a stronger Internet ecosystem, making sure everyone has high quality access. Please tell your friends, tell others who might be interested about this show. If you have a chance to rate us on iTunes, please do. Several people already have. We really appreciate all of the comments and we really appreciate you taking the time to listen to us.
Lisa Gonzalez: We have transcripts for this and other Community Broadband Bits Podcast available at MuniNetworks.Org/BroadbandBits. Email us at Podcast@MuniNetworks.org with your ideas for the show. You can follow Chris on Twitter. His handle is @CommunityNets. You can also follow MuniNetworks.org stories on Twitter. The handle is @MuniNetworks. Subscribe to this podcast and all of the podcasts in the ILSR family on iTunes, Stitcher or wherever else you get your podcasts. Never miss out on our original research. You can subscribe to our monthly newsletter at ILSR.org. Thank you to Break the Bands for the song, "Escape," licensed through Creative Commons. And thanks to listening to Episode 246 of the Community Broadband Bits Podcast.