Transcript: Community Broadband Bits Episode 255

This is the transcript for episode 255 of the Community Broadband Bits Podcast. Christopher Mitchell speaks with Kyle Hollifield of Magellan Advisors, a consulting group that works on community networks, about the importance of marketing. Listen to this episode here. 

 

Kyle Hollifield: The way you increase shareholder value for the municipal-owned network is for the owners of that network, which is your customers, to feel like they're part of the process. That's how you increase shareholder value.

Lisa Gonzalez: This is Episode 255 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I am Lisa Gonzalez. Delivering fast, affordable, reliable connectivity is typically the first goal for communities that choose to invest in publicly-owned internet infrastructure. There are different business models and local governments usually hire consultants like this week's guest, to help them flush out which model suits their unique situation. Kyle Hollifield from Magellan Advisors joins Chris this week. This is one of Chris' interviews he conducted at the Broadband Community Summit in Dallas earlier this month. Magellan works with communities across the nation looking for ways to improve connectivity. In addition to a conversation about public-private partnerships, Kyle and Chris get into one of the areas municipal networks often find unfamiliar: marketing their services to potential subscribers. Now here's Chris and Kyle Hollifield from Magellan discussing public-private partnerships, and marketing for municipal networks.

Christopher Mitchell: Welcome to another edition of the Community Broadband Bit podcast. Coming at you live from Dallas, well, it's recorded live in Dallas at the Broadband Community Summit 2017. I got with me Kyle Hollifield, the Senior Vice President for Magellan Advisors. Welcome to the show!

Kyle Hollifield: Thanks, Chris, it's a pleasure to be here!

Christopher Mitchell: Kyle, I think you might have the best accent of everybody in this field.

Kyle Hollifield: Well, I don't know what that means but thank you very much.

Christopher Mitchell: It's that Tennessee drawl, it's very fun to listen to.

Kyle Hollifield: Well thank you, it's nice to know you have assets you didn't have to work for.

Christopher Mitchell: So quick background, why should anyone think that you know anything about municipal broadband community networks, that sort of thing?

Kyle Hollifield: I've been in the business since about 1978, believe it or not, and I've been in fiber optics and broadband since about 1984. My history goes way back to the first company to actually lay under-sea fiber optic cable which is Standard Telephone and Cable, which was the old ITTUK, we actually spun our own fiber across the ocean between Europe and United States back in the mid-eighties, and I was an integral part of that whole process. So that's kind of where the broadband piece started from the operations side, and then from there I developed a whole broadband strategy for British Telecom for their marketplace in the United States under different licensing and different OM-type of agreements that they had with other companies. And then beyond that, started and founded my own company in technology around IP voice stacks in 1987 and until 2007. Also have worked in municipal broadband in the Commonwealth of Virginia for over five years establishing, helping establish, I had a lot of help, establishing a very successful community broadband triple play provider, also doing a lot of middle mile stuff under the old B-top program to reach out to rural areas that needed some kind of economic stimulation.

Christopher Mitchell: And you gave a lot of advice. You have a big background in marketing, before broadband you've got all this broadband expertise, I know you've worked with a lot of communities over the years.

Kyle Hollifield: Yeah, the marketing piece actually came out of Proctor and Gamble. Fresh out of college, fresh out of the military, I finished my college degree and got an offer with Proctor and Gamble which to me, at least in those days, was like getting a PhD in marketing because they were the leader, probably still are, in real marketing and spent six years there as Assistant Brand Manager for a lot of very successful products. The general level marketing plus I have a degree in it, that helped also, then on the community broadband side, obviously I spent a lot of time on business development and marketing and one of the things that I think really was a huge help for myself personally and also maybe for the industry in some ways, is at the organization I was at, we had so many requests from other communities around the country saying, "How did you do this? Can you help us?" So we begin to help people just for free, when we had time, and unfortunately or fortunately it turned into a business. People kept saying, "Wow. I need more of your time. I'm willing to pay for it."

Christopher Mitchell: So you're doing a a lot of work with Magellan now, and working with cities and one of the things I've been talking to folks about at this event is trying to get a sense of whether we are seeing -- We know we are seeing a massive uptick of cities that are studying this, are cities actually doing things or are they just studying what they could do?

Kyle Hollifield: In our experience, they're doing both. This is an estimate, I don't have empirical numbers because I really haven't studied that part of it to any detail, but I would say roughly about 50% of the clients that engage us to do a feasibility study goes much beyond the feasibility study. Now it may not be a full build-out, but it may be they just adopt smart community policies that allow them over time to build a network, or it could be that they take the next steps of doing a pilot project to see how it goes. At least 50% of our clients are going to what we call the next step and getting board approval or mission approval to move forward in some ways that would enhance the opportunity to expand broadband.

Christopher Mitchell: I think some of the people that listen to this show are frustrated at some of those interim steps, and I think when we look at history, a lot of people misunderstand Chattanooga, or other utilities that are in the news, Lafayette, Louisiana, a lot of these utilities they didn't just say, "We're doing nothing today, tomorrow, we're building out fiber to everyone." These interim steps you've been in this business longer than I have, it seems pretty common that it's not an aberration that so many cities are starting small.

Kyle Hollifield: That's correct because you have to remember that first of all they're really averse to risk, and they also have a fiduciary responsibility to the rate-payers, to the taxpayers, and to the community in general. And it's a balancing act because they really have three basic responsibilities. First responsibility is to take care of the community assets in a very responsible way. The second responsibility is to try to have some kind of control over the community's progress in the future. And the third is to try to figure out how to best leverage the assets that the community has in a way that will create an environment that will allow for more economic development, it allows for, we call it better quality of life, that term has been used way too much, but it certainly is in things like better education services, better healthcare services -- We see a lot of aging in place now on the healthcare side, especially in rural communities and that's becoming really dependent upon broadband. Those three areas is why they take those interim steps, they want to make sure as much as possible that they lower their risk and also leverage the most out of the reward that they would get on what risk that they do take.

Christopher Mitchell: Now I don't want to tar the communities you're talking about that are taking these initial steps but, there's perhaps the 50% of the communities that are not moving forward, this morning I was talking with some folks from an ISP that work with cities, and we were talking about this "I want a pony" problem. Which is something Carol Feld termed and I think it's a great term for cities that basically say, "Look, this is what we want. We want fiber to every home, we want control of it as a city, we want it to be open access, we don't want to pay a dime, we want y'all to build it for us." I'm curious when you are dealing with a community like that, how do you respond?

Kyle Hollifield: Well, I would take it further I call it the Sparkle Pony. It's beyond the pony.

Christopher Mitchell: It's a specific breed of magic pony.

Kyle Hollifield: Exactly, and like the great white whale, it's very elusive, talking about animal metaphors. One of the things that I try to convey to communities who take that approach is that it's very hard to expect private enterprise to invest in something that you want to invest in. Especially when you're asking them to carry the entire load, and give you some measure of control at the same time. Investment and control go together. So one of the things I try to council them on is even if you get someone that willing to do this, the amount of control that you're going to give up, the amount of things that you may want for your community that you necessarily probably won't get, is what this is going to lead to. And then the reality is, I can't think of one case where a community has issued an RFI, or RFP, or just a press release and said, "Hey, come to our community! We're great people, we've got wonderful opportunities. We'll help you in some ways, maybe we'll help the permitting process, maybe not. Maybe we'll help you with some right-of-ways, and we expect you to put up all your capital and to build a network." Well that's just not how a private enterprise works. I think that when you throw those Hail Marys out there, it's more of an issue of trying to placate the demand as opposed to actually taking some kind of action that will be positive for the community. I think that's really the political piece of this that sometimes we miss.

Christopher Mitchell: Oh I think that's absolutely right, and I've railed against this in my session the other day in which I said- this is something I've said about state leaders and federal leaders in the past, I hadn't said it about community leaders until more recently and that's this idea that: "Broadband is so important, it's vital for our community, we need it for the jobs for tomorrow, there's nothing more important than it, and we will not spend a dime on it." It doesn't work!

Kyle Hollifield: Exactly, in your personal life, if you don't invest, you don't get a return. It's just pure economics. I think what communities have to look at is, the question is, for communities is, how vital is a real high-speed, very secure, extremely reliable broadband, how important is it to your future? That's really the question you've got to ask. It's a very similar question to a water treatment plant. What does that mean to your community and is it worth a 25-year investment, and are you willing to wait, take the long view and say, "Hey you know what? This is a long-term investment, this is not a retail sales operation." Although it may boil down to that at some point, the reality is this is not where you're going report to the shareholders a reporter and have a return on investment that makes you look like you're a genius in finance. What it really is, is a community asset to be shared by the community. One of the things that we do a lot is we do a lot of negotiations with public-private partnerships. A lot of our clients are involved today in public-private partnerships. What's important about that is, the private enterprise world has a certain way of thinking and doing and working. The municipal, or the community, world has a different way and two different mission statements. The private enterprise is very simple, we all know it, it's to increase shareholder value. Period. That's their mission. Community organizations are to serve the public, so the question is how do you meld those two together? It's a very difficult process, you've got to understand both sides and you've got to find common ground in the middle. And it's very difficult. That's one thing I want to bring up sometimes I think sometimes both on the enterprise side and community side are kind of naïve about where that middle ground is and they have a really hard time finding it. So we hope that we can bring some of those expertise to that process.

Christopher Mitchell: I've been pretty critical of too much hype in the public-private partnership, and I'm sure that you agree, I also think that there's a lot of promise and I think as we work these things out we'll have models and more ideas. The challenge that I have is what the term "partnership" means at this point. I was at an event, there's a municipal network and Comcast competes against that municipal network but also it's a rural area and that municipal network buys transit from Comcast to get to the wider internet. Comcast sponsors the lunch, they're up there talking, nobody is listening, and I'm sitting with the guys from the small community and suddenly Comcast is talking about how they partnered with this rural community to deliver broadband, not only doing it themselves but enabling the community to do it with the transit. And the guys look at me like "Partnered? I buy stuff from you!" And I looked at him and I said, "Yeah, I partnered with Delta to get to this event. I partnered with Exxon to drive down the street." So when we try to track partnerships, we don't see that many of them. I'm curious, it strikes me there's be many more attempts that there's been successful real partnerships actually signed on the dotted line and everything. Am I right?

Kyle Hollifield: You're absolutely right and what I spoke to earlier is the reason for that. That common ground. A real partnership is both parties have skin in the game, both parties can realize a return from the partnership. Otherwise it is a business transaction, it is not a partnership. So that's why you see so many that are rare. And I put blame on both sides of that equation, by the way, because I've worked on many of them, and I can tell you right now --

Christopher Mitchell: There's often good people on both sides --

Kyle Hollifield: And good intentions. But on the community side, municipal side, county side, regional side, governmental side let's say, one of the big stumbling blocks is the political issues around "How do we do this in a way that it looks fair and transparent? How do we give everybody a shot at it so that we don't get criticized for being a non-partisan player." But the problem is, you can't enter into a partnership unless you are a partisan player. So there's this dichotomy between transparency, which a private company may not want as much transparency as you think you have to give, so on the community side that's a real challenge for them. There's ways to overcome it, but you've got to think it out, you've got to plan it out, you can't just be haphazard. You're going to be attacked, no matter what, you're going to be attacked, because if you're doing a public-private partnership, and even if everything is going well, the other private partners that didn't get the deal are going to attack you. Community leaders are going to attack you because the question is going to be "How do we know we got the best deal?" Okay? On the private side, oftentimes because of this demand for shareholder value enhancement, they're too greedy, and I don't mean greedy in a bad way, they're just too demanding knowing that the community can only do certain things at a certain level. So I think that's the main two reasons you find this really hard part -- It's really hard because you've got to find this middle ground where everybody can live, and operate in, and be partners in and its very difficult. That's why you see very few of them happen, however, it's really worth the effort. There's no doubt in my mind about it. I'm like you, I'm very critical of the PPP and everybody hyping it and talking about it when it's so hard, but I take a different approach. My approach is if it's really difficult, it's probably worth it. It's the ones that are really easy that don't work out.

Christopher Mitchell: One of the things that we've seen is people will attack consultants and say, "Consultant's always going to say you should just build a municipal network," and in fact one of the reasons we're talking about public-private partnerships is I'm a hard-core supporter of the right of cities to make their decisions and to build networks where it makes sense, but we all recognize not everyone should build and operate their own network. And so this is an important tool for those many communities where building and operating or owning their own network may not be appropriate.

Kyle Hollifield: Exactly, and I rail against those folks that say that our community, our consulting community, always tells people they should do something because they think there's income for us on the back end. I really rail against that. Because if you're a bad consultant, and you tell people to do stuff that fails, your name is tied to that.

Christopher Mitchell: We've seen consultants that have disappeared already. It's not the situation where every consultant that worked in the space is still out getting new customers.

Kyle Hollifield: Or even should be. To take it a step further.

Christopher Mitchell: One of the things I love about consultants you're all very competitive. I think every consultant has a critical view of every other consultant, and that's --

Kyle Hollifield: It's a self-policing industry if you think about it in a lot of ways. Even when we've been engaged in this, it's really important, and even if it fails, the community has learned a lot through the process. They really understand how complicated and what a heavy lift this is, so the next time they take a run at it, they're not neophyte anymore. They're loaded, they understand what their asset base is. That's a big issue they come to these things sometimes they don't even know "What's your vertical assets worth?" "We don't know we even got any." That why you need a consultant, right? "How much revenue are we giving to the incumbent and can we shift that? How do we aggregate demand?" I wanted to bring that up because it's really important because it is not a wasted time if it doesn't work because you're prepared for the next time you have the opportunity. I wanted to really highlight that because I've seen it over and over.

Christopher Mitchell: I just want to second that, I think it is a really good point. Communities that succeed in this are not communities that hit a grand slam the first time up to bat. They are communities that struck out, struck out and they stuck with it and they learn lessons and they figured out how to make it work.

Kyle Hollifield: Exactly.

Christopher Mitchell: Moving to communities that have gotten on base, let's just push that metaphor, they've built a network. Now one of the challenges, and I think you'll agree, and if we look at municipal networks that have struggled, and some that have failed. Failed is such a hard word because you're talking about a multi-decadal infrastructure, could fail for five or seven years and then be great after that. But there are networks that have not met the desires or the expectations. Many of those, perhaps the majority, perhaps a strong majority, it's because of a failure to, as you would say I think, execute the marketing plan.

Kyle Hollifield: That's exactly right. Every client we have that goes into this, and we have three today that are building complete networks and we're standing them up for them, and we're doing a lot of stuff for them. When they ask me what the biggest risk is, the biggest risk is not implementing the plan that's put before you and being able to execute on that plan, especially when it comes to marketing, sales, operation and support. Most of the time a community had a pretty good brand when they start out, because they already provide services at some level. And we can rail against community and government all we want to, but the reality is when that four foot snowfall comes, you like to see those socialist snowplows out there getting you to work, okay? And for economic development it's really important. You want to be able to turn on your electricity without having to say I need to meter how many things I have going at one time, you want to be able to turn on the switch and say I got all the electricity I ever need. It's really important. So communities as a whole start out with a positive, a net positive. The question is how to leverage that net positive and keep it going. This is a really important piece of that and its called your brand. I tell people all the time, your brand is not what you say you are, it's what your customers say you are. That's your brand. And they forget that, they think a logo or slogan over top of the building is their brand, and its really not, its what your customers say about you. Every touch point with a customer, this is really important about the information piece, I don't care if its contacting the CSR to begin a service offering, I don't care if it's talking to a knock about some kind of service issue, I don't care if its talking to a person that runs the public relations for the city or for the utility or whoever it is, every touch point helps define that brand. It's not just the marketing people's opportunity, or responsibility, its the entire business. What I find is, the ones that are really struggling, they don't set an expectation from above day one, "Hey, we're in a competitive environment, this is different and everybody here is in marketing and sales." No matter what your job is, your real job is to satisfy the client, the citizen, the customer in such a way that they say "Wow, I got a lot for my money." And that's really the starting point then you have to actually implement that whole procedure and you have to have ways to check it, and ways to test it and do all kinds of marketing surveys and analysis, its a continuous -- Some people think that once they reach their penetration rate that's in their business plan, they're done. No they just started, that's the start! And you have to continue that process.

Christopher Mitchell: Let me see if I got this right, and I'm going to perhaps overstate

it gently: people hate the telephone company, they hate the cable company. They often really like their local utility, particularly if its a well-run one as you're describing. Local utilities, sometimes I've seen this, particularly local electric utilities, municipal electric utilities, and they come into it and they say, "Well this is going to be easy, half the community is going to take our services off the bat. It's technically superior, they love us, they hate our competition, word of mouth, boom, we're done." That's it. It doesn't seem to work out so well. It doesn't get you the majority of the market, it doesn't necessarily get you enough customers to meet your business plan. What's wrong with that approach, what more do you have to do?

Kyle Hollifield: There's not necessarily anything wrong with the thought process, but again it's not a plan, it's a thought. So all of us in our life make assumptions everyday that don't work out. Should I turn right here at the traffic signal or should I go straight? How do I get there quicker? Those assumptions are not based on facts, they're just based on our feeling. So it's absolutely correct that utilities and communities and municipalities have that -- and you can look at any consumer report you want to look at, and their competition is always at the bottom of the list for customer service. So they have this feeling, "Well this will be fairly easy," but what they don't really understand is this is a community engagement process, this is not selling products and services. You can always have the best price, you can always have the actual fastest speed, you can have the best brand, but if you don't engage the community in way that they feel they are a part of this, then you're just another vendor. And you're just as good as the next promotion comes out from the competition. So that's where the -- one thing the communities that do it well, they have a very low churn rate. They're down to 1% churn rate at the most --

Christopher Mitchell: And churn is where you get disconnects --

Kyle Hollifield: Constant disconnects and reconnects and disconnects and reconnects -- The churn rate for the industry, for the incumbents and for-profit businesses is much higher, why? Because people want to see that next promotion, they're waiting for that next promotion. You may not accept that if you are a community broadband, I'm not going to do it that way, but it's a fact of life, so you got to figure out a way to continue to deal with that. And the best way to deal with it is not so much to have continuous promotions the way they do, but to engage the community in a way that they feel that they're a part of the process. "This is my network. I have to support my network." And its not always in dollars and cents, it's in a lot of different ways. So you have to put together programs and events and a whole overview of the community to get them engaged in that process, where they understand this is their network, it is not the utility's network or the city's network to sell you something, it's your network and the more you invest in it, the more you are going to get out of it. But you have to be able to get them to that point.

Christopher Mitchell: And this is not where you get to that point, you're done, go home, take a nap. It's a situation where you have to keep doing it, so I think as we're running out time, there's a couple of things that I've learned from you over the years and one has been that you need to reevaluate this on a regular basis, right? You're not like, "Oh, it's been another year, time to re-evaluate the marketing plan." And it's not a situation where you get 75% of the business you can just sit back and relax, because you have to maintain those relationships.

Kyle Hollifield: Exactly, a lot of times I kind of relate it to being married. You know? If you want a long-lasting good marriage, you pay attention to it all the time, right? You don't forget anniversaries, you don't forget birthdays and survive.

Christopher Mitchell: Say two men that frequently travel away from their wives.

Kyle Hollifield: Exactly! Like us. But obviously I know we both make up for it when we get home. It really is like a marriage because what you've done is you've said to the community "Give us your trust, that we're going to fulfill your needs in a way that's going to enhance your life and make the community better. Give us that trust." And we have to earn that trust on an ongoing basis. You can't take it for granted. And we don't have enough time today to really go into all the details of how you could do those things, I can just tell you that if you have a really sharp, comprehensive marketing plan that lays out what all that looks like on a daily, weekly, monthly basis, and how you continue to regenerate that community engagement in different ways whether it's supporting Boy Scouts, whether it's providing uniforms for local baseball teams, all those things are investments that come out of your marketing budget where that child goes home and tells their parents "Hey look here, I got a brand new pair of cleats and and didn't have any money to buy one, wow, I'm going to continue buying service from the municipal broadband network."

Christopher Mitchell: You've painted this picture in the past when we've talked about this where the utility may have a marketing program where they have this community fund that will buy those cleats and then the kids playing soccer, the grandmas watching it, three days later big cable company comes and knocks on her door and says "Hey, we'll lower your bill." This is a woman that might be living on a fixed income. And she's thinking, "I can't do that to my community."

Kyle Hollifield: Because what happens again, like I said, the community has buy-in that it's their network. If you ever lose that situation where they don't feel it's your network, that's where you start having problems. So that's the difference between increasing shareholder value and providing services for the community and that's the two different ways to look at it. The way you increase shareholder value for the municipal-owned network is for the owners of that network, which is the customers, to feel like they're part of the process, that's how you increase shareholder value.

Christopher Mitchell: Great. Thank you Kyle, I think this has been a wonderful conversation.

Kyle Hollifield: You're quite welcome and thank you very much.

Lisa Gonzalez: That was Kyle Hollifield from Magellan discussing public-private partnerships, and talking about marketing for municipal networks.

Christopher Mitchell: Hey everyone, I just wanted to thank you for listening and helping out now 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 the comments and we really appreciate you taking the tie to listen to us.

Lisa Gonzalez: We have transcripts for this and other Community Broadband Bits podcasts 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. Follow MuniNetworks.org stories on Twitter where the handle is @MuniNetworks. Subscribe to this podcast and all the podcasts in the ILSR family on iTunes, Stitcher or wherever else you get your podcasts. Never miss out on our original research, subscribe to your monthly newsletter at ILSR.org Thank you to Arne Huseby for the song "Warm Duck Shuffle" licensed through Creative Commons, and thanks for listening to episode 255 of the Community Broadband Bits podcast.

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