Transcript: Community Broadband Bits Episode 261

This is the transcript for episode 261 of the Community Broadband Bits Podcast. Dane Jasper of Sonic joins the show to discuss how the company, publicly-owned infrastructure, and public-private partnerships. Listen to this episode here.

Dane Jasper: I think a city that adopts an open access, dark fiber model creates the greatest opportunity for a diversity in choices for the consumer and a diversity in the performance and price of services. That's the model that I think would be the most interesting.

Lisa Gonzalez: This is Episode 261 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. Dane Jasper from the internet service provider Sonic visits with Christopher this week. We've written about Sonic on MuniNetworks.org and how the company has used publicly-owned infrastructure to bring better connectivity to Brentwood in California. In this interview, Dane offers his perspective on different types of publicly-owned community networks, and how those networks affect a potential partnership with a company like Sonic. Before we start the interview, we want to remind you that this is a commercial-free podcast, but it isn't free to produce. Take a minute to contribute to ilsr.org. If you're already a contributor, thanks. Now here's Christopher with Dane Japer from Sonic.

Christopher Mitchell: Welcome to another episode of the Community Broadband Bits podcast. I'm Chris Mitchell, and today I'm speaking with Dane Jasper, the CEO and Co-founder at Sonic. Welcome to the show.

Dane Jasper: Thanks, Chris.

Christopher Mitchell: Dane, I suspect most of our listeners are familiar with Sonic. Although you serve three cities in California, your reputation is much wider and deeper than that. Maybe you can just enlighten those who haven't heard of Sonic. What is Sonic?

Dane Jasper: Sonic is an alternative access provider, so we're a regional, competitive, local exchange carrier and internet provider. Today, we offer broadband services in 125 California cities using copper technologies, VDSL, pair bonding, ADSL2+, and three cities, as you noted, with gigabit fiber to the home. We have a little over 400 employees and about 100,000 customers.

Christopher Mitchell: Dane, one of the things I'm always curious about for a company like you is that there was, what, 8,500 ISP CLECs at one point. You're one of the ones that has flourished. Many of the people that you grew up with, I think, have gone on to close their businesses down and search out other avenues for entrepreneurialism. What did you right I guess is the question?

Dane Jasper: I'm not sure I know the answer to that. It's hard to self-diagnose when you're in it, but as you note, we founded the company in 1994. We were a dial-up ISP, an early user of Linux, and deploying modems, and terminal service to provide dial-up access. We were successful at that. As you noted, that was a time when there was thousands of dial-up providers. We moved on to DSL and we provided DSL both to our own retail customers and also to smaller, regional ISPs around the state of California. We became a competitive local exchange carrier in 2006, which is sort of late as a CLEC. A lot of CLECs, they all were founded in the late '90's. The 1996 Telecommunications Act created the opportunity for a competitive, last-mile access. Most of those competitive carriers went out of business in the early 2000s. We did not become a CLEC until 2006. Again, we deployed competitive services in 200 local serving offices around California. It's a large footprint. We provide wholesale access to a lot of other smaller service providers that are regional. We provide backhaul and middle-mile service to rural, wireless ISPs, and alternative access providers, and small cable companies. Then the latest, and really it's the fourth big thing, from dial-up, to DSL, to CLEC, and now fiber, and that's where our focus is today.

Christopher Mitchell: How much do you charge for you gigabit fiber access?

Dane Jasper: Our gigabit fiber to the home service is $40 monthly. That is an introductory price for the first 12 months. After that, it goes up to $50 per month.

Christopher Mitchell: $50. Sorry.

Dane Jasper: It's a great product. I should also mention that also includes a home phone line with not only all the voice features like caller ID and voicemail, but unlimited calling nationwide, and unlimited calls to fixed lines in over 60 countries around the world. It's a global calling for free, unlimited use phone line, plus gigabit, symmetric fiber internet for $40 a month for the first year, and then $50.

Christopher Mitchell: One of the things that I want to just mention before we get on to the main topic, which is really how you would like to see cities doing dark fiber to encourage businesses like yours to flourish. One of the things that I find interesting is that you are a strong advocate for network neutrality, which seems to fly in the face of the common theory within the D.C. Beltway, which is that you need to be able to charge higher prices, and have fewer consumer protections in order to be able to invest in high-quality networks. I'm just curious how you respond to that.

Dane Jasper: You're right in noting that the majority of cable companies, telecommunications carriers, providers of internet access, even wireless ISPs, have by and large aligned themselves against network neutrality protections, and even privacy protections. Sonic is amongst a smaller group of, I would say, strongly-principled internet access providers who think that regulating privacy and neutrality is important. I think the reasons to regulate privacy are obvious, but network neutrality bears some discussion. There's two sides to this. One is I feel like we're in a really privileged position to be able to sell people a subscription where they pay us every month to gain access to the internet. We don't own the internet. We didn't make it. We didn't create all the amazing applications, and services, and websites that exist there. There is a risk to that innovation ecosystem. If large monopoly/duopoly internet access providers across the country have the ability to pick and choose winners and losers, particularly amongst the emerging sector of services that require low latency, things like gaming, and augmented reality, and virtual reality, or which use a lot of bandwidth, replacing pay TV basically with streaming video services, network neutrality is critical to protect the internet in the future of innovation on the internet. The second reason that network neutrality is important for a competitive service provider is that whether it's a small municipality building a network, or a competitive alternative access provider like Sonic, both of those kinds of entities are too small to have the market power to extract rents out of the web services that might seek high bandwidth or low latency. In other words, if I dash off a note to Netflix and say, "Please send me a dime every month for every single one of my customers," I don't think that they'll respond to that. But when a large, nationwide cable carrier does the same, and in fact congests the interconnection in order to compel that payment, they successfully extract that. That creates an unlevel playing field where a large provider has the ability to create this other source of revenue.

Christopher Mitchell: Let's talk about what we can do locally within communities. One of the things that I've come to believe is that we can't just wait around for 50 new Sonics. I wish that we could. I like to see that you're growing. I like to see that Ting is growing, many of these companies. My concern is they're not growing, or new firms are not being created, fast enough. As you know, I'm a strong proponent of municipal networks for a variety of reasons. Why don't you just tell me, first off, what you think about local governments involved in this before we talk about a prescriptive approach for how they might want to?

Dane Jasper: I think you're right in noting that there aren't enough Sonics, and Tings, and Google Fiber type entities. We have to recognize that a lot of the issues that we have in the U.S., whether it's issues around privacy, or neutrality, or customer service, or pricing, or speed, or other innovations, they're all symptoms of what is effectively a failed competitive market. The majority of American consumers, if they want a decent amount of bandwidth, have one choice. That is resulting in many, many of the issues that we see here. If there were literally hundreds, or perhaps even thousands of companies like ours building innovative new networks across the country, maybe a lot of these problems wouldn't exist. To the point of municipalities building networks, I think that there are a lot of opportunities for good there. I particularly rail against the idea of state laws, legislation, that would disempower communities from taking local control if they're being neglected by the service providers that own infrastructure. On the other side, we're uncomfortable, I think obviously, with the idea of competing with our own government. I think it is important to find a way to meet in the middle there, to engage in public/private partnerships, with neutral open networks that allow municipalities to take control and drive the infrastructure forward where necessary, but which don't completely eliminate the idea of commercial service providers serving those cities.

Christopher Mitchell: How do you feel about a Chattanooga, for instance, where one could still come in and build alternative infrastructure, but you would be competing against the city in that case?

Dane Jasper: Chattanooga is an interesting example. They've had a lot of success. They have successfully leveraged federal funding for, as I understand, the energy system modernization to create a fiber network that has benefited their community. The concern I have with a model like that is that they've created a vertically-integrated triple play service provider, plus the power system. What they've traded is a crummy duopoly for a new city monopoly. I think while that solves the near-term problem, I think it creates in the long-term real limits in what occur in innovation. It leaves consumers with they had two choices that were poor, now they have a third choice. There's no telling whether or not that choice will be any good in the future. An open infrastructure model allows for future-proofing, whether it's around customer service, or technology innovation. Obviously, as a company that seeks to provide customer service and reliable technology, we'd like to continue to serve consumers.

Christopher Mitchell: Right. I'm not going to argue with you about it. I respect your viewpoint and I wanted to make sure people understood where you were coming from. I certainly think that Chattanooga is an outlier in that. I think if any municipal network is going to do well in the future, it will probably be Chattanooga, but I take your point about the concern about creating a vertically-integrated entity, particularly when we're talking about the internet, which has such potential for overlapping networks and all the benefits that come from that. I want to get a little technical. You're much more technical than I am, so I'll do my best to try and keep up and maybe ask clarifying questions. We don't have to use San Francisco as an example. It's worth noting that San Francisco is considering some kind of open network, but I'm curious, hypothetically, if you were advising a mayor on how to invest in infrastructure that would enable your business model, and that of your rivals even, to thrive and create this platform, what should they do?

Dane Jasper: There's a spectrum of deployment. At one end, a municipality can have a dig-once policy, allow carriers to join trenches. Moving a step further, a municipality can put in conduit, lots of conduit, and then let carriers put fiber in that conduit. Moving further, a municipality can build fiber to premises, but not light it, and leave that to carriers. Moving towards the vertical integration, while still remaining open, a municipality can light the fiber, but have it be an open network. The UTOPIA network in the cities in Utah is an example of an open network which is lit fiber. Then, finally, you have that vertically-integrated, the city is the retail service provider. The challenge is cities think that they need to go all the way to the far end of that spectrum and provide retail services, or there's a decision to do open access, but for the city to manage the network, to light it. I think that misses an opportunity because the management of conduit or fiber infrastructure is relatively easy once it's constructed, and a city that adopts an open, dark fiber infrastructure model can drive that network wherever they would like to see it delivered, can build the amount of capacity that they'd like to see. For example, a city might build two or three strands of fiber to every parcel, premise, or apartment. Then consumers could choose from one service provider for their television, if they wanted it, another for their internet. They might have a roommate who chooses a different provider for some reason. I think a city that chooses to invest in infrastructure, but that adopts an open access, dark fiber model, creates the greatest opportunity for a diversity in choices for the consumer, and a diversity in the performance and price of services. That's the model that I think would be the most interesting.

Christopher Mitchell: I think that there is a challenge with these models in terms of financing in that many people expect the network to pay for itself. I think that is what leads cities to go vertically integrated, whereas the open access may pay for a part of itself, but is unlikely to pay for its full costs. When you talk about building infrastructure, one of the things I would like to see is cities to recognize that we massively subsidize roads. I think that's been good for the economy overall. It has had negative consequences. I just got back from L.A., but nonetheless, the benefits of that have been tremendous because we didn't have user fees paying for everything. I'm just curious if you would agree with me on that, that this dark fiber model may be more difficult to pay for itself, and therefore requires some subsidization that we should not even shy away from, but embrace.

Dane Jasper: The interesting about it to me is you think about city utilities like water or if you have a municipal electric power. In that case, they have both an infrastructure component, the pipes or wires, and then a consumption component, the water or the power. Those consumables have substantial cost. This is an infrastructure component that the pipes are part of it, but the usage is extremely relevant to the long-term costs. Whereas, setting aside for a moment maintenance, which is applicable both to a fiber network or a system of roads, once you build a road, cars can drive down that road and the cars consume fuel, but the city doesn't have an ongoing cost to keep the road fueled up or something like that. It's a bad analogy, but the point is that a dark fiber network is just a conduit of glass from one point to another, a strand of fiber. It doesn't have an operational expense for a city until such time if somebody breaks it, someone puts a backhoe through it, or knocks down a utility pole. There's a repair issue. That needs to be dealt with when those incidents occur, but the infrastructure itself doesn't actually have an ongoing cost. To your point about investing, or subsidizing, the concept of home owners paying for the infrastructure over time, or the city paying for the infrastructure over time, is an interesting one. If you get rid of the idea of user fees, and you instead just say, "Every home is going to have a couple strands of fiber back to a central point," then offer that fiber to carriers or, rather, allow consumers who control and own the fiber to their home to decide what to plug it into, this is this "Homes With Tails" concept that Derek Slater and Tim Wu published around 2008. The idea is if a homeowner has this stub, this tail of fiber that might go miles away to the central point, and if they own that, maybe they've paid for that over 20 years as part of property tax, if that's a funding mechanism that voters want to opt into. The idea is that you've then got this infrastructure component that goes to the central point and service providers don't need to pay to use it because the homeowner has bought it. It goes to the central point. This is like a centralized data center, a carrier hotel, where there might be many service providers. The consumer simply says, "Plug me into Service Provider A, B, or C." The service provider doesn't have to pay for the infrastructure back to the home and can instead focus on the services, lighting that fiber, and delivering the lowest cost, fastest speed, customer service, et cetera. I think we haven't seen any municipalities take up a concept quite like this. Instead, there's always, "We're going to buy this network. How much of it is going to get used? Who are we going to rent it to? How are we going to pay for it?" There's a lot of question in that. If instead you simply say, "We're going to make an investment infrastructure, we're going to buy this network," whether that's paid for by the municipality or paid for by the homeowner, I think it's an interesting concept.

Christopher Mitchell: I agree. I think it's quite similar to what Ammon, Idaho, is doing, although in that case they are using software to find networking, and one fiber to each home, in order to slice it up among multiple service providers. I think that's the one that comes to the closest to what you're describing.

Dane Jasper: As soon as you light the fiber, you eliminate the potential for innovation by the service providers, and you add a lot of complexity to the operations of the network. If a municipality wants to build a dark fiber network that goes from every home back to a central point, that can be engineered and constructed, and then it just sits there. There's no operational cost. It doesn't use any power. It doesn't require any network engineers. It doesn't require an equipment refresh every five to seven years.

Christopher Mitchell: Although, there are decisions that have to be made. Now, I would guess that given your description of the kind of network you'd like to see, you would not consider the dark fiber approach of Huntsville, Alabama, using a passive optical network in working with Google among others to fit your criteria, I'm guessing.

Dane Jasper: No, that doesn't meet the criteria because it is a passive optical network, a PON, which is split and, therefore, shared. The idea there, as I understand, and the way they've configured that is that service providers would buy a feeder into a neighborhood, and then buy a splitter, which could then serve 32 homes, say, or 64 homes, and then construct a connection to the individual home, a drop to the home. That doesn't allow for consumers to simply make a plug-in decision. The consumer doesn't really own the fiber to their house. Google is going to pay something per splitter, per backbone segment, per drop, per month. The model that I'm suggesting is end-to-end dark fiber, one or more strands to every premise, which goes to a central point, which is owned and controlled by the homeowner. The homeowner can say, "Well, plug this into that." This allows for the simplest network management. In fact, if the consumer gets to direct what this is plugged into, there's really no need for any billing relationships between cities and carries, so there's no billing staff. There's no billing system. There's no bad debt. The consumer defines what gets plugged into which carrier. There's really no recordkeeping even. The network is completely flat and simple. As a municipality thinks about, "Well, how do we take this on," on the far end of the spectrum, a vertically-integrated, triple-play provider has to build an IPTD platform, a head-end, internet access, backhaul, the central optical line terminals, the consumer side equipment, Wi-Fi in the home, routers, Internet of Things, home security, this unlimited plethora of challenges and tasks that you can take on. That means a lot of staffing commitment for a municipality in the long-term. If a city instead builds two or three strands to every home, or even just one, they've built that physical infrastructure, and then it just sits there until it gets broken by a catastrophic event. You have to have a break/fix task, which is just like a water line breaks, somebody goes out with a backhoe, digs it up, and fixes it. The capability that a city needs to have either in-house or outsourced is repairing conduit and fiber. It's not running a network, let alone negotiating with content providers for, "How much does it cost to get MTV for the next three years?" The complexity of running a dark fiber network, I think, is clearly much, much lower, and it presents the opportunity for innovation. You mentioned Ammon, Idaho, and software-defined network, and light the network. Well, now you've got a full-time network engineer who's dealing with that and running that. Then what if that person's on vacation? How do you back him or her up? You've added all this complexity and then you have a service provider who says, "Well, I want to deliver television using RF over glass." Or you have a television provider who can't put the content over someone else's IP network for security and rights reasons. You have a service provider who wants to deploy very low-cost, one gigabit EPON, while another service provider wants to deploy 10 gigabit, NG-PON2, or a 10-gigabit active ethernet, or even a faster service. Once you light the network, you take on the management complexity, and you eliminate all the potential for differentiation and innovation in the network layer.

Christopher Mitchell: One of the things that I've come to believe is that there's not necessarily one best model. It's more that cities need to find the model that works for them. I just wanted to note that one of the things that we've seen is that cities have moved progressively through your list of the different options cities have to take on more responsibility, in part because they were unable to identify ISPs that were willing to work with them. I think what you're describing would be attractive to a majority of cities that might consider building a municipal network, or this dark-fiber approach that would let them focus on the long-term investment.

Dane Jasper: Yeah, the challenge is is the city large enough to attract an ecosystem of service providers to use it? If the city is 300 households, if it's isolated, and if backhaul to the city from major population centers is expensive, it will be challenging to find a service provider who wants to have space in that carrier hotel and light that fiber. If the city has thousands or tens of thousands of households, I think it's much more viable to see an open dark infrastructure be competitively viable. I think the other side, and this is a temptation, I think that city leadership needs to resist the temptation to add complexity to the tasks that they're doing in choosing to build a network. If you're going to build a network and just have dark fiber available to an array of service providers, and that could be incumbent operators who say, "Well, gosh, this fiber is bought and paid for by the homeowner, so let's just use it and stop maintaining our old coax system, or our old twisted-pair system, or a new market entrant," but the temptation for a city, and you see this sort of nation-building thing occur in organizations, both commercial and municipal, is everybody wants more responsibility, and a bigger team, and more challenges, and more tasks. A city will say, "Let's build a fiber network. Okay, well, let's light the fiber network. Well, let's deliver services over the fiber network." Pretty soon you have a team of 12 people, the ongoing payroll of a city staff of a growing, growing team. I would certainly encourage leadership in communities to consider the idea instead of building a dark-fiber infrastructure, which requires no operations over the top of it, this concept of a "Home With a Tail," which is owned and directed by the consumer, creates no billing overheads, no carrier relationships on a per-circuit basis, and doesn't require a small team to manage. In fact, when the fiber is broken via some catastrophe, the way that that occurs is somebody drives their car into a pole and knocks it down, or they're digging and they dig up the fiber. You hire a third-party contractor to engage in an emergency response, come in and fix that, and then the person who hit the pole, or the excavator who dug it up, gets the bill for that. This can be a very simple, simplified approach. It can eliminate any, I think, long-term cost risks that exist for a city that spools up a bunch of staff to run a network.

Christopher Mitchell: I don't feel comfortable that I've never run into this empire-builder that you've run into, but in my experience, the cities that I've worked with have often been reluctantly thrust into taking on greater responsibilities. I just want to defend some of the cities that might be listening. But I think the final question I'd like to ask is to get a sense of you mentioned cities that have tens of thousands of households. Do you have a sense that a lot of those cities already have ISPs, or are you expecting that as this infrastructure becomes available, we'll see new companies learning from you and Ting in order to try and copy what you've done?

Dane Jasper: You know, I think that there are more internet access providers still in the market than folks are really aware of. Certainly, companies like Google Fiber, and Ting, and Sonic, people have taken notice, but there are smaller companies, and wireless, and ISPs, resellers, a variety of internet access providers scattered across the country. I think if there isn't one in that city, I think one will arise, or one will come there. The other possibility is that the incumbent cable and telephone companies stop choosing to maintain their own infrastructure and just use the city-owned, or homeowner-owned, infrastructure. Then as a result, deliver faster or more reliable service. I definitely take your point that it isn't necessarily nation-building that's under way. It's the perception of the necessity. I would agree that in a very small community, it may be challenging to find a service provider who will come there. I think key to that is that if the city's building a fiber network and then saying, "Please come in, service providers, and for $10 or $20 a month, we'll sell you fiber to a home," it's challenging to prove that there's a business model there. If instead communities, members of the public, voters, can make a leap of faith and say, "We want to build an infrastructure; We want to buy and pay for a piece of infrastructure that we're going to own," but then the homeowner has this connection to this carrier hotel, the idea there is that you're saying to service providers, "Come have some space in this data center, in this carrier hotel, pay for your power usage there, and gain access to fiber that goes to thousands of homes and homeowners may want to connect to you." I think that flips the script a bit and it creates, I think, an environment where you might see a lot more adoption and a lot more innovation.

Christopher Mitchell: I'd really like to see that somewhere. I think it would work well. I hope that perhaps next time we talk it will be about the lessons we're learning from it. Thank you so much for coming on the show, Dane.

Dane Jasper: Of course. Thanks for the time, Chris.

Lisa Gonzalez: That was Dane Jasper from the internet service provider Sonic, talking with Christopher about different publicly-owned network models. Learn more about Sonic's network in Brentwood at muninetworks.org, and learn more about the company at sonic.com.

Christopher Mitchell: Hey, folks. This is Chris Mitchell, the host of Community Broadband Bits. I just wanted to ask you if you could do us a real big favor to help us spread this show around and that's to jump on iTunes, or Stitcher, wherever you found this show, and to give us a rating, give us a little review. Particularly if you like it, if you're enjoying the show, please give us a rating and help us to build the audience a bit. Thanks.

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. The handle is @MuniNetworks. Subscribe to this podcast and all the other podcasts ILSR podcasts, including Building Local Power, and the Local Energy Rules podcasts. You can access them on iTunes, Stitcher, or wherever else you get your podcasts. Never miss out on our original research by subscribing to our monthly newsletter at ILSR.org Thank you to Arne Huseby for the song "Warm Duck Shuffle," licensed through Creative Commons. Thanks for listening to Episode 261 of the Community Broadband Bits podcast.