Transcript: Community Broadband Bits Episode 316

This is the transcript for Episode 316 of the Community Broadband Bits Podcast. Justin Holzgrove of Mason County PUD 3 in Washington and Isak Finer from COS Systems discuss the expansion plans in Mason County and how COS Systems is helping the utility determine a strategic deployment approach. Listen to this episode here.

Justin Holzgrove: Absolutely, we provide the biggest pipe we can, and what you do with it is up to you.

Lisa Gonzalez: This is episode 316 of the Community Broadband Bits podcast from the Institute for Local Self Reliance. I'm Lisa Gonzalez. In Mason County, Washington the local Public Utility District, Mason PUD 3 is building out it's open access network so residents and businesses can have access to the benefits of the fiber infrastructure. In order to take a strategic approach to better determine success, Mason PUD is working with COS Systems. By collaborating, they're better able to predict take-rates, estimate costs, and make adjustments to their plan when needed. In this interview, Christopher talks with Isak Finer from COS Systems and Justin Holzgrove for Mason PUD 3. In addition to a discussion as to how Mason PUD 3 is using Service Zones from COS Systems, we get to learn a little about the origin of Service Zones and how it helps with planning and establishing funding for deployment. Christopher, Isak and Justin also touch on the definition of open access and how it varies from place to place. Learn more about COS Systems and Service Zones cossystems.com. You can also listen to our Community Broadband Bits podcast episode 274 for our earlier conversation with Justin. Now here's Christopher with Isak Finer from COS Systems and Justin Holzgrove from Mason PUD 3.

Christopher Mitchell: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell with the Institute for Local Self Reliance up in Minneapolis, Minnesota. And today I'm speaking with Isak Finer, chief marketing officer for COS Systems. Welcome to the show, Isak.

Isak Finer: Thank you. It's great to be here.

Christopher Mitchell: And we also have returning guest, Justin Holzgrove with the Mason PUD 3, telecommunications and community relations manager. Actually, what I should say is you are the telecommunications and community relations manager for Mason PUD 3. Welcome back.

Justin Holzgrove: Thank you for having me. Good to be here.

Christopher Mitchell: So Justin, you were on back on episode 274 back in October of last year, 2017. And we talked about a little bit of more of the background. Today we're going to talk more about how you're working with a software provided by COS Systems. Um, and we'll talk a little bit more at the end actually about what open access really is and how it may be different from, in different places. But I did want to start with just a very quick reminder. I strongly encourage people to go back and listen to this show to get a more in-depth sense of what Mason PUD 3 is doing, but some of the key facts, and Justin feel free to fill in after I finished up here, um, is that you're on the Olympic Peninsula, you've got 34,000 electric customers, you started the fiber network to support the electricity provisioning that Mason PUD 3 was built to do, um, you started connecting some of your biggest customers with fiber and basically a lot of your residents said, "Hey, we need fiber too, we need something because we don't have very good broadband if we have it at all." And so you got into the fiber business basically.

Justin Holzgrove: That's right. And um, for the last 15 plus years we've been trying to figure out how to expand to the rural areas, to the unserved and underserved folks in Mason County, but not have that bill be footed by the folks that do have service or that aren't being served by the fiber network. And our fiber hoods program, I believe is a great solution for that and it's going really well. And part of that success has been due to the COS Systems software platform that we've been using. Um, it allows us to identify areas that we should be building to because of interest, um, and it also helps us to define the areas that we can build to, where we have overhead infrastructure, where we can string fiber on our poles or where we have electrical conduit and fiber conduit in the ground so that we can pull the fiber through the fiber conduit, et cetera. So that's been a great software tool for us to use for communication to our customers as well as demand aggregation to identify where would be great places for us to build the fiber network.

Christopher Mitchell: And Isak I'm gonna come to you in a second, but I did want to note one other thing that I've said often when dealing with western counties is that you can both be a county and have tens of thousands of people and be very rural because you are the size of Rhode Island.

Justin Holzgrove: Uh, yes, that's right. Yes. We, um, we have, uh, we are the size of Rhode Island and um, it's an interesting place here in Mason County. We have lots and lots of forested land and a lot of water. Um, we have Puget Sound, we have Hood Canal, and we have lakes. We also border up against the Olympic mountains and Olympic National Park, etc. And so what we have is we have a lot of forested land where there's long stretches of highway in between sort of hamlets, if you will, groups of homes and uh, and it actually sets up really nicely. We have one long backbone cable, we have many long backbone cables, but, if you picture with me going out one long backbone cable to get to community and then we can set a hut and build a distribution network there and then continue on to the next grouping of homes. It took us a while to figure out exactly the best way to build a network. But now that we've established a plan and some great standards, we're really moving along.

Christopher Mitchell: So moving over to Isak, you're coming to us from Sweden and while many people are maybe familiar with Stockholm and the network they have there, I think COS Systems comes out of a tradition of many of the smaller communities in Sweden. Is that right?

Isak Finer: Well, yes. We're headquartered up in the north of Sweden, so we're basic deal on the Arctic Circle. So now we're in 24/7 daylight mode. It actually looks a lot like Mason PUD 3, their area. In our hometown called Umeå, we had some really forward-looking politicians back in 1990s and they decided that since we were in a remote location, we need to have good communications infrastructure. So in 1994, they started to build, I'm not sure this is true, but it's told to be, uh, the first, uh, all fiber community-owned network. Um, so even though we're quite small and in a faraway place of Sweden, we have a very strong fiber industry here with multiple open access operators operating from our hometown. We have many of the largest, uh, ISPs up here and um, we have a long tradition in the north of building fiber-based on-demand, uh, not only the north but, in, in the country.

Christopher Mitchell: And when you say that, I think it's worth noting consistent with, I think what many of us believe, that we should have fiber to everyone, you use your software, I think to figure out how to sort of build first to build a business case, but ultimately how to connect everyone, right? I mean, that's the, the ultimate goal.

Isak Finer: DefInitely. I remember when we, when we developed this platform in the first place and it was actually developed for the us because we have a, uh, another platform to operate open access networks. So we went to the U.S. six years ago trying to sell it to found, okay, well they need to build their networks. So then we looked at how this had been done in Sweden and we developed this product Service Zones in the beginning we met some, some criticism, uh, that, "Okay, but we are a, we are a community or we are a city, we cannot cherry pick." And we said, "well no, this is not a cherry pick, this is how we managed in Sweden, for example, to actually build to so many rural locations and places where it's hard to reach." Because you build first where you have the most customers, you get the most revenue in and then you can build the rest of the network with that revenue and even reach the more rural location. So, many, many, many cities they think they, they have to serve everyone, which I think they should. And it feels like their first thought is, we need to be in first those who are worse off. But that's a really hard thing to do because then you basically need all the funding upfront.

Christopher Mitchell: In fact that, one of the things that I've heard, and I mean I'm a strong partisan making sure that everyone has high-quality service. One of the things that I've often heard is that, you know, it's not just a matter of, of if you build first to areas that have the most subscribers that you can actually build more rapidly then, because you have a bigger base. Whereas if you, if your goal is to try to connect the low-income areas first, where you may have fewer customers, you will have to build more slowly because you'll have fewer revenues coming in and therefore it may take longer to connect everyone than it would if you start with the areas of higher demand.

Isak Finer: Yes, definitely. And I also think that you don't only need it for revenue reasons, also for marketing purposes. So if you quickly get a lot of people to use, uh, your new services, uh, perhaps really great fiber services, then there will be more people to spread the word about how great it is and the adoption will be quicker.

Christopher Mitchell: So Justin, I want to, I want to come back to you because you made a comment in our previous show that I think will help get us into exactly how you're using Service Zones and, and the way that it really helps to structure your build. I don't know if this was before or after you started using Service Zones, but you described a public meeting where you had a sense that there was a lot of interest, and as you are mapping that interest, you had a map that looks like it had chicken pox because of the interest was scattered all over the place.

Justin Holzgrove: Yeah. And that's really what we found is that, you know, as you mentioned earlier, we have a very rural community where we have people, um, you know, it may be a group of 15 homes that may be five homes or it may be 50 homes around the community, but, um, these people have been, uh, in a sense abandoned by the private broadband providers here in Washington, or in Mason County. And um, so they, they were very interested. We had a meeting on a Thursday evening, I want to say, it was a beautiful day, which here in Mason County, when it's a beautiful day, people don't want to be inside, we want to soak up the sun, because we get a lot of clouds throughout the year. Um, but, but we had over 700 people attend on a TSursday evening here in here in Shelton, which is sorta the big town in the county. And people drove upwards of an hour to be there to express their interest and their need to have access to broadband. And that was really a big moment for us because people were, were starting to show that they were willing to put their time and their money where their mouth is. It's really easy to say, "Yes, if I had higher speed internet available, I would switch or I would get on it." But, you know, if there is an investment that is required by the community, uh, to, to have that built out. You know, it was mentioned earlier in the show just to just a few minutes ago about how it's important to, or one of the strategies is to, um, build in an area where you can get a lot of subscribers quickly. I'm not, I'm not saying I'm challenging that idea, but I do want to offer a perspective. The areas that have a lot of subscribers available are probably also areas where, uh, the private Internet companies, the Comcasts of the world, and the CenturyLinks and uh, maybe a local carrier, have already built infrastructure because they are the low-hanging fruit. Um, and I was actually in, let's see, Austin, Texas, and Isak you were there as well, but I was out having dinner and um, it was a beautiful night. We were sitting outside, and we looked up at the pole, the utility pole in front of the restaurant and there were nine contacts, nine communications contacts with fiber and cable plant on the pole. And that's great. That's a lot of choice for those folks in Austin. but when we drove out of the city area, there were one or none. Uh, and I think that is the issue that we are trying to solve here at Mason PUD 3. Um, you know, our city itself is, is well served, it's the folks that are outside of that zone that we really need to be focusing on. And so what we've done is we've, we've tried to define areas, and I think this is a transition to the Service Zones, is we've defined areas that we know are unserved or underserved and we said, we're going to focus our attention here. So that when somebody calls from a served area and says, "I'm so frustrated at Comcast or name, whatever, private provider, um, you want there, I'm so frustrated with them. I get slow service, um, and I pay high bills and their customer service doesn't care. We want you to build fiber to us." Our response is always, you know, we're focusing on the folks that don't have the option that you do. Um, there are people who don't have any ability to be upset at a high-speed Internet provider because they don't have the access to high-speed internet.

Christopher Mitchell: Well, one of the things that I think that leads into a little bit is when you are focused on those areas, if you're making an investment, you really want to maximize the number of households that are there. Um, you know, if there's 50 households and you can have 40 of them serve up, sign up, then that's going to be much better numbers than if only 20 of them signed up. One of the things that Service Zones and some of the other software does, is it allows people who are excited to really rally their neighbors, right? So, um, are you seeing that happening in practice?

Justin Holzgrove: Yes. So we launched Service Zones just about a year ago now, I think about 10 months or so. And um, we now have about 30 Service Zones, we call them fiber hoods, uh, that are able to be served. And uh, we had three Service Zones meet there 75 percent commitment level really quickly, right off the bat, about it took maybe three months and those are under construction now. Two of them are going to be connected within the next week or two. And one of them a couple months later, uh, so we're really excited for that and we're excited for those customers to actually see the fruits of their labor pay off. Um, it's really important to get a champion or champions in the community that can, you know, do the hard work of, of hounding their neighbors and bugging their neighbors to, to sign up and to, uh, make a commitment, um, so that we can build the network. There are other, kind of the next group of zones that are more slowly reaching their goal, but they, they continue a steady increase of that 75 percent goal. And, and so we're encouraging those along as they go.

Christopher Mitchell: Isak, I'm curious if you want to tell us what, you know, what you think makes Service Zones special. I certainly really like the ability of potential customers to be rallying their neighbors and distributing the marketing. But I'm curious if there's another aspect or something we haven't discussed that you'd like to focus on.

Isak Finer: Well, I mean that's the, that's the core of the product, of course, to, to divide it up into these smaller zones, set the take-rate targets, uh, tried to get people enthusiastic and start spreading the words. But then there are some, some things in the back end that not all customers are using, but, uh, that is more of a technical side. So, for example, we, the system constantly calculates an approximate cost of deploying the Zone based on how many customers sign up and what services they sign up to. We do that by measuring the distance between the houses, between the, along the roads and then interconnecting the roads and then you have some rough numbers on, on how much it is to connect one house and how much it is to construct one street of fiber, et cetera. So if you really want to get into the weeds, you can, can do that as well. We also have something called Service Layers that it's also a bit advanced. You can add on, which means if you have a number of houses or a, an area that doesn't follow these, uh, Zone borders, uh, but they for some reason are perhaps more expensive to connect and you need to have a connection fee or a higher connection fee, you can actually group them in this so called Service Layers and offer them a different price. So this way you will never have to go back and tell someone, "well, you know, it's great that you signed up but we cannot connect you because of this, or we need to collect a connection for you or something like that." So it depends on how you, how you fund your network or how you plan. But that is really nice things to do. Yeah, it's, it's a really interesting. I want to tie back to something that Justin just said, and he said they had their three Zones that reached the 75 percent really fast, and then some that are a bit slower this, this happens in all the projects we do. We've done about 100 projects so far in the U.S. And that's typical, you can, you can never tell, and that is why you really have to do this. Uh, I mean, people try to look at demographics, you go for the most dense areas, but as Justin said, there might be a lot of competition there and people aren't really that unhappy. Uh, so that's why you really have to go out like this, with a tool like Service Zones and really asked people, do you want this? Because if you build that network in the wrong place first and you spend your money and you get what, 5 percent of the customers, well that is a disaster. Especially if this is a community-owned network. How can you justify building anything more? And all the naysayers, they now stand up and say, "oh, what did I tell you?" Right? You know, "you can't build fiber. It's not the right thing to do." Well, if you do it this way, and you start, for example, with Justin's 75 percent, well 75 percent of the customers sign up, no naysayer can come and have anything to say about that. It's a, it's a success.

Justin Holzgrove: You know, one of the strategies that we're using right now actually in the middle of, is very, the new loan rural broadband loan slash grant -- we only qualify for the loan -- from the Community Economic Revitalization Coard, CERB for short, in Washington state. They were just given some money through the legislature, legislative session to make money available for rural broadband deployment. So we're actually applying for it. It's the first round and the first opportunity for PUDs in Washington state to apply for, um, some, some assistance in this way. And what we're doIng is we're taking some of our fiberhoods that we know are good projects, uh, that are near the network but not the low hanging fruit. And we're applying for some curb funds for these projects and so what we're going to be doing, if we're successful, we applied for six different zones, fiberhoods throughout Mason County in different areas of the county. So we're not picking and choosing, we're being a kind of fair by spreading it out around the county. And we've picked the zones that have not only a good residential population and a population that has been very vocal, some are close to their 75 percent, some are a little bit further away, but we've picked, um, areas that are, that have some institutions in them. There's a state fish hatchery in one, there's a state park and another, there's a girl scout camp in another one, uh, there's a, uh, a tribal seafood processor in another zone. So these are areas that have cornerstones that are good for economic development, good for community development. Um, and then we will also benefit by picking up the residential customers in the neighborhood as well. And so the application is due on Monday and uh, we are just about done with it and we're very excited to see if we'll be successful in that. And this will be kind of a way to, we say kind of auto-complete some of the zones that we have selected in that. Yeah, so we're really hopeful for that.

Christopher Mitchell: Well, I think the points out a really interesting point, which is that you may want to engage in this as a community before you have a sense of how you can finish off and connect everyone, because then you will have a more compelling application when programs like that become available.

Justin Holzgrove: Absolutely. We've definitely used the, um, the insights that we've gained and the momentum that we've created through the Service Zone platform, um, to kind of get the mass numbers, the many residential customers interested and, and writing letters of support. But we've also been able to use the CERB program to kind of bring the institutions and the businesses on board. They don't seem to get involved too much with the kind of residential Service Zone type of platform, But they do know how to speak economic development language. And that's kind of the perfect harmony for these zones that we have selected.

Christopher Mitchell: I want to move on to, just again, a little bit of a refresher of how you're financing the network very briefly and then get into a discussion of what we mean by open access. Because public utility districts, with some minor exemptions now, still have to operate in an open-access manner and uh, and I know that I say that they have too, many of them choose to and like that very much, although it can be restrictive for some, so I'm not suggesting that PUDs are of one mind about that, that model, but we're going to explore that. Before that, I just wanted to make sure that we noted how you're financing the network and that's something that, um, yeah, I think it's pretty interesting in terms of, um, it's very transparent. Basically if you want fiber to your house, you pay an extra $25 a month on your bill, um, and that's collected at the same time that you are paying for the connectivity you're getting, um, you know, is there, is there a better way of describing that then I just did, Justin?

Justin Holzgrove: I think that the very simple version of it, and it definitely works. We call it a construction adder and at it's $25 per month, as you said, for a 12 year period. Let's say you connect to the network six years in to the 12 year period, well, you only pay for six years of the construction adder because you weren't taking service before that. And I think that's one of the beautiful parts about our program is that let's say you are out in a rural area because you don't want to have, you know, Internet access and, and that's fine and if you don't want that then you don't pay for it. And so our construction adder program is designed to have only the people who are taking service and benefiting from the network, pay for the network. And that's really important for us as an electric, primarily electric utility.

Christopher Mitchell: The other question I really wanted to ask you, because I saw this before, so I'm paying $25 to have the infrastructure on the side of my house. What am I paying for a gig on a monthly basis?

Justin Holzgrove: So we do a wholesale rate of $35 per month to our retailers and that is a gig transport down and up, unlimited data of course. And then what we have seen them marking up that $35 to is $55 for the first year and $60 for years following. And so, um, that's sort of what a customer would be expected to pay $55 or $60. Um, and then the construction adder of $25 is on top of that. And so in these rural areas where you have no other options, some of them are struggling through satellite or data caps on LTE, air cards, things like that. Uh, they would be paying $85 a month for gig down and up unlimited data, which is pretty nice when you're considering the avoided cost of the inferior options that, uh, that they're trying for.

Christopher Mitchell: Isak, I wanted to throw back to you about open access because the way I understand it, and I hope you can explain it, the idea of wholesale is, is not just that an ISP would rent the entire pipe, but that you handle it differently in Sweden. So, so tell me a little bit about how open access differs in North America for the most part versus what you're used to.

Isak Finer: We have had this community networks since 15, maybe 20 years and the open access model have developed over time, uh, and uh, there have been different models, but today there's currently almost exclusively one and, as you said, the, you could either lease the entire pipe to one service provider, but the, the, the model now in Sweden is that you wholesale sell it for service. So that means for a subscriber, you could go in and buy any service from any provider and I think that is the best customer experience you could have and it is also good for the network owner-operator because with more choice, uh, it's more likely that you will get high take rates on, on the network. If I'm looking for a bundle of TV and VOIP and the Internet, for example, if I can only have one provider, uh, and have their assortment, maybe that's not the perfect solution for me. I would like to pick Internet from one, VOIP from another, TV from a third and that way I would, I would get the best package I can. So it's a bit more complicated having this delivered over one single fiber pipe with the different services and different providers. And that's why you need a system to do this because you define it with software basically. So you literally split that single pipe up into multiple small pipes. And if I'm going to be a bit forward looking, um, everyone is now talking about smart services, smart city services. Telehealth is something, uh, that is a lot discussed now I can see, well this is already here in Sweden and coming, but if you lease the entire pipe to one provider, then somehow the telehealth provider or a provider of any smart city service would have to sort of get on that pipe somehow probably through that ISP if that's even possible. But if you have split, splIt it up, separated it for service, you can actually have a pure telehealth service provider that anyone could pick no matter what Internet provider they have or any kind of smart city services or a home alarm or anything that you want to provision over the network. It's not very different, but it's sort of a fine tuning of the model Mason is currently using, which I believe brings even more choice and more value of the network to the subscribers.

Christopher Mitchell: I think Ammon, in Idaho, which we talked about frequently, is certainly aiming in that direction. And a number of people have been puzzled, wondering, well, if I have an Internet provider, what else would I need? Um, and so because you are more advanced, um, you know, do you see people taking separate services aside from video and telephone and Internet? I mean, are there like home alarm companies or telehealth companies that are using this today in Sweden?

Isak Finer: Yes. That is definitely coming, now, for real there's been a lot of trials. The important thing is you have, of course, a lot of stuff that you can just buy over the top. You can stream Netflix, for example, you don't have to provision that service specifically on your network. But let's say you have some sort of monitoring device, at home because you can then be at your home instead of, at the hospital and you need a reliable connection. Well, you don't want your, that uh, instrument or whatever that is that it's monitoring, to start lagging when, uh, your, your wife is streaming Netflix, right? That might be a bit risky. Netflix isn't worth it. So that is why you will see these probation services, I think, because you need dedicated bandwidth, uh, for, for those applications. And then it's a neat thing if you can split it up by, by using smart software.

Christopher Mitchell: Right, I think one of the things we do hope is that there's enough capacity that we don't run into those simple issues, but nonetheless, you do have different applications having different network requirements. And, and I certainly think if I was Netflix and my product quality was sort of dependent on another provider like Comcast or AT&T, which are increasingly my competitors, if I'm relying on them to get to the customers, that's pretty scary. Where versus in an open access environment where Netflix can have a direct relationship with customers, that's pretty exciting. And then the most exciting piece of that for a network owner, I would think is that, you know, if Mason, for instance, um, is, has an, an open access network on which there's 10 services that people are taking. Well that helps to pay for the network because you're getting a slice of each of those, each of those revenues rather than just one slice of the full pipe. Um, so I mean, I think there's a lot of implications of what you're talking about.

Isak Finer: Yeah, definitely. And also, uh, when you look at it this way, I believe the net neutrality discussion that's been going on sort of sorts itself on that kind of open access network. Because if you are buying a service from someone who is trying to prevent you from doing something or throttling you, or whatever they are doing, you can switch to another provider who doesn't. So, and that would mean you wouldn't lose any other services from that provider. It, you, you can pick and choose what you like, so.

Christopher Mitchell: Right, and that's where I think having like Mason PUD 3 there and, and um, is so important because they want to empower the user, you know, Comcast and AT&T desperately don't want to empower the user. So it's worth remembering that we think of these things as utilities for a reason. And that's because, you know, I think Mason PUD 3, Justin, you know, you feel free to provide any anecdotes or verification of this, but you know, you pride yourself on running a system that allows people to do what they want to do rather than trying to shape what they want to do.

Justin Holzgrove: Absolutely. We provide the, the biggest pipe we can. And um, what you do with it is up to you.

Christopher Mitchell: Well, I think we've gone on pretty long here. We've covered a lot of territory and we certainly have something to come back to. Um, Isak, I've wanted to have you on for a long time. I hope you'll pass my regards on to the many folks at COS Systems that we see around. Certainly Bjorn. Um, but, uh, tell everyone we said hello. Thank you for coming on the show.

Isak Finer: Thank you. It's been great to be on your show.

Christopher Mitchell: And Justin, it was great to have you on again. Thanks for taking the time.

Justin Holzgrove: Yeah, my pleasure. You guys keep up the great work

Lisa Gonzalez: That was Christopher, speaking with Isak Finer from COS Systems and Justin Holzgrove from Mason PUD 3 in Washington. You can learn more about what's happening in Mason County muninetworks.org. We have transcripts for this and other podcasts available at muninetworks.org/broadbandbits. Email us 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 the other ILSR podcasts, Building Local Power, and the Local Energy Rules podcast. You can access them on Apple podcast, Stitcher, or wherever else you get your podcasts. Never miss out on our original research, subscribe to our monthly newsletter ILSRorg. Thanks Arne Huseby your song, "Warm Duck Shuffle," licensed through Creative Commons, and thanks for listening to episode 316 of the Community Broadband Bits podcast.

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