Transcript: Community Broadband Bits Episode 320

This is the transcript for episode 320 of the Community Broadband Bits podcast. In this episode, Christopher Mitchell speaks with Jase Wilson and Lindsey Brannon from Neighborly about how the firm reimagines the "humble municipal bond," making it easier for communities to fund public infrastructure projects, such as broadband networks. Listen to this episode here.

Lindsey Brannon: There are smart communities out there who have done their own research and who are looking for that innovation and connectivity with capital, so Neighborly makes it easier to do that.

Lisa Gonzalez: This is episode 320 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. Consistently, local communities that want to invest in publicly owned broadband infrastructure cite financing as one of their biggest challenges. Our guests this week are working to overcome that challenge by making investment in municipal bonding more accessible to communities and the individuals who live in them. Jase Wilson and Lindsey Brannon are from Neighborly. That's a firm that's working with local communities looking for ways to fund projects, such as open access broadband networks and other public infrastructure projects. They're simultaneously opening up investment opportunities for individuals and entities interested in advancing those projects. In this interview, Jase, Lindsey, and Christopher discuss how the publicly owned open access model suits their mission and why they're pursuing that mission. They also talk about how this type of financing can overcome some of the challenges more traditional approaches take because the investor and the subscriber overlap. You'll learn about a recent example of a project in Vermont and a new program they've developed to jumpstart local efforts. Whether you're looking for tools to help you fund your community's project or are interested in an investment that emphasizes local self-reliance in a variety of ways, checkout neighborly.com for more about the firm, their approach, and the different types of projects they've helped develop. Now here's Christopher with Jase Wilson and Lindsey Brannon from Neighborly.

Christopher Mitchell: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell with the Institute for Local Self-Reliance in Minneapolis, and I'm here today talking to Jase Wilson, CEO of Neighborly. Welcome to the show.

Jase Wilson: Thank you, Chris.

Christopher Mitchell: And it doesn't end with Jase. We also have Lindsey Brannon, the Head of Public Finance for Neighborly. Welcome.

Lindsey Brannon: Hi, Chris. Thanks for having us.

Christopher Mitchell: So I'm very excited for people to learn more about what you're doing. I think people have a better sense now, in part because of an announcement that you've made that we will cover later in this show. Um, but when I first heard about you guys, I had no idea what you were up to. So Jase, can you start by explaining what Neighborly is?

Jase Wilson: Neighborly is a Fintech company. We connect communities to capital. It's our mission to modernize public finance, which is the billion dollar market that builds vital public projects, like schools and libraries and parks, and we think it can and it should be updated to serve communities that want to own their own networks and communities that want to build their own microgrids so that they can own their own energy while decarbonizing their planet. We see a future in which communities can responsibly borrow exactly what they need when they need it, using the humble municipal bond as the instrument to do so in the bedrock of the community capital stack, and that investors can get direct access to world-positive investment opportunities.

Christopher Mitchell: Lindsey, what else would you add to that description of what Neighborly does?

Lindsey Brannon: We help fund these transformative, world-positive projects. Um, you know, Jase mentioned microgrids and broadband, and we're very keen and focused on resilient infrastructure, education, housing, transportation — projects that will really redefine how cities operate. And we do this through that humble municipal bond at Neighborly.

Christopher Mitchell: I think some people who are listening might be thinking, "Well, we have hundreds of municipal networks. We have the humble municipal bond. What is Neighborly doing?" I mean, what's sort of the problem that Neighborly is solving?

Jase Wilson: We make it easier, less expensive, and less complicated than the vast majority of municipal issuances that have financed municipal networks today. And we've studied them all, and we've come up with pathways for communities that want to build and own and operate their own networks to do so without having to raise taxes in every situation. And the mechanisms that we employee help to make better access for both sides — you know, communities that might not have been able to access the market any other way, or were being told, through various shades of fear, uncertainty, and doubt from experts or people looking that don't have a vested interest in the community owning its own network, that they shouldn't use the multi-trillion dollar municipal market to help build their network. And we try to work for such communities that might not have had access to capital markets in a direct fashion.

Christopher Mitchell: Jase, in my past conversations with you, you used a couple of examples regularly, uh, in terms of how things used to work. I mean, this, this is a relatively newer phenomenon relative to the ancient municipal finance market.

Jase Wilson: You're right, you're right, Chris. It's a two century old market that helped build many of the projects that helped make our nation great in the first place, that helped set up our nation as this rich tapestry of self-reliant but interconnected places. You know, it's a mechanism that we pioneered in the United States and that we used to build the public institutions but also the roads and the sewers and fresh water projects upon which we build our cities. You know, we look at it and say, "Well, it's kind of crazy that we built this mechanism that helped these communities bring up the infrastructure that they need." Uh, and then we look at the Internet and we think of it as sort of the global brain and what you do at ILSR and the movements of Entry Point and everybody that's building open access networks as the correct model to sort of make sure that the Internet can be offered as something like a public good. To us, the municipal market is a solution, and if you look at the highways and the roads that we built as a nation, it's an equivalent model. We built tens of billions of dollars into the heavy lifting of the Internet to get it to where it is. If you look at the equivalent — like we think of the Internet as the 21st century equivalent of fresh water — that we need to be thinking about it as our responsibility to make sure that everyone has access at the community level. It is [as if] we built all of the highways and all of the local roads, and then we told all the Detroit companies, like Ford and General Motors, that we need you guys to build the driveways and maintain the curb cuts and charge us every month to do so. It doesn't make sense that the Internet runs the way that it does today, so we think the municipal market can be a solution, a helpful solution, to that.

Christopher Mitchell: Sure. And I wanted to ask Lindsey — one of the impressions I've had in interacting with Neighborly's team is that there's a lot of people that have a lot of opportunities. You have a lot of sharp people on your team. And Lindsey, I'm just curious, you know, what made you want to join Neighborly? What would you see in terms of the promise of it?

Lindsey Brannon: It really appealed to me. Neighborly is very much an innovator and stands out in that regard. And I wanted to be a part of a company with other bright, motivated people who had very diverse backgrounds, and I think that that's where Neighborly really shines. And I think we are, you know, helping modernize a 200-year-old market that really needs that innovation. And so I think the opportunity to do that along with focusing on smart cities and projects that will help future-proof our cities — I wanted to be a part of that. And I believe that, you know, Neighborly is the leader in that space, um, so that really motivated my decision to join.

Christopher Mitchell: And that really brings us right to, I think, one of the key points, which is that Neighborly is really focused on smart city-type stuff. The two things that I get the impression [are focuses] are municipal broadband — in particular open access, which we'll come to after we talk about the focus on municipal broadband broadly first — also the smart grid-type projects. But I also wanted to just note that, um, we haven't really fully gotten into the problems of municipal finance, and that's something that, Jase, I've told you before, I want to have you on for a dedicated conversation about that. So if people are sort of still not entirely sure, first of all, you can see really excellent presentations from Neighborly online, but we're going to talk about that more in depth. Today though, we really want to get to exactly how Neighborly is focused on municipal broadband and an exciting announcement. So just briefly, Jase, why municipal broadband? Why is that such a focus for Neighborly?

Jase Wilson: Smart city, right? And you know, we've been tracking very closely with the smart city movement since it came out. Initially, it was like a ... sort of a marketing device among technology companies that were selling it to governments. You know, the old adage of no one was fired for choosing IBM —

Christopher Mitchell: [laughs] Yes.

Jase Wilson: To overcome that is to say like, "Well it's a smart decision to, you know, to choose this other thing," right? But then it's evolved into a real movement, and it's one that we're very personally, very passionate about at Neighborly because we have this kind of strange view of what are cities, what are communities. We think of them to some extent as macro-organisms that we sort of collectively co-create and then inhabit and then become, you know, the results of how well they're wired. And we think that, you know, in the 21st century, they're increasingly becoming self aware, and this is through the sensors that are the ones that are embedded in the cityscape, the ones that we carry around. They collect thousands of data points every second to send back to some somebody, somewhere. And [we think] that, you know, you can see the Internet as something like a central nervous system in the wiring of a global whole brain. Uh, this scale of connection between the human brain with all of its synopsys and the global brain is the wired community. And at this scale, we think it's very important that communities are able to own and access their own information. The differences to us are striking. The recent absolutely deplorable Verizon throttling of California firefighters in an act of great blatance right in a disaster situation like that — you know, compare that to what's going on with the Ammon network where they organize a collection and throughput of data around gunshots. You know, these are two extreme examples of differences of how these things can go down. So—

Christopher Mitchell: Right. I should note that, just briefly, I don't know if Ammon's gunshot thing has really been used. I'm not sure how many gunshots there are, just uh ... but they're perfectly set up for it. Just to throw that out there.

Jase Wilson: If there is one, you know, the network knows what to do, right?

Christopher Mitchell: Right.

Jase Wilson: That technology hopefully — that idea and that way of thinking can hopefully be skilled up and out to other communities where there might be more gunshots where it could help, right? But these are extreme examples in disaster situations, right? There's countless other examples of how these things can be actively serving this sort of conceptual macro-organism as it becomes self aware and as, you know, people become to rely on it. And we think that the Internet is the 21st century's bridge between our communities and economic opportunity, and it's also sort of a, a bedrock starting point for us to think about layering up and out additional smart, intelligent, self aware solutions for communities to become increasingly resilient. So it was a good starting point for us that we're very passionate about.

Christopher Mitchell: And Lindsey, you have a big history with public finance. And so, you know, one of the things that strikes me is that if your main focus was bridges, you might have less enthusiasm from people, but focusing on, um, on broadband seems like it really fits with your goal of getting people more engaged in the whole municipal finance, and really any local governance process.

Lindsey Brannon: Yeah, definitely. We share, like you at ILSR, that commitment to work with like-minded communities, which is very widespread throughout the United States right now. And you know, there are smart communities out there who have done their own research and who are looking for that innovation and connectivity with capital, so Neighborly makes it easier to do that. And um, I think that's where it starts, with that commonality and desire to build broadband, and believing in the open access model is something key to the process.

Christopher Mitchell: Tell me specifically: what is the difference? What do you do differently from your competitors — aside from, you know, you'd certainly say you're more efficient and you're less costly — but from a person who isn't deeply familiar with public finance, how are you different?

Lindsey Brannon: Yeah. So we really help engage with the community and help communities think about, from beginning to end, the financing solutions that they need to build an open access broadband network. A lot of the time, the financing piece is brought in at the middle or the end rather than at the beginning, which really helps make it more successful. And it's also a way to engage with the community to build demand and map out where that might be within the community to really engage, um, from beginning to end. And so our company, is not only thinking about that entire lifespan of the broadband process, but we're also tapping into our Neighborly global capital network as well as being a technology company. So we have that span across those three areas, which really helps to bring a full solution, essentially, to these communities.

Christopher Mitchell: Okay. So one of the communities that my listeners are familiar with is Burlington because of its municipal network. Now, you've also been involved in a recent investment in Burlington, and I thought it was really illustrative of what I find most promising about Neighborly in relation to broadband. But can you just briefly describe how you sold the bonds for Burlington?

Lindsey Brannon: Like you mentioned, the Burlington, Vermont, transaction was — the use of the bond proceeds was for bike paths on Lake Champlain and was really a community project that is similar to broadband, where your users are utilizing that bike path, you know, everyday on their way to work or on the weekends. And so that infrastructure and network of paths and roads was very critical to Burlington to redevelop. And so we sold bonds in $1,000 bond denominations, and so that's typically lower than the $5,000 bond denomination. And so we offered those bonds to potential investors on Neighborly.com, and so we allowed the community to tap into that investment opportunity directly through our website. And we, in addition to that financing piece, marketed throughout the community, used bike share ads on the stations there, and really got everyone in the community engaged, even up to the mayor level. And having that community initiative to revamp the bike paths, you know, it was something that was very important to them. And so having it be something where the community feels empowered to change that and to be a part of it is something that was really powerful to see.

Christopher Mitchell: I agree. And when I learned about this in Maine when I was onstage with Jase, I tried to keep my jaw off the floor because it was just so exciting, the idea of citizen engagement and then making it an opportunity for them to purchase the bonds and being — having that a part of this whole process of thinking about an open access network. I think it's worth noting something that you did say earlier, Lindsey, which people might have not understood the import of, but you're making it possible for cities both to sell bonds locally as part of the citizen engagement, but then you can also place the rest of the bonds the same way anyone else would. So you're not guaranteed or you're not necessarily expecting the community to buy 100 percent of the bonds.

Lindsey Brannon: Right.

Christopher Mitchell: Jase, let's bring this back to open access and then we'll come into your announcement. But why open access versus a retail model, for instance, which has certainly been successful in places that have gotten often more attention than the open access model has?

Jase Wilson: You know, the community says, okay, well it's our infrastructure, and ISPs, please come and compete to serve our community members. And it's through this way that, you know, we thought that it could probably be the best model over time to help make sure that everyone gets some type of access and that there's different services provided for different types of access and different use cases. You know, it most closely resembled how we would have approached, if we did energy, community energy and interconnected energy systems from first principles. Starting from scratch — suppose we're leapfrogging the old infrastructure and just doing it out of the box — like, this is how we would do it. You know, you could essentially show up and say, okay, well today, the rates are best over here, and in that case it would probably be some kind of algorithm that would be, you know, optimizing on what's the available rate. For us, to see the frustration about how the telcos and cable companies that were sort of accidentally bestowed the opportunity to run sort of local oligopolies in the Internet when the Internet evolved in the United States — to see them sort of, you know, get into the arena and have to compete with each other and then having upstarts in the community that want access to the ability to serve the community, you know, continues to keep them on their toes. That's the spirit of American capitalism, right? It just struck us as a model that would be best for everybody, except maybe the telco that otherwise would have had the monopoly, and we're not opposed to other models. And we would go to these conferences that — you know, you'd be doing like a keynote talk, and there'll be people talking from the community about the process, the path, and we realized that each looked like something like a Joseph Campbell style, like, hero's journey, where there's somebody's obsessed with the idea of connecting their community. And they go through this crazy journey, and they have to cross chasms of the unknown and you know, through dark forests of fear, uncertainty and doubt where ISPs are like, "Oh, you're stupid for trying to do something different. You know, just let us go ahead and continue to run the infrastructure," whatever. Uh, and then they get to the part where they need the resources the most, the financing. And like Lindsey said, you know, it was thought about as, "Okay, well we'll get to that problem when we come to it," versus thinking about it as something that will happen from the outset when the time is right. And there's not a mechanism today, other than Neighborly, that you can push some buttons and responsibly borrow exactly what you need, exactly when you need it, starting with your own constituents and fanning out, like you said, to the global capital network that, you know, is tens of billions of dollars per year of annual bond purchasing power and desire to invest in things like community broadband.

Christopher Mitchell: You've kindled my interest in public finance, but as I think back to what the humble municipal bond has built — and again I would come back to like bridges and roads and major enablers of modern commerce — it's been open infrastructure, and I think there's a good fit for that historically. But the part that really makes me excited about this is one of the challenges of open access is that it is harder for revenues to meet the costs and the debt. But, the reason that that's true is because the incumbent providers can lower the price, and if people are just going to make up their mind based on the price of service for the next six months, the incumbents have the advantage. But if people are bondholders, if they've been engaged in the process, their thinking is different.

Jase Wilson: Exactly. Yeah, you nailed it. That's it. You know, it's the alignment of incentives. It's investing in a thing that you're helping to build. And investment is financial, but it's also affinity. It's attachment, you know. If you're directly involved with it, if you buy it and understand it, and if you're going to invest in something like that, or are given the opportunity to invest in it, then you know, when it comes time to do ... We're talking about demand aggregation, the mechanisms pioneered by COS and used to good effect — you know, Google fiber. And as folks started to roll out various high speed modules in the United States, pitting community against community in fun competitions and helping local champions rally their neighborhoods and get everybody connected, in that process they extend the ability to invest directly. It's not going to be appealing to everybody, but it certainly is something that's going to help folks that want to see it happen and become an extended form of champion because, you know, you become invested in it not just financially but psychologically. And there's a really clear path to that being of service to the model where, you're right, the incumbents have a huge advantage in that they can act irrationally. You know, you play this out, you see they're charging you $100 a month that they are only paying eight bucks a month [for] or something like that. You know, when the community starts talking about, "Okay, we're gonna build some other model that would not allow them to be the only game in town," they say, "Oh, congratulations to everybody! Now we're offering a special where is $25 a month," or something like this, where they're still making a fortune on margin, but they were able to drop that cost. But if you have the investment in long term infrastructure and you have the ability to bring others into the competition, then everybody but maybe the prior monopoly gets an advantage.

Christopher Mitchell: Well, and it seems to me that this is an odd situation in which your financial mechanism can lower the risk of the overall project, which is pretty fascinating.

Jase Wilson: Take rate gets extended and enhanced by folks, you know, wanting to come to the table and be a part of the opportunity.

Christopher Mitchell: And so now, with all that as background, we get to the big announcement, which is an accelerator that you — you know, I get the impression that in some ways, Lindsey, that you're sitting around thinking, "We really want to see these ideas in practice. We want to start iterating and working with communities. How can we make that happen more rapidly?" So what's next?

Lindsey Brannon: Yeah. So our accelerator launched last week, and we've opened up the Neighborly Community Broadband Accelerator to not only communities but also ISPs and community advocate groups. The idea with the Neighborly accelerator is that we will help supercharge these broadband ambitions or projects that are currently in process by helping connect the best and the brightest in the broadband industry together and creating this ecosystem of those particular parties that are able to open up the dialogue, giving these communities tools to help push forward their broadband.

Christopher Mitchell: What kind of tools?

Lindsey Brannon: So the tools that we are helping develop with our partners are educational sessions with these leading experts throughout the industry, our technology platform is very powerful and so giving them access to that, helping to build what we're calling demand aggregation, as Jase alluded to that COS pioneered. That type of technology that helps bring together and map out the community engagement and the subscribers that may care about the broadband network. And we also give them the ability to create marketing collateral. And so with every bond deal that we've done, we've given the community marketing tools — you know, designed posters for them, built pages on our website to attract the community and spread the word. And also we will talk with them about how to finance — how do you build the open access network through creative financing structures — and give them access to the Neighborly global capital network.

Christopher Mitchell: You mentioned, Lindsey, that this already had launched. Jase, can you tell us a little bit about the reaction that you've seen?

Jase Wilson: Definitely, and we're most excited that day one, 20 communities signed up. We're about to do some big pushing on it with some friends that want to see the world work this way, so hopefully it'll attract the goal of 100 communities. But we also are really excited about the ISPs that have signed up to provide access through those networks and operate on those networks when they're built. We've had great signups from engineers to help design the networks. You know, we've been working very closely with Foresight Group on making sure that we understand exactly the range of opportunities. And we're also really excited about the local builders that are showing up and saying, "If this community is going to do this then we're here to help build it." So like Lindsey said, it's not just about the finance. In this case, it's about the ecosystem and building a pathway and helping them to get together, you know, sort of all the raw ingredients that a community would need to cook into what becomes the network. It's the most efficient form of financing that we can bring to it.

Christopher Mitchell: Where can people go to learn more about it and to sign up?

Jase Wilson: I think it's at slash broadband, right? So neighborly.com/broadband. {Note: neighborly.com/broadband-accelerator is the correct url]

Christopher Mitchell: Okay, we'll have a link to it certainly in the notes that accompany this show, but people could also just Google "Neighborly accelerator," I'm sure, and find it. So is this the kind of thing that if you miss your opportunity, it's gone? Or is this going to be a recurring program of sorts?

Jase Wilson: Well, the accelerator is still one of the first communities that will get to use the tools and put them to use to make their network happen. But it's part of our long range commitment to becoming the platform of record for financing community broadband networks. So this program that accepts applicants that we'll work very closely with will be the first to be able to access the tools, but from there the tools will continue to live on and the financing platform will certainly grow. And every time somebody shows up to invest in their community or — there's folks on the Neighborly capital network that Lindsey mentioned that range from, you know, grandma down the street that wants to put a thousand dollars into the project all the way out to sovereign wealth funds on other continents that can't invest less than a million dollars in your project and everything in between — and every time one shows up to sign up to invest in a specific project, they find interest in other projects. So it sort of snowballs into the effect of becoming that platform of record that's enduring for community broadband finance.

Christopher Mitchell: So basically these communities are getting an advanced sneak peek at tools that are going to be more commonly available in the near future.

Jase Wilson: Yeah. The tools and they'll also get a level of assistance and attention from Lindsey and all the all-stars in the Neighborly squad that probably won't be there [otherwise], to the extent that they are putting in, you know, countless hours and going to bat for that community. So it's not just about getting a sneak preview. It's about the extra TLC that once the program, the accelerator program, and initial class comes through. Then from there, it's more of a self-service kind of model. We'll help where we can, but the first communities will be very fortunate to have a team of all-stars and aces and wizards who are really passionate about helping them to connect to each other and to other communities and to the capital that they need to build their network.

Christopher Mitchell: And people have about a month until the deadline is over, and then you're gonna decide who to work with after that point, right? It's going to be toward the end of September [that] people can still sign up.

Lindsey Brannon: Yeah, that's right. September 28th is the deadline for the first wave. And so you can go to our website and sign up, and we will be selecting five to 10 out of those applicants. And you know, entry to the accelerator program is free, and so we believe that, you know, there's an opportunity for that connection. And we welcome those three different main buckets of parties, whether it be the community, the ISPs or the advocacy groups, either nominating their community or nominating themselves as a partner and a resource for the program

Christopher Mitchell: Well, and I think it'd be really terrific if you have the trifecta of a community group, a local government, and an ISP all combining in single package. That would be amazing.

Jase Wilson: Definitely.

Christopher Mitchell: Well, is there anything else that we should touch on briefly about Neighborly before we end this episode and start preparing for a future episode about the history of the humble municipal bond and how some have attempted to corrupt it.

Jase Wilson: We'd love to talk your ear off and your listeners' ears off, Chris. We look forward to coming back. We're excited to talk more about the crazy history of the humble municipal bond and how it really got its start through something that could be written up as a best-selling murder mystery. And there's just a fascinating history ... But you know, we just want to thank you, Chris for — again — for connecting communities and helping others to connect their communities, and you know, for ILSR, for doing what you do. We're huge fans. And all the listeners, you know, we're probably biased but we thank you all for what you're doing because you're probably here to think about how to better connect communities. We appreciate that and want to help any way we can. Thank you.

Christopher Mitchell: Great. Well thank you. Thank you, Lindsey, thank you, Jase, for making time today. We actually attempted to record this previously, and Skype really, really screwed us up and I didn't want to, um ... I didn't want to let that go. I wanted people that are still listening to know that Skype has really infuriated me, but I really appreciate your dedication to getting this interview done.

Jase Wilson: Thank you, Chris.

Lindsey Brannon: Yeah, thanks very much. We really appreciate it.

Lisa Gonzalez: That was Christopher speaking with Jase Wilson and Lindsey Brannon from Neighborly about the firm, their model for helping local communities use municipal bonding to fund infrastructure projects, and the new accelerator program that's focused on broadband infrastructure. Remember to check out their website, neighborly.com, if you're an investor seeking funding resources or if you're just curious about their work and the projects they develop. The accelerator program link is neighborly.com/broadband-accelerator. We have transcripts for this and other 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 the other ILSR podcasts, Building Local Power and the Local Energy Rules podcast. Access them wherever you get your podcasts. Subscribe to ILSR's monthly newsletter at ilsr.org. Thanks to Arne Huseby for the song "Warm Duck Shuffle," licensed through Creative Commons, and thanks for listening to episode 320 of the Community Broadband Bits podcast.

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