This is the transcript for episode 330 of the Community Broadband Bits podcast. While at the 2018 Broadband Communities Economic Development Conference in Ontario, California, Christopher spoke with broadband consultant and practitioner Jory Wolf about various projects happening in California. Listen to the episode here.
Jory Wolf: Regionalism, I think, is becoming very popular with cities — again, combining resources and to be able to create a critical mass to get attention from third party entrants to actually create a competitive network that would provide services to businesses in their communities collectively, at a much lower price [than] if they did it singularly.
Lisa Gonzalez: This is episode 330 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. The 2018 Broadband Communities Economic Development Conference in Ontario, California, gave Christopher a chance to talk to several people for our podcast. One of the people he wanted to be sure to speak with was Jory Wolf, who now works as a consultant. Many Community Broadband Bits podcast listeners already know that Jory was the driving force behind Santa Monica's CityNet. In this episode, Jory takes some time to give Christopher an update on what's been happening in Santa Monica, including their plans for bringing high quality connectivity to residents living in the city's public housing. He also shares updates on some of the many other projects happening in California. In addition to sharing what he's observed about some of the opportunities local governments have been able to take advantage of, Jory talks about several of the regional projects in California. He describes new approaches of public-private partnerships and the way local communities are setting themselves up today for better future connectivity. Now, here's the interview.
Christopher Mitchell: Welcome to another episode of the Community Broadband Bits podcast. This is Chris Mitchell at the Ontario, California, Broadband Communities Economic Development Summit, sitting with Jory Wolf, who is currently the Vice President of Digital Innovation from Magellan Advisors. Welcome back, Jory.
Jory Wolf: Thank you, Chris. Good to be here.
Christopher Mitchell: Jory, two years ago, you retired from being the CIO of Santa Monica and you've done some interviews with us then. We did a case study on what you did in Santa Monica. Now you're helping many other cities do this. Why don't you just give me a little background of how you're approaching consulting because I think it's a little bit different than how some others do.
Jory Wolf: I look at myself as a practitioner, not as a consultant. I've been building broadband networks in the city of Santa Monica, both wired and wireless, for the last 20 years. [We] started after the 1996 Telecommunications Act, built our first network in 2002, [and] connected 56 city, school, and college facilities by 2004. We connected Google in three locations in the city and had ventured into providing not only businesses but anchor institutions broadband connectivity at speeds of one Gig, and we were using a four gig network for the city, school[s], and the college. By the time that 2010 rolled around, we upscaled the network from one Gig to 10 Gig, and by the time we got to 2014, the network went from one and 10 and multiple Gig to 100 Gig. The city of Santa Monica is unique in many ways from other cities that are venturing into the muni broadband space in that it not only owns, but it also operates its municipal fiber network. As well as implementing a fiber network, we've implemented — for businesses and of course for economic development — we've implemented many smart city applications, including intelligent transportation, improved public safety, many applications for real time parking and congestion management.
Christopher Mitchell: Those are the ones that I was immediately thinking of, especially when my wife and I were in Santa Monica not too long ago and took advantage of those on a vacation.
Jory Wolf: We continued to look at other government innovations. We grew the network. The network then not only included businesses and drew businesses to the area, but it also retained businesses in Santa Monica. That was spread out to anchor institutions, such as UCLA hospitals and clinics. And of course, the schools and the college district continue to thrive and have savings from being on a 10 Gig connection through the CityNet broadband system. We implemented ubiquitous Wi-Fi throughout 80 percent of the commercial corridors and of course continue to look at opportunities to go beyond businesses and anchors. And by just about the time that I was starting to leave Santa Monica and created a utility fund for CityNet, we started looking at the financials and what it would mean in terms of a revenue flow and a break-even to provide residents in low-income housing units with a Gig of broadband. It was clear to us in the math that we were doing that for $69 a month we could deliver broadband to any multi-dwelling unit, and the numbers penciled out if there were at least 14 units in a particular multi-dwelling unit structure. There was a break-even for the city for the switch equipment, for the interior structured cabling that would need to be done to the unit, and any other power modifications that would have to be completed.
Christopher Mitchell: And that's based on units paying $10 a month, I'm guessing, or . . . ?
Jory Wolf: And that was based upon units paying $69 a month for a Gig. If the unit qualified under California Care as a subsidy for low-income housing, then they were able to receive a subsidy and [it] lowered the rate down to $48 per month for a Gig.
Christopher Mitchell: Okay.
Jory Wolf: These were units that are being currently managed by the Community Corp of City of Santa Monica. They manage these low-income housing units. There are 100 multi-dwelling unit properties, and we started with a pilot program for 10 of them.
Christopher Mitchell: And so I think a lot of people go the opposite direction where they're trying to figure out how to do a more basic connection at a very low rate. What experiences has Santa Monica received, you know, from doing your approach?
Jory Wolf: A basic connection for residents where we really didn't want to offer anything lower than a Gig for residents — it doesn't cost any less money to offer 100 Meg versus a Gig to either a business or to a residential location. The equipment is pretty much the same, and any carrier will tell you that, and any product reseller or manufacturer will also tell you the same. A Gig port is a Gig port. You run 100 Meg off of it or you slice and dice it down to anything else, you're still gonna pay for a Gig port, and so you might as well. It doesn't cost us any more. As a matter of fact, for CityNet customers, it was our standard routine if they signed up for a Gig, we would always give them a Gig and a half or two Gig during a six month signup program. And that was a good incentive for them to sign up. First of all, they couldn't even get a Gig from the other carriers because the other carriers hadn't invested beyond their coax and copper systems. So it was a good incentive to get businesses and residents onto the network. And again, it didn't cost the city any more, so why not?
Christopher Mitchell: Well, I guess the question is — and there's an assumption, I think, often that the kinds of low-income households you're connecting wouldn't have that kind of monthly revenue, the ability to pay those monthly bills, but your experience suggests that they are paying those and I'm going to go ahead and guess, are pretty happy with the service.
Jory Wolf: They are. The system is, you know, still in its infancy. I would say that there are still lots of low-income housing properties that need to be connected, and then also to look at other multi-dwelling unit properties that have 14 units or more that will pencil out and a break-even in connecting those properties. Whether or not CityNet will ever advance to providing a Gigabit or multi-Gigabit to single family residences is still not clear. It is possible, but our opinion is those people really don't need an alternative, more affordable solution.
Christopher Mitchell: Okay. So the reason I wanted to interview you is actually based on a question I'd asked you a long time ago, maybe a year ago or so, about what was actually happening. Because I know that in your work for Magellan, you're working with a lot of cities — a lot of them particularly here in southern California, but also all up and down the West Coast, sometimes working with cities in the middle of the country or the eastern part of the country from what I can tell. And I wanted to talk about some of the different approaches that we're seeing because frankly, there's a number of things going on that we just don't get much news about. And so one of those, I think, is how Inyo is partnering with a number of cities. So why don't we start there and just pick your brain a little bit about what we're seeing with business models in terms of partnerships with this ISP, a regional ISP called Inyo: I-N-Y-O.
Jory Wolf: Well I'm really excited about the whole P3 model. I think a lot of cities are saying, well, how are we going to go ahead and not only fund creating something like this, but we're not qualified to operate something like this? It needs to be maintainable. I don't think that there's a city manager or city council in this country that would want to go forward with a broadband initiative and then have it fall apart. No one wants to be part of a failure, so they want to be sure that it's going to be successful, and they need a solid operator to be able to do that. Interestingly, municipalities typically already have fiber assets to get started with, so a business model has now emerged, which is the predominant model that we see that Inyo is taking advantage of, and that is a P3. So the municipality owns the fiber network, [which] typically comes from a traffic signal system with conduit connecting the traffic signals or from a street light system or any other conduit that they might have underground. Of course, we all know about ways to incrementally build and opportunistically build. When wireless carriers come into town and they want to do encroachment in the public Right-of-Way to backhaul wireless with fiber, or other utilities for that matter, and you do joint trench and you lower the cost, and you joint trench and put in your conduits while they're putting in their conduits. It saves the roadway and it also saves money. But then after you've built this thing, who's going to operate it? And Inyo fills that gap. There are companies like Inyo, and others could be named as well. And of course, I meet with them on a regular basis because they're the partners that I bring to the table for all of our clients that are looking to solve that question for their councils and their city managers: who's going to maintain this and are they qualified to do that? Inyo has the credentials, and of course there are others. And I see cities now being more successful and are approaching broadband more confidently because they have an answer to the last question on maintenance and operations.
Christopher Mitchell: So a city may have conduit on main arterials, may have, you know, some conduit elsewhere, but is the relationship that the city then leases whatever it has to Inyo and they figure out how to extend that and build off of it? And then Inyo owns the rest of that, often the connection to the home and that sort of thing, and then they share back revenue based on the amount that they're leasing? Is that the kind of arrangement?
Jory Wolf: Mostly. That's the typical form of the arrangement. Obviously, cities encourage Inyo and companies like Inyo to continue to expand on the footprint and get to new areas. As the city continues to build out to new property developments or works with developers and developing tracts, as the city continues to look at its smart city initiatives and overlays its smart city and other government innovation with anchor institutions in areas that don't have affordable broadband but need affordable broadband, the answer is how do we maintain all of that for all those varying constituencies? And these P3 public-private partners come in and do that very well for them. And of course, we see the models changing. This is something which is new. I am familiar with Inyo. Inyo actually started with Vallejo in northern California. They then picked up —
Christopher Mitchell: For those of us not from California, that means the middle of California I think technically.
Jory Wolf: Correct. Yeah, but we wouldn't call it central California either.
Christopher Mitchell: Sure, sure.
Jory Wolf: So then after that, they picked up Ontario, California, and they're bidding actually on two other projects: one in the South Bay coalition of 15 governments for a regional I-net on a loop, and then also they're competing in La Mesa for a city network where they need a P3 operator to maintain that for their traffic signals, their smart city, and to build for economic development.
Christopher Mitchell: So let's talk about that South Bay approach. This is something that I think you're pretty excited about, and I think it may be based on a vision you had 30 or 40 years ago even. So what is happening? Well, I guess a first good question is, what is the South Bay, and then what are they doing?
Jory Wolf: The South Bay is a coalition of governments, very much like [how] many governments throughout the country collaborate on local or regional initiatives. And we all understand they have corporate boundaries, but projects and various initiatives cross those corporate boundaries. And it might be transportation, it might be housing, it might be economic development, it might be public safety.
Christopher Mitchell: Or air pollution
Jory Wolf: Or air pollution. Yeah. Or it might be an airport or a port district that they're all very close to, and it could be emissions and from those ports and those airports as well. So they band together, and they work on these local initiatives. In the South Bay in particular, we did a project and we looked at economic development. There was a project that was funded by the Workforce Investment Board, and through the WIB we were able to acquire the funds to answer the question: will broadband be an incentive to facilitate and to expand economic development within the region to be able to develop jobs and retain jobs within the area? The region had started to see some very large employers move to other locations throughout the country. Most of them were blue collar manufacturing jobs, so the region has these very large warehouses. And I'm talking about communities that range from multimillion dollar homes in Rancho Palos Verdes and Rolling Hills Estates on the peninsula, all the way north to Inglewood and El Segundo that are not as expensive communities, and then many others in between which are either beach communities or inland communities within the region. The idea here is they did believe and they did want to test the waters. Will a broadband network, a regional system, actually retain jobs? Will it create a new knowledge worker workforce so that they can maintain the value of their homes and their very rich housing stock? They needed to be able to fill the gap, and they wanted to be sure that they found a new instrument or a tool to be able to help maintain and sustain their economic growth. We've seen many things happening within the region. We all know that they not only need to maintain their economic growth, but all communities need broadband. And if they went and tried to do this on a continuous basis on their own, it's divide and conquer and they're all paying more than they should. Our study for economic development identified [that] all of them were paying two to three times more than they should for broadband.
Christopher Mitchell: Right, because a lot of these areas are areas that have some level of decent telephone service. I mean, it may be advanced DSL or might be a less advanced DSL, but presumably almost all of them have cable, certainly at least to anchor institutions. And so it's not a matter of they can't get any providers but probably that the providers who are there are limited and overcharging, I'm guessing.
Jory Wolf: Absolutely. And so there are no third party entrans in this particular region. The cities themselves really didn't have any assets that we could cobble together. Some cities did but certainly not to the extent where we could pull them all together into a regional system. The traffic signal system from most of these communities is managed by LA County Department of Public Works, Traffic Engineering Division, and everything is a point-to-point wireless connection. So obviously fiber was not going to be an answer to be able to connect this using public assets. And so, at the tail end of that study, we reached out to a couple of fiber providers, non-traditional fiber providers, who are just starting to think about, maybe this is something we want to get into also: Southern California Edison, Crown Castle, Zayo, and others. CenturyLink and even Frontier and Spectrum came to the table. We had 17 interested parties at the bidders conference in phase two of the project when we started it up, and we now have some very good responses to the RFP. And Inyo in fact is one of them.
Christopher Mitchell: And this is an RFP to build a fiber network that will be owned by the local governments connecting anchor institutions — is that right?
Jory Wolf: Interestingly, this particular one is a network that is owned by the public-private partner. The cities are the anchors, and the partner provides the fiber connectivity, continues to maintain and expand the fiber footprint beyond city building connections to business connections and to anchors as well.
Christopher Mitchell: This is the kind of model that always makes me nervous because it seems like the local governments then don't have much recourse if things don't go as planned, if the provider begins offering poor customer service or doesn't want to upgrade in 10 years or you know, whatever scenarios I could cobble up.
Jory Wolf: Right. So there is no exclusivity at this point, and the model that we're looking at are contracts for three, five, and 15 years. So cities have the right to individually opt into either a three or five or 15 year program. And after that, if they're dissatisfied with the service, they move on to another provider. And so it's not an exclusive relationship and after the contract expires, they can get out.
Christopher Mitchell: Would they have to then build a new fiber network then as part of a new arrangement if they opted out?
Jory Wolf: They look for the next responsive — the best responsive bidder.
Christopher Mitchell: But that responsive bidder wouldn't be able to use the fiber that was built by the first — is that right?
Jory Wolf: That is correct.
Christopher Mitchell: Okay.
Jory Wolf: But, understand that there is plentiful fiber within the region of these 15 cities. It just wasn't available to them before.
Christopher Mitchell: Right. Zayo, like, presumably has fiber all over the place already.
Jory Wolf: Crown Castle and Southern California Edison as well.
Christopher Mitchell: Right. The Inyo model in particular that we were discussing before we get into the South Bay, it reminds me a little bit of what we've seen Ting doing in Centennial and Sandpoint and Holly Springs. And I'm curious if — you know, as someone who's looked at those I'm guessing — are there any differences there where the city basically has arterial fiber that its leasing to a trusted partner that is going to expand it to the last mile? Are there nuances that are different?
Jory Wolf: Well, we're seeing — take La Mesa, for example. So La Mesa was rehabilitating all of their traffic signal fiber and they decided instead of just pulling a 72 count fiber bundle, they asked us, should we pull another bundle or should we pull a larger bundle? So we all agreed that the best thing for La Mesa to do was to pull their 72 count — and the cost is really not in the fiber itself, [but] the cost of pulling the fiber, and of course any construction which would need to be done to make it all fit and to work within the infrastructure. We decided that they would pull an extra 144 count of fiber, and then we put out an RFI and said, everyone come and tell us what kind of business model you would offer to La Mesa. And we had 70+ interested parties.
Christopher Mitchell: One of the exciting things happening in southern California is Beverly Hills basically just decided — not unlike I think kind of what Hillsboro is doing outside of Portland — hey, we can hire people. We can just go ahead and build Fiber-to-the-Home and operate it. You know, we're a capable city. What's going on there with Beverly Hills, and is there anyone else that you're working with that has a similar approach?
Jory Wolf: Beverly Hills, their model is to not leave any money on the table. So they're not looking for a public-private partner; they're looking for contractual services. So we need to be sure that we understand that that Beverly Hills model is very different. They're not like a Santa Monica where they're going to own and operate it. They are not like a P3 like what we normally see in that they own it and someone else operates it through a P3 arrangement and expands it. The city is going to own it, but the city is going to contract out and select incrementally all the various contractors that will provide the maintenance and operations, including content and other services.
Christopher Mitchell: Okay. So this is a situation in which they are going to own it and may be able to switch who's providing the services on it and that sort of thing. But it is, you know, broadly speaking, a pretty vanilla Fiber-to-the-Home, publicly-owned network in which they call the shots themselves, and they're just doing a lot more of it on contracting rather than in-house, right? Which makes sense in part because they don't have a municipal electric utility,
Jory Wolf: They don't, and the contracts are going to be managed by their assistant director of IT. They expect to let somewhere between six and seven contracts, including dial tone and video services over the network, and then this would include your standard local TV channels as well. And they're looking to the industry, they're looking for third party partners, to be able to fill each and every one of those particular services on the network. The issue is that when you have that many contractors, you've got a lot of contracts to manage and you've got a lot of things to negotiate. And when you're doing that, there's a lot of things that can go south.
Christopher Mitchell: Right. I mean, there's a lot of ways in which I think [they] may not interoperate very nicely, I presume.
Jory Wolf: Yes, and you might be relying on a particular agreement to lease an asset from a third party and that third party changes their mind.
Christopher Mitchell: And I thought Beverly Hills had already started building, you know, had the contracts out. Where are they exactly in the process?
Jory Wolf: I can't speak to exactly where they are, but I know that they're being held up by some earlier negotiations that they had with third parties on using third party assets. The third parties now have come back and asked to renegotiate or are reconsidering whether or not they're going to allow those assets to be used.
Christopher Mitchell: Okay. Culver City is building out fiber to local businesses. What's happening there in a nutshell?
Jory Wolf: So it's Culver Connect, and [they're] working with Mox [Networks]. It's a business model where the city actually owns the network, and it's going to be managed in a P3 relationship with Mox [Networks]. Mox will market, maintain, and operate the network and can continue to expand it over time. They will share obviously in the revenue like Inyo does, but be more proactive than Inyo is, in their model and in working in Culver City, more proactive in actually expanding the network.
Christopher Mitchell: Okay. What else is happening along those lines? Are there other projects that I'm missing?
Jory Wolf: Oh, sure.
Christopher Mitchell: Of course there are.
Jory Wolf: Yeah. Um, so—
Christopher Mitchell: To be clear, there's probably some that are in opening stages that we're not going to talk about, but these are ones that are fairly public already.
Jory Wolf: Yes, and I think I can safely say there's a new model which is starting to emerge, and I can safely say that using the model of regionalism I think is becoming very popular with cities — again, combining resources and to be able to create a critical mass to get attention from third party entrance to actually create a competitive network that would provide services to businesses in their communities collectively, at a much lower price [than] if they did it singularly. A good model that we're looking at growing — we're really not under contract yet, but I can safely say they will venture either using us or someone else — the County of Ventura is looking at creating a middle mile loop, just like a regional loop in the South Bay, and that middle mile loop will allow all of the cities to connect to a wholesale middle mile loop that's connected to two Internet points of presence. They'll be able to drive down, we expect, the cost per Megabit for broadband and be able to share in some local services, plus expand other kinds of services for mutual aid and other kinds of parking and traffic, traffic signal, regional transportation, and public safety matters.
Christopher Mitchell: Great. Well, Jory, I appreciate you letting us pick your brain on so many different happenings of what's going on here in southern California.
Jory Wolf: Well, thanks Chris, and my pleasure.
Lisa Gonzalez: That was Christopher with consultant Jory Wolf. Jory gave us an update of what's happening in California. We have transcripts for this and other podcasts available at MuniNetworks.org/BroadbandBits. Send us an email 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. You can subscribe to this podcast and the other podcasts from ILSR, Building Local Power and the Local Energy Rules podcast. Access them wherever you get your podcasts. Subscribe to our monthly newsletter at ILSR.org, and don't miss any of our original research. While you're there, take a moment to donate. Thanks to Arne Huseby for the song Warm Duck Shuffle, licensed through Creative Commons, and thanks for listening to episode 330 of the Community Broadband Bits podcast.