This is Episode 4 of the Community Broadband Bits Podcast. Kevin Kryzda, the Chief Information Officer for Martin County, describes how the community created an institutional network. Listen to this episode here.
Christopher: This is Christopher Mitchell with the Institute For Local Self-Reliance talking about community broadband networks. Today we're talking about a Florida county that built its own network to save millions of dollars in connecting schools and other public facilities. We recently released an in-depth report explaining how and why Martin County declared independence from Comcast. You can find it at muninetworks.org/reports. In a moment, we'll talk with Kevin Kryzda, the Chief Information Officer for Martin County, but first some background. Local governments across the country are getting ripped off by the big cable and telephone companies. Many can get a much bigger bang for the taxpayer's buck by building their own networks, and where the community is willing, such networks could be expanded to serve residents and businesses. In the following interview, we'll talk about how Martin County saved millions of dollars by building its own network, which was actually far superior to the one they were leasing from Comcast. Here's the interview with CIO Kryzda.I'm here on the line with Kevin Kryzda, the CIO of Martin County in Florida. Thank you for joining us today.
Kavin: Thank you for having this interview with me.
Christopher: I'm excited. We've talked several times in the past so we could get a flavor of your network. I was hoping to start by you describing the dark fiber network and the conditions under which Comcast was attempting to increase the price of it.
Kavin: Sure. The original network was negotiated in 1999 as part of a franchise agreement, which at the time in Florida local governments had franchise authority. Under that authority and under federal law we learned about institutional networks and the provisions of the federal government and federal law about institutional networks, so we tried to take advantage of that. Negotiated with the incumbent carrier at the time, or cable operator, and they agreed to install incremental fiber in their sheath, because part of their franchise agreement was to upgrade their network's technology. They agreed to put in incremental fiber to serve our needs as an institutional network. We then attempted to negotiate the purchase of that outright, because we didn't think the value was that extensive. There were fifty-three sites we needed to .... Actually, forty-nine locations, but fifty-three buildings. We think that the initial cost of capital for that original network, the incremental cost, was somewhere around four hundred thousand. We offered to buy it outright and they refused, and instead offered us what was then a pretty attractive lease. The extent of the network was roughly eleven hundred fiber miles all strung on poles aerially, and that comprised the network that we leased for about nine-and-a-half years, almost ten years, till 2009 when we attempted to renegotiate.That was the extent of the original network. It served libraries and schools. It served libraries, education, fire, law enforcement, emergency management services, and a couple of municipalities in the county, as well as the county. All in all that was the extent of that network.
Christopher: Right. Then, in 2009-ish, you no longer have the power to issue a franchise, and you need to find a way of having a wide-area network for your county. What happened next?
Kavin: In 2005 Florida passed a law which basically presents municipal governments with very large obstacles which have to be overcome prior to being able to serve competitively against an incumbent telecom carrier. Because of those laws and because the state took back franchise authority from local governments, local governments no longer have standing to negotiate. Because of that, the cable companies have taken the position that they don't really have to go out of their way to do anything to meet the needs of communities in Florida, and they haven't. Basically they've taken the national position that, "We're allowed to serve anywhere we want, and local government authorities don't really have any rights to demand more than what the federal law requires."Shortly after July of 2009, which is when our franchise came to term, we received communication from the local cable office that they would be in touch with us soon to offer us some proposal to continue this institutional network. Of course, we kind of had a sense of what that meant. We thought at the time that what that meant was they were going to start racking up the price, and probably do it to a point where it would be unsustainable or unaffordable. We started doing calculations about worst case scenarios, and we learned that if the price of the cable franchise were to triple, that we would be better served by spending that money building our own network rather than leasing it.Of course, by 2009 the real estate bust had hit Martin County, so there was a lot of economic downturn. It was very difficult to convince people to spend more money when we were trying to save and cut money everywhere else. We got a sense from the community that there was enough of a stomach for a good financial decision, what would be good for the community in terms of expenses over time. Things were very favorable. By 2010 we had negotiated a one-year agreement with Comcast at the time which wasn't very onerous. They increased the price by six percent, which was very reasonable since we had no increases prior to that. Then they made a proposal to us to increase the price again month-to-month for 2011.By then, we had done a lot of legwork. I hit the rubber chicken circuit, basically going on the speaker circuit and talking to every community interest in town and every business interest in town, whatever it took to get in people's faces and get a gauge from the community. Things were looking up. People were very positive. Many of them were thankful that we had the foresight to think about it ahead of time. Based on all that input, we decided we would try to get some money, so we started thinking about a commercial loan or a municipal bonding. That's eventually what ended up happening. We spent roughly twice as much for our commercial loan debt service than we would've otherwise faced by doubling the rate of our lease.
Christopher: Can we delve a little bit into the amount that Comcast was attempting to raise your costs over a period of five years?
Kavin: Oh, sure. In 2009, Comcast offered to give us an incremental cost increase, which was about six percent. We gladly took it. It gave us time to get all of our ducks in a row and our act together. By the spring of 2010, Comcast wrote us a letter saying that they would be happy to extend the lease for us for another five years, starting with twenty thousand dollars a month. We said, "Okay, twenty thousand for the first of five years, we can still deal with that. It gives us a little bit of time." Remember, that was almost six months after the expiration. We're already in the spring of 2010. By the summer of 2010, the price would rise to twenty thousand dollars a month. Then the price would rise again to thirty-four thousand for the second, and then forty-five thousand for the third, and then ninety-eight thousand per month for the fourth and fifth year. Then, after the fifth year, Comcast didn't want to lease anymore. They said they would want to switch us to managed services. Managed services just means an opportunity to charge more for less. At the time, our original estimates, if we were to build completely from the ground up, were about nine-point-eight million. If we compared the cost of leasing a network, the life of a network that we would build, and the cost of that network, it was easy to see that after ten years or less than ten years we would recover the cost of leasing at one-point-one million dollars a year. It was very easy to sell the buy versus lease notion. We went back to Comcast and said, "No way, we're not going to do that. We're going to go build our own network."Lo and behold, by the fall of 2010, they said, "Well, actually, we have another offer, and the offer is half." It was still four hundred and fifty thousand dollars a year for the network that was a hundred and fifty thousand prior to that, and it was no different. It was still the same aerial network, single points of failure, no redundancy, et cetera, et cetera.
Christopher: I think it bears noting that Comcast in providing this network isn't really doing anything. They don't really have a cost. Am I correct? It's like a landlord coming out and just increasing your rent by eight hundred percent over five years just because they can.
Kavin: Oh, absolutely. In fact, the thing I forgot to mention was that the network we leased from Comcast was a dark fiber network. In other words, we provided all the electronics at the county's expense to make use of the network which they provided in their bundle. You're right, Chris. Comcast didn't do anything except repair their network wherever it was broken and affected ours. Comcast never did anything for the county other than provide the glass in their bundle. You're right, they basically were raising the rent without doing any improvements to the property.
Christopher: You've moved ahead now and you've built your own network. What are some of the benefits you're seeing from your new network as opposed to the old one?
Kavin: One of the first benefits when we designed the network, I mentioned we designed the network of about nine-point-eight million dollars, and that was supposing that there were no other opportunities to reduce costs. In fact, that's not the case. We also built other segments of networks along the way, Martin County did on its own. Some of them were under FHA grants with transportation, and some of them were to extend the Comcast network to serve other facilities that the county had as well. The county had invested in other network routes. The traffic network was putting in fiber as well in the ground, and they put in about twenty-four miles of fiber. The county put in another roughly fifteen to seventeen miles of additional routes elsewhere. It turned out that all the fiber routes that the transportation department put in were the same routes that Martin County, the rest of the network, would use to build its own network, so we had an agreement with the engineering department to use those routes, and while they were building their network the county also put in additional fiber bundles. That brought down about two-point-five million dollars of the nine-point-eight million dollar network.
Christopher: The report does detail how you cut the costs almost in half, which the various discussions you went through to get to that.
Kavin: They serve everybody. They serve all the utilities, law enforcement, fire, public safety, all the municipalities, and many non-profits in the community, libraries, et cetera. As far as the transportation network is concerned, we doubled the number of intersections that can now be automated and we have traffic control monitoring on. Another big improvement that came from the community is that the network paths also pass several of our public safety towers, and so what we were able to do because now our new network has a redundancy where the old one didn't, and it's underground, which is less prone to interference from man-made and other weather interferences, the public safety people were much more comfortable about putting the public safety radio system on the fiber network as a backbone rather than leasing the network to connect the towers. That reduction alone is seventy-three thousand dollars a year, and the fiber routes are redundant. That was an enormous benefit to the public safety radio system.
Christopher: Right. I just can't imagine having a purely aerial, non-redundant connection that you're relying on on Florida's coast. It seems like an opportunity for gambling more than anything.
Kavin: Oh, sure, and gambling with someone's life. Of course, there's other opportunities, because we've now added a number of new facilities that have come online, so we've now been able to put all those facilities on the county's network, and they don't have to be interconnected with public service or commercial services. It's all our network, and we can put whatever we want on that network. In fact, not only are they interconnected for data, we extend our telephone dial tone system to them as well, and that savings is about fifty-three thousand dollars a year. You can see just two opportunities have reduced the operating costs to the extent of almost being able to pay for our capital expenses, our capital debt service.
Christopher: There's a whole host of other benefits that are discussed in the report, from the benefit to the schools which we haven't talked about, they would have been really hard-pressed to come up with the money under the Comcast approach, as well as the local hospital, and a potential for others in the future potentially to benefit from the availability of dark fiber in the community now.
Kavin: Absolutely. In fact, I'm glad you mentioned the hospital. We just signed an agreement. We're actually exchanging the final draft of an agreement to provide them, lease them dark fiber. Our health care institution in Martin County, they're the largest employer in our community, and of course in terms of broadband, they are the largest users of broadband in the community. They've interconnected twelve of their facilities, in fact all of their facilities in Martin County using this dark fiber network, and the lease cost for the network they're using, not only is it underground, it's theirs, so they light it with their own electronics, and it's redundant completely between their sites. Now they have the security and the resiliency for life support that they've never really had before, never really had confidence in, and the lease costs to them put Martin County in the black in terms of capital debt service for the construction of the network. We're ahead of the game now, and only a year and a half from completion.
Christopher: That was Kevin Kryzda, the CIO of Martin County. To learn more about Martin County's network, check out our report on muninetworks.or/reports, or search the internet for Florida Fiber: Martin County Saves Big With a Gigabit Network. If you have any questions or comments, please tell us directly, e-mail email@example.com. Thanks to my colleague Lisa Gonzalez for putting the show together, and Fit and the Conniptions for the music, licensed using Creative Commons. The song is called Storm's Over. Thank you for listening.