Transcript: Community Broadband Bits Episode 419

This is the transcript for episode 419 of the Community Broadband Bits podcast. In this episode, Christopher interviews Brad Honold from Coon Rapids Municipal Utilities in Iowa. They discuss the city's long history of offering telecommunications services, its upgrade to fiber infrastructure, and its community engagement practices. Listen to the episode, or read the transcript below.

 

 

Brad Honold: They're our owners, they're our customers, they're our partners. We live with them, we go to church with them and they're the ones that are going to end up paying the bill so you better ask them if they're going to take your service before you start it.

Ry Marcattilio-McCracken: Welcome to episode 419 of the Community Broadband Bits Podcast. This is Ryan Marcattilio-McCracken here at the Institute for Local Self-Reliance. Today, Christopher speaks with Brad Honold, general manager at Coon Rapids Municipal Utilities in West Central Iowa. Coon Rapids started with the cable TV system almost 40 years ago and remains today, one of the smallest municipal fiber networks, especially of those that offer cable TV packages. Christopher and Brad talk about the evolution of the communications utility over the last four decades, from cable all the way to fiber today. They discuss the importance of the network, taking community concerns seriously, including engaging the community in discussions about what is needed. Now here's Christopher talking with Brad Honold.

Christopher Mitchell: Welcome to another episode of the Community Broadband Bits Podcast. I'm Christopher Mitchell with the Institute for Local Self-Reliance up in Saint Paul, Minnesota. Today I'm speaking with Brad Honold, the general manager at Coon Rapids Municipal Utilities in Coon Rapids, Iowa. Welcome to the show.

Brad Honold: Thank you for having me.

Christopher Mitchell: Let me ask you first, I'm going to ask you in a second how we know your network has been worth the investment, but first, Coon Rapids. What part of Iowa is that in and what's the community like?

Brad Honold: It's in West Central Iowa, it's a very small community of about 1,305 people. Very small knit, tight, about two and a half square miles as far as our city or our corporate limits go. But it's a mix of commercial, industrial, some light industrial, but mostly residential, as far as customer classes go.

Christopher Mitchell: Pretty surrounded by farmland, grower community?

Brad Honold: Yeah, we're an agricultural based community, but we've been transitioning out of that and we have more of a diversified downtown now. We have a lot of young entrepreneurs from boutique style arts and crafts, home decorations, things of that nature. We used to be predominantly a one industry town with Garst Seed, or what was Pioneer ICI seed corn company in town, and they were the largest employer, but since then that's gone away. Hartung Brothers have taken over that operation and our main street's become more diversified and spread out, which is good.

2:35

Christopher Mitchell: That is good. That's exactly what we want to see. I have to wonder then, and my next question, if these things are related, having such great broadband service that your utility has been providing, how do you know that it's been worth it all of these many years that you've been providing broadband?

Brad Honold: Well, I think it absolutely is. I mean, we hear it from our community. We don't do things hoping that good things will happen, we actually live in our communities and know our customers and know our neighbors well, and we ask them before we do stuff. Back when Internet started becoming a thing in the nineties and just advanced telecommunications, we were getting left behind. As you know, a lot of analogies were made to, if your town didn't get built on the railroad, progress stopped. The old axiom of the Internet super highway, if you will, or the new interstate system of the future being the Internet, and if you didn't have modern broadband in your community and/or access to that, your community and businesses were going to get left behind.

Brad Honold: That's exactly what our population told us. Our customers told us that and we see it today. I mean, I can't imagine businesses functioning today, our insurance agents in town, almost all their systems have gone to the Cloud now, where they log in and get it through the Internet instead of having their own servers and stuff of that nature. It is very important. That was part of the reason that we build our fiber network, was to keep that up.

Christopher Mitchell: Now, you are one of the communities that I think has gone through multiple iterations, right? You had a cable network before the fiber network.

Brad Honold: Yup.

Christopher Mitchell: Walk us back to how you got into communications back in the beginning?

Brad Honold: We have, unfortunately, I mean, we've seen three of them get built. We've overbuilt ourselves three times. Back in the eighties, we were one of the first communities in Iowa to get in the cable business. In 1982, we built a 300 megahertz system so you could basically do 35 to 40 video channels, and that served our community well, but our community didn't want to get into it. We had a local utility for quite a while, we had electric, gas, water and wastewater utility, but we didn't have a cable utility. Our forefathers wrote to the nearest cable company, which was, I believe at the time, Heritage Cablevision or TCI, and asked them to come to Coon Rapids and build a cable television system. The response that they got back basically was, "No thank you, we're going to build out into our major metropolitan areas first and when we get to rural Iowa, we'll get to it."

5:14

Brad Honold: That didn't settle very well with the people in Coon Rapids, and having a history of doing things ourselves and having local utilities and taking care of it theirselves, they said, "Let's do this. Let's build a cable television system. " Formed that utility in '82, like I said, built a 300 megahertz system, and that provided video up until what 1990s until that started running out of room. Basically everything we've overbuilt, we've either ran out of capacity or our customers have wanted more. That 300 megahertz plant, like I said, could only go up to about 35 channels, 35, 40 if it was really clean.

Brad Honold: Then in the mid nineties, as ESPN2, all these other networks started coming on, everybody started wanting more channels. We were hearing that loud and clear and the technology was there, so there was a bigger network you could build. We could build a 750 megahertz hybrid fiber capacity, so basically more than double the capacity at our plant, which would allow us to put more channels on. But when we ran the financials, it didn't work. The cost to do it with just video as your only revenue source just didn't work.

Christopher Mitchell: When you say that, how many customers did you have?

Brad Honold: Video back then, probably about 450 customers, I would guess.

Christopher Mitchell: Well then that makes sense. I mean, you're talking about a significant fixed cost.

Brad Honold: If you think about that, we had our own headend. We have our own headend, our own dishes, or receivers, modulators for every channel for 450 customers. There wasn't a lot of customer base to spread that capital over.

Christopher Mitchell: Right. Anyway, I cut you off, but you said you decided you couldn't do the cable only, but I'm guessing we're going to get to a but?

Brad Honold: Right, but. We were frustrated in that and then everything came together in about 1996. Technology legislation, you know that little thing called the Telecom Act of '96, that basically came out and deregulated the communication history and allowed us, or any entity if you will, to get into the communications business or telephone, for lack of a better word. That helped, so when we looked at that and said, "Hey, if we built this new network, not only could we do video, we could get in the telephone business." That'd be another revenue stream.

7:37

Brad Honold: And then if you remember too in 1996, the Internet really started to grab hold. Now we're looking at three different services, so three different revenue streams, one network that could carry it all. Technology caught up then too. With the 750 megahertz plant, there was a system out there, if you will, with these voice ports that we ended up going with through Nortel, that you could do all of that on one plant. When we reran the numbers in the perform run with three different revenue streams, we're like, "Hey, I think we can make this work and be profitable."

Brad Honold: We sat down with our community and presented them all this information, educated them on the technology that was out there, the different revenue streams possibly with telephone and with Internet. We made up a task force of about 16 different people across our community, asked them what they thought, had a lot of meetings and consensus was yeah, that we should move forward. We held an election in August of '96 and it passed by 87%, and before the end of the year, we were providing dial-up Internet.

Christopher Mitchell: 87%. I mean, you weren't kidding when you said you talk with the community before you make these decisions.

Brad Honold: Well, you have to. I mean, like I said, they're our owners, they're our customers, they're our partners. We live with them, we go to church with them and they're the ones that are going to end up paying the bills so you better ask them if they're going to take your service before you start. I mean, it seems to make sense. It went really well, and then in 1998, we bought a new hybrid fiber co-ax plant, a 96 fiber loop, 750 megahertz plant, and then started providing all three of those services. We chugged along pretty good, adding more video channels as you can expect, Internet became high-speed, Internet became more popular all the time, more people using it.

9:25

Brad Honold: We went through different iterations of CMTS's, or I guess our Internet product, if you will, with different cable modems from DOCSIS 1 to DOCSIS 2. And then before we built our fiber network, we were looking at DOCSIS 3.0 and we just kept chasing our tail with trying to keep up with the exponential growth of bandwidth that people were needing for Internet. Our plant, it's still a co-ax based plant, it was getting about 20 years old. 20 years of cycling in Iowa weather, freezing and thawing, was starting to show its wear and tear and different things and maintenance costs were starting to go up. We'd always looked at Fiber-to-the-home a long time ago when we put our HFC system in, but at the time we couldn't do it. It just cost too much.

Brad Honold: But as with anything, technology advances, cost of equipment comes down, it gets faster and cheaper at the same time, which is not normal, but the way the telecom world seems to act. We looked at and did another perform run changing our plant out and overbuilding again with Fiber-to-the-home. That's what we did. In 2017, we ended up building fiber to every home and business in Coon Rapids. We did it a little different than most people, meaning our town is so dense and small in geography, that instead of putting splitters out in the fields and stuff of that nature, we ran a home run from our NOC building, our Network Operations Center, to every home and business in Coon Rapids.

Brad Honold: Because the main cost of the construction was actually the digging, tearing up streets, boring and stuff of that nature, so it just didn't make financial sense for us to put a splitter or splitter cabinet, a half a mile from our NOC when we could just have to run all the fiber there anyway. We overbuilt our town about three to one with as much fibers we need for everybody, and we have a really great system today.

Christopher Mitchell: Do you actually face any competition then? Has the telephone company started offering DSL or what's the competitive landscape?

Brad Honold: Well, for cable television, we don't have another wireline-based competitor. We obviously have Dish, DirecTV, and now all the streaming products, since we have good Internet, as far as YouTube TV, Hulu, what have you from those guys. That's on the video side. On the telephone side, yes, we've had an incumbent telephone provider that's here. When we first started out it was a company called GTE, then it went to Iowa Telecom, and now it's been acquired by Windstream. It's still copper-based, but yes, they have DSL that we compete with, but their plants pretty darn old. Copper-based system with DSL has its limitations as far as providing real good service out, especially the farther you get away from their CO.

Christopher Mitchell: I know that they in Frontier are usually competing for not being held in the highest esteem by customers so I'm sure there's quite a different reputational situation.

12:36

Brad Honold: You said that, I didn't, but I would agree with that.

Christopher Mitchell: I know. I wouldn't want to put words into the mouth of anyone I'm interviewing, when I've looked at what Windstream has done to Georgia, people are pretty frustrated. It's just this reality that Windstream, those companies, they're going to put their money into the major metros first. Those of us that have 401(k)s and stuff like that, we prefer that.

Brad Honold: That's exactly what I tell people. If I'm investing in an investor on utility, I don't want them coming to towns my size first. It doesn't make financial sense. I want a return on my investment and they need to go where they can get that return and it's not in rural Iowa or rural anywhere really, until the very end. It makes sense, it's understandable, and that's capitalism, that's how the markets work and I get it. Unfortunately, that doesn't bode well for the residents of the rural areas where they live. If they want to stay up with times, unfortunately they're going to have to do it themselves.

Christopher Mitchell: Let me ask, what challenges have you had recently? I'm curious, in particular, we could probably start with the video. I have to assume that even large providers are having trouble with the video costs, and now you're competing with YouTube effectively, which I'm not even sure if Google is making money on the YouTube TV, but how is that going for you?

Brad Honold: It's not. Video's horrible. We lose money on it every year and we've debated about getting out of the video business every year. Every six months at meetings we talk about it, but until there's a really good replacement... Right now it's easy. We offer linear products, they don't log in high def and then we also have the TV Everywhere platform for those networks that make it available. It's very easy for our customer base to manipulate and to use, it's traditional, they're used to it. In our population based too, you got to know your customers, we have an elderly population and quite a few of those people over 55 in our town make up the majority of our customer base. For us too, it's about meeting their desires and their wishes.

14:39

Brad Honold: Right now, teaching them how to put a Roku streaming stick in their TV, source to that, surf through that and select their channels and stuff, it's just a little too much to ask yet, but every year our customer base gets smarter, they get more educated, they get more used to doing that sourcing to a different source on their TV, if you will, or different input to watch video and stuff. It's coming, but it's not there yet. But again, we don't like hemorrhaging money and losing money like we do in video. We're still profitable, very profitable I would say for as small as we are, when you put all three of the revenue streams and the utilities together, but we are subsidizing video pretty heavily to keep offering it. Like I said, until such time that there is a more viable, easy to use product that our customers are happy with, then we'll get out of that space.

Christopher Mitchell: What other challenges have you faced? I would say you're not the smallest that we've run into, but you're pretty close.

Brad Honold: I don't know, as far as challenges. It's always about serving the customer. If you keep that in mind first, then it comes pretty easy. You just give them what they want. I think that's what separates us from our competitors, it doesn't matter what the business model is, but it's the service that goes behind it. When we go to customer's homes, we reprogram their TVs, we'll move furniture, we'll hook up their stereos, we reprogram their remotes. We want to make their experience pleasurable. We've really had the opportunity to do that with Internet now.

Brad Honold: With Internet, everybody wants to make it wireless in their house so they have wireless routers and that caused a lot of heartache with us at first, when we had our HSC system, because everybody would go get these retail grade routers at Walmart or Best Buy, come home and plug them in, usually put them in a closet or a furnace room, walk 200 feet away and wonder why they don't have 100 megabits at their phone. It's been an educating thing to them about how RS signals work and how every time you go through a wall it degrades the signal and stuff.

Brad Honold: We've come out with a managed Wi-Fi product now too that's really been a big hit and really helped us take a lot of service calls off of our list because the things just work. We put them in the right spots, we optimize the locations for them, we'll put mesh units if they want whole home Wi-Fi, we send upgrades and firmware updates every time a new cell phone or a new smartphone comes out to make sure they have the latest software and firmware to run it and ensure it works. The thing just works, and that's what they want. They don't want to know about interference or tile or why is this not working here? They just want it to work when they want it, where they want it, and that's what we want to do for them.

17:33

Christopher Mitchell: Some of the background noise that people are hearing is work in my basement. While everything's open I have a spool of CAT 6 cabling because we have our wireless out, but we try to keep as much off of it as possible to keep the experience high.

Brad Honold: You sound just like what we tell our customers. We always tell our customers that a wired [inaudible 00:17:53]. Anything that you can wire, we want to wire it and we try to take it back to their ONT where that's at. Just like everything, the more you can keep off your wireless network when you do want to use it, then the better it'll perform. Even though your TV that you just bought at Kmart and putting in your kitchen has a wireless connection in it for Internet, if you can wire it, wire it. Then it stays off of there and then when you're using your cell phone, you're using your laptop, you're just going to get the best experience you can.

Christopher Mitchell: What else has happened around town, to get back to where we started, I like to end with some more positive stories. Do you hear from folks that you've brought business to town? What do you hear about being a town that has such great Internet access? We have a lot of towns that have fiber now in rural areas, but you've had it longer than many.

Brad Honold: We do get positive feedback. Like I said, all the businesses that require it now, the insurance companies, even your convenience stores, from their gas pumps to their credit card machines, everything goes over the Internet now because it's lower cost. They used to have used dial-up modems and stuff of that nature, and it's just such a faster, better experience now. Same thing with our school. Our school now is gigabit service and they're offering so much more online and interactive programs into their curriculum and I expect that will continue. We can watch their load go up and it's just been amazing to see how their load has grown with the access to high speed Internet now. I can't imagine not having it or having access to it, it would certainly be a hurdle to overcome to keep your business community prosper and to keep moving forward.

Christopher Mitchell: Do you have any naysayers in town?

19:38

Brad Honold: Oh, yeah. Everybody has naysayers. I like to tell people, if somebody came up with the idea to abolish hell, that half the other people would be against it because of who came up with it. We do, but in general, like I said, with modern communications and stuff of that nature, I can't see how anybody is against having the fastest, most reliable Internet that you have. Our whole networks underground. We bury all our electric, everything's underground from reliability and storms that we have in Iowa from that nature. Like I said, out of sight, out of mind. We want the people, every time they hit the button when it clicks, for their pages to load as fast as they can and not think about it. It's like when they turn on their light switch, we want the light to come on, not think about it. We just want to be in the background and have it work every time, all the time and have us be forgotten almost. Then we know we're doing our job well.

Christopher Mitchell: Well, I'm definitely jealous because I've been a proponent of the undergrounding for a while as well. I guess my last question is then, I'm curious, the areas around you, how are they served and have you considered expanding beyond your territory?

Brad Honold: We have, and that's a little tricky for us. We do do some wireless. On our water tower, we do have two AP's, so we provide wireless to some of their rural customers within about a seven mile boundary, I guess, to our northeast and to our southeast. That's gone really well and they have been very appreciative, but our town has a little unique geography where we're at the base of where the glacier stops. So north of town is pretty much flat and south of town's really hilly and has a lot of ravines. Even if we were to put an AP on the south side, it would hit about a half mile south of town and stop because of the hills. We'd have to put a lot more infrastructure out there.

Brad Honold: We've also had discussions about expanding, but we have a base where the people in town have paid for the network three times over since the eighties, and then when you get out to the rural area, there's obviously a higher cost per mile per customer served. We always have the moral debate, should we be spending the people in the community's money to venture and get risky to serve these higher cost customers out in the country who really aren't a part of our community, and/or the people who built the network. Like I said, though, we want to try to provide service to them, but it's got to make sense for our residents and our people too, we don't want to spend money foolishly.

Brad Honold: We've looked at some of the subsidy money from the government and stuff and possibly looking at building out, and we still continue to do that. If the business case is there to do it and really not risk the people who built our network, we'll probably will do that.

22:22

Christopher Mitchell: When I've had this conversation with other folks, we talked a bit earlier about spreading the costs, and it's easier if you had 20,000 customers to spread the risk than among fewer. Well thank you so much for taking time today. I'm sorry that we haven't had you on before, but I'm really glad that we finally filled that hole. Love learning about what's going on in Coon Rapids, so thank you.

Brad Honold: You bet. Not a problem. Thanks, Christopher.

Ry Marcattilio-McCracken: That was Christopher talking with Brad Honold. 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 and other podcasts from ILSR, including Building Local Power, Local Energy Rules, and the Composting for Community podcast. You can access them anywhere you get your podcasts.

Ry Marcattilio-McCracken: You can catch the latest important research from all of our initiatives if you subscribe to our monthly newsletter at ilsr.org. While you're there, please take a moment to donate. Your support in any amount keeps us going. Thank you to Arne Huseby for the song Warm Duck Shuffle, licensed through Creative Commons. This was episode 419 of the Community Broadband Bits Podcast. Thanks for listening.

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