Transcript: Community Broadband Bits Episode 456

This is the transcript for Episode 456 of the Community Broadband Bits Podcast. We're joined by two representatives from Minnesota based CTC, CEO and General Manager, Kristi Westbrock, and Director of Business Development, Joe Buttweiler. CTC is a firm that started as a telephone cooperative and has become one of the most aggressive fiber network builders in greater Minnesota. The firm partners with electric cooperatives and communities to undertake internet infrastructure projects around the state. Listen to the podcast here or read the transcript below. 

Kristi Westbrock: As telcos and as broadband providers, you have to remember that when you work with the municipals and the electrics, the tribes, whoever that is, that you're coming in to help them there. They're not coming in to help you.

Ry Marcattilio-McCracken: Welcome to episode 456 of the Community Broadband Bits podcast. This is Ry Marcattilio-McCracken here at the Institute for Local Self-Reliance.

Ry Marcattilio-McCracken: Today, we're joined by two representatives from Minnesota based CTC, a firm that started life as a telephone cooperative that today is one of the most aggressive fiber network builders in greater Minnesota offering its own triple play services, but also partnering with electric cooperatives and communities to undertake internet infrastructure projects around the state. CEO and General Manager, Kristi Westbrock, and Director of Business Development, Joe Buttweiler, talk with Chris about the history of the cooperative's decision to embark on a network upgrade to bring fiber to its 15,000 members almost 20 years ago.

Ry Marcattilio-McCracken: They also talk about CTC's pursuit of partnerships with other cooperatives and communities to bring fiber far beyond the immediate Brainerd Baxter area. We learn about the towns of Long Prairie and Little Falls, which struggled for better connectivity solutions before CTC became a partner and the two joined forces to bring fiber service to residents and businesses there today.

Ry Marcattilio-McCracken: Now, here's Christopher talking with Kristi and Joe.

Christopher Mitchell: Welcome to another episode of the Community Broadband Bits podcast. I'm Christopher Mitchell at the Institute for Local Self-Reliance in St. Paul Minnesota. Today I'm speaking to one of the, I'd say better known companies that's doing really great investment across Minnesota and greater Minnesota. We're speaking with CTC. And in particular, we have Kristi Westbrock who is the CEO and General Manager. Welcome to the show.

Kristi Westbrock: Thank you.

Christopher Mitchell: And we also have Joe Buttweiler, the Director of Business Development. Welcome.

Joe Buttweiler: Great to be here.

Christopher Mitchell: Well, thank you both for coming on. CTC, I think, in area probably serves more fiber than almost anyone else. I don't know if... You've probably done the analysis, and there's one or two others that are aggressive as well. But you're one that has, I think, been very innovative and had a real history of just bringing great services to a wide area of greater Minnesota. So let me start, Kristi, by just asking you for a brief history of CTC.

2:35

Kristi Westbrock: Let me just start by saying that we're a co-op. We're located in Brainerd, Minnesota, for those that don't know that. We have about 15,000 members that we currently serve today, that's both within our regulated islet footprint and in our CLEC.

Kristi Westbrock: So I'll talk a little bit about how the CLEC started. After the communications act of 1996 happened, CTC did a study to see if they could put a feasibility study together to build fiber optics in the cities of Brainerd and Baxter. After looking at those studies, they've determined that it wasn't financially feasible, put the study back on the shelf, and walked away from it for five years. In 2001, the school district in Brainerd, ISD 181, was doing a referendum. And by the wonderful thoughtfulness to the superintendent at that time, who knew Brainerd was in this dark, black internet area that just wasn't working for the communities, he put a million dollars in to build a connection for all of the schools, and then wanted a company to come in and operate off of that network to build out to the residents and the businesses. And CTC was then selected through an RFP process to do that. And that was really the beginning of our investment in fiber optics and also the beginning of our CLEC.

Kristi Westbrock: In that, so 20 years into that, we also invested a great deal, almost $70 million in our regulated footprint to build fiber out to all of our members that live outside of the Brainerd Baxter communities and in the most rural areas of our network. And so all of our islet customers have fiber to the home, no matter how far off the beaten path they are.

Christopher Mitchell: Brainerd and Baxter area is an area that has like some significant density, but also is surrounded by areas of very low density, and you serve all of that area. Right?

Kristi Westbrock: Right.

Christopher Mitchell: So when you're saying about the ILEC, it's sort of like that's a historic territory. Prior to 1996, you had a monopoly to serve in those areas and you couldn't just go outside of that. But after 1996, you could start building anywhere you wanted to. And we refer to those as the CLEC territories because you're going in, in competition with the incumbent in those areas.

Kristi Westbrock: Right.

Christopher Mitchell: So that is, I mean, it's really fascinating. When did you achieve full fiber to all of your incumbent territories?

Kristi Westbrock: 2008. Because we had a ten-year plan and we finished it in seven years to build to all of our rural areas.

5:02

Christopher Mitchell: And I just love throwing that out there because I feel like people have the sense, like, "Well, we can never get fiber into the very rural areas." Here you are having done it 10 years... More than 10 years ago.

Kristi Westbrock: Yeah. Yep.

Christopher Mitchell: Joe, there's a number of cooperatives and independent companies that, I think, one might say had a similar profile to you, if you're looking from afar. And yet, most are not nearly as aggressive in terms of trying to solve the broadband problem for the rest of Minnesota. What makes CTC wants to be so aggressive in bringing fiber across the state?

Joe Buttweiler: Well, I think there's a couple key things. One is, as you noted, we're a co-op. And co-ops have principles that all co-ops have, regardless if you're a telco co-op, an electric co-op, ag co-op. And some of those are cooperation amongst cooperatives. And it goes back to one of the things that Kristi mentioned is we serve... We'd like all our members to have the same type of service and we want them to have the best value for the service that we can provide. So as Kristi mentioned, we made a commitment to borrow over $70 million well over a decade ago, to make sure that all of our members in those regulated areas had fiber to the premise, the fastest speeds, the longest lasting infrastructure we can possibly put in the ground. So that's one. That co-op organizational structure, I think, is key.

Joe Buttweiler: Another is the culture at CTC. And that is directly attributable to Kristi, our current CEO, our prior CEO, Kevin Larson, and a really progressive board of directors who believe that, even if you're not a member of a co-op today, but you're unserved or you're underserved, you still have a right for someone to try and give you world-class broadband. And who is going to do that? And we try and fill that void the best we can. And as a co-op we're somewhat limited in the cash and the funding we have. So that's why we get super creative in trying to apply for pretty much every grant that we can and finding every low cost financing source that we can, because we have a drive, culturally, amongst... From the board, top down. From the board, all the way to all of our brand new employees who might just be coming out of tech school or college. We get that cultural instinct set right away. We want to grow. We want to serve people.

7:37

Christopher Mitchell: That culture piece seems really important to me, in part because we don't just see CTC saying, "Okay, we have this one model and we're going to do it everywhere." We see you experimenting and working with different folks and sometimes buying other local firms that might be struggling more with some of the investments that are needed. I guess that's more of an observation than a question. But I just feel like culture is super important for these sorts of things being successful. But I am curious. How does it work, then, if you move into an area and you get new customers? Do they become members of the cooperative then, with, like, voting on the board, and things like that?

Kristi Westbrock: They do. Yep. We don't have any waiting period for our co-op members. Once you sign up for service, you become a member of the co-op.

Christopher Mitchell: Now let me ask. Because I feel like this is something I keep playing with in my mind. Now, I think the North Dakota co-ops were very aggressive, very early on. And I don't know... I think it's probably because of the same salesperson from Optical Solutions that worked with CTC back in the day. Because everyone talks about him. We've talked about him on previous podcasts. But I have a sense if North Dakota was all one big cooperative, I don't know if it would have seen that same willingness to innovate and that sort of thing. And so I feel like there's a size at which may be co-ops can get too big, and we do want to have different ones. And have you given any thought to that? I don't think you're there yet obviously, but is there a point at which you worry about being too large to be able to be responsive to your members?

Kristi Westbrock: Hey, it is something that definitely is part of our strategy that we think about. And anytime we're looking at a new area or a new build out, it's how are we going to make sure that we have local customer service, local support, local responsiveness? And so a good example of that is we've expanded up into the Iron Range. We received a grant for Cherry Township to do residential services. And then we also have over a hundred business customers that we serve in that area. And we do that through a partnership with Northeast Services Cooperative, and with the middle mile that they brought in.

Kristi Westbrock: And so in that model, what we do is we've hired a local sales rep who's there, she's present, she's in the market every day that can help customers. And then we have technicians that are dedicated to making sure that those installs and the customer service piece happens without any sort of glitch, just the same way that would happen anywhere closer to Brainerd Baxter. And so when we build our models, Chris, we're always putting that local headcount and local support into those so that we do remain your local service provider.

10:11

Christopher Mitchell: So one of the reasons I wanted to chat with you, something, Kristi, you and I did a... I think it's maybe six months now since we did a show for NTCA about some of the innovative partnerships that you've done, but it's never been available publicly. So I want to spread that out a bit. And let me ask Joe. Can you give us a sense of what you're doing with... Is it Long Prairie? I should have written this down. I'm relying on my memory, which gets worse every year. Your partnership with Long Prairie, and I think you have another one or two that are already public. How did those come about?

Joe Buttweiler: Yeah. The city of Long Prairie is, like, great example. And when we talk about co-ops cooperating, I think there's a similar relationship between co-ops and local government, because the goal is the same. It's to get service. Everyone has to have financial models that work for their organization and their co-op, eventually. But the overarching goal is to get service out.

Joe Buttweiler: In the city of Long Prairie, they had a situation where they felt they didn't have adequate broadband services for both their residential residents and a number of their businesses. And they had applied for some grants and they were unsuccessful in that endeavor, and they were kind of ready to give up. And we approached them and said, "Do you have access to low cost, local government financing that you could use to build a network if CTC agreed to manage the construction?" We would enter into a lease agreement so that the revenues from broadband services that came to CTC, part of those, then, we would repay to the city of Long Prairie to pay off their debt service. And we did that a number of years ago, and the city now has a fiber to the premise network throughout the city, and CTC operates it. And we were able to build that with extremely low cost public financing. And it has just worked fantastic for us. And it's not the first time we've used that model, and I certainly hope it's not the last, because it just works really, really well for us there.

12:21

Christopher Mitchell: Yeah. That model is one that I find extremely appealing. In particular, the way the Minnesota state Border-to-Border fund works. Cities that may desperately need the kind of services you provide may not be eligible for grants because they appear to be served based on statistics that the state has collected, or just because they have something. It may not be good enough for people, but it might be high enough that the state wants to focus its money on other areas. In those situations where the community can make its own decision, to decide, and then have a partner like you to work on. Kristi, how does that work then? The city owns the network? And you have... What's the timing of your lease of it?

Kristi Westbrock: And, Joe, correct me if I'm wrong. But I believe we've done, both of them, are ten-year leases, that we have with the city. And so they work with us to structure it so that we're making those payments, so that then they're making their payments back. And so it really just is us paying them, them paying back the municipal loan side of it. And we did the same thing in the city of Little Falls. And we were able to pay off that network in seven years, versus the full 10. And Little Falls has already come back to us and said, "What can we do next?" Because that just works so well. And it really becomes turnkey, Chris. Once we get through the legality of the financing and that piece of it, the city never has to reach out to us again. We now just take care of that network for them and we send them a check every month. And so it doesn't require any staffing time from them or anything like that. It just simply works.

Christopher Mitchell: In my mind, one of the things that works about this is that I expect you have a really good relationship, and you would expect that you would be able to renew that and be there on the longterm. Because I imagine it could be somewhat destructive after 10 years, they were to say, "Nope. We're going to..." Like, this fly by night company has come in. We're going to go with them even though no one's ever heard of them before. Is that something that you feared or do you just feel like you have a good enough relationship in these situations that it's not something to worry about?

Kristi Westbrock: We build some, I guess basically, some legal language into it so that there's protections for both entities. But you are spot on when you say relationships. Every partnership that we have, we have a good relationship with the partner. We don't have any that are struggling relationship, where there's any tension or anything like that. And that is key for us, because we have had a situation where we just had to walk away from it because we knew based on the personalities that were involved, the kind of the bureaucracy that was taking place, that it wasn't right for either entity, because we just weren't going to have a good partnership. And so that relationship piece is key to making these things work.

15:03

Joe Buttweiler: Yeah. And I think a big component of that is because it takes so long from the time you start discussing to the time that you actually get to a publicly financed project. And so, there's a lot of education that goes on there because... And especially, take Long Prairie. Talk about, okay, we're going to issue bonds within the city that are millions of dollars. That's a lot of money tax money for those cities and people initially hear this really, this big number, these millions of dollars, and they immediately kind of want to run away. But over time, as you talk about, okay, let's think about the tax implications. So this might raise your taxes a couple hundred dollars a year, which could be a lot for many families. But on the other side, their internet pricing might be dropping by a couple hundred dollars a year. They might not... Now, they might be able to work from home. They might have just saved a hundred dollars a month in gas alone.

Joe Buttweiler: All of the advantages of broadband and the value that broadband brings, pays for that tax increase so quickly before you even get to talking about things like my home just increased in value because now it has a fiber optic connection to it.

Christopher Mitchell: Yeah. Not only that, but then there's a flip side of the coin. Which is if you're a town that's losing population, you can't pay for infrastructure with that. I mean, you're really in a hard place then when you're looking at that kind of a situation. So if you can stabilize it with this kind of an investment, then that's a real benefit.

Christopher Mitchell: One of the things that I think cities in, especially in more rural areas, but frankly, even the biggest cities feel is "I don't know how to manage this. Even if I'm going to work with someone, I don't know how to build it." And you mentioned that the city is basically paying for it and you constructed it. First of all, does the city have to do an RFP in those sort of situations? Is it possible that they'd go through this process and they have to use an open procurement strategy, and then someone else could swoop in and sort of make it difficult for the city to move ahead with its preferred partner?

Joe Buttweiler: Yeah. I think that's a risk you run. But I think the goal is to get service within the community. And so from our perspective, if we invest a certain amount of time and education as a good partner, and we rely on our referrals, which knowing that our members have top-notch service and we'd get five-star referrals, the partnerships that we work with give us great referrals. I mean, those things lend themselves to be good for CTC. And in different parts of the countries, I'm sure there's different municipal contracting laws. In Minnesota, broadband and telecommunications is considered a specialized service. So it takes a little bit for local units of government to understand that, but we kind of point them to their legal teams and they can look into and do their due diligence. And they can say, "Oh, yeah. Telecommunications as a specialized service. We don't need to go through a lot of the typical procurement RFP processes if we choose to not do so."

18:00

Christopher Mitchell: And so then the other question is, where's the kind of demarcation? Where do they... Where does the publicly-owned parts stop and where do you start? Do they own the devices on the side of the home? How does that split work?

Joe Buttweiler: Well, it can vary. And we actually have different flavors of it. So in some instances, the fiber asset is owned by the city and CTC owns all the electronics. In some instances, the public entity owns the entire thing until our lease is over, and then it becomes the ownership of CTC. And we have another one or it's actually kind of in between that.

Christopher Mitchell: I can imagine you're kind of also wondering about the audience of this show, where I'm feeling like I have to explain what an ILEC and a CLEC is, but I expect people to know what the electronics on a network are. But it is an odd audience. I think they appreciate that level of detail.

Christopher Mitchell: So I guess... That was an insightful comment, Kristi, also about, I think, looking at places where, as you start to deal with them, you have a sense, like maybe these aren't great partners for us. Do you have any advice for ISPs in terms of how to assess that when they're considering working with cities? And I would offer this... Offer advice to cities, that they would be aware of these sorts of problems and try to iron them out.

Kristi Westbrock: One of the things that I say often, Chris, is that as telcos and as broadband providers, you have to remember that when you work with the municipals and the electrics, the tribes, whoever that is, that you're coming in to help them. They're not coming in to help you. You have to go in it as a kind of that servant-leadership sort of mentality in what you're doing. And I think so often it's the sales pitch of, "Look at everything that we can do for you," instead of really sitting there and listening to what the township wants, what the city wants, whatever that is. Because then, like Joe said, we have lots of different flavors of how we do things. We can listen to all of that and then customize that flavor for the city or for the township.

Kristi Westbrock: So I think the biggest piece of advice I have is go into those initial meetings just all ears. What is it that they're looking for? Go back to the drawing board and figure out how you can customize that for them instead of coming in and saying, "This is the only way we're going to do it. Otherwise, we're walking away from the project." Because everybody, especially a municipal, wants it a little bit different to fit the constituents that they're serving.

20:36

Christopher Mitchell: I would have expected that if you go into a community, the first thing you'll hear is they'll be like, "We don't know. We just want you to solve the problem."

Kristi Westbrock: Yep.

Christopher Mitchell: Now, have you run into that at all? Or am I just underestimating the local planning on this?

Kristi Westbrock: Yeah. I think what they're getting is a lot of cry for help. We come in and people want this, and we're not sure if we want to do wireless or if we want to do fiber. And so when you're sitting there and you're talking to them and it's like, "Well, what's the biggest complaint?" What is it that you're hearing? How much money do you have? Do you want to invest in it? And getting them to start thinking about that and answering those questions. So, yeah, we come in, we're going to ask a lot of questions, but then sit there and listen to what it is that they're really describing that the community need is. People are getting much more intelligent and educated on broadband than I can say our projects that we worked on 10 to 12 years ago. It's just become a universal service, per se, that people need and so they pay attention to it more.

Christopher Mitchell: You've had the benefit of the blend in effort to educate communities as well. I think if you're in some other states, you might find there hasn't been as much work to get people ahead on the curve on that.

Christopher Mitchell: So I'm curious about state and federal broadband programs. What are one or two of the things where, when you see a news item or something comes along, that you send like a snarky email or a text to each other about like, "Oh, can you believe they did this thing again?" What's something that springs to mind?

Kristi Westbrock: Chris, we never do that, ever, at CTC. I'm just teasing. So, yeah. Joe can jump in on this, too. Federally, Chris, we have to start getting this right. And the RDOF auction is, to me, glaring evidence of us just not getting it right as a nation. And there's a lot of pieces that I could go into with it. But, you've heard me talk about this before. I'm going to continue to talk about that we focus so much on what the speed goals should be. And to me it should be what is the network goal? What is the long-term goal for these monies? Is it that we're going to deploy a product out that's going to last for five years and we're going to be back at the table looking for more funding? Or is it about rightsizing the network when you build it the first time? And funding those providers that are going to do it right the first time so we don't have to come back for more money and build a right sized network? So that 500 people, at the end of the day, in a project, can all get gigabit service at the same exact time. You know, how do you right size your network for that?

23:09

Kristi Westbrock: And so, I find that this whole speed conversation is so granular and it never makes... Takes a lot of conversation, and people talk about it a lot. But to me, it's what are you going to build? What's going to be the best for the future of this country? And then invest in that.

Christopher Mitchell: If I could just add onto that before Joe jumps in, I would say a piece of it that I'm frustrated with that people don't appreciate is also the real lessons of electrification, which are where can you put money that the entity that builds it will still be there? We have structures that have decades, in some cases, a century of experience of providing services. And instead to say, "Well, let's just find the lowest bidder for this area..." It totally ignores that this is not just sort of like, "Oh, once fiber's there, it's solved." No. Someone needs to continue operating it. They're going to develop policies, prices, customer service levels. And so that has to be a part of the conversation as well. So, Joe, go ahead.

Joe Buttweiler: The timing of things is always challenging. And we're a little guilty of this, CTC, I think, as well as our partners in government who make grant awards, and that is the awards are announced, and then the time it takes from the time of announcement to get all of our documentation finally executed so that we can begin a project... And taking into consideration, at least in Minnesota and Northern states, the fact that we can only construct underground half of the year, per se, or three quarters of the year, and if it's a good year, can delay a project by as much as a year. And so it's really difficult if you're a member, a person, in a unserved area who learns a grant award, you get that instant gratification and excitement, and then you learn that, "Oh, it might be 18 months before I get service." Or, "It can be two years before I get service."

Joe Buttweiler: And in some instances, when you have big projects, you can have up to five years to build a project. Or you take the RDOF auction, where you could be waiting six years with a possibility of up to eight years, if they apply for an extension. So does RDOF really help me if I might have to wait for six years to get service? How does that help me? That doesn't help me? My eighth grader's out of high school by then. They're already at a college. You didn't solve my distance learning problem.

25:35

Christopher Mitchell: Yes. And that's actually something I've heard from other providers as well, that are, I think, more locally rooted and used to getting things done, is the sense of put the money out there and have much stricter requirements for how fast it has to get done. And maybe do more rounds and things like that, where you're iterating rather than... Yeah.

Christopher Mitchell: The idea of eight years, really nine years, because it's after the money starts flowing, it's just... It's more than a lifetime away. But at the same time, I see Kristi has this big smile on your face. Like we must be doing something right. Right? I'm hopeful. I'm waking up hopeful these mornings. So let's end with what's giving you hope right now?

Kristi Westbrock: Oh, boy. What's giving me hope right now? Well, it feels a little bit... And I'm going to steal this from a friend in South Dakota, but he said it's like we're in one of those money machines where you got to catch the money and then stuff it out the hole quick to be able to obtain it. There's a lot of money opportunity, funding opportunity, and that does excite me as long as that funding opportunity is deployed correctly. And that's something that, in fact, I'm going to visit with the Blandin Foundation about a little bit later today, is about let's make sure Minnesota gets it right. If that money trickles into our state, let's do the right thing with it. So that brings a lot of optimism, for sure.

Christopher Mitchell: And Joe?

Joe Buttweiler: I concur with Kristi. There is a lot of money out there and that sounds great, but let's get it right, both in Minnesota and nationally. Let's spend it the right way and feel good about how we've invested our own tax dollars into these projects.

Christopher Mitchell: Great. Thank you both for taking the time today, and good luck with the build.

Kristi Westbrock: Thanks, Chris.

Joe Buttweiler: Thank you.

27:14

Ry Marcattilio-McCracken: That was Christopher talking with Kristi Westbrock and Joe Buttweiler. 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 Husby for the song Warm Duck Shuffle, licensed through Creative Commons. This was episode 456 of the Community Broadband Bits podcast. Thanks for listening.

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