Transcript: Community Broadband Bits Episode 56

Thanks to Jeff Hoel for providing the transcript for Episode 56 of the Community Broadband Bits podcast with Scott Hurlbert on fiber network in Shafter, California. Listen to this episode here.

 

00:16:

Lisa Gonzalez:  Hi again, and welcome to the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance.  I'm Lisa Gonzalez.

This week, we talk to Scott Hurlbert, Assistant City Manager of Shafter, California.  Several years ago, Shafter city leaders decided a municipal network was a must, to ensure future economic development.  The community was -- and still is -- transitioning from an agricultural economy to a more diverse mix of industry and manufacturing.  Like water and electricity, Shafter recognizes that broadband is critical infrastructure to promote growth.  Our regular listeners will note that Shafter is unique because it does not have an electric utility.  Nevertheless, this community is in the middle of an expansion, and has built its network incrementally, with no borrowing or bonding.  Here are Chris and Scott.

01:01:

Chris Mitchell:  Welcome to another episode of Community Broadband Bits.  Today, I'm up in Minneapolis again, talking with my guest, who's in Shafter, California.  I'm speaking with Scott Hurlbert, the Assistant City Manager of Shafter.  Welcome to our show.

01:15:

Scott Hurlbert:  Well, thank you very much, Christopher.  It's a pleasure to be here today.

01:19:

Chris:  We're excited to learn a little bit more about your network.  I've long known that there was something happening in Shafter.  And I think a fair amount of our guests are always curious to learn about a city they haven't heard of before.  Maybe we could start with you telling us a little bit about what Shafter's like.

01:34:

Scott:  Sure.  That would be fine.  Shafter is what you would consider a small town -- 17,000 residents currently.  We're in California's Central Valley, just above the town of Bakersfield, which is the largest town near us.  And we're between highways.  So a lot of people, even in the Central Valley, aren't familiar with Shafter.  We're between the two north-south highways that run down California's Central Valley: Interstate 5 and Highway 99.  We're a city that is in transition from being a primarily agricultural heritage.  But in more recent years -- the past 15-20 years -- is transitioning into being a favorite home for large distribution and manufacturing concerns.  And the proximity of the railroad lines -- also the two north-south rail lines in California -- pass through the Shafter city limits.  And that has definitely been an attraction to some of these businesses.

02:39:

Chris:  So, as the city is transitioning away from just focusing on the agricultural aspect of the local jobs and the economy, my understanding was that you had started to look at your broadband situation, and decided that the city itself needed to take some action.  So, can you take us back a little bit in history, and talk about why the city decided to make its initial investment, and what sort of investment it made?

03:03:

Scott:  The incumbent telecommunications provider here -- and for good business reasons -- made it difficult for a business to locate here, out in the middle of an undeveloped area, and get high-speed service in particular, quickly and economically.  And we started seeing the requirement that broadband was available move higher and higher on site-selector lists.  Folks that would come out and find locations for businesses like this -- they have a checklist of requirements.  And when I joined the city, in 2005, telecommunication and broadband were in the middle of that list.  Over the years, that requirement moved up to the top of the list.  So now it's usually the second or third question they ask: is broadband available, and in particular, is fiber available?  The city started seeing that as an economic development tool, to help shorten that cycle, make broadband more easily accessible to our industrial areas.  And also some benefits to the city itself, as far as communication between our different locations for city business, and schools, and so forth.

04:23:

Chris:  The experience that we've found is that -- it's exactly as you described it, which is a checklist.  Which is to say that having a robust -- having robust access to the Internet does not necessarily mean you're going to get businesses; but it does mean that places will refuse to even consider you as an option.  And that's basically what you were experiencing.

04:44:

Scott:  That's correct.  It has become more of a standard expected utility or infrastructure, just as roads and sewer and water service.  The expectation that accessibility to broadband is there is just assumed at this point.

05:03:

Chris:  So, when you started looking at these networks, at that time, a lot of cities in the United States were thinking about building wireless networks.  And some of them did, and some of them partnered with other companies, like EarthLink, that -- it really didn't work out well.  But as I looked at your history, it seemed like you understood very quickly that wireless wasn't the sole solution that was needed.

05:28:

Scott:  That's correct.  We did.  We looked at -- wireless mesh technology, in particular, was emerging at the time, in 2005, 2006.  But when we looked at the demand curve for broadband, and what businesses were using, and what technologies were emerging -- You have to remember, 2006 was prior to the real estate bubble.  And so our business plan really was focused around a full fiber-to-the-home implementation.  And there were large residential developments planned within our city limits.  And those, really, were the foundation of our strategy, for that short period of time.  And mesh -- it seemed obvious to us, anyway, that a mesh technology just was not going to be able to scale and handle a full broadband-to-the-home implementation -- that the mesh would be overwhelmed.  And, you had to build a certain amount of fiber infrastructure to backhaul the mesh system anyway.  So if we were going to build that fiber backbone, let's do it strategically.  Let's take it to the places that we know there is a demand almost immediately.  And we'll figure out the connections to the individual premises as we go.

06:53:

Chris:  When you have that opportunity to build the fiber straight to the greenfields, before they were even developed in to the housing developments, that's just the best case you can have.  Unfortunately, as you said, that was right before the bubble burst.  And so those subdivisions didn't come through.  But nonetheless, you had already made some investments.  Can you tell us a little bit about how much the city spent, and what it ended up building, and some of the benefits of that first phase in the mid-2000s?

07:23:

Scott:  But, in that same timeframe, we determined that we needed to get our feet wet, with fiber in general.  And we designed an approximately 4-mile downtown core to connect our city facilities, a county court facility, some schools.  And we got pricing from the local telecom provider to build those links.  And they were very, very high.  The initial cost was high.  The monthly recurring cost was high.  We looked at the number of T1s we had in place at the time, and how many we forecast in the future, and the numbers seemed to pencil out to go ahead and build our own fiber backbone in the downtown core part of the city.  And, in fact, that's what we did.  We spent about $140,000 on that.  Eliminated all our T1s.  Didn't buy any new T1s.  And that phase of the project has paid back in less than six years.  And we've had -- in the place of those pairs of T1s previously, we replaced that with 1-gigabit connections between all the facilities.  So, a huge jump in performance, reliability.  A drop in recurring costs.  And, to date -- that system is six years old, or roughly, and -- we've had zero fiber-related outages.  And so that's ...

08:55:

Chris:  Well, if I can just ...

08:55:

Scott:  ... quite an improvement.

08:57:

Chris:  That is quite an improvement.  I mean, that's a 333-fold increase without increasing your costs at all.  I mean, going from 3 Mbps to 1,000 Mbps is just incredible.  Without increasing your costs.

09:11:

Scott:  Exactly.

09:13:

Chris:  But let me ask you -- when you say "we," I'm just -- I'd really like to just spend a minute on that.  Because a lot of the cities we talk to have a municipal electric utility.  And that utility already has some experience building a fiber because of running fiber to substations, or maybe some microwave links.  But, at any rate, a lot of the municipal utilities have an expertise of doing this sort of thing that I would suspect Shafter didn't.  And so, was it at all daunting to you?  Or -- how was Shafter able to make that leap into being confident that it could build the network itself?

09:49:

Scott:  Well, it was a little daunting.  My background -- I was hired here as the IT Manager.  So I had a technology background, but no expertise specifically in fiber networks.  And so, there was quite a learning curve, both for the vocabulary and learning what the best practices are.  And key to our success, I think, was partnering with a consulting company who helped us along during that phase.  They had put in municipal networks in other communities throughout the western United States, and had that expertise.  They could guide us.  And we found -- with kind of small steps at first and then larger steps later -- we could -- had confidence in their abilities.  And the plan worked.  And so, that gave us the confidence to take the next step.  But that is a very good point.  And when I say "we," I talk about the city as a team.  But I also include these consultants that have worked with us and guided us along the way.  And I think most valuable there is to not repeat the mistakes that have happened in other places.  And having someone that can come in and sit down and look at a map of the city and say, well, here's where it needs to go, and here's why putting it over here is a bad idea.  And that has saved us a lot of heartache and, I'm sure, a lot of money as well.

11:13:

Chris:  What are some of the other benefits of the network?  We covered that, obviously, you have this incredible new capacity for the city facilities.  There's some cost savings, especially when one considers that a lot of the prices from carriers go up every year.  But are there any unanticipated benefits that you've seen, from owning and operating your own network?

11:34:

Scott:  Probably the most obvious was the benefit to the local school district.  We have a kindergarten through eighth grade local district, and then our high school is part of a larger county district.  But we were able to provide dark fiber to the local K-8 district through the state of California's E-Rate program.  And I don't think that's unique to California.  But it's a subsidy that's collected on the phone bills of everybody in the state.  And it creates a fund that provides partial funding for telecom services in rural-type or depressed-type of community environment, where the local district might not be able to afford those services.  So, that process required the city to become an E-Rate vendor, and then provide the dark fiber service to the district.  And, in our case, the subsidy fund picks up 90 percent of that cost.  The city is able to charge a normal competitive rate for those services, but the local district only has to pay 10 percent.  So, a tremendous benefit to the school district.  They were using antiquated wireless connections previously.  And also were able to upgrade to 1-gig service.  A benefit to the city -- we were able to expand our fiber infrastructure get it paid back over a period of years.  And beyond that payback, provides an ongoing revenue source to help maintain the entire network.

So that's one of the unforeseen benefits.  I think another is in our -- some of our rural areas, where the industrial parks are, we're able to deploy cameras that help prevent and identify criminal activity.  And that capability, with the current phase we're working on now, is going to increase again significantly.

13:39:

Chris:  You said that the funds are coming in, from the steps you've already taken in building your network.  So, a lot of cities that have that have plans for how to expand using those additional funds.  Are there any expansion plans that you're working on?

13:54:

Scott:  The ability to build the network in the first place, using city general fund monies, rather than a grant or some sort of bonding effort, was really part of a longer-range economic strategy that the city of Shafter adopted some time ago -- 15 or more years ago.  And that was to decouple ourselves from the traditional sorts of municipal funding streams that trickle down from the state -- and take more control over our destiny by getting proper zoning in place, getting lands ready for development, for industrial use, for rail access.  We built sewers and water infrastructure before it was needed, so that wouldn't be an impediment for business to locate here.  As a result, the industrial and commercial growth that has occurred here has provided the city with an ongoing source of revenue that can be used for public safety, for educational programs, and for expanding our infrastructure -- like fiber, like streets, and like sewer.  So that has given us an economic base that is much more stable.  And it's also given the City Council and the City Manager the ability to be patient and waiting for these programs to start bearing fruit.

15:21:

Chris:  If I'm understanding correctly, then, what you're basically saying is, this city has focused very intently on making sure that it has all the infrastructure it needs to really thrive in the modern economy.  And that, from your perspective -- and probably for a long time, it sounds like -- access to the Internet was considered to be a part of this essential infrastructure that's needed by the community.

15:44:

Scott:  That is correct.  And not only essential going backwards, but absolutely critical going forward.  And the types of businesses that are locating here -- some are highly automated manufacturing plants.  They're operated from other parts of the country by people who have never even visited the plant.  And so that access to broadband connectivity is absolutely critical.  The public safety aspect as well.

16:16:

Chris:  You know, a lot of times, people think, oh, if it's just manufacturing, it's manufacturing.  But, you know, the U.S. is having some amazing growth in this very high-end manufacturing.  And you need to have these networks.  But anyway, I'm digressing a little bit.  You were going to continue on with discussing more about the future plans of the network and how it's been financed.

16:38:

Scott:  Going back to this cycle, if you will, of investing in the infrastructure, bringing in businesses that provide funding to the city itself, not only can we provide typical kinds of city services, but we can continue to pour some of that revenue back into investing in even further growth.  And a case in point is, today, we are under construction for a 25-mile expansion of our network.  So, we're going to go from 4 miles, in the core of the city, to a 30-mile ring that will encompass the entire city limits perimeter.  It will -- this new ring will pass through two areas that are industrial in nature and are expanding rapidly.  It will also pass through that same residential area that didn't develop back in the early 2000s.  But now we're starting to see some increased interest in that area.  And we expect houses to start being built there within the next 18-24 months.

This phase that's under construction now will raise the backbone performance of our network to a 10-gigabit metro-Ethernet.  We'll have multiple rings.  And some will be used exclusively by the city for communication between our facilities -- traffic cameras, traffic control, monitoring of our water, tank sites and so forth.  Very important to the continued growth, and the rapid pace of growth.

And we also have some particular industrial facilities that are coming in that insist on having redundant telecommunications connections.  So, in the absence of our network, that would be very difficult to do.  We're in a non-metro area, really.  And we've got an incumbent.  But, really, everybody else runs over the incumbent's last mile.  So we provide that secondary last mile, and an alternative, and a -- secondary path for those types of companies that require it.

18:49:

Chris:  So, as you're expanding this network, though, you're not really offering services to the businesses that are going to be connected.  Am I understanding that right?  You're actually going to be enabling connections for other ISPs to operate on your network.

19:05:

Scott:  That's correct.  Our current business model is not for the city to become an ISP ourselves, but rather to be a last-mile provider.  And in some cases, kind of a middle-mile provider even.  But to lower the barrier of entry for competitive -- either CLECs or ISPs -- to come in and offer their services in Shafter, where there might not be enough potential customers for a company to make an entire investment in a brand-new infrastructure.  But in our case, if they could place a piece of equipment in a rack that we provide, and make it to the customer premise over a last-mile we provide, and pay a modest fee for that, we lower that barrier, and we increase the number of choices -- and hopefully the quality and the pricing of those products -- to the customers inside Shafter.

19:59:

Chris:  Right.  And, as you said in our pre-discussion, you know, you're well aware of those who have invested heavily to build a network using this manner, where they're not an ISP.  Some of those networks have struggled financially.  But what we've seen is that, among the cities that have taken the approach you're describing -- this incremental approach, where you're not borrowing, you're not going to have to worry about interest rates driving up debt payments -- you can just expand the network.  It's already paid for.  And that makes the -- this open access type approach, with multiple ISPs -- it really makes it work.  And so, I have to assume that a lot of the businesses there are excited to see you complete this installation.

20:46:

Scott:  They are.  We're getting a lot of interest.  And we hadn't been secretive about it.  But -- you know, we hadn't done a lot of marketing ahead of this construction.  But now that they see conduit going into the ground, we've been approached on a regular basis by companies along the route who are now very interested in getting on board, and finding out what's going to be available.

And I think you point out an important point.  The "aha" moment for us was to step back and take a look at the fiber infrastructure as a utility like anything else, or a part of the city infrastructure like everything else.  We aren't building a telecom company here.  We're not expecting our fiber infrastructure to be a major revenue source for the city, any more than a water line or a sewer line is a revenue source.  We want those utilities to pay for themselves through user fees.  But it's an enabling infrastructure.  And it's something that will promote growth, promote a better business environment, and ultimately a better residential environment.  And so, getting that monkey off our back, where we had to make this thing profitable from day one, really helped us to get the priorities set properly, and start looking at this as a business development investment rather than building a telecom company.

22:21:

Chris:  Is there anything else that we should know about Shafter before we sign off for the day?

22:26:

Scott:  Shafter turns 100 years old this year.  And so we have a lot of activity going on around that.

22:33:

Chris:  Terrific.

22:33:

Scott:  Our centennial celebration.  And, you know, we are a small town, but, really, some big ideas here.  And, I think, to a large part, can be attributed to a City Council that really cares about the town and puts them first, and a city management culture that does the same thing.  We make our decisions based on the benefit of the city.  And we've been very fortunate to keep politics out of our decision-making process.  And I think, for other folks that work at cities, who are listening to this and thinking about their town, to do something similar, you really cannot underestimate the importance of that -- of having a patient and thoughtful city government, and city staff in place to get through these things.  'Cause they don't happen overnight.  They take some patience from everybody to get them done, and get them done right.

23:30:

Chris:  One of the things that you said, in an earlier discussion with my colleague Lisa, was that the city needs to have a vision, and needs to be, you know, patient and diligent.  I don't know if you used exactly those words, but that was definitely the theme.  And, I'll tell you, we just see that, time and time again, with the cities that are successful.  It's not enough just to have a great idea.  You have to stick to it.

23:52:

Scott:  That's exactly right.  And, as I said, this whole business philosophy, and how to attract businesses to town, that's a twenty-year-old idea.  And the Council and the city staff have stuck to that plan, even when it seemed like, well, maybe this isn't going to work, they DID stick to it.  And it is paying off.  And we're starting to see the benefits now.

24:15:

Chris:  Excellent.  Thank you for coming on this show.  I have no doubt we're going to be checking back in with you as construction proceeds and learning more about what you're learning as you move forward.

24:26:

Scott:  I appreciate it.  And I'm glad to come back and give an update any time.  We ought to be lighting up some fiber before the end of this year.  And it will be very exciting.

24:36:

Chris:  Terrific.  Thank you.

24:38:

Scott:  Thank you.

24:39:

Lisa:  To learn more about Shafter's project, visit muninetworks.org and follow the "Shafter" tag.  We'll be sure to bring you updates as the network grows.  If there's a community you're curious about, and would like us to interview for a podcast, let us know.  Likewise, if there are issues related to telecommunications that pique your interest, we welcome your suggestions for future shows.  E-mail us at podcast@muninetworks.org .  You can follow us on Twitter, where our handle is @communitynets.  This show was released on July 23rd, 2013.  Thank you to the group Break the Bans for their song, "Escape," licensed using Creative Commons.  Thanks for listening.

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