Thanks to Jeff Hoel for providing the transcript for episode 98 of the Community Broadband Bits podcast with Rick Smith on the municipal open access fiber netowrk in Cortez, Colorado. Listen to this episode here.
Rick Smith: I'm kind of proud to say we were able to impact about 250 of those businesses, which -- you know, you've got to take this in baby steps.
Lisa Gonzalez: Hello. You are listening to the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance. This is Lisa Gonzalez.
The Director of General Services for the City of Cortez, Colorado, Rick Smith, joins Chris this week to dig into the story of the community's fiber network. Rick explains how the community incrementally expanded that asset to what is now an "open access" network. They faced a few challenges, but designed their business model to fit the community. As a result, their network has flourished. Here are Rick and Chris.
Chris Mitchell: Welcome to another edition of the Community Broadband Bits Podcast. I'm Chris Mitchell. And today, I'm speaking with the Director of General Services for the City of Cortez in Colorado. Rick Smith, welcome to the show.
Rick Smith: Thank you, Chris.
Chris: Rick, you and I have been talking for a number of years, off and on. You've been doing some really interesting work down there with fiber optics, both in your community and within your local larger region. And, actually, I should say, as well, I've been through Cortez. My wife and I came through right after a bunch of snow fell. It was beautiful. And, down there in the southwest corner of Colorado. So, why don't you describe the community a little bit, for people who haven't had the privilege of being there?
Rick: Well, a lot of your listeners will be aware of Mesa Verde National Park. We're about 16 miles away from that. We consider ourselves kind of a gateway to Mesa Verde. We are, as you said, in the extreme southwest portion of Colorado. We're about 20 miles from the Four Corners, where you can step on all four states at one time. Cortez itself is a small community. We have about 8300 people. Quite a few in the county area, which is Montezuma County. But Cortez is the largest city in the county. So... We're about 45 miles from Durango. A lot of people know about Durango.
Chris: So, it's fairly rural area, with the population being fairly well spread out, except for some of the communities that you just mentioned, right?
Chris: So, in this area, you haven't had the best connectivity.
Rick: Back in 1999, we were trying to get a T1 out of here, to Denver, and the pipe was full. The incumbent at that time served southwest Colorado, a five-county region, with just two microwave links out of here. So we had them come down. And, of course, we got the textbook answer of: can't make a business case; too rural. At that time, City Council decided to take destiny in their own hands. And we started exploring ways of bringing telecommunications in without their help. It was a collaborative effort between southwest Colorado and northwest New Mexico. And that was the beginning of the fiber going on the overhead power lines. And it actually hooked up Grand Junction, Colorado, down to Albuquerque. Everybody rides that same pipe out of here now, including the incumbent. So that improved our pipeline.
But it still didn't solve our problem internally, inside the city. So we did a study. And we first connected up the municipal buildings.
Chris: Can I ask what the timeframe was -- of when you started connecting the internal buildings?
Rick: We started connecting the internal buildings in about 2002. And we, of course, started deploying different services such as VoIP -- that came along in 2005. We approached the Department of Local Affairs [DOLA] for the state of Colorado, and received grant. And from that grant, we were able to connect up the county buildings, the hospital, and the school districts. And that happened in about 2005. So that was the beginning of what we call our government network in town. And nothing really took off until we were able to make that connectivity out of town. I mean, it was great to be on fiber, but it didn't really mean much. And we put in an OC-3 facility from the incumbent. And then that's when things really started taking off.
Chris: Then you were actually -- started working on solving your problem with the long-haul, getting out of town. And before that was solved, you started connecting some of the local buildings. And you couldn't really take advantage of those local connections until after you solved that long-haul problem with the connection between Santa Fe and Grand Junction. Is that right?
Rick: That's correct. We built the local network but had nowhere to go. So when we got the long-haul built, and we were able to make that connection, then things started to take off, because then people saw the value in it. It was expensive. But we ran the government kind of like a coop. We just kind of took all the cost and divided it up by the number of members, and off we went. So, we had all the schools, the hospital, fire department, city buildings, county buildings already connected. So we had the aggregation already. In 2010, by having fiber in town, businesses and them people were asking to get on the network. And prior to 2005, which is -- this is an important thing in Colorado. We were serving just a few businesses on that network. We had an independent phone company that was -- we were handing off signal to, and they were taking care of the private business. The reason I say that's so important is because in 2005, the state of Colorado passed that crazy law, called Senate Bill 152, which prohibited governments from providing service.
Chris: Right. It was -- some people call it the Qwest Law, because the predecessor to CenturyLink, Qwest Communications, was the one that pushed that through for its own interests.
Rick: Correct. And in the case of the City of Cortez, we were very fortunate in the fact that we were considered grandfathered under that law, because we were already doing services. So we decided, OK, what can we do, for economic development, that we can enhance Cortez? And one of the obvious questions was -- well, let's just deploy fiber-to-the-business. So, in 2010, we got a planning grant, which included doing the business case, doing surveys.
Chris: And that was from the state?
Rick: Yes, that was from the state, from the Department of Local Affairs. You know, gee, we really need to do this. I know some of your listeners know Dr. Andrew Cohill. One of the first things we did when we did that, we brought him in, and we invited people like the government, people that were already on the network, how they could use it -- bankers, county commissioners, City Council members, prominent businesspeople around town. And what Dr. Cohill did was kind of expand on the benefits of "open access," and why this is so important. So I think that was one of the key things that we did.
Chris: So that's what you were doing at the local level, in terms of trying to build this "open access" network to spur economic development. But I also know that you were being active in a more regional level, with nearby counties. Can you tell us what was happening there?
Rick: Colorado is divided up into economic development regions. And we're considered Region 9, which is a five-county area. And some of the other towns were: geez, look what Cortez is doing; and why can't we do some of that? Well, of course, Senate Bill 152 blocks a lot of communities from even knowing how to proceed. We thought, why can't we take this model of a government network, at a minimum, and expand it region-wide? We approached, again, the Department of Local Affairs, and got another planning grant for a regional effort. And I might say that this has become some kind of a model for the Department of Local Affairs, to have the other regional approaches to rural broadband. DOLA is real proactive in planning grants for this. So right now, they're kind of looking at Region 9 as the poster child for implementing a regional effort.
Chris: Would other regions need to have an anchor, such as yourselves, that is either grandfathered or someone that's passed the referendum to restore their local authority?
Rick: Well, in Colorado today, you kind of have a mixture of all things. Some regions aren't doing much. Some regions are -- like in Montrose -- have passed a ruling against, to allow them do services and exempt Bill 152. So it's kind of all over the place. But they have created regional technology planning groups. And they're taking our playbook, so to speak, and kind of moving it around the state as....
We did another study. And in that study was identifying, of course, the community anchor institutions in each community. We also invited, early on, right at the start, the local telecom providers. Because we recognize that there's no way Region 9, being a rural area of the state, could afford to overbuild everything. So our grant mostly focused on collaboration and building a network within each community, and then leveraging the infrastructure that was already in place between the communities to build out the middle mile. Long story short, we got the grant. We submitted it to DOLA. And we were successful in getting a regional grant for $3 million from the state, which we had to match with a million dollars. So we had, basically, a $4 million project. And, as you can see, you couldn't build much middle mile with $4 million. So, from there, we started digging down into the details. And each community came up with a design for their internal city. We'd just completed that grant and, I'd have to say, region-wide, it's been pretty successful.
Now, to speak to Cortez specifically, since we had the business model, the business case, already done, we had the city already designed for fiber-to-the-home, we got $1 million out of that $4 million pot. And with that, our plan was to begin what we call phase 1 of the fiber-to-the-business project.
Chris: And when was that?
Rick: That was in 2011 -- we started construction. So, then what we did, we took our roadmap design, field engineered it, and we broke the city business districts into chunks we thought would fit with the $1 million. Because, obviously, $1 million wasn't going to cover all of the business districts. We contacted the Chamber of Commerce. And we understood that there's about 650 businesses in Cortez. When we did our bid process, we just kind of broke it out in chunks, so that we could make the project fit the money. I'm kind of proud to say we were able to impact about 250 of those businesses, which -- you know, you've got to take this in baby steps.
Rick: Out of that 250, today we have sold about 172 drops -- fiber drops, we call it -- which means fiber to each building -- fiber building. And business. And we're enjoying a take rate that's right at the national norm of about 40%.
Chris: So, does that mean that out of the companies that paid for drops, that not all of them decided to take service?
Chris: What was the cost of the drop?
Rick: We priced the fiber drops very affordable, to the businessmen. Because, after all, we're going down an alley, and we want to maximize the drop construction as we're going down that alley, because we don't want to have to come back.
Rick: And the alleys are all paved, and.... By the way, our whole network is underground. None of it is above ground. Because the city does not own the electric utility. It's a separate coop. And they get to control the network. And the city did not want anybody else telling us where -- and we couldn't go in the city. What we learned out of that fiber drop, the first thing the incumbent did was -- went in and signed everybody up as quick as they could to a longer-term contract.
Chris: Hopefully at a lower price, at least. If you're going to lose customers potentially, at least you hope the businesses are doing better with a lower price than they would have paid otherwise.
Rick: Well, I hope so. I think it actually happened. But if you recall, about that timeframe -- 2010 and that -- that's when DSL was really kind of coming to the forefront in rural areas. We recognized in the business model that we had to provide a competitive price to DSL, even though there's no comparison to DSL and fiber connectivity. But when you look at the demographics of our local businessmen, a lot of them are small mom and pops. And you have to make the connection affordable to them. Where we're at today is: we've deemed phase 1 successful. And we're having a lot of community businessmen, still approaching the city and wanting on the fiber, that weren't in that phase 1 serving area. So we are in the process of going -- now, this is on the city, on our own -- to go after a $2 million project, which would be a million-dollar grant with a million-dollar loan. City Council set this up as a fiber utility, and we're treating it just like the water, or refuse. And we've created an enterprise. That's important in Colorado because now all the revenues that come into it stay there, they don't go out into the General Fund.
Chris: And has the City of Cortez put in any resources, or has it been mostly or entirely grant-funded?
Rick: We have put in match over time. And we have put in capital. Prior to being enterprise, we put in some capital money to build out some small extensions to different areas. So, it's been kind of a mix-and-match.
Chris: And do you have a sensed of -- do your community anchor institutions pay less, and have better service, than those in some of the surrounding counties that haven't been touched by the fiber?
Rick: I have a good example. We have an adult learning center in Cortez. We made it a point to serve them in phase 1 of fiber-to-the-business. And prior to that -- this is probably a common story around the United States -- they were paying for six T1s, bonded together, trying to do video training -- video classrooms. And, as a matter of fact, they teach adult education to some of the Alaskan villages up there. And they had connectivity to the College of Eastern Utah and some of the others. They were able to get on our fiber and increase their bandwidth by 5.5 times for the same dollars that they were paying before.
Chris: That must have made a big difference for them.
Rick: Right. Their video conferencing equipment was constantly going down prior to it. Now, they're wide open and running.
And, Chris, I do want to say one thing. It's -- our network is all "open access." We chose not to provide service to the citizens, based on Dr. Cohill's thing. We wanted to work with the local providers. And, I'm kind of happy to say, we have seven private service providers on our network today, providing service over our fiber network.
Chris: So, does the local telephone company use the network as well?
Rick: No, they do not. They have been invited, throughout this whole process, and here to date have chosen not to participate. Just northwest of Cortez -- it's real rural -- there's an independent phone company called Farmers Telephone, and they have the ability to come into Cortez, and they are providing services on our network. So we do have telephone. We have data. We do not have video at this point. There again, you can't make a business case for 8000 people.
Chris: Right. Well, I think, a lot of times, you certainly need at least 1000 subscribers on the network, I think, anybody would even entertain a video package -- in my understanding.
Rick: Yeah. And I looked into the cost of building a video head end that.... And even buying used equipment was not cost-effective. And then you get into the whole programming side of things. So, it just didn't pencil out for us.
Chris: So what is your ultimate vision? Is it to serve the entire community with an "open access" network? To serve the whole five-county region? Or, you know, is there some place in between?
Rick: My vision, and the City of Cortez's vision, is to eventually have fiber-to-the-home in all areas of the town. We've already completed phase 1. We get phase 2 done, that will complete the other 400-and-some businesses. That will take care of all the business districts. And we're hoping at that point we'll start generating enough revenue that we can be doing phase 3, phase 4, phase 5, etc., and just eventually grow this thing out. Regionally, the network, since Cortez was pre-Senate-Bill-152, the other communities are right now focusing on getting the community, the anchor institutions, taken care of.
And it's kind of a unique design there, too, is.... Cortez and Durango are the two largest communities in the region. And our network design for that is -- we put a what we call a main aggregation hub in Durango, and a main aggregation hub in Cortez. So, Durango hub serves the eastern portion of that five-county region, and Cortez hub serves the western point. And there, again, we've collaborated with private service providers to carry traffic from the other towns into the hub. And then, from the hubs, we have connected the two hubs, and we have redundancy built in, so that if Durango goes down, their traffic comes over to Cortez, and goes upstream. So we're trying to build in some redundancy in that.
Chris: That's a really interesting network you've got going on. Or, actually, two networks you've got going on. And we'll look forward to checking in on the future. Thank you for joining us on the show, Rick.
Rick: You're very welcome, Chris. Thanks for the opportunity.
Lisa: As Cortez and Region 9 move forward, we will be sure to check in with Rick to keep you up-to-date. Until then, you can learn more by following the Cortez tag at muninetworks.org.
We want your ideas for the show. E-mail us at email@example.com. You can also follow us on Twitter. Our handle is @communitynets. This show was released on May 13th, 2014. We want to thank Valley Lodge for their song, "Sweet Elizabeth," licensed using Creative Commons. And thank you for listening.