Conduits Lead to Competition - Community Broadband Bits Podcast Episode 182

David: Providing the conduit system allowed the private carrier who was building fiber to the home to economically build to all the neighborhoods.

Chris: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell, and today I'm speaking with three fine gentlemen from Lincoln, Nebraska. We're going to start off introducing them. I'm just going to tell you their names and they're going to tell you their title so we can get a sense of their voice. Since we have four male guests today we're going to try and make it as easy as possible on you, gentle listener. 

Mike Lang, please tell us what your position is and the last time you had a Runza.

Mike: As Chris mentioned, my name is Michael Lang. I'm an Economic Development Aide and I work in the Mayor's Office. To be quite honest, you asked me the question about the last time I had a Runza, actually not my favorite, but I love their burgers.

Chris: Yes. Actually, I'll  be honest. This is a local chain, for people who aren't familiar, throughout Nebraska. It's just amazing burgers, and they have this famous Runza dish that I myself have not had as well. 

Our second guest, Steve Huggenberger, please tell us what your position is.

Steve: I'm one of the Assistant City Attorneys in the City Law Department. I've been here for 31 years. Probably the last Runza I had was the last hundred I made for myself.

Chris: Wonderful. Local self-reliance at its best. Our final guest is David Young. David, please let us know what your position is and the last time you had a Runza.

David: Hi, Chris. This is David Young. I am the Fiber Infrastructure and Right of Way Manager for the City of Lincoln Public Works Department. The last time I had a Runza was probably a year ago. 

Chris: Wonderful. My wife and I, the last time we drove through Nebraska we just saw so many of those signs. It's become fixated in my head. Too many of our listeners have not been to Nebraska or through it. It has a lot of things for people to enjoy, frankly. 

Mike, you're going to tell me about Lincoln, please.

Mike: The City of Lincoln is actually part of a Metropolitan Statistical Area that includes Lancaster and Seward County. In terms of population, our city is just over about 270,000, and the county we reside in, Lancaster, is over 300,000 in population at this point in time. We're a fairly diverse community, meaning that we have a very good differentiation in the portfolio of the businesses that are located here. We're also the state capital, so there's a strong governmental component, as well as home to the flagship University of Nebraska here in Lincoln, so certainly an economic development engine and helps with our ability to attract and retain workers in our community, which is important. In terms of our industry makeup, I would say the strengths are finance insurance. We definitely have a growing software development and technology cluster in the community, but also have a fairly good presence with manufacturing, transportation, distribution, and warehousing as well. There's a little bit of everything here. 

What we're probably most excited about is the evolution of the startups, the tech companies that are really growing in leaps and bounds. We recently announced the construction of a new corporate headquarters for a company called Hudl, which is located down in our west Haymarket area, which is a large redevelopment area that has been the catalyst for growth in our downtown area. We built a new arena. It's called the Pinnacle Bank Arena. There is an entertainment district that's developed in that local area as well as many tech companies moving there due to the amenities. 

Chris: I think one of the things that we've been following that Lincoln has been doing is this interesting conduit system. One of the things that we've long been discouraged by in Nebraska was that there's been a prohibition on local governments building or operating their own broadband networks, internet access networks, but you have found an interesting way of encouraging local competition with local government policy by a conduit system. I think I'm going to ask David, since conduit is in your title, or at least the fiber certainly is, to tell us a little bit about the history of it, and then anyone else who wants to jump in, feel free to do so. What's the background of this conduit system you have running through parts of Lincoln?

David: The origin of the conduit system goes back all the way to 1979. A traffic engineer by the name of Virendra Singh started installing inch-and-a-half steel conduit to connect traffic signals. Somewhere around the '80s he switched over to two-inch. In the '90s he switched over to four-inch conduit. In 2012 we were building the arena and redeveloping and a pretty big infrastructure package in our downtown area, and Virendra and some of the business owners came together and looked at what could we do to build conduit under those streets while they were under construction? We put together about 18,000 foot of conduit. Then Mike, Steve and I got together and started looking, and Virendra came to us and he said, "You know, I've got 300 miles of conduit around the city in various conditions." 

The three of us created a master plan for how to lease out this infrastructure to private carriers and basically pull out copper cables where they existed, upgrade multimode fiber that we were using to run the traffic signal, and at the same time when we're creating this space work with private carriers to lease access to the system and pull their fiber in as well. It's been an exciting ride for basically the last two-and-a-half years.

Chris: A couple of background facts. Is there one conduit? Do you have multiple conduits with ducts? How did you make sure that you wouldn't have too little conduit based on your need?

David: Back in '79 we didn't, so those areas that we have inch-and-a-half or two-inch conduit, we have very little space. Those areas are some of the areas we replaced with the downtown conduit system and we upgraded it to a four-inch. Now we install six-inch-and-a-quarter conduits. That way we don't have to pull in a MaxCell sock or subdivision conduits inside of a larger conduit. It's actually cheaper for us to install six-inch-and-a-quarter conduits in the first run. That's what we're doing now. Where we have four-inch conduits we will pull three-inch-and-a-quarter and one one-inch conduit inside of that, or on bridges we'll put in MaxCell sock, a flexible interduct product, to subdivide the space for private fiber as well as public fiber.

Steve: This is Steve. I think you need to keep in mind, too, that originally and for decades we were focused on government use and government needs only. Until very recently, the last five or six years, because of a lack of competition and outcry in the communityb we didn't begin looking at ways to use the assets we had for something other than just government.

Chris: I think that's something we see often with local governments, that same approach, although I'll say that I've often been in meetings with people who recognize the value of conduit, and when they try to get others who may not have the technical background to support a vision of building a conduit system, they run into road blocks. They'll find that people will say, "Well, there's maybe a theoretical benefit of someone using it in the future, but we know that, even though it has a small cost, it does have a cost of doing now." Did you run into any of that hesitation when you had this idea of building so much conduit more recently with the downtown area?

David: This is David, Christopher. We did research, and there's a lot of research out there that when you cut an arterial street, you degrade the life of the panel that you cut by 35%. When we're doing the math, it costs us roughly $30,000 to install a mile of the six-inch-and-a-quarter duct-pack system, and five vaults, hand-holds if you will. For us to do that versus to come in and manage all of the private cuts on those brand new arterial streets, the numbers add up pretty quick, $30,000 versus having to have the local carriers or private carriers cut the streets within sometimes months of us completing the project. It's just good planning, really.

We did have those conversations. We have looked at it. When you have a leasing model where you're getting revenue for those systems, you can look at ROIs that are in the five-year mark, and then you look at not cutting the street, the math adds up very quickly.

Chris: Did you have any champions of this project outside of the local government? Were local businesses actually paying attention and cheering you on, calling their elected officials, those sorts of things?

Mike: This is Mike. You have to remember, we just really have been working at attracting new broadband providers since 2012. There was I think a fairly broad recognition, and I think Steve alluded to it, that there was a perceived lack of competition in the community. On top of that, also concerns about reliability, diversity, redundancy, and those types of things. I think we all recognized that commerce, particularly e-commerce, is playing a more significant role in our economies. The private sector businesses were a catalyst for getting approval of the project. 

Originally when what we called at that time the downtown conduit grid was installed, we had to allocate and approve funding for that particular project, and the timing was good. We were just in the process of essentially rehabbing all the streets in the downtown area, and there was broad support not only from the private sector but the local chamber of commerce as well as the city council, which has been on an ongoing basis up to this point very supportive of all of our broadband efforts. Yes, it was very much in that spirit of public and private partnership that allowed us to get to this point.

Chris: I feel like I've seen a mixed record from telephone companies, cable companies, and particularly the big guys, of not wanting to use even conduit that they don't control. They'll say, "Oh, we'd rather have our own." I know in some cases they have used it, although they've then wanted to then over time go back to having their own. They might use a conduit in a stretch where it's convenient, but then if they have an opportunity to dig up the street years later, they may do that. Is there anything to stop existing companies from putting in their own conduit or wanting to, or do they have to use the conduit that you've put into place?

David: This is David, Chris. There is no prohibition on construction in the right-of-way. If you have an occupancy agreement with the city you are allowed to construct private facilities, but as part of our right-of-way occupancy code if you bore under an arterial street or cut an arterial street we can request that you add additional conduit for the city for the public purpose, and that the city would reimburse the company for the additional cost of the conduit. When you look at that and you apply it, practical application of the city-owned conduit system in this area, and if you're going to cut the street we're going to ask you to put in conduit as well, why would you? 

As a company, our local carriers are also leasees in the system. They have used the system to support their technology upgrades as they're upgrading their infrastructure. It makes economic sense for both the city and the private carrier, whether they're incumbent or a new market entrant, to utilize the conduit system where it's available, and where it's not available, when you cut the street we will ask you as a policy to put in conduit for the public use.

Chris: Was there any opposition at the beginning of the project, or was this something that the various providers ... As a large city like yours, you had not only the big telephone and cable company that most cities will have, they'll have one of the big companies for both sectors, but they'll also have a lot of smaller companies, CLECs as they were called under the old days, and we just think of them as different independent companies now providing competition. What kind of support or opposition did you see from the carrier community?

Mike: This is Mike. I wouldn't call it flat out opposition. I think it more related to concern that the city was getting involved in the competitive nature of broadband. Other than during the initial meetings when we were putting the business plan and model together in which they shared those concerns, we just continued to march forward. We have projected having just one new broadband provider in the conduit system up to this point, and the fact of the matter is we're nearly full and leasing on a linear-foot basis, so the project has been very successful, but it's not like there was any obstructions standing in our way. I would characterize it more as concern.

Steve: This is Steve. I probably would characterize it a little differently. Certainly there was not outright opposition, but there was an utter and complete lack of support from the incumbents.

Chris: Steve, I'm curious legally if there's an issue in terms of sometimes if you were doing joint trenching there's an expectation there might be a believe what's a pro rata share, which should be, rather than just the additional cost, you would actually split the entire cost of the project. Has there been any opposition to the fact that there would be the additional cost is incurred to the city to join in with an existing project that would be opening the streets?

Steve: No one's voiced any opposition to that. Prior to the conduit effort, we had our electric company and a number of the private companies join together in joint trenching agreements anyway, so they already had a history of working together in that area. We haven't had a single complaint or indication of opposition to the requirement to add conduit at an incremental additional amount.

Chris: Often the institutional networks that cities' have where they'll get conduit as part of a video franchise will have a conduit system that cannot be used for commercial purposes. I guess I'm just curious if you can tell us a little bit about as a city attorney what you think in terms of cities balancing the lower cost of that sort of conduit which can only be used for public purposes versus paying more to put conduit in and then having that available to everyone.

Steve: Certainly we have some experience in the past where we have installed conduits as part of an institutional network that was previously government-only use, and some of the grant moneys that we received from some of the cable television providers had those kinds of limitations expressly indicated in the grant moneys that they gave. The conduit that we're really talking about here was put in for other purposes, for traffic-related purposes, not for institutional networks, community type networks, so I think we're really talking about two different things.

Chris: Okay. I just always want to make sure people are aware of conduit isn't conduit. The legal rights matter. One of the things I wanted to talk about that is I think the biggest benefit, and that's to say, "What's happened because you have the conduit that would not have happened if you did not have the conduit?"

David: This is David. We have a fiber to the home project that is happening right now because we have the conduit system.

Chris: David, can I ask you to clarify that? Did you have conduit running to homes, or in what way does the conduit specifically being used to enable fiber to the home?

David: In several ways. We do not have conduit that runs to the home. All our conduit system is in arterial rights-of-way, major street right-of-way. The issues in Lincoln for constructing a system is 55% of the city is serviced to the underground utilities. For us to make an economic case to build fiber to the home, we need to balance constructing against aerial models, so half the city would be aerial, half the city would be underground. Obviously, aerial significantly cheaper. Providing the conduit system allowed the private carrier who was building fiber to the home to economically build to all the neighborhoods. 

If you think about each miles section being a construction unit on the outside boundaries of that mile segment, we most likely have conduit, and where we do not have conduit the carrier extended the conduit, and under the ordinance we pay our pro rata share in the form of lease revenue and we own that conduit after it's constructed.

Chris: That's terrific, because one of the concerns that we've had in the past with conduit is that one might use a part of the conduit and then establish effectively a monopoly or be able to create barriers to others going into new areas, but the fact that you have the conduit and then you require that it be extended when other carriers would extend their own conduit, it's really a hand-in-glove kind of policy, it seems like.

David: It is. The model that we use specifically is if we, if the city install conduit on a new road project, it is available to all leasees on the same basis. If a carrier installs conduit and as an extension of our system, it will be to our standard and it will be available to all people in the system, all parties involved in the system. We have large-name national companies leasing from us and we have local carriers as well. This model is pretty straightforward. We rebate a portion of the labor and materials only for the pro rata share of the conduit construction in the form of lease abatement, so lease payments to pay for these extensions. That's how we help offset the cost of the additional conduits to be installed. It's been very successful. The fiber to the home project will make the 7th conduit lease that we have signed since June of 2013, so 26 months.

Chris: What kind of impact has there been on small businesses? This is an area that I always find interesting, because I feel like there's interesting opportunities for niche providers, maybe, to step in in ways they would not be able to because they wouldn't be able to afford the capital cost of building out to just certain kinds of businesses.

David: I think that's where our model has been very successful. In the very beginning, we sat down, Steve, Mike, and I, and divided the city up and started looking at the economics. We purchased some information on all the businesses in the city, geocoded information. We create a ArcMap showing where all of the different sizes of the businesses are in the city, by revenue, by employees, and started looking at what kind of carriers we needed to attract to the city. Our carrier mix is pretty good. We have level three in Century Link, and those carriers are really focused on really probably the top 200 employers in the city. Then we have United Private Networks and Nebraska Link, and they're probably focused on the from 200 to 3,000 size. Then the remaining 10,000 will be serviced by the fiber to the home product. 

Each carrier has their own strength and their own market that they're focused on, so by attracting multiple carriers to the system and then every extension being available to every other carrier in the system, I think we really have allowed each market segment to be served. We just started at the top and worked out way down, and that's basically how we approached it.

Chris: If you have advice for another community that might be starting this up, having gone through the process, what advice can you give?

David: Chris, this is David. I guess I would give other communities two pieces of advice. Ask what assets you do have. You would be surprised. We have 80 miles of abandoned 12-inch or larger water main, and those water mains go across bridges, they go under levees, they go under creeks. Those are some significant value. Pulling fiber through those abandoned water mains has been very successful for us in troublesome spots, crossing highways and in big bore areas where we would've incurred significant expense. 

Then the second piece of advice I would give is, just because somebody says you can't do it, find a good attorney and talk to them. There was a narrative that ran around our community for a long time that said we could not do this, and when Steve took a look at it there was actually no prohibition on leasing conduit. Just because somebody tells you you can't do it, I would ask the question and find a good staff attorney to work with to take a look at the actual laws and what they do say.

Chris: I'm reminded that something that a lawyer friend of mine has said is that broadly speaking there's two kinds of lawyers. There's those that will tell you, "Nope, you just can't do it," and then there's those that will say, "Well, actually, if we do it this way, we can do it." I think it's sharp to recognize that the first answer may not be the best answer.

David: Not to give Steve a lot of credit, but he deserves it. He has definitely been the guy who makes things happen for us when we run into a problem.

Chris: Steve, do you have any advice for any other city attorneys that might be asked to consult on this matter?

Steve: Oh, I'd just tell them to listen to David's advice. Or, don't take no for an answer.

Chris: Mike, let me ask you if you have any words of wisdom for other communities that might be thinking about this.

Mike: I'd say business relationships and getting a sense of the community needs are key. Also, building alliances, much like out of the gate when we launched the conduit project and actually held the presentations over at the local chamber of commerce. Having key stakeholders involved on the front end of the project can really influence your ability to get approval, particularly for funding, which is one of the keys to implementation. Probably the other one, if you have constraints on, say, a conduit system, is really take a look at the demographics of the business community and build the appropriate portfolio for your community, like what we have tried to do in the small, medium, large business enterprise I'll call it. 

The last thing is, if you do build conduit, don't expect broadband providers to necessarily come flocking to your door. There was a lot of very proactive outreach behind the scenes in order to secure the broadband provider mix that we currently have. Challenging to get some providers to commit capital to building out networks in communities, but you have to be persistent at it and good things will happen. Along with that, having the adequate information for them so you can make a case. David mentioned all the demographics on our business community in the downtown area, but also David has done a wonderful job auditing the entire conduit system and creating very detailed GIS maps so he can really build and make a case to the providers based on not only business demographic data, but you really have to show them where the conduit's at accurately so they can really get a sense of the community and do their own business modeling.

Chris: Great. Those things are incredibly useful. I think we've really got into the trenches here. Sometimes people just say, "Well, yeah, you should have conduit. Put it in." There's a lot of details in this conversation that I think will help people that have been trying to figure out how to actually do it and to do it right. Let me thank you each. Mike Lang, Steve Huggenberger, David Young, thank you all for coming on the show to share this with us. I'm sure we're going to be checking in to learn more about what you're doing in the future.

Mike: Thank you for the opportunity, Chris.

Chris: Thank you, podcast listener, for tuning in and staying until the end. That was Mike Lang, Steve Huggenberger, and David Young from Lincoln, Nebraska. Follow us on Twitter @muninetworks and @communitynets. You can e-mail us at podcast@muninetworks.org with your ideas for the show. Thank you to Arne Huseby for the song Warm Duck Shuffle, licensed through Creative Commons. Thank you for listening to episode 182 of the Community Broadband Bits podcast.