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Danville's Incremental Strategy Pays Off - Community Broadband Bits Episode 166
Danville, Virginia, has long been one of the municipal network approaches that we like to highlight. Built in a region hard hit by the transition away from tobacco and manufacturing economies, the open access fiber network called nDanville has led to many new employers coming to town and has shown the benefits of a low-risk, incremental investment strategy for building a fiber network.
Jason Grey, Interim Utilities Manager, is back on the show to update us on their approach. He introduced the network to us three years ago on episode 22. Since we last checked in, Danville has continued expanding the fiber network to a greater number of residents and Jason talks with us about the importance and challenges of marketing to residents. We also discuss how they lay conduit as a matter of course, even in areas they do not plan to serve immediately with the fiber network. Read all of our coverage of Danville here.
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Jason Grey: It's a great thing to have when trying to market a data center or IT company. It's a wonderful tool for them to come in and say, wow, you have fiber optics wired in this park or this business center.
Lisa Gonzales: Hello, and welcome to episode 166 of the Community Broadband Bits Podcast from the Institute for Local Self-Reliance. This is Lisa Gonzales. This week Chris interviews Jason Grey, Interim Director of Utilities for the city of Danville, Virginia. This is a return visit for Jason, who last spoke with us in 2012. nDanville, the city's open access fiber network has been offering better connectivity to the community for years. We've documented a few of the many economic development wins attributed to their network, and in this interview Jason provides a few more examples. Jason and Chris also discuss the city's incremental approach, the residential expansion, and some of the challenges the city has faced as it sought to add service providers to the network. Jason offers some tips on dig once and marketing efforts based on lessons learned in Danville.
We bring you focused, specialized information on municipal networks with no annoying advertisements. There are very few places you can find the in-depth discussions we offer on the Community Broadband Bits Podcast. We go the extra mile to bring you important, engaging material that mainstream media typically ignores. Please take a moment to support our work at muninetworks.org or ilsr.org. Click "donate" and contribute any amount. Now here are Chris and Jason Grey from Danville, Virginia.
Chris Mitchell: Welcome to another edition of the Community Broadband Bits Podcast. I'm Chris Mitchell, and today I'm speaking with Jason Grey once again. Jason Grey is the Interim Director of Utilities in Danville, Virginia. Welcome to the show.
Jason Grey: Thank you for having me.
Chris Mitchell: It's great to have you back on. You were one of our early guests, and you and I spoke into a microphone right there in Danville as part of the very first economic development MuniNetworks summit sponsored by Broadband Communities. It's great to have you back on the show.
Jason Grey: Yes, that was about three years ago that the Broadband Communities had a conference here in Danville, and we were glad to host it and be a part of it.
Chris Mitchell: Why don't you tell our listeners who aren't familiar where Danville is, and a little bit of the background of the nDanville project?
Jason Grey: Danville is located in southern Virginia, right on the North Carolina-Virginia border. It's in the middle of the state about two hours from Roanoke, an hour from Lynchburg, about four hours from Washington DC. We're centrally located on the southern portion of Virginia. We're historically a textile and tobacco town, which that industry has left the country or died off, but we're looking to diversify our future industries and recruit new business to Danville and provide jobs for our citizens here.
Chris Mitchell: nDanville has one of the more interesting approaches, I think, because I remember thinking when I first started working in this field in 2007, Danville, you're doing this thing, it's incremental, it's going to take you forever. You've moved on, you've been expanding the network. It's very impressive. Why don't you tell us how it got started and basically the way that you operate the network?
Jason Grey: nDanville is the name of the network, it's short for Network Danville, but we actually built the majority of the network in 2004 to serve our own city government buildings and locations and city schools. City schools are separate from city government. We generate revenue through connections that we provide them. Over the years we've just expanded and expanded through capital projects. In 2007 we started wiring our industrial parks for economic development purposes and to help attract industry to Danville. Later on in 2012 we started doing a residential project. We tried to do one earlier in 2009 and actually go out for a substantial loan to do a mass area, but City Council was hesitant about jumping in that far with the unknowns of the market. We're a utility that offers electricity, water, gas, and being in the telecommunications business you have competition with the incumbents. They knew that there were some risks there as far as take rate customer signups, so we wanted to go about it in a little more conservative manner and build as we have revenue.
Chris Mitchell: I think one of the benefits of your network and your cautious, incremental-type approach has been that there's been low risk, and in fact every year the utility's been contributing back into the General Fund. What was that amount?
Jason Grey: We contribute roughly 300,000 dollars towards the city's General Fund on top of the allocations we pay for services that the general fund offers as well. The fund is completely self-sufficient. It doesn't require any loans or subsidations on any other funds. It did start off with a loan from the Electric Fund, but it was paid back with interest. Since then, the Telecommunications Fund has operated fully based on revenues generated from connections to businesses and residential customers. That's the neat thing about the project, is that we've never had to go out for loans or money to pay debt service.
Chris Mitchell: I think one of the things you've mentioned was the desire to really increase economic development. What has been some of the impact of having the fiber on economic development in Danville?
Jason Grey: Current business has been able to expand, and some of them have been able to be backup data centers for their corporate headquarters. It's a service that we're providing here in town that a lot of the incumbents can't because they don't have the infrastructure now. It's an attraction when economic development goes out. It's one less thing we can check off our list that we do have broadband, and we have scalable broadband that we can offer many different tiers of services, and whatever basically the company needs. We can partner with middle mile and other kind of networks to wherever in the world they need to be connected to. It's a great thing to have when trying to market a data center or IT company. It's a wonderful tool for them to come in and say, wow, you have fiber optics wired in this park or this business center.
Chris Mitchell: I seem to remember that you have had investment from China, you've had investment from Cray Supercomputer, you've had investment from consultants that set up in that area. You have all kinds of businesses, and even your network has helped local dentists to expand their operations, as I understand it.
Jason Grey: We have companies from all over the globe here in Danville: Sweden, Germany, India, China, a lot of different countries. Some based on our broadband capabilities, but some because of other reasons. One that you did mention was the Cray Supercomputer that requires a very high level of broadband in order to be able to function and to process data to get it transmitted. That was an attraction for that company to locate here.
Chris Mitchell: Great. One of the things that people often ask me when I'm recommending incremental solutions, which as I was saying a little bit earlier, I do often, because I recognize that this sort of go big or go home kind of thing, it may sound nice, but a lot of communities have not ended up doing anything, because they only looked at how they could do something really big. I think Danville's one of my best examples where we've seen incremental, low risk investments paying off. You've begun expanding into the residential area. About how many households can access your network now?
Jason Grey: We've passed over 2,500 customers. The city has 26,000 houses in the city limits. We've passed 2,500, and we're incrementally stepping that up each year, because revenues are increasing as we pass more homes and we connect more businesses. Our contractors are doing all the installations. We're not having to hire a large staff to be able to manage this. We have a staff of three people to manage 175 route mile networks. It's very efficient and lean as far as management goes.
Chris Mitchell: One of the things that I don't think we've mentioned yet is that you operate on an open access basis where the city does not directly provide services, and U Utility does not directly provide services, but you have private service operators that are able to deliver services using your network.
Jason Grey: That's correct. We have a very active local service provider that was here before nDanville, but they have really benefited from nDanville's expansion, and they're offering triple play. The company's called Gamewood, and they offer TV, telephone, internet. The internet speeds are different tiers. We've also been able to attract all the providers from outside of Danville here to offer services. Right now they're just looking at business offerings, but as soon as we probably pass more customers, they'll be offering residential. That requires more staff and locally more cost for maintenance to be able to maintain a large customer base. Once we pass more customers I think those other two providers that we have will look at offering residential service.
Chris Mitchell: Gamewood Service Provider. When I look at what's available, I was just kind of curious if your network technically is limited to 100 Meg or if you can go to a Gig? Because it wasn't clear how high-capacity service is, at what level your network tops out. I was curious if you could tell us a little, for the technical geeks among us?
Jason Grey: We deploy Calix E7 gear, which is 10 Gig rings with GPON customer interfaces. The GPON is two and a half Gig down, one and a quarter up. It's split between 32 connections. You can oversubscribe one customer over the other. We do have active connections as well, active Ethernet connections that are point-to-point that can range from 50 Meg all the way up to 10 Gig.
Chris Mitchell: The GPON standard is actually what we see in a lot of places that are actively marketing a symmetrical Gig. I know some of that gets oversubscription, and some people who are purists like to say that direct point-to-point is better. Fundamentally, what you're telling me is that your network can do what basically any other network can do.
Jason Grey: Right. For residential work we're deploying GPON, but for most businesses that have higher demands we're doing point-to-point.
Chris Mitchell: With the service providers, I'm very curious, you and I have talked about this before, it seemed like you need a minimum of 1,000 subscribers before you can really try and get interests from more than one service provider on the network. Can you just walk us through what any challenges are, maybe unexpected difficulties in terms of attracting more service providers to a fiber network like yours?
Jason Grey: The network operator needs to have a TV provider or a triple play provider in order to do residential, and a residential service provider that's offering triple play needs to have at least 1,000 customers passed in order to market to, in order to justify providing these services. It's kind of a chicken and an egg thing. It was a challenge. It was very helpful having a very active local service provider here that was already offering some of those services. Now that we've passed that hurdle and have passed 2,500 homes, we're past that point. When you offer residential service you have to have more staff and be able to respond to calls and installations and things like that. So it's more cost to a service provider to do residential rather than business installations.
Chris Mitchell: When you have a service provider, how much do they pay to access a customer? Is that a set fee, like on a schedule, or is it a percentage of the revenue?
Jason Grey: It's a percentage of the revenue. It's based on their gross revenue of that particular customer. We don't start making money until that customer is connected and they're paying the service provider. We don't actually bill the customer, we bill the service provider for their list of customers and their list of services. Our customers are the service providers, the service providers' customers are the actual users, the business owners, the residentials.
Chris Mitchell: When you're looking to add new service providers, is there a trade show you go to meet them, or do you just have somebody that's occasionally calling up potential service providers? How do you make a connection to attract someone to your network?
Jason Grey: We used to have organized meetings periodically throughout the year with local providers, regional providers, to see if there was any interest. We wouldn't go to a trade show because more than likely to get a big provider to come to Danville would be very costly. We're looking for the regional, local ones that are within less than 100 miles away that could easily come to our community to serve our customers. A lot of times, once you've connected a few businesses, and people know what you're doing, they find you. Once you have that one, and you start offering service, then a few others take notice, and then they want to join in, too.
Chris Mitchell: There again you have the chicken and the egg problem of trying to get the first one might be very challenging if you don't have a localized P already operating in town that wants to work with you.
Jason Grey: That's the first step is to find the one, and hopefully there's one that's local. We were very lucky to have Gamewood, who was local to Danville and very active.
Chris Mitchell: Let's talk about planning for the future. I'm curious about the sort of dig once or conduit-type approaches where, since you know that ultimately you'd like to have fiber out to everyone in the town, if you might be laying conduit or fiber in one area of town in conjunction with some other project that's going on, maybe a water project or something like that, even though you know you can't serve them for several years. Do you do that sort of thing?
Jason Grey: We do. We keep HDPE conduit, and when we install into electric service we always put in a small three-quarter inch fiber conduit, because a ditch is open. We can go in and just put it in. Same thing with the business, if there's new services being put in on the electric side, we'll go ahead and put a fiber conduit in. Even though we're not pulling the cable in, we'll have the conduit there for future use. Those are things that we take advantage of.
Chris Mitchell: If there's a new development going in, then you wouldn't necessarily require the developer to put in a bunch of conduit when they're building it. You would put it in as part of your electrical setup at the same time.
Jason Grey: We would coordinate it with the electric and actually, to give you an example, we've had a condominium complex go in that's four per unit, and it's 36 total. We've actually supplied their contractor with a reel of HDPE fiber conduit. They put it in as they put the electric service in. We're actually connecting that complex. It's one of our target communities. We actually coordinated that with the contractor, and they put it in as they're building the unit. Our electric crews will also help coordinate with any new businesses that come up. They'll work with the local contractor, construction company, that's building that company. We'll get the contractor to come pick up the real conduit, and they'll put it in for us. Then we'll go pick it up and bring it back. It takes a little bit of coordination, but it's nice to have that conduit there for future use so you don't have to dig up a parking lot or locate utilities. It's already there.
Chris Mitchell: One last question that I should've asked earlier was, you're passing 2,500 folks, what is your current take rate among the people that can take service?
Jason Grey: It's roughly 20 percent. We forecasted what our take rate, what we thought it would be or what we would like it to be. We would envisioned any new community to have a 20 percent take rate year one. After construction's finished and the year after that, we would have 20 percent of those customers signed up for service. Five percent per year after that. We've been hitting those numbers pretty well.
Chris Mitchell: I think that's interesting, because if I had to guess, you have a situation where a lot of people probably aren't even aware of what services are there, necessarily. They're getting fliers from Comcast in the mail and the telephone company, but they probably aren't as aware of your service. Then over time, you add another service provider or something, and it catches wildfire. I think you'll see a sudden surge in signups.
Jason Grey: Marketing is a key component that a lot of communities may overlook. We've had to do a lot of marketing ourselves and communication. We've done community meetings that have been well received. Like if we're building into a new neighborhood, they'll have a local neighborhood committee, we'll meet with them and answer any questions that they may have. Are we going to hit their sprinkler lines or things like that? Or can we coordinate with them when we're installing the new infrastructure? Marketing, when you're building into a new neighborhood and then after you're finished, is key, because if people don't know why you're there or what you're doing and what the offerings are, it's going to be hard for them to find out information. Communication and marketing are key.
Chris Mitchell: Yeah, that's what we've found as well. It can be a challenge, because some people, they may not go to the meetings, they may not even check out local news. It's always a challenge, and that's why I think it takes a while when you start offering a service for word of mouth to get around. People are thinking, wow, I'm sure glad I'm not on Comcast anymore. Their neighbors may be thinking, wow, I didn't even know we had another option.
Jason Grey: That's right. Word of mouth is the best marketing tool, but direct mailings and letters, and of course then community meetings, are also effective. But they don't beat word of mouth marketing.
Chris Mitchell: Great. Thank you so much for coming on this show and updating us on how things are going.
Jason Grey: Thank you, Chris.
Lisa Gonzales: Learn more about the network at ndanville.com, and be sure to check out the Danville tag at muninetworks.org for our stories. Please continue to send us your ideas for the show. Email us at firstname.lastname@example.org. You can follow us on Twitter. Our handle is @communitynets. Thank you bkfm-b-side for your song, Raise Your Hands, licensed to Creative Commons. Thanks for listening, and have a great day.