Industry Insights on Connecting Underserved Communities - Episode 604 of the Community Broadband Bits Podcast

Christopher Mitchell (00:00):
Welcome to another episode of the Community Broadband Bits podcast. I'm Christopher Mitchell at the Institute for Local Self-Reliance, and today I'm going to share a segment along segment from the show that we did last week on Connect This, which is our video show and is recorded live. We talked a lot about low income households and how to make sure they're [00:00:30] well connected. We talked about the ACP and we're going to excerpt some of that here because we thought that our guests, Robert, Travis Kim and Blair Levin, all of them really dove in and provided a lot of interesting points of view. So we're going to share that with you here and we look forward to getting you back next week with more of our one-on-one or one-on-one interviews, you're [00:01:00] going to hear a conversation between Kim McKinley and Travis Carter. Kim is from UTOPIA Fiber and Travis runs USI Fiber in Minneapolis.

(01:10):
Both of them are longtime guests of Connect this and also Robert Boyle has gone on before he runs Planet Networks, a Fiber optic ISP connecting communities in New Jersey as well as now Pennsylvania, New York and Virginia. Then also Blair Levin, who's been a past guest on many of my shows [00:01:30] and is an equity analyst as well as someone who is deeply concerned with making sure we can connect everyone with high quality Internet access. So I hope you're able to enjoy it and untangle it because there's some good discussion. In fact, Blair, if you're around regularly, I think people would appreciate you explaining what I'm trying to say on a regular basis. But the point is, so I was in Montana and some of the states in the west in particular are going to run out of money before they can touch all the unserved and if they have to try [00:02:00] to figure out a solution for homes that cost a hundred thousand dollars to bring a low cost wireless solution to that would be a terrible waste of money I think, and that would drag money away from places that could have a decent fiber connection. And so I wanted to clarify that there is, and my understanding is NTIA either is about to or has just tried to clarify that states are supposed to do everything they can, but if they run out of money, it is okay that they do not connect every last unserved person [00:02:30] location. Alright, let's get into the fun stuff. So

Kim McKinley (02:34):
I'm just asking is there going to be another round of funding after this to connect those people that Travis always ask about, oh

Christopher Mitchell (02:39):
Yeah, I just have no doubt about this. There's going to be more money. Some of it might be at the state level, some of it might be at the local level. There will be line extension programs would be my expectations to fix the holes that are left from poor mapping. But I don't know, Blair, what you're seeing.

Blair Levin (02:58):
My view is slightly different, which is [00:03:00] this is not a once in a decade program, once in a lifetime program. It's a once program by which we are attempting as a country to connect everybody to future-proof broadband. If it succeeds, we don't need to do another round. If it doesn't succeed, there'll be so many questions about it. Also, Congress spent a lot of money in 2009. It spent a lot of money in 2021. It will be at least a decade before I think congress starts to spend money again in this way. [00:03:30] Now the universal service program at the FCC will be spending money but at a much lower level and a lot of that money is going to be spent. I mean, we can get into what's going to happen with USF, but a lot of that's going to be spent for the OPEX of the final 2% of the companies that will have an operating expense shortfall. So whereas it's true that there will continue to be some money for CapEx, not a lot,

Christopher Mitchell (03:59):
Not a lot, but [00:04:00] I think we won't need as much.

Blair Levin (04:02):
No, we definitely won't

Christopher Mitchell (04:02):
Need as much. But my sense is is that the fact that we know that there are, I mean I don't know the exact number, but it wouldn't surprise me if there are more than a million locations that are ineligible for bead that need to be connected. States will find some way of trying to fill that gap. There will be some sort of pressure, Robert. Well,

Robert Boyle (04:17):
The other thing is that once you build to a lot of these rural areas, and we find this in our own builds, we will build to a rural area. We obviously fill in the lake communities and the downtown areas first because that's where you get your cashflow that helps [00:04:30] pay for the other stuff. But if you build a bunch of areas and you find that some little offshoot doesn't have service or it doesn't make sense to build to them now you don't want to leave those customers on that road unserved. So you wait maybe six months or a year or whatever and then you get revenue from all the other stuff that you just built. And you use that to build that super rural area that's 10 year ROI

Christopher Mitchell (04:53):
Or you sell it to private equity and you buy a boat. [00:05:00] Travis is not laughing. I'm going to keep making that joke every week and when Travis doesn't laugh, I'm going to know that there's something afoot.

Travis Carter (05:07):
I tell this over and over again, there's going to be a lot of opportunities to buy networks out there at 10 cents on the dollar when this money's been spent. So everybody save your nickels now.

Christopher Mitchell (05:18):
We'll see. I think we'll treat that as a prediction that is chicken wing able. Well,

Travis Carter (05:24):
And you've kind of been modifying your percentage of the incumbents that are going to go after this money too. [00:05:30] I was at 99%. You were at like 2%. So where are you at?

Christopher Mitchell (05:33):
No, no, let's check the record.

Kim McKinley (05:37):
Okay. I'll be fair. I think he went up to like 75, 80% last time we talked, but he started at 30. I mean or something ridiculously low and he's moving his way up

Christopher Mitchell (05:48):
Maybe. So one of the challenges is what we define by incumbents. I'm worried about,

Kim McKinley (05:53):
Oh no, we don't get to change the rule of,

Christopher Mitchell (05:57):
I'll admit we certainly cannot change the rules, [00:06:00] but I'll say that there was a point and then we talked about it in one of the shows where I realized when Travis says incumbent, he means something different than me when I'm usually using that as a short form for the big telephone and cable companies and I am less worried if a mom and pop incumbent in Illinois getting money to build a network.

Travis Carter (06:18):
Okay, well aren't you ing four on bets so far? If we want to use a sports analogy? Yeah,

Christopher Mitchell (06:24):
No, I'm not doing great. Okay,

Robert Boyle (06:28):
So the smart money bets [00:06:30] against you, Chris, is that? Oh yeah,

Travis Carter (06:33):
Every time.

Christopher Mitchell (06:34):
So Travis, you launched the ACP program, what's going on?

Travis Carter (06:38):
So as we know, I really thought this was finally once an amazing government program. We signed up for it. It was incredibly laborious to get on board. We would spend, what would we spend 20 hours a month trying to put the reports together only to get audited at a regular basis. So we decided

Christopher Mitchell (06:59):
You got audited once. [00:07:00] Did you get audited more than that?

Travis Carter (07:01):
Twice. Okay. So when it came to an end, we had all these customers sitting there that no fault of their own, we're in a pretty good situation financially, so we just decided to continue on and do it ourselves. And if there is another ACP government program, you know what? Everybody else can have it. We'll just keep doing it ourselves. It's much easier this way the customers are happy and there's no question if it's going to continue or not. So yeah, we just launched [00:07:30] on Monday. It's going okay. We rolled over our 650 customers. I think we're up to 10 editions since then and we start marketing on Monday. I'll keep you posted.

Robert Boyle (07:42):
Do you mind if I ask what platform you're using for that to vet whether they qualify or not?

Travis Carter (07:48):
Yeah, let's see here. I have a little writeup we did, we more or less, Ryan, let me email this to you, maybe you can copy it in what we're doing.

Robert Boyle (07:59):
We were [00:08:00] looking at something called Sheer id, but we haven't done anything with them yet.

Travis Carter (08:03):
We're not getting too overly sophisticated. We're basically just saying, are you on any of these qualifying programs? If you are, send us the proof. And what we learned is most people know how to let people know. And so they take a picture on their phone, send it in, and then what we do is we make them re-qualify every year. So in month 10 we're going to send 'em an email saying you need to re-qualify, update the documentation and we'll keep 'em going.

Christopher Mitchell (08:29):
Will you have [00:08:30] to re-qualify the 650 accounts that you brought over?

Travis Carter (08:33):
Every customer will just re-qualify every year. So I mean, worst case, somebody's on a program today, they get the low cost and they're not tomorrow. Alright, so they get a year's worth. It's not the end of the world. Robert, the one thing we did do though we learned through the ACP thing was we require new people to use our router is what happened is we were getting just somebody would buy something from their neighbor's cousin's next door [00:09:00] neighbor and it was 2.4 gigabit and then they blamed us for all their problems. So we just built it into the monthly cost. So we'll give you as many routers as you need to cover your area.

Robert Boyle (09:12):
We did is we continued, we're trying to figure out something like build our own a CB program, but in the meantime we've committed to all those customers that their pricing isn't going to. So it's free now. It's going to continue to be free. If it's discounted, it'll continue to be discounted through the end of 2024. So we've just done that across the board and let everyone know,

Travis Carter (09:30):
[00:09:30] No, I think it's going to be wildly successful. We just got to get it out there and let people know. Most of 'em that we have gotten so far have heard it through word of mouth, which is funny. We didn't really tell anybody. So there's somebody talking about it. So

Christopher Mitchell (09:45):
Blair, were you going to say anything?

Blair Levin (09:47):
Nope,

Christopher Mitchell (09:48):
I saw you on mute at one part, Kim? Yep.

Kim McKinley (09:51):
Nope, don't have anything to say. Just disappointed that it ended and grateful that there are providers who are able to continue offering low cost [00:10:00] solutions for these people. It's a huge loss for the country that we're even in this situation right now.

Christopher Mitchell (10:08):
And I did see that a number of the national companies have continued their efforts. A $10, $20, $30 different programs have popped up and so there are a variety of opportunities that we saw before. We're going to move into a segment now that is sort of focused on Blair Levin's response. Sorry [00:10:30] you're not even here. Mr. Levin's response to Ted Cruz's questions after you are at a hearing Blair about the ACP and the loss of it. Some of the questions are weirdly antagonistic and we'll cover that in a few minutes. But one of the things that I thought was interesting was that it didn't seem like it was shared that this was a successful program. Like Kim just was lamenting that it's gone [00:11:00] and it felt like the tone of the questions was more of a gotcha than it's sad that this program has left.

Blair Levin (11:06):
Yeah, I know. I think that's fair. When I got the questions, my immediate reaction, so I testified in early May a few weeks later get 10 questions and since I was skeptical that any legislation to extend ACP was going to go forward anywhere, I'm thinking why are they sending me these questions? And then I read the questions and I go, really? Why are you sending me these questions? [00:11:30] Because there's really only two reasons to ask. One is because you sincerely want to know information that will help you form your view of policy in particular how to improve the program because Cruz has not said he's opposed to it. What he has said is it needs to be reformed in a variety of ways, which he has not specifically identified though. Some might argue that some of his amendments to the Cantwell legislation represents that. But the other thing is exactly what you said, which is a bunch of got you questions, which is [00:12:00] a little bit weird since he asked me no questions when I was there live. If I was going to as a lawyer going to ask someone a got you question, I'd rather do it live. But having said that, when I started to read the got you questions, I decided to do what I would never advise a client to do, which is to write very lengthy explanations for why no, you don't got me.

Christopher Mitchell (12:23):
So one of the ones that started was, and one [00:12:30] that I think is legitimate and that I also want to pick on because I think it's useful is do we know if we've spent on the order of what, between 15 and 20 billion between the EBB and the ACP, do we know if more people, particularly low income families were able to use the Internet than would have without the subsidy?

Blair Levin (12:50):
Yes, we do know the answer to that. The answer is yes. It's very clear. There's a debate about how many, and there are a couple of things that I think are important. Number one [00:13:00] in the questions and in some of the analysis that come with critics have done, they completely ignore the emergency broadband benefit, which was the year before it was a $50 benefit. It was covid related, but EBB ramped up the number of people who could get on. And then some people look at the number from when EBB expired and said, see, ACP didn't do that much, but they were starting at the wrong level. So there was a technical [00:13:30] error in my view. But the other thing is there really are three categories. There are those who already were on and were on in a sustainable way, but who are nonetheless low income and benefited from the program, but not because they were able to get on, but because it just helps them generally.

(13:46):
There's a second group which we're not on, and I think that's about 25% not on at all and who were absolutely able to get on. And then there's about 50% of the 23 million homes who were off and on. And I think the goal should not just be [00:14:00] to get people who were not on before on, but also to get people on in a sustainable way. And I think that's about 75% of the people. And there were some of the questions that questioned my logic about saying some of the things I did and I thought those questions were totally legitimate and I was very grateful that they gave me a chance to explain why I said what I said.

Christopher Mitchell (14:22):
Now I'm curious Kim, Robert and Travis running networks and keeping an eye. Kim, you probably keep a close eye on churn. [00:14:30] Do you feel like you saw a reduction in churn during the period of the EB and the ACP?

Kim McKinley (14:37):
I don't think we could really quantitatively say there was a reduction in churn. Our churn is ridiculously low at two to 3%. So I can't say anything was ACP contributed, but it could be. I think what Blair just said, what they didn't calculate A, BB is just ridiculous because EBB is the one who got people on [00:15:00] the Internet in the first place and ACP kept up those EBB customers on the Internet. So yeah, no, I I'm almost dumbfounded bla of hearing that they didn't even consider that.

Blair Levin (15:13):
No, they didn't look. The national expert on this is a guy named John Horrigan and they actually quoted a figure and said John said this or they said, Mr. Horrigan I refer to as Dr. Horgan since he's one he said was really only 22%. [00:15:30] And I will tell you my first reaction was it reminded me a lot of the scene in Annie Hall where Woody Allen is standing in line at a movie and some guy is talking about Marshall McCluen and Woody questions him and the guy says, well, I'll have, I'm a professor and Alan brings in Marshall McCluen personally and who starts by saying to the professor nothing of my work. And Alan then says, God, I wish life was like this. I actually contemplated [00:16:00] doing a little video with John, starting with Dr. Horrigan, with him saying to the crew staff nothing of my work. And then basically John and I together and though it's my responsibility explained why they were taking that one data point completely out of context and they really should focus on the totality of what Dr. Horrigan has said. And then you have a very different answer.

Kim McKinley (16:28):
Marketing people, Blair, [00:16:30] they just can take data and present it however they want to really prove their point.

Blair Levin (16:36):
Well, as I said to them, what you're doing is you're taking a snapshot and if you look at the snapshot before and you look at the snapshot after you get a very different picture. But that was a question though that I thought was quite legitimate and I was happy to answer it. And hopefully the data helps those who want the program to continue to support either the extension [00:17:00] or bring it into the context of universal service or in some other way.

Christopher Mitchell (17:05):
And I do want to spend some time having some fun with the people who deserve it. I think it can be hard at times when you're dealing with critics who there's two camps, one is they're not serious and they'll say anything and trying to respond to them is trying to nail jello to the wall. And then there's another camp who are people who are seriously questioning. They might be just generally have [00:17:30] a lot of questions and like to see the hard evidence I think rise in that camp and sometimes I'm a little bit antagonistic towards academics who fall too far into that camp to the beyond all reason. But I do want to get at this and just note that the ACP made a big difference and then particularly, and Claire, you called this out on tribal lands, but before we do that, I want to see Travis and Robert, Travis has spoken in favor of the program. Robert, you're continuing the program obviously [00:18:00] it seems like from your perspective it makes a difference for your customers.

Robert Boyle (18:04):
No, absolutely makes a difference for the customers and just morally and ethically, it's such a small percentage for our customers, you just can't, oh sorry, you can't afford it, you don't get Internet anymore. It's just not the right thing to do. And so we have talked to several of them. I talked to a couple personally, but I know our staff has talked to them and we said, does this make a difference between you being able to afford service and not [00:18:30] enough of them said yes that we said, okay, well we'll figure something out. And that's why we decided to extend it because but what was said earlier before with the EVB was $50 a month that paid a hundred percent of the costs initially before we even had a lower cost program. And that was during the pandemic when everyone's working from home, everyone's school from home. So you had a huge uptick in people getting better broadband at that time and then obviously [00:19:00] just kept it through ACP. So I don't know who went through the EBB stage and didn't use that benefit if they knew about it, who would then later on say, oh, well now Covid is over and we're all back to school and back to work, but now I need high-speed Internet. It just doesn't make sense.

Christopher Mitchell (19:17):
Travis.

Travis Carter (19:19):
Well, remember ACP is one of the only programs we've ever been able to participate. We build in a metro in a city even though there's a ton of need in a city, [00:19:30] we don't qualify for any of the other government programs that are out there. But I'll give you this, which I found was interesting when I was looking at the data ACP, we had a nice uptake and then even when ACP ended, there was some months in there where a high percentage of our customers were verted to our normal price tier. 99% of them paid the normal price tier and just kept going. So once they had reliable broadband, [00:20:00] they kept it and paid for it until we program.

Christopher Mitchell (20:05):
So for some number of your customers, they were ACP and they were getting either discounted or free service and then you began charging them and you saw that they were paying that.

Travis Carter (20:14):
Yeah, attrition was almost nothing. So it is kind of an interesting thing where if people get online and they have a high quality service and they start utilizing it, this small group of people continue to pay for it and now they qualify for our new ACP program, so they're backed down to a [00:20:30] lower dollar amount, but

Blair Levin (20:32):
You are not alone in that. I also am a Wall Street analyst and one of the interesting things has been that the ISPs have been telling people like me and others on Wall Street that fundamentally what the government did was it paid for a two year program and it was fantastic and that they don't think that many people will drop off. But that's a big question mark and if we see very little drop off, then I think it'll be very inexpensive to [00:21:00] come up with a new ACP program. If we see a lot of drop off, then it'll be different. But one of the questions I was asked was about private sector responses and I'm a big fan of them and I actually had a role in the early days of Comcast Internet essentials and I think they're great, but I would just want to remind people, as I reminded Senator Cruz's staff, we don't treat low income medical needs by depending on the charities of wonderful [00:21:30] charities, right? Wonderful hospitals who do charity. We don't depend on connecting everyone to food. We have a SNAP program, but we don't depend on community soup kitchen. So I mean there is on some things you really need the government, I think this is one of them for the reasons I lay out, but that's not to in any way criticize the private sector efforts and it's a big unknown as to how successful they will be beyond, because really June will be the first month where there's no support of the government [00:22:00] for low income broadband subsidies.

Christopher Mitchell (22:04):
But I

Kim McKinley (22:04):
Think what you're starting to see is that people like what Travis just said that people weren't dropping off, and what you just said is that people are still getting it, that this is a necessity for people. So maybe yes, that people are not dropping off Travis, but what are they giving up because of that they're paying the bill. I think that is a conversation that people aren't having because people cannot live in these days [00:22:30] and times without Internet and be functional.

Christopher Mitchell (22:34):
I do want to add onto one thing that Blair said, which is not only do we have a sense that it wouldn't work to depend on soup kitchens and volunteer hospitals, we've run the experiment. Humanity has done this many times. There's a reason we develop those programs flawed as they might be. They are a response, not to a hypothetical issue, but to people dying of poor healthcare and not having horrible [00:23:00] lives from malnutrition and things like that. And so I just like to remind people sometimes we have done this in the past and if you look back and you read a biography of someone born in the late 18 hundreds and they experienced the difference between their early part of their lives and the lighter part of their lives, it's significant.

Kim McKinley (23:17):
Was that during the Woodrow Wilson administration or was that

Christopher Mitchell (23:21):
It just so happens that it did touch on the Woodrow Wilson administration? It's always Wilson. Okay. [00:23:30] I haven't read Alexis's question here. Do folks have thoughts about the fact that many state level grants relied on the ACP for cost modeling and so you've got a bunch of people that have accepted money and soon will accept money to build in areas under assumptions that they would be getting on the order of $350 per year of subsidy to make sure they had more customers in these areas. So it's pretty significant.

Blair Levin (23:57):
Absolutely. By the way, one of the questions I was most astonished by [00:24:00] during my testimony, I said that it is an absolute fact with mathematical certainty that if we get rid of ACP, there will be a number of locations in Texas that will not get fiber, but instead will be forced to take either fixed wireless or satellite. That is an absolute certainty. And they asked me to explain with actually do the math. So I went through and I did the math, why would you ask me to do that for one thing? I'm not that good at math, but even I can do the math. So I can't remember what [00:24:30] the number was, but it's tens of thousands. Why does Ted Cruz want to know the precise number? It's an absolute certainty.

Christopher Mitchell (24:39):
Well, some of the questions really betrayed that we'll get to my favorite in a second as well as a couple of your footnotes, but I'm curious for people's, I think the issue is it's one of deep frustration and I don't understand the law as well as I hope you do Blair, [00:25:00] but they're required to take part in a program that doesn't exist anymore. And I kind of wonder if the actual wording of this is going to come into play as they struggle with it. Now we know that for instance, CTC up in Minnesota, and I always use them, I think they're a wonderful local ISP that does everything they can. They built out to Boys Fort, which is a tribal reservation. Many of the people on boys fort were able to take service at $75 a month because of that subsidy. But CTC as a co-op that doesn't [00:25:30] have vast reserves of profits to rely on to dig into, they can't just slash the million dollar salary of the executives in order to make it happen. They can't provide that service now and so people don't have service, but at the same time, we've paid public money to build that network.

Blair Levin (25:50):
It's a big problem. I mean the loss of ACP has significant administrative problems, legal problems, but the biggest problem is it raises [00:26:00] the cost that bead will have to pay to connect everybody because you're losing a bunch of revenue.

Christopher Mitchell (26:08):
One of the things that suggested that they were not entirely serious when they were asking you questions is they asked, and this is a quote, do you agree there are harmful effects of too much screen time and this is the sort of thing that I want to plaster on billboards across Texas for his reelection campaign. He is more worried about whether or not kids have too [00:26:30] much screen time than whether kids in rural areas can access the Internet at all.

Blair Levin (26:34):
Yeah, I was a little astonished by that question. You wrote

Christopher Mitchell (26:38):
Perplexed, perplexed.

Blair Levin (26:40):
I was perplexed by that question. Look, I actually gave a speech that was partly about that topic 15 months ago. They obviously didn't do much research on me, but I don't blame them for that. But my more serious point was society is always wrestling with new technology and the costs and the benefits, [00:27:00] as I pointed out to them, cars kill 40,000 plus people a year. We do not ban them. We try to make them safer. There's medicine that saves lives but is also really destructive to certain people. We don't ban the medicine. We try to make the distribution of it safer. And so here, and I pointed out, and by the way, pro tip, I only cited Republican states. I looked at the states of Florida, Ohio and Utah and said, these are states which are trying to address the problem of too much screen time and they're doing it in different ways.

(27:30):
[00:27:30] At the same time, they're spending hundreds of millions on dollars of getting educational technology into the classroom. So the kids are spending time in the classroom on screen time. Now is that hypocritical? No, that's just trying to do what we always are trying to do, which is to balance, get as much of the pros as possible and diminish the negatives as much as possible. That's what we should do. And this notion that it's kind of all one or the other, I mean you, I actually had an answer. I cut back a lot on my [00:28:00] sarcasm in the answers, but Cruz himself has sponsored various legislation to do the very thing I'm talking about and they seem to be unaware of their own point of view on it, but I didn't include that. I thought, yeah,

Christopher Mitchell (28:13):
It's not a serious body anymore. And that's what I think I find really frustrating. I want to move on to a question about how we're going to build networks and what kind of things we can do. So we're going to put Robert, Travis and Kim more on the hot seat here, but as we're coming out of it, I did want to note one of the things that I think about, which [00:28:30] is ACP put about $360 per year into the pockets of people of 20 million households in order to try to make sure that they had decent Internet access. And the question for a government program should be what did we get back from that as a society? And Blair, in your writing, you cited multiple examples in which in different studies you could have gone on much longer. I'm sure you did and then you cut it back [00:29:00] just noting that what we know from telemedicine is that probably we had, and this are my words, but we probably had more than an average of $360 of benefit just from telemedicine.

(29:13):
I would say we probably had more than $360 per household of benefit from educational opportunity, from economic opportunity for many number of other things. And so you have cited a whole bunch of studies and so one of the things that I think people might enjoy doing is just looking through some of those to remind themselves [00:29:30] of this. And the part that I find really frustrating, this is not just making fun of people I disagree with, but there's a lot of people who don't appreciate the power of a multipurpose or platform technology and the way that it just doesn't generate revenue directly, but it enables everything else to be more effective.

Blair Levin (29:49):
Yeah, yeah. No, actually I had a wonderful dialogue with Senator Vance at the hearing on this question about the general purpose technology.

Christopher Mitchell (29:56):
I refuse to believe that.

Blair Levin (29:57):
Yeah, I know it was a little bit surprising, [00:30:00] but no, Senator Vance has been very good on this issue and that was to me the best part of the hearing. But there's both a policy point which is not only can we save money, we should be designing the program to save money more. But there's also a political point, and if I may be so bold, I think the argument, and I've been in discussions with the White House and the FCC and others about this, the argument that we need to continue ACP because poor [00:30:30] people will be hurt in this political context is not a winning argument.

Christopher Mitchell (30:35):
Well, we know that

Blair Levin (30:36):
If you cut ACP, you're going to raise the cost of Medicaid could be a winning argument. And so I've been trying to do the latter. I just think that if you're trying to get it through a Republican house and a basically split senate, the argument about how government will cost more and be less effective if we cut ACP can be a political winner.

Kim McKinley (30:58):
And I would just like to let you know yet another [00:31:00] reason that it is still political broadband very political that we're having to be creative of how we get things through Congress because of how political it is. Just that's my point of the day

Christopher Mitchell (31:14):
We ran the experiment, the people tried to make an argument just in the basis of we got to help poor people and we don't have an a CB anymore. So I very much agree we need to ground our arguments in things that will move people. I did a whole show with Harold Feld about this, about [00:31:30] public policy. It's not about convincing people to act the way you want them to act or think the way you think. It's to get them to do what you want them to do and to do that doesn't mean cajoling them with what makes the most sense to you. We're going to move on. And so I want to ask Robert and Travis in particular about their thoughts of how to open up a conversation about you both operate networks. I know that Kim does as well, but Kim just spoke, so I'm going to ask you both. [00:32:00] What would we need to do to try to make sure that we could have a high quality network connecting the people that you're struggling to connect in Minneapolis? Travis, let's think about Phillips or North Minneapolis and I don't know your territory as well, Robert, but what sort of help could be done that would be a decent program to make sure that we were getting fiber networks run by good companies out to people and that they would meet their needs?

Robert Boyle (32:29):
Travis, [00:32:30] you want to go first or you want me to go first?

Travis Carter (32:32):
No, no, go ahead. This is the question I keep posing to Mr. Mitchell in a much simpler fashion of how do you build high quality networks and generate very little revenue off them.

Robert Boyle (32:43):
So to me, the number one factor is long-term low interest financing. That is with an almost unlimited pot that will get paid back and you can cycle through it over time. But that to me is the [00:33:00] biggest hurdle. I mean now we're in a really good position. We have a wonderful bank and we have access to lots of capital now, but for the first five years when I could have built way easier than we can now because there's the incumbents are starting to build and build. There's other competitors starting to do things, but having access to capital is huge and it doesn't need to be grants, it doesn't need to be a gift of any kind. It just needs to be access so that we can make a business case [00:33:30] to build an areas where the ROI is 10 years. And if you have, what about finance?

Christopher Mitchell (33:35):
Do you have areas where the ROI is not? I mean where there is not one where the cost of collections, the cost of security, the lower take rate will result in you just not being able to turn a positive if you were building out to Camden in the harder neighborhoods. Sure.

Robert Boyle (33:53):
So the biggest problem in a metro area where you have apartment buildings, [00:34:00] HUD can do more than anything the FCC will ever do. And that is if you take money for section eight, you must allow providers in the building. And if they don't do that, the only buildings that don't have coverage that are low income are the ones where the building owners do not give whatever, not going to square, but whatever, they do not care at all because their tenants are not their customers.

Christopher Mitchell (34:25):
And you're not talking about public housing, you're talking about anyone that accepts money from hud, which [00:34:30] is the many, many, it's almost every location in some of these

Robert Boyle (34:33):
Areas. Public housing, they're wonderful. They love working with us because they care about their residents and they want to serve their residents. It's essentially the slumlords who have 100, 200, 300 unit buildings that they're collecting their section eight money and they do not care whether we're in there or not. And just having a conversation with us is a waste of their time and they don't want to. And so all they have in a lot of these buildings is horrible old [00:35:00] coax infrastructure or in many of them all it is is copper and they can get DSL. And so the most vulnerable populations don't have access and we're literally in front of the building. We want to bring fiber in, we charge the building owner nothing, and we have people in there who want to pay us for service and can't get it.

Christopher Mitchell (35:16):
I'm so glad you said that because it collides headlong into the answer that Travis and I have come up with. And I think Blair and Kim will both appreciate this, which is I think Travis and I would say bulk deals in which you make sure that you can get paid for every unit from the owner [00:35:30] and you lock out the others, which is the opposite of what you just said in some ways. And it's not to say that you are wrong, but that these problems are fricking hard to figure out what the right balance is. So Travis, I want to give you a chance to jump in. Well,

Travis Carter (35:41):
And I thought it was interesting what Robert said because we see the exact opposite here in Minneapolis. The public housing, they don't care at all about having competition inside the building. It's the low income homeowners property owners, they'll let us in every time. [00:36:00] So see, so here in Minneapolis is different than where you're at, but

Christopher Mitchell (36:05):
Travis, are you saying that a small MDU lets you in every time for those buildings or

Travis Carter (36:10):
Private owners will let us into the building, but the government owned buildings, we're not in a single one and we've had fiber out in front of those buildings for 14 years. So going back to Kim's political thing, it's all political even, and I disagree with you at the local level, Chris. Everybody in government has a political edge to them [00:36:30] and there's nobody driving this. No matter how many times you beg or say, Hey, we can provide a better deal, honestly, I hate to say it, they don't care and I don't know about broadband, let's say about broadband. They probably have 50 other issues they're dealing with and broadband doesn't even make the top of the list.

Christopher Mitchell (36:50):
Yeah, I think it's a very good case, Travis. I would restate my earlier claim that the local level is not political to say in some circumstances, which makes me meaningless.

Travis Carter (36:59):
He's

Kim McKinley (37:00):
[00:37:00] Always changing the rules. Chris is always changing the rules. Okay, keep going Chris.

Christopher Mitchell (37:04):
I learned it from my son. We play a lot of games together. Robert, you were going to jump back in I think and then Blair,

Robert Boyle (37:09):
So small MDUs are fine, like six, eight units, no problem. Those people want us there. HOAs no problem. It's absentee landlords who own apartment buildings where they're not there. They've probably never even been to the building. They have a local super who takes direction from their headquarters management office and they're [00:37:30] just like, you have to call these people. And these people are like, no, we're not interested. In some of those cases, they have a bulk deal. One of the buildings I can think of has a deal with Gigamon, which I think is now in chapter 11, but I think they ran a dedicated a hundred make connection to the building for 200 apartments and they have a hundred meg Lumen connection and we have fiber in front. We want to give them access. Can't do it.

Christopher Mitchell (37:57):
Blair,

Blair Levin (37:57):
I was just going to add the bulk building question [00:38:00] is actually in front of the FCC. In March, the chair announced that she was going to address the question of bulk billing and whether it should be banned or something like that. Certainly a step back and her more recent comments suggest that she's starting to see that perhaps there are multiple sides and the record. There definitely are some like Harold felt, who you mentioned earlier, are supporting what you might think of as an opt out. But there are a lot of mayors and a lot [00:38:30] of public housing folks and traditional allies of assisting low income housing who are saying bulk billing is the only way we lower rates for low income folks. So it'll be interesting to see what the FCC does with that one.

Kim McKinley (38:45):
And I filed a comment for that FCC saying that though we are open access, we do not agree that there should be a ban on bulk billing because we feel like there should be that first of all, private owners should be able to do what they want with their own buildings. [00:39:00] Should they be more equitable? Absolutely. I'm not saying they shouldn't, but opening up the doors into MDUs doesn't mean that every provider is just going to run in and invest in those MDUs if there is a bulk rate for five years in there too. There's some that will, but most probably will stay away.

Robert Boyle (39:20):
And that's why I said it has to be tied to hud. I mean, it's property rights. If it's my building, I can do what I want. But if you're taking money from the federal government, then you have to [00:39:30] apply, you have to have fire protection, you have to have all the other rules with hud. You have to allow open access to the building.

Christopher Mitchell (39:37):
Travis, how did you respond to Robert's suggestion that a lot of the problem could be solved with long-term low interest capital?

Travis Carter (39:46):
Well, that is a spot on scenario there. I mean, we went from what, 4% to almost nine to 10% on interest rates in the last year and a half. I mean, if [00:40:00] this keeps up, there's no way you're going to be able to do areas that are tough to quantify the return.

Christopher Mitchell (40:09):
Well, could you build North Minneapolis at 4% if you had a guarantee of being able to borrow that for some number of years?

Travis Carter (40:15):
Well, let's see how successful this ACP program is because if we can get successful with ACP and generate revenue off there, and let's say we had 4% capital, then there is probably a model that makes sense.

Christopher Mitchell (40:30):
[00:40:30] So you could with sufficiently low and secure capital that you know could plan around even at a reduced take rate. You're just trying to cut your losses as opposed to actually trying to figure out how to make a profit is

Travis Carter (40:43):
One of, yeah, this interest environment is, it's hard to explain how difficult it is to operate in, again, compared to where it was just a year and a half ago, whatever the reason they've done this, [00:41:00] a lot of us small operators are, we're significantly impacted. Our builds are smaller.

Christopher Mitchell (41:06):
On a previous show, I believe you said that it's on the order of half a million at a minimum is what you've cut back

Travis Carter (41:11):
Of just interest. Yeah, I mean it's unbelievable.

Kim McKinley (41:15):
I think the interest rates have stopped a lot of the progress in the broadband field right now. I think then, so what I've seen is that people are not going forward with their broadband project or they're waiting for interest rates to go down hopefully, [00:41:30] which I saw the EU reduce theirs today. So the reserves might be reducing ours or they're waiting for the bead money, which who knows what's going to happen with that. So yeah, I think the high interest rates have really impacted how much fiber is being put in your ground

Travis Carter (41:45):
Right now. I'd say Robert's, right? That's the number one issue above and beyond everything else is your cost of capital. I mean

Christopher Mitchell (41:52):
The thing that always comes to mind then I want to ask Blair is I've heard it talk of an infrastructure bank since before I knew what a bank really did or what infrastructure actually was.

Blair Levin (42:00):
[00:42:00] No, actually my former boss, Reed Hunt, he and I both served but in different capacities in the Obama transition team and he made a big presentation to try to put an infrastructure bank in the, what was passed in February of 2009. He and Larry Summers had a great debate about it and summers disagreed and summers won. I think that was the last

Christopher Mitchell (42:25):
So often did.

Blair Levin (42:26):
Pardon?

Christopher Mitchell (42:27):
He so often did, and I'm not going to say he was always [00:42:30] wrong, but I'm pretty frustrated. I

Blair Levin (42:32):
Think if you read my Reed's book entitled A Crisis Wasted Available on All Good Bookstores and an Amazon

Christopher Mitchell (42:39):
Highly recommended it. I really enjoyed it as

Blair Levin (42:40):
Well. It does tell the story and Summer's a very smart guy, but I think Reed was absolutely right.

Christopher Mitchell (42:47):
We're about to lose Travis, and then we will wrap up with one or two more notes about ACP Travis. Anything else you want to include?

Travis Carter (42:58):
No, sorry, I got to hop off. Ironically, [00:43:00] we have a conversation with the bank and Kim, you said the EU just lowered their,

Kim McKinley (43:07):
Is that right? I saw it come across the eu. So they said that the Fed reserves probably will reduce ours as

Travis Carter (43:14):
Well. Yeah, let's be clear. 25 basis points isn't going to matter.

Christopher Mitchell (43:18):
Right? Well, I think the question is we're all in over our head except for maybe Blair, but probably Blair too is the question is how does the market respond after a small reduction? And that might give us a better sense of [00:43:30] where things will go in the future.

Travis Carter (43:33):
Well, yeah, but the market doesn't affect Robert and Kim and I borrowing.

Christopher Mitchell (43:38):
Right. But I mean, I think the question is if we see if things get too hot with a small reduction, then we will not see much more of a reduction is the concern.

Travis Carter (43:47):
I doubt we see much through the end of 25. I mean, realistically the way things are going,

Christopher Mitchell (43:54):
I just think that if you talk to a state or a city that had the ability [00:44:00] and they task them, what does it take to build North Minneapolis? And you say, well, we need a loan at this rate or something like that. It's not as hard as people might think to actually figure out how to do something like that. It's not, you need to get a thousand dollars to every family.

Travis Carter (44:16):
Well, we have had those conversations and they just go off into the ether. So we'll see. Really the key for us is if this ACP program that we've launched is successful and let's just say we could add three, 4,000 [00:44:30] people onto it, that's good cashflow that we could then reinvest that money into other areas. So that's really kind of what we're hoping that happens out of this.

Christopher Mitchell (44:40):
And so just to be clear for people, you build a fiber network, your operating costs are such that just getting some level of cashflow from certain aspects is just far better than getting zero from those households. Well, sure it's already built.

Travis Carter (44:52):
Yeah. You've already have the bypass costs done. Yeah, and

Robert Boyle (44:54):
I don't know, Travis, we always say 80 20, 80% of our cost is to build in front of somebody's home. 20% [00:45:00] is to connect them.

Travis Carter (45:02):
You are 100% spot on. Thank you all. Appreciate the time. Thanks Travis.

Christopher Mitchell (45:05):
Travis. So one of the things I wanted to note is that if you read anything from Blair, don't skip the footnotes. I did the math quick, and Kim is the youngest person on here, and I don't know exactly how old Blair is, but according to some economists, we are roughly the same age [00:45:30] all of us, right, Blair? Yeah,

Blair Levin (45:34):
That's right. Another one of the questions that I couldn't believe they were asking me this, I cited literally dozens of studies. There was one study that had a problem and I was grateful that they brought it to my attention. I don't actually think it was that big of a problem. It was a problem. And then they asked, well, should Congress rely on problematic studies like this? [00:46:00] And the reason why I was astonished they asked me that question was they a hundred percent relied on a study that said the ACP program caused inflation. Now, there are so many problems with that study, but it allowed me to say, you're making a really good point. Congress should be very vigilant in looking at the studies that are cited in these things. And oh, by the way, the study that you cited, it has a few small problems. Then I went into details about what the problems are. [00:46:30] But one of them, by the way, is that they regarded $50 and $30 as being similar, which I think that's what you're referring to. Don't really think they are similar, at least from an economic perspective, have other problems.

Christopher Mitchell (46:45):
Right, a 67% variance. Yeah,

Blair Levin (46:47):
Yeah, yeah.

Christopher Mitchell (46:50):
Also, there's a problem with causality, which allowed Blair to make a reference to a certain John Connor series.

Blair Levin (46:58):
So look, the methodology [00:47:00] of the study that they cited, which has so many big problems, and I'm going to just focus on a small one, it appeared that he attributed the rise of prices in 2022 to enrollment in 2023. Now, as I said, I am not an economist, but I am pretty sure you cannot attribute, you cannot say that a future event caused a pass occurrence, except of course in the movie The Terminator, which is what the reference was.

Christopher Mitchell (47:30):
[00:47:30] Yes. And it's a solid reference in that I feel like any hall, I wonder how many people had seen it. Right.

Blair Levin (47:41):
No, I'm definitely showing my age there, which is significantly higher than your age except to this one economist. Right?

Christopher Mitchell (47:50):
So Robert and Kim, I am curious then, where do you think we will be in four or five years in terms of, [00:48:00] do you feel like we will be in a situation in which we have a high quality ongoing discount for low-income families as well as something to actually connect a different program perhaps to try to make sure that they're connected?

Robert Boyle (48:18):
Kim, do you want to go first?

Kim McKinley (48:19):
I'll go first. Isn't this what we call USF reform?

Christopher Mitchell (48:24):
It could be, but I mean this is leaving open the possibility that it would be some other things. I mean, I think some of us thought USF might've been reformed by now.

Kim McKinley (48:30):
[00:48:30] I think that nothing else is going to get passed until we reform USF. I think that is going to be the crux of the situation because USF is out there, it's dying. Something has to happen to it. So is that going to be a broadband tax and is that going to be our new USF? I think you're going to see more of that movement, but there's always going to be a low income program, but I think it's going to be re-imagining what is already there than a new one. Personally.

Christopher Mitchell (48:59):
Let [00:49:00] me plug the Community Broadband Bits podcast, which had Mike Romano on it, and we just talked about some of the aspects of this and the politics around that. So if people haven't heard that, that would give you a little more depth on what Kim had just brought up. Robert.

Robert Boyle (49:16):
I think that you're going to see over the next six months things like the ACP program that was created in Minnesota and what we're doing and what other companies are doing to try to come up with private solutions [00:49:30] because we want to connect everyone we've already paid to go in front of their houses. So let's try to get as many of them as connected as possible. It's just good business to do that. In more rural areas where you've gone by five houses in a mile or two houses in a mile, getting a minimum amount and subsidizing it is not going to work. So you're going to have to have some type of subsidy for those areas to have them make sense. And I think part of that is based on the customer mix of the company. So if you [00:50:00] have more suburban and rural areas together, then you can kind of dollar cost average what you're getting in, even if you're operating some parts of your network at a loss, which is what we do, and that's fine, it's just part of the deal. But then you'll also have areas where it's purely rural and those areas, you're going to have to have something. And like what Kim said, the USF reform where you have a dying service that nobody really uses anymore, subsidizing another dying service that nobody really uses anymore is probably not the [00:50:30] solution.

Christopher Mitchell (50:32):
So Blair, I feel like the question for you is muddle through. Will we still be muddling through at that point or will we have had a more significant solution?

Blair Levin (50:42):
So if you'd asked me four years ago, I would've said sometime in the next four years, we will actually reform universal service. The contribution factor doubled under G Pi who never talked about it once until he was walking out the door saying, oh, by the way, we probably need to deal with universal service. [00:51:00] The Congress asked the FCC to do an analysis of what is the future of universal service after the B program. And I know the FCC staff very well. They're capable of extremely good work. The response was not extremely good work. And that study, it's just not at all relevant to the current discussion. There is an important discussion going on between Senators, Luhan and Thune and a bunch of others to present a bipartisan universal [00:51:30] service reform package. I think it's tricky, but I think regardless of the election results, it is certainly possibly because there's a bipartisan interest in it. And while everything is political, I agree with that. It doesn't fit in the neat packages of liberal conservative. So I do think we'll get universal service reform, but I would be the first to say whoever does it, it's a politically difficult thing, and I don't see people having a lot of political capital [00:52:00] and courage to do that kind of thing. They're not going to do it in a presidential election year, but hopefully next year they'll actually be able to do it.

Christopher Mitchell (52:09):
Yeah, I certainly hope so. And I feel like, I guess the thing I would just wrap up with is in my mind, the uncertainty is where anything can happen. And so I am never in this situation where I'm like, oh, we'll definitely just be muddling through this forever. At some point, something will change [00:52:30] often due to something that one did not expect causing it. So I have hope.

Ry Marcattilio (52:39):
We have transcripts for this and other podcasts available at muni networks.org/broadbandbits. Email us@podcastmuninetworks.org with your ideas for the show. Follow Chris on Twitter, his handles at Community Nets, follow muni networks.org. Stories on Twitter that handles at muni networks. Subscribe to this and other podcast [00:53:00] from ILSR, including Building Local Power Local Energy Rules, and the Composting for Community Podcast. You can access them anywhere you get your podcasts. You can catch the latest important research from all of our initiatives if you subscribe to our monthly newsletter@sr.org. While you're there, please take a moment to donate your support in any amount. Keeps us going. Thank you to Arnie Hughes for the song Warm Duck Shuffle, licensed through Creative comments. This was [00:53:30] the Community Broadband Bits podcast. Thanks for Listening.