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Overbuilding Encourages Competition - Community Broadband Bits Podcast, North Carolina Bonus Episode One!
We're pleased to bring you the first episode from a special bonus series of the Community Broadband Bits Podcast titled "Why NC Broadband Matters." The series is a collaboration with the nonprofit NC Broadband Matters, whose focus is on facilitating the expansion of ubiquitous broadband coverage to local communities for residents and businesses. We'll be working with NC Broadband Matters on this series to develop nine more episodes that center around broadband in North Carolina.
"Overbuilding Means Providing Internet Choice: How One Small Company is Closing North Carolina's Digital Divide," is a conversation between host Christopher Mitchell and Alan Fitzpatrick of Open Broadband. The North Carolina company delivers high-quality Internet access to local communities. As Fitzpatrick notes in the interview, Open Broadband uses different types of technology, depending on what's most effective in each region. The goal is delivering quality Internet access.
Christopher and Alan talk about how the term "overbuilding" is now associated with waste, rather than with competition. They discuss the benefits of overbuilding and competition, problems with of lack of choice, and Alan reviews some potential long-term policy changes that could encourage investment. Alan and Christopher talk about local government involvement in promoting competition for better access to high-quality connectivity. They also touch on how lack of competition can increase the digital divide and how North Carolina could make changes to allow local governments to work with private providers in order to expand Internet access.
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This show is 28 minutes long and can be played on this page or via Apple Podcasts or the tool of your choice using this feed, at the Community Broadband Bits page, or at the NC Broadband Matters page. We encourage you to check out other "Why NC Broadband Matters" content at the podcast feed so you don't miss future bonus content that may not appear in the Community Broadband Bits Podcast feed.
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Alan Fitzpatrick: Well we'd like to see the state take more positive action on, you know, allowing the use of state assets, county assets, town assets to improve broadband for everyone.
Lisa Gonzalez: Welcome to a special episode of the Community Broadband Bits podcast and our new podcast series, Why NC Broadband Matters. I'm Lisa Gonzalez with the Institute for Local Self-Reliance in Minneapolis, Minnesota. NC Broadband Matters is a North Carolina nonprofit. Their mission is to attract support and champion the universal availability of affordable, reliable, high-capacity Internet access necessary for thriving local communities, local businesses, and a local workforce in order to compete in the global economy. The group has created the North Carolina chapter of CLIC, the Coalition for Local Internet Choice. We are collaborating with NC Broadband Matters to present this series that touches on issues that while certainly affect people in North Carolina also impact people in other states. Our first episode is titled "Overbuilding Means Providing Internet Choice: How One Small Company is Closing North Carolina's Digital Divide." Christopher interviews Alan Fitzpatrick from Open Broadband, and they discuss why the word overbuilding should have positive rather than negative connotations. They talk about the need for better connectivity in North Carolina, how the state might play a more meaningful role, and how his company is offering broadband through a range of technical solutions. Now here's Christopher and Alan Fitzpatrick from Open Broadband.
Christopher Mitchell: Welcome to a special episode of the Community Broadband Bits podcast. I'm Chris Mitchell from the Institute for Local Self-Reliance up in Minneapolis, Minnesota, and today kicks off the first of a series of podcasts sponsored by NC Broadband Matters. That's North Carolina Broadband Matters. And to get it all going, we're going to interview Alan Fitzpatrick, who is the CEO of Open Broadband, a local company there in North Carolina and a founding member of North Carolina Broadband Matters. Welcome to the show, Alan.
Alan Fitzpatrick: Thanks Chris. It's great to be here.
Christopher Mitchell: You've been on the regular Broadband Bits podcast before multiple times, wearing different hats in fact, and now we're going to be kicking off this series of one episode a month for the next 10 months or so. And I'm wanting to see if you wanted to maybe explain briefly why you thought it was a good idea to have me talking more into a microphone.
Alan Fitzpatrick: Sure. So, we always value your conversations, Chris, and what you could bring out to the light. And NC Broadband Matters, our whole mission is really to champion universal availability of high-speed Internet and broadband, letting communities make their own choices. And you've been a longtime proponent and an advocate and a renowned expert in this field, so we couldn't think anybody better than you to kind of help us capture the stories and communicate them, you know, out into the world. So thank you very much for starting this whole series.
Christopher Mitchell: I'm really excited for the opportunity. I feel like I've spent a lot of time thinking about North Carolina, working with many of the people who are involved with NC Broadband Matters, and all of us want the same thing. And I really like the amount of organization and effort that you all in North Carolina have put into this, and so I'm excited to dig deeper into these episodes. We're going to start today talking about overbuilding, this word which is almost a slur but one that you want to unpack and talk more about. But let's kick it off by talking a little bit about what Open Broadband does because, you know, I think it's fair to say you're an overbuilder.
Alan Fitzpatrick: Oh, we are to some extent. You're correct. So Open Broadband is a private Internet service provider. We are headquartered in North Carolina. We operate in 11 counties across the state, we're building out in five more counties, and we're working with our first few communities in southern Virginia. So our mission is to bring broadband service to underserved communities, areas that have been pretty well left behind by incumbents or don't really have a whole lot of competition. In most cases we are giving people broadband for the very first time. You know, they may have had DSL, they may have had satellite Internet, but they never had, you know, 25 megabit speed. So that's been kind of our foremost go-to-market strategy is going into these areas and providing them with high-speed Internet. We do provide some service in areas where there are some incumbents, but we can get into that as we go.
Christopher Mitchell: Right, and I wanted to note that you have a very fun Twitter account. I believe it's just Open Broadband, isn't it?
Alan Fitzpatrick: Uh, @OpenBBNet.
Christopher Mitchell: Okay. Okay. Yeah, see I just follow what's written there as opposed to the actual @ sign. But for people to follow it, I recommend it. You have a lot of fun pictures on top of water towers. I feel like you're a company that really embodies that idea of what works. You do fiber, you do wireless, but the main thing is you're just looking to expand access in places in which it has been difficult to do it and no one's really done it. Although, you're still called an overbuilder by the people who don't want to see you out there improving access.
Alan Fitzpatrick: Oh, thanks for the compliments, Chris, and you're spot on. What we're trying to do is solve the problem, and the problem is people don't have access to good Internet or they don't have a choice. So one of the two: either you have nothing or maybe you have one carrier that can do this. And the way we've chosen to go about solving the problem is use whatever technology makes sense, and to a large extent you'll see us doing fixed wireless. So to your comment having, you know, antenna pictures on water towers and things like that, yes, we have quite a few of those. So feel free to follow our Twitter and LinkedIn accounts to see those. But you know, we have locations where we have fiber directly to the premise. We have coaxial cable in a couple of places just because it worked out that way. But we've always tried to view ourselves as "let's go solve the problem and use whatever technology makes sense." It's gotta be cost effective, and you know the reason why there isn't fiber to the curb in rural markets, it's just hard to cost justify it. So if we can find a different technology that could still solve the problem, that's what we do.
Christopher Mitchell: Well, you used a word when you were describing what you do. You used the word "underserved." I can't think of the right word, so I'm just going to describe it — but underserved versus overbuilding. I think a lot of the providers who are doing the under-serving are the ones who are the most angry about overbuilding, and it's because there's a real opportunity. But let's unpack that word. When you hear overbuilding, which we often hear particularly when it comes to government programs? But what do you hear when you hear the word overbuilding?
Alan Fitzpatrick: I hear one thing in the marketplace, and I have another internal view. So in the marketplace, what I hear is carriers that are already providing service are wanting to retain the monopoly, and they don't want someone else coming in and also providing service. And they've put this negative spin on it saying, "Well, service already exists, so why should somebody come in and spend more money and overbuild what we have?"
Christopher Mitchell: Right. There's a sense that it's wasteful, right? I mean that's what's embodied in that term. It's overbuilding. It's unnecessary.
Alan Fitzpatrick: But my view on it is we need competition. Competition is good. We need multiple providers. We need in the term overbuilding. And if you think of this in any other industry, gas stations, you know, what would it be like if your account only had one gas station or a grocery store? What if you only had one grocery store to go to? What would prices be like? What would service be like? What incentive would they have to do anything good for the community? Essentially none, right?
Christopher Mitchell: Or what would the lines be like at the coffee store?
Alan Fitzpatrick: Oh, good point. Yeah so lack of choice hurts consumers, and if you look across the landscape in telecom for high-speed Internet, the two major providers in the country are cable, Comcast, and Charter. And if you take a look up their footprints, they don't really overlap. You know, they don't compete with each other.
Christopher Mitchell: Right, I actually think it's less than 2 percent, but it's certainly single digits. We've done the analysis, and that's deliberate.
Alan Fitzpatrick: And the tlecos do compete somewhat with cable. So you got AT&Ts in the world and Verizons are out there competing, but it seems that they only make the major investments in, you know, the larger cities where they can go head to head against cable and compete in the market, which I think is great by the way. I love seeing AT&T Fiber roll out and competing with cable. Or you'll see the sort of upstart companies, like a Google Fiber or a Ting or some of the municipal networks or co-ops, going into markets, which I think are great. So, having competition is what helps consumers. I remember when Google Fiber first came out, they called it the Google Fiber effect. You know, they went into the different cities and what happened, you know? Their competitors drastically increased speeds and they lowered prices, and they called it the Google Fiber effect. It was the fact that having a major competitor come in, and it basically raised, you know, the water level so everybody got better. So the more we can promote competition, I think, the better.
Christopher Mitchell: I agree. That's certainly what one hears in the talking points from D.C. and state houses and that sort of thing — everyone wants competition. Now, we often hear overbuilding in regard to a government program, which may have subsidies that are going out to expand access. And there's a line and it's used, I will say both by smaller providers and by larger providers, in terms of saying, you know, "We don't want the government to overbuild. We don't think that's fair." And let me, before I give you any chance to talk in the way a proper host would, I would like to say that this argument drives me nuts because it acts as though history starts today as opposed to yesterday when a number of these companies had massive subsidies, you know, whether it's the cable companies that in many cases built their networks in a time of exclusive franchises, or the telephone companies, which certainly had exclusivity to build their networks and often to build very good high quality networks. And you know, if our expectation is that we are just going to have competition magically because we've stopped preventing it, I don't think we're going to get much competition. And so, I'm very hostile to the argument that the government should not do anything to encourage competition, it should just allow competition to happen because for 20 years we've been doing that, and we haven't seen competition really develop I think.
Alan Fitzpatrick: I would agree with you, Chris. It just is such a massive infrastructure need that if you just hope that there's going to be competition magically, it's just not going to happen in very many places. So, you know, I'm in the camp of saying let's encourage competitors. I am a capitalist. I believe in competitive markets. I think we need to encourage markets because it's better for everyone. It makes companies better and improves the community. It helps spurs economic development. It's better for the residents — you know, so good on so many levels. I guess the only thing it's not good for is monopolies, so if you do have a monopoly in an area and another competitor comes in, they're probably the only loser in that case. Although at the end of the day, what they'll end up doing is improving their own processes and getting better because it's sort of being forced upon them.
Christopher Mitchell: Now, let me ask you, because I think there's this thing that I believe and many of the people that have support for similar policies that I do — we have this belief, and I want to test it by asking you, as a person running a business in this area, when you have a choice of different markets in which you're going to invest, are you prioritizing markets in which people are happy with the service that they already have?
Alan Fitzpatrick: Actually, no.
Christopher Mitchell: I wouldn't think so.
Alan Fitzpatrick: Yeah. We go into areas where they hate their service provider and they really want something better.
Christopher Mitchell: And that's one of the things that I think is important because I respect that particularly the local companies — I was just here at a meeting in Minnesota with a lot of family-owned, independent companies that have a history of providing good services in smaller towns in Greater Minnesota, and they're quite fearful of government programs bringing in competition in ways that would hurt their business models. And I generally don't expect to see providers seeing a market opportunity to go serve a population that likes its provider, and I'm guessing that's what you see as well when you're trying to think, you know — I mean, you've sunk your own money into this. This is not a game for you. You're not a guy like me where if I'm wrong, I'm wrong. You know, for you it's a pretty big deal.
Alan Fitzpatrick: Right, we're all in, and early on we had to make a decision with Open Broadband, you know, where we're going to go, where we were going to make our investments. And we're located just outside of Charlotte, North Carolina, and some people ask me, "Well, do you provide service in Charlotte?" And the answer is we have a few sort of opportunistic customers in Charlotte simply because I'm pretty well connected in the community. But by and large, we don't offer regular services in Charlotte, and the reason is exactly the point you just made. You know, we have Charter here who provides very good service. We have AT&T that does Fiber service. We have Google Fiber in the market. We have a number of other competitors. So it's a pretty saturated market in the larger city where people are pretty happy with their options. You know, yes, there's one or two, here and there we can go in and help. But by and large, the need isn't here. The need is out in the rural parts of the counties, and that's where we focus.
Christopher Mitchell: You know, this actually gets quite complicated in that I think there are market opportunities in Charlotte because although the companies you named are providing much better service than you see throughout North Carolina, the opportunity right now really is in these areas that are not getting investment. We're talking about often Frontier and CenturyLink territories — there's no cable operator, and so that's the real big market opportunity. And I would congratulate the way the cable companies have really done a better job of providing one good option in the cities at least, and then, we have some neighborhoods in which AT&T has been very aggressive and Verizon and some of the other companies — CenturyLink in their territories, although that's backed off a little bit. But I don't want anyone pulling out their hair because they're frustrated with the options they have and thinking that you're saying it's good enough. What you're saying is that the market opportunity right now is in the areas in which we're not seeing private investment really flowing on its own, I think.
Alan Fitzpatrick: You're right, and that is where we're focusing. And you do see digital divide in large cities, and I guess I should have focused on that earlier in my comments. But you know, you have cities like Detroit and Cleveland where half of the city is not on home broadband, and that's terrible, right? Everybody should have the ability to get home broadband. So, it can exist in the city as well, like you say. We've seen examples where people live in older neighborhoods. A new neighborhood goes in, literally right down the street, and that new neighborhood gets all the new technology, right? Cable comes in, you might have fiber going in. And the people who live in the old neighborhood are saying, "Hey, what about us? You know, extend that over to our neighborhood," and the answer is often no. So you might have these two streets, these two neighborhoods, side by side, the new one gets the high speed broadband and the older one doesn't. And if you looked at like a census block or you looked at a city, you might say, "Oh well they're served," right? Because that census block has this wonderful Internet capacity, but that particular neighborhood is not served. And that's where it may be viewed as an overbuild if somebody goes into that specific older neighborhood, but in reality it's not an overbuild. In reality that neighborhood never had service.
Christopher Mitchell: As I mentioned earlier, and I think this is — I think it's really important when we talk about overbuilding to recognize that prior to 1996 telephone companies were monopolies that were enforced by the state, and prior to 1992 cable companies could have exclusive franchises, which were monopolies that were guaranteed by the city. And since then, we've more or less at the federal level — and some states — they outlawed the monopoly. They wouldn't allow them to create an official monopoly, but they didn't really encourage competition so much. They didn't set the rules to enable new competitors to compete with these existing providers that had such a headstart. But North Carolina is one of the states in which I would say the state has been somewhat hostile to competition, particularly the way that local governments could encourage competition, something we often talk about in terms of the words local Internet choice. And so I'm just curious if you want to share your thoughts about how North Carolina law, you know, could enable you to compete better or in ways that it's a little bit harder to compete than it should be.
Alan Fitzpatrick: That's a great point, Chris. So we have a law in the state that forbids municipalities from starting their own Internet service to customers. There are few cities that have been grandfathered because they were already doing this before the law went into effect. Wilson, North Carolina and Salisbury, North Carolina are a couple examples of that. But new applications of this, if towns wanted to start providing service to their own residents, are basically forbidden by law. Now there is the FIBRE Act that's being proposed that we're hopeful could get passed that would allow municipalities to lease their own fiber to, you know, private companies to help spur investment and spur better service to residents, kinda utilizing the city assets or county assets. We believe that's a good thing. We hope that legislation like that could get through, but we'd like to see the state take more positive action on, you know, allowing the use of state assets, county assets, town assets to improve broadband for everyone.
Christopher Mitchell: What does that mean for your company if local governments, counties, and cities were able to lease you fiber or to build a network and lease that to you? I mean, to some extent, cities have limited authority to lease dark fiber to you. If the FIBRE Act passes, what does that allow you to do that you can't do today? And how does that really allow you to expand more rapidly?
Alan Fitzpatrick: For us, access to infrastructure is so important, whether we're mounting antennas or implementing switches or just finding a way to get from point A to point B. So we look for commercial solutions today, so we can route on fiber that's available from, you know, for profit companies. We look for tower assets that are sometimes available from private companies, but if towns or counties or state assets are in ideal locations and they have excess capacity, oftentimes that can speed our entry into the market and potentially lower cost. So that's how we would look at it.
Christopher Mitchell: You know, I mean, you just sort of said speed our market entry and lower our cost, but what does that actually mean? I mean, does it just mean you make more money?
Alan Fitzpatrick: Oh, actually it means service gets to the customer faster. I guess that is the endpoint.
Christopher Mitchell: I hate it when people act as though making money is somehow wrong, but I think — I just want to make the point that it's not just about additional revenues or that sort of thing.
Alan Fitzpatrick: Correct. Yeah, at the end of the day, we're trying to get service into the hands of people, but we gotta be profitable doing that of course. But how do we solve the problem faster? I'll get back to the whole point of why we're doing this. We're trying to solve the problem. We're trying to get broadband into the hands of people that haven't had it for one reason or another, either it wasn't available or it was too expensive or it just didn't work, and trying to solve that problem. So to the extent that the legal environment, the political environment can encourage us to roll this out faster and solve the problem faster, that's a very good thing.
Christopher Mitchell: It's worth noting — I mean, you have people that work for you who right now, I suppose, who are trying to figure out how to get from A to B in areas in which either local governments might have fiber, or you know, if they knew that you were trying to do that, they might be willing to do that themselves so that you can focus on turning on customers and doing less of that time, which is less direct involvement with the customers.
Alan Fitzpatrick: Correct. You know, it's interesting. Sometimes there's this fear out in the marketplace like, "Oh, what if the towns and counties started service themselves?" Like, "Oh no, that's a bad thing." My conversations throughout the state and at different levels, they don't really want to be in the service provider business. When I'm talking to county managers and town managers and so forth, they just want the problem to be solved, and the county commissioners, they want to stop hearing from the residents that their choices are terrible and their service is terrible. They just want the pain to be solved, right? If no one will solve that pain, then yes, maybe the government needs to step in and do it themselves. By and large, I don't find that many government entities that really want to do it. They just want the problem solved, and if there's a private provider out there that's willing to step in and be a good partner and actually listen to the community and want to solve that problem and listen to the community needs, then they're all about it. We've had a very good response from communities we've spoken with when we go in with that type of approach.
Christopher Mitchell: So this is another hot button issue I want to jump into real quick because a lot of the people that I interview are either people from local governments or people who have broad sympathies with local governments. And I wouldn't say that you're unsympathetic to local governments, but you are an entrepreneur. You have a different perspective. One of the things that we hear often from people working directly or indirectly for the big cable and telephone companies is the problem is that local governments are trying to prevent new investment and that they are the ones that are getting in the way, and so I'm just curious if you can react to that.
Alan Fitzpatrick: I don't see it that way at all. Generally speaking, we are widely encouraged by the communities we speak to. They feel the pain point. Their constituents are complaining. They're looking for a solution. If we go in and have a conversation and say, "We're willing to help. You know, where do you need help? You know, what can we do to solve this problem? Where is your greatest need?" we found them extremely supportive and responsive. So there are various grants that are available, as you know, for broadband deployment, whether it's at the federal level or the state level, and we found that the communities that are really suffering are willing to work with us to help apply for some of those grants and work as a partner with us. So we've had nothing but positive response.
Christopher Mitchell: Yeah, that's been my impression is that the people who are working for the local governments are prioritizing this, and they're trying to figure out what will work, and they're willing to be proactive on it, I think. So I just — you know, it'd be worth it for me if you wanted to take a field recorder to some of your customers and ask them — try to explain to them overbuilding, and I'm guessing that they will either laugh or be confused at just the idea that this is a problem.
Alan Fitzpatrick: They would, yeah, beause what they would say is the service is terrible. They need somebody to come and fix it. All of their requests to incumbents are being ignored or being given lip service to, but the problem isn't being fixed and the problem is not going to go away. It's only getting larger from the standpoint that more and more of our lives involve, you know, high-speed Internet access — that somebody needs to go in and help. Now if the incumbent will step up and solve the community's needs, I think they'd be very happy with that. I think that when they get frustrated with those conversations, they start to look for alternatives, and that's where companies like Open Broadband would have conversations.
Christopher Mitchell: Great. Well Alan, I appreciate this once again. I appreciate the hard work that you're putting in in North Carolina to make this happen, even in the face of government policy that unfortunately still discourages competition. We have to get rid of those barriers first, and then we can talk about very targeted programs may be to encourage competition after that.
Alan Fitzpatrick: Yes, and I have to put in one plug for North Carolina is we have a state broadband grant program called the GREAT Grants, which the governor has been very supportive of and it has gotten through our legislature as well, that provides grants for broadband to unserved communities. Now it's unserved communities, not underserved, so there is still this whole element of not overbuilding. But at least the state has put up money to help invest in these areas that haven't had any service and help providers basically solve the problem, so that is a very good thing the state is doing.
Christopher Mitchell: Yes. And I think it's worth knowing the state has also removed some restrictions on the electric co-ops. So, you know, we're focused on a few particular areas, but I don't want to sound like the entire state is acting in ways that are contrary to better Internet access. We are seeing that from some, but we're deeply concerned about whether the legislature will take the next step to really allow more investment in areas. Oddly enough, one of the biggest opponents to it is Charter cable, the company that is not going to invest in a lot of the areas you're investing in Alan, but they're trying to make it harder for cities to work with you and counties to work with you to get that done. But, that's where we live.
Alan Fitzpatrick: Thanks for the opportunity to be on the show, Chris, and thanks for what you're doing with the whole series for e Broadband Matters. Your voice really matters and we appreciate you getting the stories out.
Christopher Mitchell: Well thank you, Alan. I appreciate the opportunity and it's been wonderful. I hope to see you next time I swing through town.
Alan Fitzpatrick: Thanks Chris. Good to talk with you.
Lisa Gonzalez: Thanks for tuning in to the special Why NC Broadband Matters podcast series and for listening to the Community Broadband Bits podcast from the Institute for Local Self-Reliance. Remember to follow Christopher on Twitter. His handle is @communitynets. Follow Open Broadband on Twitter at @openBBnet. And if you follow @NCheartsGB on Twitter, you'll tap into all the NC Broadband Matters material. We want to thank Shane Ivers of SilvermanSound.com for the series music, "What's the Angle," licensed through Creative Commons, and we want to thank you for listening. Until next time.