Transcript: Community Broadband Bits Episode 139

Thanks to Jeff Hoel for providing the transcript for the episode 139 of the Community Broadband Bits podcast with Alex Deshuk on "dig once" policy and benefits from fiber leases in Mesa, Arizona. Listen to this episode here.


Alex Deshuk: The iCloud is now over Mesa.


Lisa Gonzalez:  Hello.  This is the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance.  I'm Lisa Gonzalez.

As the community of Mesa, Arizona, began to grow, community leaders recognized that telecommunications would be a key element to its success.  This week, Chris visits with Alex Deshuk, Manager of Technology and Innovation for Mesa.  As you will hear, Mesa used several creative methods to ensure better connectivity.  The community was an early adopter of "dig once" policy, placing conduit whenever streets were excavated for any other infrastructure purpose.  Mesa has also taken advantage of non-traditional existing infrastructure, planting fiber in abandoned conduit that had been used for other utility purposes.  The result is a network of about 150 miles of fiber throughout the community.  The investment has paid off in a number of ways over time and helped the city establish a broadband-friendly environment for economic development.

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Now here are Chris and Alex, discussing the ways Mesa has turned a long-term vision into reality in Arizona.


Chris Mitchell:  Welcome to another edition of the Community Broadband Bits Podcast.  I'm Chris Mitchell.  Today, I'm speaking with Alex Deshuk, the Manager of Technology and Innovation for the city of Mesa, Arizona.  Welcome to the show.


Alex Deshuk:  Thank you, Chris.


Chris:  So, can you tell us a little bit about Mesa?  I've been through Arizona a number of times.  And it's an incredible place.  But I had not actually been to Mesa, I don't believe.


Alex:  We're kind of a sprawling suburb of Phoenix, as are most cities around us.  We're the third biggest city in the state of Arizona.  We have just shy of a half a million people.  And we're approximately 180 square miles.  We're the 35th-biggest city in the country -- most people don't realize that -- bigger than Miami, Minneapolis, and a number of other more name-recognition cities.


Chris:  Wow!  That is definitely different than how I -- than my impression of it.  So I'm very glad that you could explain that.  Most large cities have not gone to the lengths that you have, in terms of establishing really smart approaches to conduit and fiber and -- in the modern telecom economy.  So maybe we can take a step backwards and you can tell us, how did it all start, that Mesa started getting involved in conduit- and fiber-type investments?


Alex:  Well, it goes back a number of years.  Probably, I would say, at least 10 or 15 years, really, with the idea of municipal networks, which never really took off to a large degree.  But it was also a combination of building our own infrastructure where there was none.  Again, 15 years ago, Mesa was very different.  I remember the freeway had a sign that said "next two exits, Mesa," back in that time period.  Now it says, "next 17 exits."  So the city has grown.  The population has grown dramatically.  But in that forethinking time, the city was investing in infrastructure, which is key to our, you know, developing Mesa from this "Boomberg," as we were called, to a more thriving technology-based economy.  So the infrastructure is, obviously, sewer, water, and gas, and electric.  But we saw -- the city people at that time saw -- technology and connectivity -- broadband -- at that time, which was in its infancy, as key to attracting that kind -- type of investment in the city.


Chris:  One of the things that I think a lot of us associate with Arizona is a very sort of anti-government feeling -- that government that governs least is that that governs best.  And so I'm curious to what extent that has informed your approach or if it's just that I have a mistaken impression?


Alex:  Ah -- I actually think Arizona is a Republican state, tried and true, although we've had some Democratic governors here and there.  Mesa has a reputation in the press as being one of the most conservative cities in America.  But I think, you know, within the timeframe that we're talking about, we've had this change in leadership where we've had more progressive, more inclusive leadership that is really -- sees a vision for Mesa that's changed.  And that includes the city facilitating our business partners and not regulating as much.  So, it really -- it's changed, like I said.  It's not that we're less big government, but we want to facilitate -- we want to help as much as we can -- bring those important assets to Mesa.  And then if that means investing in infrastructure, we will do that.


Chris:  So, maybe we can get into a little bit of the nuts and bolts.  And let's start first with the conduit and the fiber.  What exactly does Mesa do?


Alex:  So, a number of things.  The program that I mentioned that started well over a decade ago had a name, then called E-Streets.  And it was really to invest in -- when we opened up streets for other work, whether we were building out sewers or water infrastructure, to also put in conduit, with the, you know, express purpose of leasing it out, you know.  Obviously, we used it for our own infrastructure -- connecting our own city facilities across the city.  But also with the intent that we would lease this conduit.  And in the cases where we had the capacity we put in 144-strand fiber count throughout all backbone, we would lease the fiber if the carriers were interested in the fiber.  The E-Streets project put in, I would say, at this point, we probably have about 150 miles -- if not more, maybe 200 miles -- of conduit in the ground, throughout the city.  We haven't added more to it recently, although we're starting that program again, as we get more capacity in our public works improvements.  Going forward again, we will continue to opening -- or, when we open up streets, we will put in conduit in key locations, and continue building this infrastructure.


Chris:  And I'm curious about the cost of that versus revenues.  Do you know if there's been a net gain to the city?  Just ignoring any of the positive externalities we can talk about next.  But in terms of just the revenue of leasing it versus the cost of having put it there.


Alex:  So, the idea of a net revenue gain is -- you know, it may vary state by state -- but, technically, we can not have a revenue gain.  We can have a cost recovery.  So we price out the infrastructure for full cost recovery.  So, at the end of the day, as the assets are leased out, the burden back to the taxpayers gets negated.  So it's not as if we're a revenue center.  So, we do have full cost recovery in our rates, that we lease the infrastructure out to -- carriers and vendors.


Chris:  And so, I'm curious how that works.  Does that mean that if there's a number of people that have been leasing ahead of me, and you've recovered your costs, that I can then lease for free?


Alex:  It's really based on a linear foot, and it's not based on a particular segment.  I assume, at some point, if we ever leased out the whole infrastructure, we would have a total revenue-neutral at that point.  Now, we may change the model then to then take the new money and invest it into new infrastructure.  So it -- we're not actually at that point, where we've fully recovered the cost of the whole project.


Chris:  Right.  Although I think, toward the end of the conversation, we'll turn to some of the ways that the project has certainly returned more benefits than its costs.  But I want to first ask you about -- aside from just putting in conduit and fiber -- earlier, before we started recording, you noted that you've been repurposing older pipes and older infrastructure.  Which is something that, I know, just in New Mexico, some of the cities have debated and decided NOT to do.  So I was -- I'm very curious to know how your experience has been with that approach.


Alex:  As our utility infrastructure ages, it's, in most cases, more cost-effective to leave the infrastructure in the ground than to take it out.  And then to add on top of it, or alongside it, or through another alignment, the new infrastructure.  So we have, you know, many hundreds of miles of decommissioned utility pipes.  And Mesa's got gas, water, wastewater, and electric.  So we've got infrastructure everywhere -- you know, underground and overhead -- that we can use.  And we tend to want to use underground, because of the reliability.  But there is some opportunity for co-los on our electricity lines too.  So, from the piping perspective, which has been our biggest success so far, is -- we have been -- we have identified all of our abandoned utility in a GIS layer.  And it is available to the carriers.  We sit down and meet with them whenever there's a construction project and show them what assets we have.  So they have to start inventory.  We've had two vendors -- I can't remember the exact mileage, but it's several miles of abandoned water utility that they proofed.  The cost of proofing the pipes is up to the vendor.  We don't incur any additional costs.  And then we lease it out at a predetermined rate for the vendor to use.  And we've got two vendors -- just recently -- we started the program about a year ago.  Approved by council.  And we're already returning some money and value to the city.


Chris:  As you've mentioned that you lease fiber, a lot of times you've mentioned that it's often to carriers.  And one of the things I'm usually curious about is, when dark fiber's available, or conduit's available, you know, how much of that is going to other carriers versus to just like a business -- like a bank -- that itself may just want to run fiber?


Alex:  So, what we're doing, in terms of a hierarchy of how we're working with the business, again, in facilitating the business, we're not looking to compete with the carriers.  We would rather have the carriers come in and provide service to the end-business.  That's their business they're in.  Mesa does not want to be a carrier.  We don't want to be in that business.  We've made that conscious decision.  So we will work with them to put their own assets in, put their own conduit in, and help them through right-of-way and permitting.  And our "dig-once" program.  And get there.  That's the preferred method.  If that's not the case, and there's a business need, we got assets, whether it's conduit or fiber or a water pipe, we will help them get to a location that may need some services.  And in a rare instance, if there's an economic development opportunity, and the carriers don't want to do it -- they don't want to partner with us -- we will offer, through an economic development agreement, the city to provide bandwidth connectivity.  On a temporary basis, basically, wrapped around an economic development opportunity.  So we can facilitate that.  We don't want that to be factor to say that they're going to relocate a business somewhere else, because they can't get broadband.


Chris:  You've mentioned, also, earlier -- or something that you said before our interview began -- was this notion of being "broadband-friendly."  And so, I'm curious, if there's things that go beyond what you just described that also are a part of how you think of being "broadband-friendly" to those who want to invest in their own services?


Alex:  Well, I think we're -- you know, we're trying to coordinate.  We have regular meetings with the incumbent carriers in the valley -- anyone who's starting a new business.  You know, we're fully transparent.  Sit down with them and show them our street construction activities, so there's a chance to co-locate and reduce their expenses.  We show them our assets, as we add assets to the infrastructure underground -- fiber and conduit and utility pipes.  We show them our economic development areas.  Unless we have a specific opportunity to bring them in, we can't really disclose that, for confidentiality, but we can show them areas of economic development we're concentrating on, trying to partner with them to be ahead of the economic development activities.  So, we've targeted five areas around the city, based on our health, education, aerospace, and technology initiative.  Around our airports.  And around our universities, and our hospitals, specifically.  And then we have a technology corridor.  So we're working with them to be there before the businesses have a need.  And it's been relatively successful at going forward.  They are coming to the table.  They tend not to sit at the same table, from a competitive perspective.  So we talk to them one-on-one, when we meet.  And we don't disclose any information, other than what we have.  Their information is confidential, so they don't have that reluctance to talk to us.


Chris:  And about how many carriers are you working with?  I mean, I think, a lot of people think incumbents -- they think the two -- the cable and the telephone company, typically.  But I would guess there's a number of other companies that have specialized services for businesses, or something like that.


Alex:  You mean in the valley?  In Arizona, we've got CenturyLink and Cox as the big broadband providers.  But there's EOI.  There's TW telecom.  Time Warner, obviously, in a -- with their merger.  There's Zayo.  There's probably a dozen right now that are putting in competitive infrastructure.


Chris:  One of the impacts of that, I think, has been that you have a corridor that, in particular, is doing pretty well tech-wise.  What has the impact been on the city of these various policies?


Alex:  Well, I -- you know, I think we've had opportunities.  Obviously, we've gone through a cycle.  With Apple, where they were here or not.  And we're getting to get on the cusp of their building this largest, biggest investment -- $3 billion investment -- in Mesa.  One of the factors, as I mentioned, was the infrastructure.  That area was targeted heavily -- serendipitously -- years ago with lots of conduit and fiber.  There's connectivity there, multiple different paths.  We've got multiple different electric utility pathways in and out of there.  All the assets are there in the ground already.  And I think the plant is -- the datacenter, as envisioned, is 1.3 million square feet.  It just boggles the mind, the size of this thing.  I think the envisioning, and for your audience, is -- something like 28 football fields could sit under the roof.


Chris:  You know, let me just say that you must have good connectivity, because I understand you build a datacenter in Siberia, in Iceland.  But Mesa?  You have to have something really going on special, to deal with the cooling costs.


Alex:  It's not just their datacenter.  It's their global command center.  It's the penultimate datacenter, I would think.  You know, not to put words in their mouth, but Our Mesa called it -- the iCloud is now over Mesa.


Chris:  [laughs]  Nice.  Well, I hope it doesn't interfere with any of the solar power investments that, I'm sure, are going on there.


Alex:  Well, you know, the plant, when it's finished, will be fully powered primarily by renewables.  Although, obviously, the backup for a facility like that.  But they're committing to the environment as well as the technology.


Chris:  So, how does it work, in terms of local connectivity to the larger Internet?  You know, have your investments resulted in any improved options for those who need to get super-fast connections across the country?


Alex:  Yeah.  Absolutely.  For Mesa citizens, as well as the opportunity for us to deliver options to businesses when a carrier may not provide it.  Mesa recently completed an agreement to connect to a tier 1 peering point through Zayo Communications.  We're going to connect initially at 500 meg, and by the end of the year we'll be at full gig connectivity.  We can go up to whatever bandwidth we want to purchase.  But, essentially, by bypassing the middleman local carrier, we doubled our bandwidth and cut our costs in half, and made this service ubiquitous throughout our fiber network.


Chris:  And so, the hardest part, I think, for any city that's trying to figure out how to improve Internet access is always how it filters down to residents.  And I'm curious if you're seeing any of your city policies resulting in any super-fast residential connections, or what's happening in the community?


Alex:  The valley was part of the next rollout of the Google Fiber.  We weren't selected.  But that alone brought competition.  The incumbents are now offering gigabit to all new construction.  They were rolling out Wi-Fi networks for their customers.  So, our biggest issue with connectivity is really economic barriers to entry.  And the city's working to help that by providing free Wi-Fi in all city facilities, as a city-funded program.  There'll be opportunities for economically-challenged folks that can't get to Internet to be able to go to a city facility -- community room -- which there are dozens and dozens of around the city.  You know, our city halls, our libraries, we're all going to provide Internet -- free Wi-Fi Internet.  In public meeting spaces, in outdoor spaces, in public parks and things like that.  So that is in the works, or underway right now.  We're getting another 7 miles of light rail.  There will eventually be Wi-Fi at all light rail stops.  So, we're putting Internet out to citizens and city facilities.  But it's not our intent to compete -- provide -- be a provider of Internet to the home.


Chris:  Well, thank you so much for coming on the show, Alex.  I appreciate it.


Alex:  Thank you, Chris.


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