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Transcript: Community Broadband Bits Episode 174
This is episode 174 of the Community Broadband Bits Podcast. Chad Glanzer and Carmen O'Neill from the consulting company Vantage Point share their thoughts on the role of consultants in the creation of community broadband networks. Listen to this episode here.
Chad: It's getting good solid answers from all those questions. Talk to other cities and the problems they’ve ran into and just to insure that those are taken care of in your plan as well.
Lisa: Hello. This is the Community Broadband Bits Podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. Welcome to Episode 174, a conversation with Chad Glanzer and Carmen O'Neill from Vantage Point, a telecommunications engineering and consulting company with headquarters in Mitchell, South Dakota. Chad is the president and Carmen is the assistant director of engineering of this worker-owned firm. Chris interviews our guests today about the process involved when a municipality or other entity decides to invest in a network. There are a number of considerations when transitioning from vision to implementation. Chad and Carmen walk us through some of the questions community leaders need to tackle once they're ready to move forward.
Learn more about Vantage Point at vantagepnt.com. Now here is Chris visiting with Chad Glanzer and Carmen O'Neill.
Chris: Welcome to another edition of the Community Broadband Bits Podcast. I'm Chris Mitchell. Today I'm speaking with Chad Glanzer, president of Vantage Points Solutions. Welcome to the show.
Chad: Thanks Chris.
Chris: We're also going to be speaking with Carmen O'Neill, the assistant director of engineering. Welcome to our show.
Carmen: Thank you.
Chris: I'm excited to be speaking with someone from Mitchell, South Dakota. Congratulations on being such a wonderfully named city. I've been through there. Why don't you tell us a little bit about Vantage Point Solutions and how you came to be in such a great city?
Chad: Mitchell is the Corn Palace city. I'm not sure exactly how Vantage Point Solutions started in Mitchell other than the fact that we live in and around the area. We actually serve over 400 clients in 44 states across the United States and also some foreign countries. We branch out all across the US from our headquarters.
Chris: Excellent. What sort of things do you do? I think to some extent it helps to keep in mind that a lot of people don't understand the many different firms that have been involved to get municipal broadband projects off the ground.
Chad: One unique thing about Vantage Point Solutions is we're an engineering and consulting firm. There's a lot of firms out there that do consulting. There's a lot of firms out there that do engineering, but very few do both. From a municipal or a company that's looking at doing a large fiber broadband deployment, we not only help with the consulting side, with the business plans, the marketing studies, the filings and the inventory work that needs to be done in conjunction with that, but also on the engineering side, whether it's doing the installation of the equipment, anything to do with the outside plant, cable, fiber planning, inspecting the fiber as it's being installed, the CAD work associated with it, and even if you get into some offshoots like video, wireless, anything to do with electronics associated with these types of deployments, we have staff expertise to help.
Chris: One of the reasons that we decided to do this show was because of the experience you've had. I thought it would be helpful to help cities get a sense of trade-offs in terms of when they're doing their bidding, when they're deciding how much they want to spend for feasibility studies and all the different processes that go along with building a simple network; trying to shed some light on it. I also notice you're a worker owned company and I'm interested in that. What does that mean?
Chad: Vantage Point turned an employee owned company about a year ago. Essentially from a client's perspective or a city perspective that may be working for us, everyone that you work with at Vantage Point also owns Vantage Point. From our standpoint, we've seen a really good vibe with our employees. They're excited about what's going on. They're excited about helping clients with their projects be successful, because the more successful our clients are, the more successful our employees will be as well.
Chris: Great. One of the first things that I think cities do after they've decided that they're going to build a network or they want to learn more about it because they're very interested in the prospect of building a network is they look at doing a feasibility study or getting a sense of the business case for the network. Carmen, I think you have a lot of experience with this. Can you walk us through what cities should be doing once they've more or less committed to wanting to figure out if they can make it work?
Carmen: One of the first things they should look at is getting an accurate financial forecast of the build and the cost it's going to take to run that operation. One of our first things we would do typically is to review the capital costs associated with the project. Implementing a fiber-to-the-premises network that requires an investment of various network components. We want to put together a summary of that property and plant equipment and all the real estate needed to offer those services over the 5-year forecast period.
Some of the other additional items to build into it of course would be your personal expenses, your operating expenses, and then of course the marketing penetration and rates and service offering information that you can build into that forecast.
Chris: Is that basically just a spreadsheet that's pretty much the same from city to city, or what might it vary from city to city that local officials should be paying attention to?
Carmen: It varies greatly. For example, you want to build in what you have for a business core in the town versus residential areas. Some cities, of course, are going to have quite a bit more industry than other cities. You want to make sure you build that into your marketing study. You want to make sure your engineering plan is also tied to that marketing study and your financial forecasting.
Other items to look at from a city to city perspective is what do you have for competition? Who is going to be going up against you head-to-head wanting to provide services to customers? Each different financial forecast is very important to the community we're going into.
Chris: One of the questions that we sometimes see in these studies, and I have to admit I often question its rigor, is a question that will say something along the lines of will you take service from a municipal network if it costs less than rivals. Is that worth knowing? Why is that question in there?
Carmen: That speaks to the comfort level the community has with the municipality and that's a very important question to ask. For one, it will tell you right away how happy they are with the incumbent providers in town and it will tell you what penetration you'll get from most people, knowing who is wanting the municipal services.
Chris: Okay. Was there anything else in terms of the business planning that cities should be thinking about? Actually it might be useful to know if you get a good plan, how is that going to impact your moving forward versus if you get a plan that's not so good?
Carmen: One of the other things to maybe keep in mind after you've got that financial forecast and you do decide to move ahead is to not ignore that plan once the project starts. Obviously there's going to be changes made throughout the process. Maybe you're not going to build a certain area or maybe your penetration is not what it was intended to be, or maybe even you're having to change your prices from what you had in your original business plan. Make sure as you're rolling out the project you're updating those items and getting them more accurate if possible while the project is deploying.
Chris: Is this like the architecture plans more or less? We may actually be getting into engineering then? How does the business plan ... Does that overlap with the engineering plan that's developed next?
Carmen: To an extent it does. The engineering plan that Chad will talk about kind of talks about how we connect with those capital expenditures, how we architect the network. Those things feed into the business plan and are very important aspects to build in. Make sure when you're putting together your financial forecast you understand how those items fit together, what the depreciation rates are going to be, and the length of service you'll have for those various components.
Chris: Okay. Chad, I think we're going to turn over to you, but I think it's useful ... A lot of people intuitively grasp that if you're going to think about building a network, you got to figure out how the business costs are going to pencil out, when you're going to potentially break even, what are the knowns and unknowns in terms of how that date could be changed. But I think a lot of people don't know once you've found a business plan that you think will work, what comes next?
Chad: I think when you look at a business plan, by the time you kick it off, not only have we worked extensively with the clients integrating how it's going to operate, how the manpower is going to work, how the marketing is going to work, but also from the engineering side we've also gone through the layout of the network, how the network is going flow, what areas it's going to serve. So from an operational standpoint and an engineering standpoint, all of that should be tied back into the plan and the financial model you've been working with. At that point it's really pulling the trigger.
Chris: Let me just ask you ... I guess I was sort of thinking that you might do the business plan before the engineering, but what I'm hearing is that you actually need to do them in tandem, I guess because you need to know how much something is going to cost in order to figure out if it will break even in cash flow?
Chad: Correct. That's why we think it's very important in the business modeling from our standpoint ... We put a team of our engineers together with our consultants because if you just figure out a financial model, what are you really modeling at that point other than crunching some numbers? With the feasibility studies, we'll always start with the high level engineering plan to get some cost captured of what the plan is and the areas we're going to build and work with a financial model with that as well. Both of those need to happen in parallel. Otherwise, the plan really doesn't fit with what the client is looking at doing.
Chris: Something I've heard ... I've talked with a lot of consultants that I think have done good work for clients over the years, and sometimes I hear them saying something negative about a different plan, saying the engineering wasn't very good. Why is the engineering important? What does that tell us?
Chad: I think a lot of the plans that fail, there's a disconnect. It may be a very nice financial plan and a financial model, but it doesn't fit what the client really wants to do. It doesn't fit the corridors of that city or the best way to overbuild this area is. On the same token, you can have a great engineering plan and a great way to build a network, but there's no financial way to make it work. The successes often that we've seen, you have to have both in sync. They have to both be working in parallel. Both of them need to come together at the same time in unison.
Chris: Carmen, I'd like to ask you this. A city may put out a bid and find that some of the responses are lower than others. They may find a cluster of them that are similar. What are the sort of things that a city should make sure it's going to get so it can evaluate those bids and make sure it's not missing a crucial piece of information?
Carmen: One of the things a city should look at when they're reviewing these bids that come in is the experience level of the companies responding. For example, have these companies been involved with actual deployments before? Are they in this particular network space? Have they seen the success and failures out there to know how to build these market plans and these financial studies and the engineering side of it?
Chad talked quite a bit about the fact that a lot of these things are done in parallel. The capital investments are put into the financial forecast and the discussions that need to happen between the folks performing the financial forecasting and the engineers to make sure that things are bucketed properly within the financial forecast. It's important that when they're looking at a company to do this that they can handle both the financial piece of it and the engineering piece of it to make sure that they're getting the best business for their specific market area.
Chris: Chad, I think you may want to fill in a little additional thoughts. One of the things I guess I'm curious about is for a city that has not done this before and may not be familiar with it, how do you know you're getting the appropriate amount of engineering for the bid responses?
Chad: That's really a tough thing because we respond to a lot of RFPs and you see a lot of these RFPs just wanting to take the low bid or just looking at a price basis. Is this a 1-man shop that's never done this before or is it a firm with expertise?
Another thing is when you get into an actual deployment and we're looking at deploying fiber and we need to go out into the city and stake and plan where the fiber is going to go, there's so much variability in that. If you want the cheapest job possible, you could drive 50 miles per hour through this town and just jot a few things down on a piece of paper.
Chris: Are those things like where the poles are, how loaded they are and that sort of thing? What sort of details might you be jotting down?
Chad: Correct. If you're doing this job really, really fast and a poor job of it, you're just jotting the cable is going to go on the side of the road and that's about it; throw a couple of handholds and a couple of pedestals in. The problem is when you don't take the time to plan out the route accordingly, when the contractors go to bid on those jobs they see that. They see how is the cable going to go on this side of the road? How are you going to get around these type of obstacles? Then essentially the actual deployment costs the city more money because there wasn't the time put into the planning portion of it.
There's a more appropriate method. Given you don't want to go out and get too much detail and spend too much time detailing the stake in your field process, but if you put an appropriate amount of detail on the plan as far as where the fiber is going to go, what's the aerial plan for putting this cable on aerial or buried, the contractors will see that. They'll understand that their job will be a lot easier because it will flow much smoother. Consequently, the price of deployment will be less for the entity deploying that fiber.
Chris: One of the things that I think you mentioned in a hotel bar not too long ago when we were originally talking about some of these different factors was that you actually get more accurate bids too from those who will be actually doing the work. Is that right?
Chad: Correct. If there's not a lot of detail and this contractor starts running into all kinds of obstacles out there, the first thing any contractor will start doing is coming back for change orders; change order this, change order that, this wasn't in the plan. I wasn't planning on this. On the same token, the more you put out there as far as good quality data, the more contractor knows exactly what his responsibility is and consequently there will be less field changes in the project.
Chris: One thing that I've seen in some cases is where a city may hire a consultant at first to sort of hold its hand and help it to understand some of these questions. Then that consultant might help the city to evaluate RFPs for going further down the line. Is that something you think cities should be doing?
Chad: I've seen both. Sometimes a consultant can help the city guy to some good choices. On the same token, I've been in a lot of cases where that consultant hasn't been through any of this and is really of no help to the city. I think checking the references, getting successful stories out there and checking on those, how did this entity do, that's probably a better source for a lot of these cities or entities looking to do it; is word of mouth and who is actually helping people to be successful out there.
Chris: One of the things that I've learned at looking at these different networks is that some of the networks that spend more up front in the capital costs will actually have much lower operating costs, which leads to their feasibility. Is that basically the same sort of dynamic we're seeing throughout this process?
Carmen: Moving forward in a project can range from many different things. It could be the network operations, leasing facilities, billing, maintenance, or even corporate legal accounting and marketing; those kind of operating expenses moving forward. Typically a good solid business plan and a good solid engineering plan will reduce your operating costs long term and the engineering plan most leads to getting in the right equipment, making sure they've got a good long term network built so you're not having to do these upgrades over time that will eat into your operating costs.
Chris: Chad, is there anything else that you want to say? I think most of the people that are going to be really interested in this conversation are going to be cities where they're thinking to themselves we're going to be heading down this road and we're not sure exactly what to make sure we do right. I think a lot of cities are worried about how much trust they have to put into consultants. What can cities do to make sure that they're doing the best they can to be educated on the process and getting the best results?
Carmen: I think building out from what Carmen said there, keeping the costs and long term costs low, trying to minimize electronics out in the field. Any time you have electronics, you have cabinets, you have electricity and battery issues, plus you have to deal with how difficult is it to go out and troubleshoot the network. The more points or splitters you have deeper in the network, the more difficult that becomes.
I would just look at your network plan and how will growth occur, how will we handle growth, what kind of spare conduits do I have? If you're getting good solid answers from all those questions great. I would ask all those type of various questions, making sure that all your bases are covered. Talk to other cities and the problems that they've ran into and just insure that those are taken care of in your plan as well.
Chris: Great. Thank you both for coming on the show and helping us to better understand what goes into these early processes for planning and how to make sure you get the best result.
Chad: Thanks Chris.
Carmen: Thank you.
Lisa: That was Chad Glanzer, president, and Carmen O'Neill, assistant director of engineering, from Vantage Point talking about the factors to be considered when municipalities and other entities decide to invest in internet networks.
You can follow us on Twitter. Our handle is @communitynet. If you use Facebook, you can find us by searching for Community Broadband Networks. Please continue to send us ideas for the show. Email us at email@example.com. Thanks to Arne Huseby for the music this week. The song is Warm Duck Shuffle, licensed through Creative Comments. Thank you for listening to Episode 174 of the Community Broadband Bits Podcast.
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