Transcript: Community Broadband Bits Episode 328

This is the transcript for episode 328 of the Community Broadband Bits podcast. In this episode, Christopher Mitchell speaks with Joe Knapp, the IT Director for Sandy, Oregon, about the city's municipal broadband network SandyNet. Learn more and listen to their conversation here.

Joe Knapp: Our friends are users of the network. Our families are users of the network. People that I see at church or at the grocery store — anyone that I run into, there's a 68 percent chance they're going to be a user of my network.

Lisa Gonzalez: This is episode 328 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. It's late October and Christopher is at the 2018 Broadband Communities Economic Development Summit in Ontario, California. While he's there, he'll moderate a few panels, speak on some others, and touch base with people like our next guest, Joe Knapp from Sandy, Oregon. Sandy's community fiber optic network, SandyNet offers super affordable gigabit connectivity all over the city for around $60 a month. Joe has been on the show before to share their story, and we've covered the city's accomplishment by producing a report and a video about the network. Joe took some time out of the summit to give us an update on what's happening in Sandy and to talk about some of the elements that make SandyNet such a success. Christopher and Joe also discussed the possibilities of expansion to other nearby communities, the challenges Sandy has faced, and some of the community's plans as they now work on their long-term strategy. Joe also offers some words of wisdom for other communities considering a similar investment. Now, here's Christopher with Joe Knapp from Sandy, Oregon.

Christopher Mitchell: Welcome to another edition of the Community Broadband Bits podcast. Recording live today from Ontario, California at the Broadband Communities Economic Development Summit, sitting across from a former guest, Joe Knapp, the IT Director for the city of Sandy and SandyNet general manager. Welcome back to the show, Joe.

Joe Knapp: Thanks for having me.

Christopher Mitchell: I'm excited. You just came off a panel from the Coalition for Local Internet Choice. It was a good opening day to the conference, and I feel like it's a good time to dive back into what Sandy has been doing in the past and talking a little bit about some recent challenges, if we can think of any that you're having or if it's all just easy sailing. So let's start, and I thought maybe we could just go back and forth briefly to tell the story of Sandy in like 90 seconds.

Joe Knapp: Sure.

Christopher Mitchell: So Sandy is between Mount Hood and Portland. 11,000 people now and you could not get Internet access 15 years ago there effectively — like high-quality broadband of the day.

Joe Knapp: Right, exactly.

Christopher Mitchell: And so you decided to do wireless, and I know this is before your time, but the city of Sandy did.

Joe Knapp: Right. Yeah, we started with DSL and then moved into a fixed wireless network and then ultimately built a Fiber-to-the-Home network.

Christopher Mitchell: Right. And this was a Fiber-to-the-Home network for which you needed a take rate of like 50 percent in year five in order to be able to cash flow.

Joe Knapp: Correct. Yeah, so we wanted a 35 percent take rate year one and have that grow to 50 percent by year five.

Christopher Mitchell: And this is straight up municipal. You did not have a municipal electric. You started with a municipal telecom utility doing wireless — I feel like I'm talking too fast. People might be freaking out a little bit, so I'll slow down a little bit. Um, you had a municipal wireless and DSL system. You started a new utility for that, and then in 2014 you went Fiber-to-the-Home.

Joe Knapp: That's right, yeah. We started construction on Fiber-to-the-Home in 2014. Yeah, but definitely kind of went through several iterations of the network before we got to that point.

Christopher Mitchell: And you saw much better than 35 percent take rate in year one. Describe for me the dynamic of what happened?

Joe Knapp: We found as we started building — you know, you have a lot of presence when you've got contractors out in the field digging things up and making a mess. We found that the more we got out and constructed, the more people came out of the woodwork and wanted to sign up. So what actually ended up happening, we were hoping for 35 percent at year one and we ended up coming away with just under 50 percent or right at that 50 percent mark before construction was complete.

Christopher Mitchell: And so now in the year 2018, where are you at?

Joe Knapp: So we're four years into the existence of the network, and we are sitting at around 68 percent take rate.

Christopher Mitchell: Excellent. For other details, people should reference the video that we made with Next Century Cities. ILSR and Next Century Cities did a great video on Sandy. You starred in it.

Joe Knapp: Yeah, we love that video. I send the link out to that pretty regularly.

Christopher Mitchell: So I think the last time you were on the show, which I encourage people to go back and check out, Jeremy Pietzold, the city council president and political champion for the project — in general for better conductivity in the entire state of Oregon in fact. The two of you were talking about improving service to businesses. You had a new method to make sure that businesses had high quality connectivity.

Joe Knapp: Right. So we actually leveraged urban renewal funds in our urban renewal district to deploy fiber optic infrastructure to our business community. And we have wrapped up construction on that. We've actually still — it's been almost two years, and we've still got a little bit of splicing work and cable placement to do. But the bulk of the business district is connected and we're getting businesses hooked up at a pretty rapid pace at this point. And those businesses, especially for our small business community, get the benefit of the same price offering that we extend to our residential customers. So 300 Megabits synchronous for $39.95 or gigabit speeds for $59.95 for any business in Sandy.

Christopher Mitchell: [laughs] It's a hard life, and it's a beautiful city on top of it. I'm not surprised that your population seems to be swelling.

Joe Knapp: `Right.

Christopher Mitchell: You mentioned that in the panel. Tell us a little bit about what's happened in recent years.

Joe Knapp: We've seen a lot of development. I'd have to reference the article, but we did just see a study come out in Oregon with the fastest growing cities and Sandy was on the list. I want to say we were at number six for the fastest — sixth fastest growing city in the state of Oregon. So we're seeing a lot of housing development, and a lot of that's just because the housing market in the Portland metro area is just going crazy. And I think Sandy is just far enough away from that it just creates this nice little hotbed of development, and we've got great connectivity options for people that want to locate there as well.

Christopher Mitchell: One of the things that you mentioned in the panel also — the entire interview is not going to consist of me talking about your panel. But you did mention something about customer service, and I was hoping you could rehash that a little bit in terms of their opportunity to interact with the people that run the network on a regular basis.

Joe Knapp: Yeah, I mean, so one of the great benefits, and one of the topics that we were really driving at on that panel, was the importance of local and how that local presence makes a difference in the interaction with our customers. And, you know, one of the things that we really pride ourselves on in Sandy is all of our staff live in Sandy — all of our SandyNet staff lives in Sandy. They all are customers or users of the network. Our friends are users of the network. Our families are users of the network. People that I see at church or at the grocery store — anyone that I run into, there is a 68 percent chance they're going to be a user of my network. So we take that very personally. I think one of the comments I made was, you know, when we have an outage, it's not just my network monitoring systems that are sending me text messages, it's my neighbors and my friends and my pastor and my wife sending me messages to say, "Hey, are you having a problem?" It just generates a different level of support and investment and pride in the work that we do because we live and breathe it every day. And then the other aspect of that local element, and I've said this many times before, twice a month on the first Monday and the third Monday of every month, the controlling board, our city council, the controlling board of SandyNet meets in a public forum. So they hold their regular city council meeting. There's a section for public comment, and any one of my customers, if we're doing something that's not treating them right or not providing the level of support that they want, they have an opportunity twice a month to come and talk to our controlling board and their voice will be heard.

Christopher Mitchell: So one of the things that I sometimes get a question of is has the window closed in terms of building a citywide fiber network? You know, I'll admit I'm somewhat hesitant. If I'm talking to the city of Portland and I'm thinking, should they try and do what you did? I would say they should probably look at trying to achieve a similar outcome with different strategies. But if you hadn't taken action in 2014 and you're looking at the numbers right now in 2018, with the technologies that are out there, do you think you'd still move forward with a citywide fiber network in the same way that you did?

Joe Knapp: I think in the case of Sandy we absolutely would. And one of the driving factors for us to build was the lack of alternatives. And since we've built, I don't know if it's a direct result, I can't say it's a direct result of us building a Fiber-to-the-Home network, but our cable company has stepped up their game and is offering competitive services now. The phone company hasn't done anything but there is at least other option in our community. But that begs the question, is one option enough? Does one option really create a competitive environment where the consumer's going to win? And I think the obvious answer to that is no. So you know, if we were to start today, I would say even if the local cable company was providing the service that they are, we would probably still take a serious look at building just like we did and we still win customers from the competitor pretty routinely. As a 68 percent take rate, you can imagine, I mean . . .

Christopher Mitchell: Well, and knowing your take rate over the years, you must not have much churn. I mean, as the cable company has gone from offering pretty poor service to more competitive service, it does not seem to have dented your numbers.

Joe Knapp: Right. We're still growing and I think again, the big win there for us is local presence, outstanding customer service, and just pride in our network.

Christopher Mitchell: One of the things that I expected, you know, when we were working on the video and when I looked at how successful you were, was that by now you might be in a couple of other communities. You might be looking at expanding, whether you know you do it yourself or if someone else would build some infrastructure and you would run it for them. Can you tell me anything about some of the realities of challenges of that or if you've just been focused on Sandy. You know, I have no sense of what your life is like on a daily basis.

Joe Knapp: We've talked with several communities about partnering with them. It's kind of been a full range of opportunities, from the low level of just consulting and helping all the way to the high level of partnering with them to actually run and operate a network. And that's been from communities that range from just a couple of hundred premises up to communities that are actually larger, significantly larger, than Sandy. The interesting thing is all of those communities — there are still some that may flesh out and we may actually move forward on some projects, but it's a difficult sell for a city. It's a big thing to bite off, to build a network like this. So I think a lot of city councils, even though they see the success that we've had in Sandy, they're still hesitant and they're looking for a few more success stories before they'll dive in. But I think there's a few on the horizon, like I think of the city of Hillsboro in Oregon is another Oregon community that is actively pursuing a fiber network right now. We've talked with them and offered them, you know, help and any insight we can give them. The city of Sherwood has some initiatives that are going. Obviously MINET's a success story. There's several scattered around. A public-private partnership up in Maupin is occurring right now. So you know, there's several different things that are coming to fruition, and I think it's just going to stimulate that economy more, in the Oregon market at least.

Christopher Mitchell: And, is one of the issues, is there a political challenge in terms of . . . I know Jeremy is a strong proponent of improving Internet access and that's driving goal for him to improve it all around the state. But there's also just the reality that it might be viewed as improper for Sandy to take risks with a publicly owned entity by the city of Sandy, by residents within Sandy to try to improve access outside of Sandy. Has that come up much?

Joe Knapp: Not a lot yet, but we haven't gotten to a point where we've had to have that discussion, like, really down to the details. So we'll see what happens. But, you know, I think in Sandy we have this spirit of pioneering, I guess you could say. Our high school mascot is the Pioneers. But you know, we didn't like the service we were getting from TriMet, the Portland Metro bus system, so Sandy started its own bus system. We didn't like the service that we were getting from our providers, so we started our own telecommunications service. This isn't the first time that we've done things like this, and typically we also have an attitude of sharing with those around us. So I think if opportunities present themselves that make sense and the council doesn't feel that it's going to be an overreach of our capabilities or going to put us in unnecessary risk, I think it'll be a welcomed and received idea.

Christopher Mitchell: Great. I think one of the things if people here are listening and are in the area, you should be talking to your county commissioners and making sure they know that this tool is there and that if you feel like Internet access would be improved you should be pushing the county to step up. I know I've talked to some of the folks from many of the counties around there and they are definitely interested, but I think what moves it from a priority four or five to a priority two or one is citizen input. And so, I certainly hope that people who are listening to this and taking the time to educate themselves are also educating their elected officials as to what a priority it is.

Joe Knapp: Yeah, absolutely.

Christopher Mitchell: So let me ask you something that builds on the last question in some ways. What is your day like? I mean, at one time you were trying to do an amazing number of installs. You had a waiting list. You had people that were knocking down your door to get connected. I'm sure you're still expanding, but you know, is it all easy now that the fiber network's built? You just sort of sit around and wait for things to break and then rapidly respond? What do you do on a regular basis?

Joe Knapp: We are in the midst of basically longterm strategizing and planning, so the question is kind of what's next? Our current iteration of the Telecommunications Masterplan for Sandy, if you boil it down to a nutshell, says build fiber everywhere, so we can kind of put a big check mark next to that. So the question now is what's next? And it has been still certainly a lot of — with all the development that's occurring, we're doing a lot of planning and making sure that as development occurs, the fiber infrastructure is designed and implemented correctly. So there's a lot of that, a lot of maintenance that we're trying to catch up on on the network too because it's been such a flurry of installations that there's been some maintenance that had to be deferred Even though the network's only four years old, it's already in need of maintenance, which is an important thing to understand. Nothing critical or earth shattering, but just clean up and labeling and cataloging and things of that nature. And we've developed a software system to manage our network and manage our customer database, and there's been several iterations of that. So that's been a major, major focus, is how we can improve that tool and hopefully make it available to other municipal networks or any network really that wants to utilize a system like that. And then the final piece that kind of goes along with — like I said, we're doing a lot of long-term planning and strategizing — is as a city, we serve the citizens of Sandy within our city limits. Obviously that's the constituency of our elected officials. But really at the end of the day, there's a much larger area around Sandy that calls Sandy home. And they may not have a vote in our city, but they're certainly a part of our community.

Christopher Mitchell: They may even work there, but live just outside of it.

Joe Knapp: Absolutely, absolutely. And maybe they're business owners or you know, there's all sorts of interaction within our community. So there's kind of this question of how do we serve them. And I wouldn't say we've created an issue, but we've certainly highlighted an issue of disparity where in Sandy, you can get a gigabit service, but just on the other side of city limits, you're lucky to get maybe 50 megs, you know, is great. And in a lot of cases there's actually nothing. You can't even get — you know, your choices or dial up or satellite,

Christopher Mitchell: Right. I mean that part of your county is quite underserved.

Joe Knapp: Absolutely. So that's one of the things that we're looking at from a long-term strategizing and planning perspective, is how can we better serve the rural community that calls Sandy home? Certainly within our urban growth boundary and urban reserve, but even farther out into just the Sandy zip code, anyone that would consider this their community, what can we do to extend that access? And that frankly will probably keep us busy for the next 10 to 20 years.

Christopher Mitchell: What are the . . . Can you just dive a little bit more into the maintenance sort of thing. So you said, is it the sort of things where as you're installing rapidly you sort of leave a post it note: "clean this up later" ?

Joe Knapp: Right. Yeah, we come across things pretty routinely. Probably one of the biggest maintenance issues that we've encountered thus far is rodent damage. So we'll get rodents into our infrastructure and they like to chew on fiber for some reason. So a lot of times the fix for that is a very quick repatch, get customers back online. The long-term fix is we need to take that cable segment out and repole the entire thing and fix everything up. So there's a lot of things like that, that they're fixed and functional but they're not really fixed properly. We've had several pedestals get hit by vehicles that, you know, again, you can get services back online or put a band aid on it, but the proper fix might be, "Hey, this is going to happen again. Let's get this moved under ground." So we've kind of got a list of work orders going that need maintenance. We did realize too, in hindsight, we probably didn't label things as well as we would've liked when we built the network. So that's a major checklist item that we want to go back and do is label and verify everything and make sure our records are correct. And that software tool that we've been developing will ingest all that data, so we've got very good information on where everything is and where it's going.

Christopher Mitchell: So last question, I think, and this is something where I might ask you to be honest, because I think you may have a tendency to be really modest about it. But I think a big part of the success of SandyNet is you and the sort of passion that you've brought to it. And in the panel you mentioned that, you know, maybe 10 years ago, maybe 15 years ago, you wouldn't have known what GPON was. You know, you weren't someone who came to this with 20 years of experience from Verizon or something like that. So and you also mentioned on the panel that you felt that this was something that cities can take on and do themselves — smaller cities in particular. You said you thought it might even be better.

Joe Knapp: Right.

Christopher Mitchell: What sorts of things does a city have to do to succeed and make sure that they're not setting themselves up for just a lot of headaches?

Joe Knapp: Yeah, I've said in the past, you know, cities are already set up to serve residents. So the idea of — I mean most cities are already doing water service, they're already doing sewer service, some cities are doing electric service. The mechanism for a utility service is already in place in the majority of cases, and the idea of serving our residents is already there. So it's kind of a perfect storm from the perspective of the tools are in place, the mentality is in place. Adding the provisioning and operation of a Internet service on top of that is not rocket science. So, you know, obviously you need to hire someone that's got some network savvy, but to be able to learn to provision a Fiber-to-the-Home network is not difficult. I look at all of my staff. I have seven guys that work for me now.

Christopher Mitchell: Wow. When we did the video, I think you had two or three, didn't you?

Joe Knapp: Yeah. And before we built the fiber project, I had two employees and then we've since scaled up because we do all of our own construction and maintenance and installation now because I just don't like contractors.

Christopher Mitchell: I think you mean you don't like the challenges of dealing with them, right?

Joe Knapp: Yeah. I mean contractors are great for a project basis. But [for] long-term interaction with our customers and with our citizens we found that when that's an employee of the city, they just take more pride in their work and they've got more ownership of the network and the maintenance and all the things that they're doing. So it just gives us better control and when you think about it from the perspective of who's going to interact with your customer the most, the bulk of our customers, the only interaction that they ever have with SandyNet staff is when we show up to do their installations. So for contracting that out and I don't have control over who those employees are or what they're communicating when they're in the home — that just didn't make sense for us. And we tried it for awhile. Anyway, yeah, we have a staff of seven. All of those staff, when we brought them on, none of them had experienced installing fiber optics and none of them had never ever done underground construction. Only one of them had spliced a fiber before, but we've always just had this mentality of we can figure this out, we can learn how to do it. So whatever we need to do resource-wise to train and learn and grow, let's just get in there and do it and make it happen. And now, you know, we've got a staff that is fully capable of operating and maintaining and building a fiber optic network. We could literally, with the tools and staff and equipment that we have, built it ourselves. It would take much longer than a year, but we have the full capability to do it.

Christopher Mitchell: So just to wrap that up, I think, two things that I think you have advantages of that don't explain your success but other communities should be aware of, is that you had a very low cost connection to NWAX to get your Internet transit, via the county because of Clackamas having built a really good network to be able to do that sort of a thing. And then the other piece of it was, I don't think you had to do a lot of advertising to get your customers. I mean, you weren't really taking them away. If Wave had been a stronger presence, I wonder if you would have struggled after you hit 40 percent, for instance, to get the next 20 percent. And you can set me straight if you think I'm wrong, but I think some other communities might struggle to get some of that take rate up there so early, so quickly.

Joe Knapp: I think that's a fair assessment. And I often, when talking with other communities, say you need to take a serious look at who exists in your environment, if you're going to go about this. And I think too, it's a fair thing to ask, is there really a need for a municipality to come in and build a fiber optic network? If there are private providers that are doing the work and doing it well and the residents are being served in a way that's acceptable, then probably not. But if there is a need and if your constituents are not happy with the service levels that they're getting, then municipal fiber is a great option. But in an environment where you've got some of the bigger players that have a history of opposing endeavors like this —

Christopher Mitchell: And deep pockets.

Joe Knapp: Yeah, and very deep pockets. It's definitely a wise to do the research and make sure that you can . . . Basically, don't anticipate a 68 percent take rate in year four because it might not happen. But I think if you can model it to win with 30 or 35 percent, that's a great place to start. And if you look at a lot of municipal networks, do you due diligence. Look at cities that are of similar size because there's a lot of examples now around the nation. So look at cities of similar size with similar players in the market and see where their take rates are at and build your models off of that. But don't just go in expecting to win like gang busters in year four.

Christopher Mitchell: Right. Well thank you so much, Joe. I appreciate the check in and the reality check from someone who's been there for awhile. Congratulations on continuing to offer one of the lowest costs gigabit connections in North America. It's quite amazing what you've done.

Joe Knapp: Yeah. Well thanks for having us. It's always a pleasure.

Lisa Gonzalez: That was Christopher with Joe Knapp from Sandy, Oregon. Check out MuniNetworks.org for more coverage on Sandy and its network SandyNet. We have transcripts for this and other podcasts available at MuniNetworks.org/BroadbandBits. Email us at podcast@MuniNetworks.org with your ideas for the show. Follow Chris on Twitter. His handle is @CommunityNets. Follow MuniNetworks.org stories on Twitter. The handle is @MuniNetworks. Subscribe to this podcast and the other podcasts from ILSR, Building Local Power and the Local Energy Rules podcast. You can access them wherever you get your podcasts. Don't miss out on our original research. Subscribe to our monthly newsletter at ILSR.org, and while you're there, take a moment to donate. Thank you to Arne Huseby for the song Warm Duck Shuffle, licensed through Creative Commons, and thanks for listening to episode 328 of the Community Broadband Bits podcast.