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Update on Westminster's High Profile PPP Network - Community Broadband Bits Podcast 252
If you picked up the Institute for Local Self-Reliance dictionary, under "public-private partnership," it would say "See Westminster and Ting fiber-optic network." We discussed it with Westminster City Council President Robert Wack in episode 100 of Community Broadband Bits and he rejoins us for episode 252 to update us on the progress they have made.
We get an update on the construction process and the exciting developments around the Mid-Atlantic Gigabit Innovation Collaboratory (previous accomplishments noted here). One piece of good news is that they are hitting the milestones needed in the business plan for the network to break even financially.
We also discuss the importance of finding a good partner to work with. Communities seeking a similar partnership cannot just copy this arrangement - they might start with it as a blueprint but will have to mold it to their circumstances and partner.
We want your feedback and suggestions for the show-please e-mail us or leave a comment below.
Listen to other episodes here or view all episodes in our index. See other podcasts from the Institute for Local Self-Reliance here.
Thanks to Arne Huseby for the music. The song is Warm Duck Shuffle and is licensed under a Creative Commons Attribution (3.0) license.
Robert Wack: When he brings clients or vendors or just friends into his office, he sits them down at his desk and says, "Watch this." And he shows off his gig like it's his new, shiny, red Corvette.
Lisa Gonzalez: This is episode 252 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. When Christopher was at the Broadband Community's conference in Austin recently, he had the opportunity to check in with Robert Wack, city council president from Westminster, Maryland. Westminster is a town of about 18,000 people that decided the best way to improve local connectivity for schools, businesses, and residents was to invest in publicly-owned fiber and work with a private sector partner. In 2015, they began working with ISP Ting. Robert was the leading voice of the initiative. He gives Chris an update on how things are going in Westminster and the two talk about expectations, realities, plans, and challenges. Robert was on the show way back in 2014 for episode 100, when the project was just getting started. And we've written about Westminster for muninetworks.org as the community network has grown. Be sure to check it out. Now here's Christopher with Robert Wack, city council president from Westminster, Maryland.
Christopher Mitchell: Welcome to the Community Broadband Bits podcast live edition, coming to you live from the Broadband Community Summit with Robert Wack, the city council president from Westminster, Maryland. Welcome back to the show, Robert.
Robert Wack: Thanks, Chris. Glad to be here.
Christopher Mitchell: I'm excited to get an update, because I know that things have been going well. I've been following and I don't think we've talked about this much since maybe we did a podcast talking about the public-private partnership as you were getting it kicked off.
Robert Wack: It was a long time ago. And as you recall, in the fall when we saw each other in Minneapolis, I said, "When are you gonna ask me to come back and talk about our project?" And you gave me a look and said, "Well when you have numbers, real numbers, to talk about, then we'll have a discussion."
Christopher Mitchell: That sounds more honest than I normally am. So I'm not sure that that happened.
Robert Wack: No, I think we know each other well enough now that you're honest with me. And you were pretty direct.
Christopher Mitchell: Yeah, we've probably have a whole four or five guests lined up at that time and I was feeling pretty good. But when I have people face-to-face, I love to be able to do the recording here in this very professional studio in my hotel room. So let's just do a quick reminder for people who aren't familiar. If you were just ... If you had a elevator pitch for what you're doing in Westminster, how would you describe it?
Robert Wack: We're building a community-wide gigabit, broadband network using a unique and innovative public-private partnership model. The fiber is completely owned and built and maintained by the city of Westminster. And our private partner, Ting, lights the fiber and installs the equipment and has the customer service relationship with all the residents and businesses.
Christopher Mitchell: Now let me ask you ... Because I know that you pay really close attention to what's happening out there. What do you think is most unique about your approach?
Robert Wack: Now that I have seen more projects all across the country, our project is even more remarkable than I originally understood, because we started with nothing. We didn't have municipal utility. We had no native fiber experience or skills within our city employees. Frankly, we didn't know what the heck we were getting ourselves into. But we knew we wanted to do it. And it's been a very steep learning curve. And had I know back then how hard this was going to be, I'll be honest, I might have had some second thoughts. But we've done it, or we are doing it with considerable success. And the other thing that's remarkable about our project is our relationship with our partner. Ting is a fabulous company to work with. They've been as interested in creating innovative solutions to this tricky space of, "How do you divvy up the responsibilities of creating a gigabit fiber network in a community?" But not pushing either partner outside their comfort zone. And they've been great to work with.
Christopher Mitchell: Let me tell you what I think is something that is incredibly unique and I hope continues to get people thinking along these lines. And I'm curious how you react. Your relationships with Ting is, as you alluded to, I think unique in the sense that I don't that there's another place where that relationship is happening, even where Ting is working with other cities. You divide up the responsibility in the event of an event where you don't have enough money for debt service. If the network is not producing enough cash, you pay, the city pays a certain amount. Ting pays 100,000 dollars and then you pay the rest potentially. So it actually, for the first 200,000 dollars of overage, splits it down the middle, right? If I'm remembering it correctly.
Robert Wack: Yeah, more or less. Yeah.
Christopher Mitchell: Right. So it's a little bit complicated, but it's something that we haven't seen anywhere else. The thing that I thought was genius was that Ting pays you, because you own the fiber, and Ting pays you for homes that could connect to the fiber but are not connected to the fiber, thereby giving them an incentive to do a really good job advertising.
Robert Wack: Exactly. And how we got to that is something I've been talking about a lot, but I'm not sure it's catching on. I don't know if that's my fault or if there's a problem with the idea. But it's thinking about fiber as real estate. So if you think about a shopping mall and you go into a shopping mall and you want to open a yogurt stand, you're gonna pay a base rent. Even if you never make a penny, you still own the landlord a base rent. Now some real landlord will do interesting things where they will give you a cut, a break on your base rent in exchange for a piece of your business. So if some percentage of your profits or your revenues. So we looked at that. And ours is skewed more heavily toward the performance part. So we get a bigger payment for a lit customer than we do for a passed premise. But the passed premise is exactly what you said. It's an incentive. It's a base payment to help us cover our debt service, but it also creates a very powerful incentive for them to get those customers lit. And it also creates an incentive for us to help them get customers lit. And because when we did our research looking at other projects that have failed around the country, that was one of the things, is that there weren't aligned incentives all the way along the process. So there's incentives aligned during construction, but then the operations part and the customer service part and the subscriber enrollment part, there have to be very concrete, real incentives for both parties to be working together at each of those stages, even though that thing may be more one party's responsibility than the other. You want them helping each other all along.
Christopher Mitchell: To what extent do you think your successful relationship with Ting comes out of Ting being a really interesting partner versus the contract that you drew up with them?
Robert Wack: That's a really interesting question, Chris. And I refuse to be drawn into the false dichotomy that you're proposing.
Christopher Mitchell: It was a brilliant contract with the right group.
Robert Wack: This is like choosing between your spouse and your wedding vows or something like that. It's both. And they are a function of each other. We wouldn't have the contract we have without Ting as being the partner that they are. And vice versa. We wouldn't have Ting as a partner if we weren't willing to be creative with the contract and do innovative things, so I think they're inextricably intertwined. You can't separate them out. But that should be a goal, going into the relationship knowing what both parties want and then being willing to do whatever it takes to make it happen.
Christopher Mitchell: But also then a lesson that one can't just take your contract and say, "We're gonna do it with this group."
Robert Wack: That's correct. That's another lesson from this. As I've gone around the country and looked at other kinds of projects is there's no template. There are some principles. There's some basic concepts about risk-sharing and proper allocation of risk between the parties, but the devil's in the details. And those are gonna be a function of the unique characteristics of the community, the local government, and the partner and the kind of project, and the community, the features of the community and what's possible and ... So yeah, every contract, every partnership's gonna be unique. But there are some underlying principles that are common to all of them.
Christopher Mitchell: Let me ask you then, you said you have some doubts as to whether maybe you might not have done it based on how difficult it's been. Well, what has been the most difficult part of this? Because I think from afar, we just see you rolling and rolling and rolling and it looks like it's working pretty well.
Robert Wack: Yeah, that's a good point. I'm probably ... My perception is skewed because I live it day-to-day. One of the biggest challenges has been we're pushing our municipal employees, particularly the folks at public works, really hard, way far outside their comfort zone, because fiber stuff is not anything they've done before. And they're doing a great job learning it, but it's a lot to learn. The other piece is just managing the vendors in this space. It's something that's new. We've never contracted with fiber engineers before. We've never contracted with fiber construction companies before. We don't have that capability, so we are relying totally on them to do the work the way it's supposed to be done in a timely manner under budget. And that's a lot of work managing that. So we're getting better. But I'd be lying if I said it's been perfect. There have been little snags along the way. And then there's stuff that's out of our control. So for example, the fiber shortage in the last 18 months. It's gotten better, but we had a solid six months where we couldn't do anything, because we couldn't get fiber. And that was a result of all the other activity around the country. And didn't plan on that, but you had to deal with it. Weather was another thing. And the whole utility locate thing. We are putting such a burden on our local utility locating company that there are delays sometimes because of that. We ask them to come out and do 100 locates, because we're getting ready to plow through a neighborhood and they can't keep up with us. So little things like that. But they add up. And so we're behind schedule, not catastrophically so. We're certainly under budget. Our guys have done a great job managing the construction costs. So we're doing really well in that regard. And now our take numbers, our subscriber numbers are really picking up. So we're very pleased overall.
Christopher Mitchell: Right and so as a refresher for people, you have Comcast and Verizon DSL, those two service providers in the area. They haven't done much real investment to keep you current. You partnered with Ting. Ting is rolling out ... You're doing this in an incremental fashion. About how much of the community has service already?
Robert Wack: We're probably at about 20% of what will ultimately be the total build. The pilot project was pretty small relative to the rest of the city. This first phase that we just lit is about 800 premises. And then this next phase after that is another 1700. So that'll be completed by the end of this year. So that will end up being about 30%. 30-something percent by the end of this year will be built out. So still early, relatively. But as I've said, we're very pleased with the subscriber take already even in this early stage.
Christopher Mitchell: So what're you seeing?
Robert Wack: North of 30% for the pilot project and then in phase one that just got lit, we're already at 15%. Altogether, then with those two pieces, it's about 10% of what's been constructed. So not where we want it to be. We want generally to be north of 20% for the whole thing, but the trajectory is in the right direction.
Christopher Mitchell: If I remember correctly, you are obligated to go to the next phase when you hit 20%. So sounds like, I mean if you're that close that quickly, it sounds like you're doing what you were expecting to do when you were making the plan.
Robert Wack: 20% is kind of a guideline both Ting and we agreed to. But there's wiggle room in the contract that allows both of us to say, "Hey, speed up. Hey, slow down." And so it's a discussion. And again, it goes back to the partnership and the lines of communication and their efforts and success with their subscriber enrollment and the pre-subscription numbers are sufficient enough to give us confidence to keep moving.
Christopher Mitchell: Just reminds me of the line from Pirates of the Caribbean, if you can remember back to, I don't know, 20 movies ago when it first came out. It was: "The pirate's code, more of a guideline than-"
Robert Wack: "It's more guideline, love."
Christopher Mitchell: So you are aiming for city-wide for people who are not gonna go back and listen to our original interview. I'll spoil it for them. You're building out city-wide.
Robert Wack: City-wide. That will end up being over 7,000 premises. And then, we're already looking at building beyond the perimeter of the city. Assuming we have a continued success that we're having now, we'll start looking at ways to finance extending it out to our entire water sewer system, which will end up being about 15,000 premises.
Christopher Mitchell: Wow, that's wonderful. And Carroll County already has some fiber infrastructure, so I hope that helps a little bit.
Robert Wack: It will, a little. Mostly what's near the city is gonna be all us. But the county's interested in working with us. So.
Christopher Mitchell: When we last spoke, I feel like you already had some early business excitement. You had a business that brought more ... They were coming into your community. They brought more into your community than they expected because of this infrastructure. Do you have any other exciting stories, anybody stopping you at the grocery store to say, "I can't believe how wonderful this is!"
Robert Wack: Well actually, yes. One of my colleagues on the council ran into somebody at a soccer game or something and it was a father of a family of four in one of the neighborhoods that we just lit. And this guy almost threw himself weeping into the arms of my colleague saying, "Thank you. You have saved my family, because our internet before was so crappy that the kids were fighting all the time. I couldn't get work done. My wife works from home. And it was a nightmare. And we got our Ting lit up and for the first time in years, everybody's happy. And we can all do whatever we want: stream movies, download large files. And nobody has a problem and everybody's happy."
Christopher Mitchell: That reminds me of a story. This is actually something that never gets discussed in public policy, I feel like. That's important, right? That's like a ... And you're a doctor. And this a measurement of quality of life-
Robert Wack: Stress.
Christopher Mitchell: And health. Stress? Yeah.
Robert Wack: Yeah.
Christopher Mitchell: There was a family we interviewed in Ammon, Idaho that they were on the city ... They were on the cable system that the city was building a fiber network to basically offer people good service, because the cable system was so bad. And this is a cable system that's advertising gigabit speeds. But the modems, they keep, people's cable modems, kept cutting out. And so these people would say every Saturday morning, they'd be woken up by their kids early because they'd be like, "We can't get on the computer. We can't do this. We can't play the games." And as soon as they switched over to the ... They were beta testers on Ammon's municipal fiber network. And they were just talking about how they got to sleep in on Saturday mornings now.
Robert Wack: Well so along those lines, we have a business locally who's a software development company. And as you may know, in software development, it's usually a distributed process. So they have developers in other countries, all over the United States. And they're moving big files back and forth all the time to test modules and it's just a part of the process. It's a very iterative process. So he said once they got their gig, that it shortened their development time by days and when he brings clients or vendors or just friends into his office, he sits them down at his desk and says, "Watch this." And he shows off his gig like it's his shiny, new, red Corvette. Those are his words, "Because this is my shiny, red Corvette. Watch this." And he does a speed test and starts doing stuff and it's made a significant impact on the efficiency and profitability of his business.
Christopher Mitchell: I believe it. One of the things that I'd like to do is, I think, is not to tell people. To have them sit down and say, "Hey, just go check out some news sites or do something you'd normally do online." And just see how they react and if they notice a big difference. I suspect they would. They may not notice it immediately, but once you call it to their attention, I would guess that they would just be blown away.
Robert Wack: There's a video out there from our fiber lighting ceremony. And the Ting folks put it together. And there's a short clip showing a young girl with her phone flipping through some stuff. And that's my daughter. And you look at the smile on her face. She said literally, "This is unbelievable. This blows me away." Because she was flying through stuff on her phone just from the wifi connection from the gigabit at the place we were. So yeah, it is a mind-blowing experience when you feel it and experience it for yourself.
Christopher Mitchell: So I want to get onto the discussion around what you're actually doing with it in a minute. But first, have we covered all the nuts and bolts in terms of the numbers that you're seeing and your experiences with the infrastructure stuff?
Robert Wack: Yeah. I mean, so we're a little behind schedule. We are under-budget. And our subscriber numbers are hitting the targets that we're expecting. And we are covering our debt service. That's probably the most important number from the municipal finance perspective and the replicability of this model, is that this is paying for itself. So this is a 21 million dollar project that, at the end of the day if we stay on track like this, it will not impact city finances by a penny, because the revenues generated by the fiber will pay for the fiber. And that's a really, really important thing for people to know.
Christopher Mitchell: That's interesting because one of the things that I perhaps falsely remember was that you didn't make a huge deal about that. I mean in some people, they make this whole thing: "Your taxes will not be raised. We are going to build this network without using a penny of tax payer dollars." I seem to recall ... I know that you live in a more conservative community, but I seem to recall you saying, "This is infrastructure. We're gonna make it work."
Robert Wack: Chris, that's called managing expectations, my friend. So you're right. I did not make a big deal out of that. Because I didn't know, with a capital K, that that's how it was gonna work out. But now that we have data and it ... That was our intention for it to work out that way, but we weren't gonna lead with that. Because if we didn't deliver on that, it would've been a big problem. So yes, we opened with the argument that this is infrastructure and this is our responsibility as municipal officials to provide this kind of infrastructure, because it's good for our economy. And that's it. But the plan all along was for it to pay for itself. But we weren't gonna lead with that, because we didn't know for sure that that was gonna be the case. That's politics, baby.
Christopher Mitchell: Well that's successful politics, maybe yeah, not just politics. What's MAGIC?
Robert Wack: MAGIC stands for the Mid-Atlantic Gigabit Innovation Collaboratory. And what MAGIC's mission is, it's an independent non-profit that's building economic development around technology generally and broadband infrastructure specifically. A thing I'm involved with that's going to leverage our fiber infrastructure and hopefully turn it into jobs and new companies in our community and new investment dollars. As Jason Stambaugh, our former executive director says, it's a magic trick. We turn fiber into jobs and investment.
Christopher Mitchell: I think this is something I really want to spend a few minutes on. Who are the people that are in the Collaboratory?
Robert Wack: Right now, it's a combined effort between MAGIC, our library system, the career and tech center that's part of the Carroll County Public Schools, the Community Media Center, and the community college and McDaniel College. So we've got all the educational institutions involved. And we do three general categories of things. One, we call tech experiences, which is really just another way of saying workforce development. We try to draw as many students in as possible into technology programming that gives them new skills, gets them exposed to employers, and hopefully gets them into internships and part-time jobs. The second group of activities we do are what we call our innovation labs. And these are demonstration projects for different kinds of technology. And that one ... The sort of the flagship of that category is our smart home project, which is tied into the fiber network. And we're doing some really cool work with telehealth with that. And then the last is sort of the more traditional incubation effort where we are assisting startups with mostly business development kinds of services. We do not have a building. We're not in the real estate business. We're not leasing cubicles. That, when you're saying incubator, that's typically what people go to right away. "Oh, you got a cool building. Or you've got young people hanging out playing Foosball and--
Christopher Mitchell: Free pop.
Robert Wack: Yeah, right. No, we're not doing that. We're not doing that yet. Maybe some day. When we've got 100 startups that can't find office space on Main Street, that's a good problem to have. And then we'll do that. But right now, we've got plenty to office space on Main Street, so we're not doing the real estate thing. But we are helping startups.
Christopher Mitchell: If we fast forward five or 10 years, how will you know MAGIC was successful?
Robert Wack: There will be a lot of 20-somethings crowding the bars and cafes on Main Street. There'll be a lot of cool logos visible from Main Street, because these companies have taken up office space on Main Street. We'll have some splashy announcement about some venture capital group dumped five million dollars into a Westminster, Carroll County-based technology company. But most importantly, we'll have kids graduating from local and area schools saying, "I'm going to Westminster, because that's here all the cool stuff's happening." And believe it or not, just in the little over a year we've been in operation, we're getting that already.
Christopher Mitchell: No, I believe it. And part of the reason I say that is I grew up in eastern Pennsylvania. Family friends who have some daughters that recently graduated from college, they love going down to Baltimore. And they drive down to Baltimore for weekends regularly. And the idea that someone would say, "Oh, wow. Like I'm so close to Baltimore. All this culture and cool things happening. I can live out here in Westminster where all this cool stuff is happening." And it just seems like it's an exciting place to be.
Robert Wack: That's what we're shooting for.
Christopher Mitchell: Lafayette, Louisiana. One of the things that they did was really trying to create jobs locally so that kids will not be leaving. Are you seeing ... Like I mean, what are you seeing from some of the kids that are going through this, because I think this is one of the main reasons communities build these kinds of networks is to make it exciting for kids to come back. So one thing is the culture and that sort of thing. But what kind of ... The first thing that you mentioned in terms of creating the jobs and that sort of stuff, it may not be sexy 75-100,000 dollar a year jobs, but what kind of jobs are you talking about there?
Robert Wack: First of all, it's very early in the process. So the positive indicators we're seeing are very small and subtle. But they're real. So we've placed probably about a dozen kids into internships and part-time jobs with local tech companies. You know, some might say, "Oh that would've happened anyway." Maybe not. Maybe some of these kids would've gone elsewhere or maybe the tech companies would have looked elsewhere for these employees. This is a five to 10 year project of growing these companies and getting kids placed. In terms of the kinds of jobs, what we've seen so far it's web development. It's software development, coding, some network stuff, cybersecurity. Those are good, reasonably well-paying, white-collar jobs that we want more of in our community. Like many rural and semi-rural communities, our local economy is skewed heavily toward school system, local government, the hospital, and maybe one or two large manufacturers. If any one of those things has a problem, that's a major negative impact on our local economy. So we need to have a more diverse local economy with lots of small businesses, because there's a substantial body of economic research that says that net job growth is 60 to 80% of net, new job growth comes from small businesses and entrepreneurs. So we need more of that. And that's a big part of what we're doing and the fiber infrastructure is a unique asset now that we in this community that will hopefully be an engine for creating those jobs, attracting those entrepreneurs, and getting that net new job growth that's gonna drive our economy for the next 20, 30, 40, 50 years.
Christopher Mitchell: What is the best unanticipated thing that has happened? Like what is something that came along and just hit you out of the blue? Like when I started thinking about building this fiber optic network and arguing that we should do it, something that you did not expect to happen that's happened, if there's anything.
Robert Wack: The fiber project has unrolled how I hoped it would unroll. So there haven't been any big surprises there. I guess maybe the surprise is that I was right.
Christopher Mitchell: Not used to that?
Robert Wack: No, really the big surprise is with MAGIC. The totally unexpected thing that's been a big engine driver of the success and rapid growth of MAGIC is I never realized how many technology professionals we already have living in our community that drive into Baltimore and Columbia and Washington DC and northern Virginia. And they're in the car for hours. They hate it. And they want to do anything they can to help do what we want to do in terms of creating jobs and creating a technology ecosystem in Westminster and Carroll County. So we had this army of volunteers that have been helping us with our programming and projects that are all really high-skilled technology professionals that want to do this because they see the long-term benefit for their kids and everybody's kids for creating this thing out of nothing for our community.
Christopher Mitchell: Well that's great. And I'm incredibly excited. For people who really want to know more of the nuts and bolts, we covered it in a paper that you can find dealing with public-private partnerships and what we took away in terms of the best parts of the model of Ting of Westminster. So let me just say thank you so much for coming up here and letting us know the update.
Robert Wack: Thanks for having me.
Lisa Gonzalez: That was Christopher with Robert Wack, city council president from Westminster, Maryland, getting caught up on how the network has impacted the community. We have transcripts for this and other Community Broadband Bits podcasts available at MuniNetworks.org/broadbandbits. Email us at podcasts@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 all of the podcasts in the ILSR family on iTunes, Stitcher, or wherever else you get your podcasts. Never miss out on our original research. Subscribe to our monthly newsletter at ilsr.org. Thank you to Arne Huseby for the song, "Warm Duck Shuffle," licensed through Creative Comments and thanks for listening episode 252 of the Community Broadband Bits podcast.