Yesterday, at the SHLB Coalition’s conference, Gig.U and Gigabit Squared announced the nation’s first gigabit network deployment fund. Get the details today with our guest, Mark Ansboury, CEO of Gigabit Squared.
Under this $200 million Gigabit Neighborhood Gateway Program, capital is available to support up to six select Gig.U member-sponsored projects. One of the desired outcomes of this project is that the gig networks funded will provide platforms for innovation, next generation application development, workforce development and job creation.
Will this fund open the gates to more creative investments in community broadband? Will Gigabit Squared’s action put pressure on Google to accelerate its Kansas City network project? Is this the beginning of a trend toward alternative financing for broadband as traditional government grant programs slow down.
Find out answers to these and other important questions. For background on Gig.U, listen to this Gigabit Nation broadcast with Gig.U founder Blair Levin.
Good afternoon. This is Craig Settles and you are with us today on Gigabit Nation, broadband talk radio. We are covering topics everything related to broadband and how to get broadband in to more places where broadband needs to be. I am here actually at the SHLB show which is a conference coalition of folks all involved with broadband and it has been an interesting two days of discussions and lectures and so forth and you know a lot of good gathering information and networking. And then yesterday, we had a bit of a surprising lunch when we discovered that there is a new fund out there, a new source of investment for broadband and it's a very interesting project that is behind all of this. And I figure -- let me jump on the stick really quick and answer some of the questions that people have been asking me about you know, what's going on? How much money is it? How we can we get some of it? So I decided to go to the source, I have today as our guest Mark Ansboury, who is the president of Gigabit Squared. And Gigabit Squared is the private sector company that in partnership with Gig.U is making this whole program happens. So Mark, welcome to the show.
Well, Craig, thanks for having me here. I appreciate it.
No worries. No worries. This is like breaking news. Yeah. I'm still so jazzed about this thing. So let's cut to it, what do you have -- how does it come together and what can we expect out of the back end?
Well, I got to tell you Craig, this has been an interesting journey for us. We first got involved with this at the end of last year and what happened is that the consortium of universities got together and they said, "You know what, if we are going to impact broadband we got to do something about it." And universities are the corner stone with a lot of innovation.
In the creation of Gig.U what they said then is, 'Why don't we submit and see what the community is going to do.' Let's send it out to the vendors, let's send it to providers, listen, bring everybody to a meeting and see if they're gonna participate.
All the big providers were there and a lot of vendors were there and we had the opportunity to be there and what we saw in the consortium was a combined effort to get it done. But the real need was to create a roadmap, you know, what does it really take to deploy broadband in our communities? So we responded to the RFI, we built a consortium. We actually came to sort of a self-organized team of vendors and partners and people who have really done this before. You know, we have done this over and over in multiple communities so we brought G4S. They helped Chattanooga, they helped Lafayette. We worked with Juniper, we worked with Level 3, we worked with Alcatel-Lucent and worked with Calix. We brought the right kind of vendors to the table that we know can really implement a successful broadband implementation. And by putting them together, then what we also needed to do was to create a financing vehicle that could help fund us, but in response to the RFI we approached this as the communities have to demonstrate the need for the broadband.
If you can demonstrate the need we can create the great business models to make it work. And so after the RFI and after response, we started talking to the universities and one of the things we realized right away was you know what, we really have to lay out the roadmap for them. I mean we can't just tell them what this is about and what they need to do. We need to give them a roadmap and we need to give them -- to become a catalyst for them and actually executing a strategy.
We spent some time developing a number of financial vehicles working with banks and working with private investors just to get an idea of what kind of structure do we need to put together to you know really put something on the table for the universities and the communities and everybody loves the idea of universities being part of that process. So what we were able to do is identify a program structure. We were able to identify an investment strategy and model so that we can put $200 million to work with the right partners.
And so what we have done now is actually develop a request for a proposal, we have submitted that to the Gig.U universities so that they could structure their programs and activities work with their municipalities, work with their other local stakeholders to come up with a strategy. And for us it's a about them participating in that engagement so we took a page out of Google Spyware. And we just want to make sure it's a little more structured and that it fits a good strategy and that we can develop something that has long-term sustainability.
Okay. So let me get a couple of -- well, actually let me get a little background. Because I mean I have known you for a while and you have been at this broadband stuff for a while. You started -- well, let me rephrase that. When we met, you are with one community and...
And that's the -- but yeah, I guess you did stuff in broadband even before then.
You know, I have been in the business for longer than I want to say, I can bring here to prove it.
Okay. We won't force you. (Laughs)
Well, thank you for saying that. You can guess but, no I've been in the industry for quite a number of years and actually served as director teleconference state of Texas and I've been in the public sector, I've been in the private sector started my career in the late 90s. You know I've been in the non-profit sector and that's where we met and actually trying to create a new innovative business model which we did with Cleveland which then became one community. And that actually really opened my eyes to a lots of different ways to do this, there was no single plan. What we saw is that you can get community stakeholders to get together. You can aggregate demand and create a real viable business model for implementing broadband infrastructure which then permeates to the community. You know how to get everybody get ubiquitous access.
Which is the real goal here at the end of the day. And you want to get this in a fashion that is symmetrical and you want to make sure that all people have access to equal capability and services because that's where innovation really comes in. At one community what we were able to do as a non-profit, we were able to get grants. We were able to raise some capital, we did some borrowing. We got stakeholder investment and we created a model that everybody contributed in over six years we brought in $150 million. We created a 2500 round model cyber network. We connected healthcare, we connected schools, we connected you know the government. This was even before Stimulus.
Right. That's right, because we have met before the Stimulus thing was a done deal.
And when Stimulus became an accelerator that was really helpful.
But one of the reasons why we created Gigabit Squared is we realized that the Stimulus which was 7.2 billion invested into broadband was largely focused on middle mile. It didn't focus on that last mile which is really the connection where you need to be able to create a high capacity connection and community.
So there is the fight with some kind of strategy and what we also saw through this process, we have the AT and T U-verse and we had FiOS from Verizon. But they are not everywhere and in fact they are not building to all their communities.
We see the challenges in municipal networking. We see the opportunities; we see states are banning the opportunity for municipalities to participate. So we've got to create a new wave. We've got to create a vehicle that helps bridge the gap between what I call the public and the private sector in such a way that we can create partnerships.
And we can create investment vehicles that leverage the public investments that already there. They already have some cost, they are spending in services or spending in you know aggregate capacity and put that together with private capital and create a multiple so that the private capital is a large investor in the infrastructure.
Which enables them more advance broadband services in the community.
Okay. So, I'm going to break that down as I see it for the audience and you can tell me if I am spot on or not. So Gig.U the driving primus there was that if you had a creative entity that had access to high speed networks, you could create in essence a sandbox for lack of a better word that would be able to foster the development of application. Right? Is what the big deal so far?
I think that's a good one.
Okay. And then when I look at the RFI, RFI was saying 'Okay, we want to foster more of these environments, more of these sandboxes.' And I know this from other people that I talked to about responding to the RFI, you know the big question was always about money. So like if we do this exercise, if we create these pallets and we create these projects, who is going to have the money to help bring those to market?
And so there was sort of a thing of you know, where is the money? We understand now the process of the sandboxes if we will, but where is the money?
And so -- and then what's interesting as I just wrote a report on finding alternative avenues for funding broadband which steps aside from the grant process and sort of the traditional if you will funding to look at getting community investors, working with community foundations and so forth. And the thread that goes through that is if you find people who are committed to the concept, you make investors out of them and you can raise a fairly decent amount of money both in the community level and at an institutional level if you use that first round of money that you raised and create a you know viable starting project. It's kind of like what ECFiber is doing.
Yes, we were there.
They have blown out, they raised enough money in three separate rounds to build enough of a network to get enough customers and start creating applications improving the value and then you want at some point goes into an institution or an institutional investor and say we've got a viable model and we've got demand.
I think that's what Blair talked about yesterday where the network's chasing demand versus they kept this network by trying to figure out we'll how we build demand for it. So yesterday's announcement seems to be then the culmination of the last missing part, which is a clear path to money. (Laughs) Right. But that kind of completes that loop if we use some resources, we use some local folks, we create a network, we create applications, we prove a case and then we go out and we petition or lobby for money. And as long as it's not necessarily government money, it's private sector money, which I understand has certain values. I have a community already questioned about that, but I just want to make sure they are reiterating what the logic behind all of this and where we are.
You know, you are really on target as what we put together as an RNP for Gig.U communities.
And it was the idea that a community has unutilized access how do you put those to work? That community has a certain kind service demand. That the community has the capability to aggregate capacity and demonstrate the need and value for a broadband. And in doing that, then you can create the financial vehicles, you don't care if it's public, private, grant, it's you can create the vehicle that justifies the value proposition for bringing that kind of capital to table to help fill out the network.
And so it's an old business paradigm. I mean really. And my partner Robert Jennings, he has really got me to think of this really differently. It's no different than a media developer. A developer builds the strategy, he also brings the right parties to the table, the construction parties, their engineers or architects or designers or users, consumers. they brings us together.
And then in simply doing that, that's part of the development process or he can be an investor in the process and actually help to implement the program and the project with a new building, whatever. And he can actually be the owner of the project and build it on and operate it.
When we look at digital infrastructures, it is no difference in building. You're putting in infrastructure in place and as a digital developer we look at this and say 'You know we can help communities to develop the strategy.' to help them and get the right tools, practices together the right business sort of structures so that they can go right capital. We can in this case in Gig.U what we are offering to be is an investment partner and we are saying we'll invest in that. And we already know that even some of the Gig.U communities will come back to say 'We don't really want to be -- we want to partake in this and will contribute to this but we don't want to operate it, so you operate it for us.
So we see lots of different business models happening as a result of the work that we are doing. What we are trying to do with this model and our particular paradigm is inspire lot's of different business strategies. It demonstrates that this can be done in multiple communities, that it's not just how Google is doing one community.
Okay. How do you do this in five or six or ten communities, how does somebody else replicate the model when communities are so different and things have to adapt. And what we want to demonstrate through this project is you can have lots of different funding vehicles, lots of different contribution on different business make ups like you need development project, you just have to know that there is a structure. How do you build the structure that's right for that community and then find the right resources to execute?
Alright, okay. So I am going to shift just a little bit. I am going to walk through in the mixture to understand the process from here. Gig.U I think currently has 35 or 36 members. In talking to Blair yesterday, he says it was capped initially just so that I can get thing up and running. I don't wanna have it be too massive and couldn't be manageable. So they capped it initially at 36, they formed some more structure, they got feedback and so forth. Now they are opening it up to a wider audience of colleges, the idea being that the college is sort of the anchor innovation tenant, if I can coin a new phrase. Basically they will be a driving force in the community around them, and these will be the potential buyers, the potential subscribers, the potential organizations that would use broadband. So, that's scenario. June 15th, I believe it is. It's the deadline...
It is July 31st? Okay.
July 31st and October 31st. We decided to do this in two ways.
Because we knew it was summertime and, you know, more colleges...
That is true.
It's gone away for a little bit.
(Laughs). Now is there a cost to be a member of Gig.U?
There is a cost, you know, I have to ask Blair on what...
There is a membership fee to do that, but I think it is more of universities who joined the dynamics of that changes.
And then I know that -- you know, the initial 35 which is really reasonably focused on Gig.U at the moment. We needed to have a constrained environment to response to. We couldn't response to a thousand communities. We're not a group.
So we wanted to have an environment that we knew we could work with that could adapt and we could build a program.
I think that's where Gig.U really comes in. They have the relationship with the university institutions, and then as you heard, and I just kind of want to comment and I said this is a little bit in the announcement yesterday is that universities are known for innovation, right?
They are known for creating, you know, education and workforce kinds of things, but what we often forget is that universities also are part of the community and that community innovation.
You know, the professors, the students; they're all part of that community, and often a fact, the innovation that goes on within the community at __16:29__.
So I suggest it is important to engage them and they become that engagement partner that helps really promulgate these kinds of concepts and ideas further and further in the community.
Okay. So, at this juncture, between now and the 31st and now and October, people who are interested should either rally their community, to rally their college, or they should rally the college -- so, you know, pull it all together and first become a member of Gig.U, then get the RFP, which they will then -- it will have all the information and parameters for what you are looking for and so forth and so on. And then they will submit the RFP and then you will have -- I'm sure it's spelled out the parameters for how they will be critiqued and judged and eventually finally awarded and so forth.
And then after -- it will be a feeling on how much they can respond for....
So we're going to tailor. So that's a good question and I like to speak a little bit detail to it. We have not set a fix amount on a program, you know. So we don't know how one community is going to look like personally.
If I have a community, it is a $100 million.
We might have a community that's $5 million. I mean, this can vary pretty dramatically.
I mean, we're dealing too with some colleges that are in small towns.
You know, we're not dealing with everybody into one community. In fact, we think that the real opportunity here is a small (inaudible).
Because they are the ones that have the most need and the biggest demand where people aren't making that kind of investment.
So they can be the catalyst for the investment in the smaller towns, which also become the anchors for rural communities, etc.
It's a part of a larger region. So in this particular case, we're going to be very flexible so the investment is based on the right kinds of projects. They have to be sustainable. We're not doing a project that does not have a life cycle to it. We're not just doing an investment in a plan saying afterwards, "Hey we're done. Thank you very much." We want this to work.
So, it's going to be oversizing the scope that is sustainable.
And I also kind of want to respond a little bit to your comment about joining Gig.U. I can't speak for a Gig.U player, but I know that they are definitely looking to make this kind of model, you know, more expansive.
They're really hoping to help catalyze what's going on across America that's why they're starting this.
There are over 3000 colleges out there.
You know, so...
There are a lot of potential folks that could rally around and respond to that thing.
Big need, big demand....
And what we would see is this is not our last announcement. This is the first way of...
Something that if we can prove this with Gig.U and we can prove it with the Gig.U communities that we could take this to the next level.
You know, we can brace the additional capital. We could raise the necessary support and we can justify a lot of these just on the basic business model.
Of these individual communities once we really prove the model and that we're working with.
So we see, this is hopefully a scalable and a replicatable strategy.
Okay. So then, once again just making sure I am understanding the process. So, I am community A and someone else (community B) comes up and looks at this thing and then collaborates and says, "Okay, we want to go for this". And so, they should be prepared, based on what you're telling me, to make a case that shows how they are going to turn that money into innovation. I guess, ultimately how will it impact the community is a factor, but also someone needs to do some planning about how the network will sustain itself.
What we realize right now is that most of these communities are not prepared to do these things by themselves. We, in this particular case, help them build the business models, some capability and strategy, the operation strategy that supports and rules for building out the network. And so, in that particular case, what we're seeing is that there's really kind of a public private partnership.
We and partner, we are going to provide a lot of the support in the expertise to get it done. So...
To get the finish product done?
To get the finish product done.
Once they get funded. Okay.
Right. Well, and really it's our operational support on this that helps pull these altogether. So, in the end, you know, we really -- and most of the communities, we anticipate at least in the first six round, in this round six.
Is that we are probably the owner operator with some partnership investments, some collaborative -- you know, can pull a private component to that. And that's because we want this to be very successful.
We do anticipate that we're going to have opportunities in the future to work with municipalities, let's say that one on the infrastructure, which we're good with.
I mean, if the community wants to do that, we can definitely help. Again, we're a developer.
You know, to do it right and they get this so that we can get the next level of (inaudible).
But in this (inaudible) that you see being the owner, I mean is it possible for one to come in with a proposal or, in essence, a community (inaudible) have identified the opportunity for them and so on so that will not be an issue because in the community scenario, often what's happening is that the community says, "We want to own business and assets. We're just going to go out and hire someone to lay the cable. We're going to hire someone to run the service and support and then run some of that business operation. So it is not (inaudible) the case (inaudible) facility.
We are in that scenario (inaudible). You know, I think your average community (inaudible) mechanical parts but it kind of comes back to the issue of, you know, ownership (inaudible) infrastructure and so forth.
In the Silicon Valley, if the investor comes in and puts in an angel investment or it is -- the main chunk of money was a series B or two or whatever. Then they want a part ownership of the eventual business and then some selection on the board, this and that and so forth. In your scenario in your program, will the investors be owners and then what does that say about the nature of the network if we're talking on a community broadband sense?
So let me step back and then can I answer that question?
The purpose of this program of Gig.U is that we're really investing in the ownership and operation of the network. We're providing facility, infrastructure and services as part of this.
Our commitment in that process is that we will provide an open access network. Our commitment in this process will be provide community gateway for applications in services.
So, in this particular case, you can view us at Carrier 3.0. We're an alternative carrier model to actually build, operate and manage that infrastructure within the community, but really working in philosophical partnership with the community we're working with.
But we do other work. This is just one program. Right?
We work with utility companies. We work with other municipalities and then at those scenarios where they are soft guided, they really know what they want to do.
They've already self organized. We help them just like any developer. You just need us to consult, design, support, you know, engineer or operate whatever, and you want to own the network? That's great.
But we're making a very strategic investment in Gig.U.
And because of that, we're taking, let say, a much more proactive role in this again, because we want to demonstrate our success.
Right, right, right.
But when we work with the municipality, we can play a different role. We might be a partial investor. We might be, you know, an operator.
Of the network. We might simply be a consultant in engineering who support the network. So we definitely support the municipality. We support the community utility's role and we adapt to those kind of situations -- why we describe ourselves as a digital economic development company.
Uh-um. So, if I am in a community that is, say, less comfortable with this kind of relationship and view on the community ownership, they should probably wait until Round 2....
What made you think about waiting?
Well, you know, on that kind of model, I will be really frank with you. We deal with those today.
We don't have to go through the __25:35__ process.
That can be a direct discussion.
Right, someone just called up and say...
Because that's a self organized model.
You see, what we're doing with Gig.U is these communities that aren't so self organized...
We're giving them a catalyst to begin to organize the community around the corner.
Right. A kick-off structure, if you will.
You got it. Yeah, and when communities are their own catalyst, they don't need that. They need a difference...
And see, what we're seeing is that the world right now relative to broadband is kind of slow.
When I slow, it's not just the bandwidth, our community ability to execute and to begin to play broadband.
We're being (inaudible), you know, Europe, by Asia, by -- you know, everybody else. They're investing billions of dollars behind infrastructure and employment. If we don't do this in America, we don't create a catalyst for this whether is a private sector or a company -- public sector whatever is. We don't create a catalyst for this. We're going to be way behind.
And you know, this stuff does not happen overnight. We're really trying to build lots of what the demand is today, but what the demand is going to be tomorrow?
Because it takes time to develop the programs, implement the capabilities and educate and to train, you know, really put them work.
So, we just want to get ahead of this curve. We want to become a catalyst for promoting where community is thinking about this in doing this.
And (inaudible) to the variety about -- you know really being (inaudible) where we can see __27:03__ shift.
I tend to, I guess, run in the middle ground. I have critics on the right, I have people on the left, I have all of these concerns about broadband. I think fundamentally, there is a strong interest in the community owning this as an infrastructure or asset. I can also see the value of an exercise such as what you were doing because it creates a set of best practices in a sense. As you look at the Gig.U concept, Blair and I had a conversation once, where we were saying anybody can do this, right? What they're doing is they're putting it on a manage bat or manage research environment to both the managers and then also learn from it and so forth, where the end result is you have, if everyone is doing good note taking along the way, you have a set of best practices. So this, in essence, can be a similar kind of thing and you can see what works as it goes into an investment and moving forward state.
You know, I think you're on with the best practice. I sort of changed that in my mind and said a road map because...
When we were speaking across the country, it was -- you know, we have human capacity, we have the financial or we don't have the type of -- there's something we have and something we don't have.
And we don't how to take the next step. We don't know where to go to get it done.
So, a best practice model gives you kind of a cloud framework to this.
And sort of that. A road map gives you a suggestion of the next step.
And what we want to do is to help communities understand what these next steps need to be.
That way, they could take the best practices and actually put them to work. We kind of call this the practical side of it, right?
How do you really get in the grassroots and make this work, make it -- you know progress?
So by creating this kind of a road map, what we hope to do is there are lots of different ways you can do it. There are lots of different paths, but there is a certain decision point that you have to make certain kinds of...
You know, you have to decide. Am I going to be a public or private? Am I going to use public capital or private capital? Am I going to finance this? You know, what's my payback period? What kind of restructure? What kind of services do I want to deliver?
You know, you have to put that altogether and you have to make your choices along the way.
And make a decision and then move forward to the next level. And you know what? You're going to make wrong decisions. Communities, I don't care if it's private sector or public sector. We all make decisions and sometimes they're wrong and we have to adjust.
You have to take course correction. You have to take different actions and make changes. Don't be afraid to make the decision, make it early, move forward with that plan. If you need do some course correction, correct and move on.
Right. And it's sort of -- when I talk to people, I'm not trying to give people the answer. I'm not the answer guy. I'm more of the question guy. Like what questions do we need to ask at which point you then come to whatever you're respective options are.
By the way, one of my more loyal and consistent listeners from UK has highly endorsed this idea. They have been working with universities for awhile, trying to get broadband in and so forth and I think she refers to as a digital parish pump. You sort of -- you're working on digital project with this relationship with university, and you're creating a way to kind of pop out the end result that you're looking for, which is good. And I should also mention we're rolling onto the halfway point. If folks want to call in and ask a question, there is a call-in number on your -- should be on your screen and -- what is this the number -- maybe we'll put it out there, 323 679 0845 and there's no elevator music, which is probably good on one hand, but when you do call in and the system picks up, you don't here anything, so don't panic and think that we abandoned you. You just will have to be there for a little bit in silence at that moment if you will. So, let's talk about -- do you have a general idea how many universities are private versus public?
You know, I don't have that number off the top of my head.
Okay. But it is in the list, I would say. When I looked up to the list one time and it seemed like there are -- so there are public, there are private and so fort. Did I make sense? So, I'm going to fill a couple of questions I got in sort of what I call early Twitter messages, which was -- when we talk about the government and the ownership, is this community asset or building community asset...
I think we kind of talk that through -- but it is -- would we get to know -- is that $200 million like for long cash investment or is that sort of capitalized on some extra number of hours of professional...
No. The impression that we're taking with us is that we're going to be investing real dollars to build the business.
These dollars and how they get spent are going to be defined by the particular program we developed with Gig.U community. And so some of these are going to be purely going to build infrastructures to the home. Some of these might be creating the open gateway kind of strategy and open access models and might be service delivery on top of that and location related. We are doing one project right now. If you don't mind, I will talk about it.
No. No. Please, please do.
But with the Case Western Reserved University, we're doing a senior wellness center and part of the objective there is Case is doing a research project with university hospital and what they are doing is connecting via big bandwidth fiber connections in senior center. We're actually putting fiber in the center and connecting all the units. Part of this is the health and wellness management and part of this is a critical care, how do we manage critical care, because you have assisted living and you're a senior and you have all kinds of different conditions and getting an understanding of those conditions so you know whether to take him in to the doctor or take him in to the emergency room can create more complications.
So, if you can manage it more effectively and help in the process, you might actually save lives, prolong lives and make a better quality of life for someone.
So, that's a quick example.
Now, are you going to do anything that would say create a documentation as you go on a public documentation. In other words, is there a way that people can watch as you guys do what you do and be able to go to a website or a bulletin board or something and get this information like how are you going to do a knowledge transfer. You're going to learn a bunch of stuff but...
You know, that's it. That's a great question. I wish I had a perfect answer for you, but I don't.
But we described -- when we first created the company, we want to describe this as open digital economic development. What we meant by that is that this will be a shared practice.
And to do that effectively means that you need to create a communication media that does share effectively the kind of things and captures the information along the way. We spent a lot of time talking about it, a lot of time thinking about it. We have not yet implemented the strategy of how we're going to promote it, but we did have some experience a few years ago with the Knight Foundation on the idea of shared best practices. And so we will be implementing for our members, for the community at large something that opens up the communal a little bit and this is how you develop work. This is how projects get off the ground. This is how you can do it in your community.
Excellent. Excellent. Okay. I'm getting messages and stuff from all over the place here, it's pretty interesting. One of the shortcomings I felt of the broadband stimulus process and to a certain extent the Google process was that by nature of both entities, the Federal Government and Google, they created a response path, they basically created an application. You complete the application, or in the government's case, you have to know basically all the parameters for how you responded to that. What I felt at that time, which I definitely feel, especially being here at this particular conference is that you can respond well to an application process, but the application process may not be what best prepares you to run the business and in fact someone earlier today, said they had gotten money and even started building out a network. But somewhere along the way, someone said, "Well, you don't really have a business case here. You don't have this whole thing tied up in terms of how you are going to deal with the last mile." We both kind of quickly came to a decision that a lot of it was because they didn't do the effective planning," but there was no time to do planning. Google had it timeframe and the government had theirs and so you didn't have a lot of time. I've basically broken down that you had people who had been planing for a couple of years.
Right. Like for example Open Cave, I was just up there last week.
Yes, indeed. They are definitely on it. There are some who were thinking about it and sort of preliminarily planning, so they were able to put together called a reasonable plan though it was not necessary by round one of the Federal Stimulus but by round two. There were some who said, "Yeah we may burn some hours, but if we get this money, we'll be like winning a lottery." I don't know if any of those in the latter group got funded, but those to me had a problem shown because they haven't planned properly because they had no time. they like this to be sustainable, but what the heck does that mean when you're going nose to the grindstone? How much are you going to look at the business planning for the group?
So, that's a great question too and this is probably why we're more proactive and engage in this. I mean we are going to be part of the process.
So, what we're really looking for for the Gig.U community is to give us sort of a matrix of resources, capabilities, things they would like to accomplish. Right? Their community development, their activities, all of things that might make up the role of a developer and says, "What kind of property do I build. Is it just a broadband network, is it a property for gaming, is it a property for the triple play, is it a property for innovation. Okay. And you sort of take that in. What we will do with them is we will work to develop the business plan, the technology road map, the implementation and operation strategy around that. So, we're going to be part of the playing process like Google in Kansas City. We're going to be the best community network and it's ours when we're done. Others projects can be much more collaborative.
They talk about a public private partnership. So, in this way that there's ongoing communication, course correction and management of building the program and I think that is a little bit of a differentiator. It means it is not as easy.
It's a little bit more complex, which is why we wanted to narrow this down to 35 communities...
Initially because we felt we can manage that in that frame.
We're going to get maybe 15, 20 proposals for example. You know, if this is worth 3000, in no way could we respond in the way we're responding.
Because it's more hands on, more partner, more units, more -- and how do we make this work.
Right. But -- so, in some respect, it will be fewer people helped, but more people helped in the long term because what you do will be replicable or people can learn from it or whatever, but there will at least be a process where before there wasn't one and more people can take advantage of that and move the ball forward.
We hope and what we're doing really is setting an example. Right? And what we want to do and whatever a long time ago, the best example is to put in practice.
So, what we've got to do here and really what Google is trying to do and what __40:11__ put this in practice, but in our role that we are trying to take is let's show them what success is.
And then it's easier to achieve it the second time.
Okay. So, giving the hip -- oh, let me ask another question, more on the mechanical side and I don't know how much of this you can or want to talk about, but how do you get the money? I don't know all the particulars, but I mean was it like institutional investment...?
Do you want me to give away the secret side?
Not all of it. No. Hey. Hey. But I __40:40__ because I just finished doing an exercise about getting investors and there was like -- there were two different ways people learn about that so I'm just curious.
So, I will tell you in this business. You're always building.
And you're always raising capital. So, it never stops.
And in this particular case, what we want to do is realize that working with universities that they have as a community. The opportunity to really create a leveraged financing. So, we knew we needed a financial vehicle and we went out and found an investment bank to work with and we created a strategy. They liked university model. They liked it. They gave us a structure to work with, which was very good, and that's what we're doing with our views, we're creating a structure...
To get financing. To be able to bring in equity. To be able to bring in dad to bring in other contributions, whether they come through grants or other sorts of things. So, we have decided that and you know this Craig because we did as well in community, we've gotten those vehicles as you have to create a broad range of resources.
And avail yourself to those. So, where grants are an opportunity, we will take advantage of that. In this case, what we're doing is we're just helping because we have the experience across all those financial __41:49__ vehicles of pulling together effectively and making them work. So, our initial commitment of 200 million is based on the combination of some equity and leveraged financing. Each of our deals will be different. So, how much equity versus how much financing we're going to do are going to be really dependent on the mix of what a community brings to the table or how much in kind, how much support, anything that we need to do.
Okay. Now, I'm not sure if it will matter, except with the lawyers and accountants, but is the money coming to you, to them or is it going directly to them, how's the...?
We are the asset owner and puller in this particular scenario for the service.
I mean in the programs that we're implementing here. The money comes to us through this process. We implement, manage and operate.
So, in truth, what we're doing is helping build the community asset, but we are in fact delivering that as an asset and as a service.
So, that's why I said at the beginning what we're doing in this particular scenario is __42:51__ carrier 3.0.
But in this case, we are trying to do this as a partnership with the community instead of we're the...
We're building a you buy it and have a nice a day.
But the openness aspect of it is what keeps the competitive element and what...
Well -- and so here is what we think about openness and this is just my particular strategy and what I've kind of learned over the years. We have already had this sort of concept and played with open in a very different way. We played with it in internet hearing. We played with it a little bit in a variety of different axioms, but you're up and other nations who have gone down this path, they've gone down that path with a full commitment and lot of times spent with public support. Right? I knew as we have a competitive environment.
We do not have the public support. Even with Stimulus, as much as it was, it was really not the investment that we have...
Right. We're not Australia base.
Right. And so as a result of that, if we want to create open access in a competitive environment, it really requires us to change the paradigm of what open access means and change the paradigm to where alternate competitive carriers will adopt the use of shared infrastructure and we think that takes time. So, in the middle mile, it's may be a little bit easier, but when you get into the last mile and circle the community networks, the way people differentiate themselves today is on their infrastructure and the services they can deliver based on the infrastructure they have.
And now what we're doing in __44:21__ before we've got to change the map because we've had this overbuilds.
The carrier overbuilt the cable company, the cable company overbuilt the carrier, they're done. They're not doing that anymore. They've really said that this is kind like __44:34__. You can't just keep doing this over and over again at some point that the model breaks down and we're currently at this point that it's broken. So, we're not seeing a lot of new investment. So, the idea now is bringing fiber to the table, which is really the next overbuild that needs to happen. It's not happening. So, that's the change, and once we do that, what we think it's going to happen is -- it's going to take three, five, seven years for the carriers as their infrastructure is no longer competitive to services and need to run over broadband fiber infrastructure. We will see then start to adopt the other infrastructure that's there and we have already seen some examples? You know Time Water is doing some interesting things which have no guarantee, they want to do gaming kind of programs realizing it's not on their network.
So you are going to see I think that emerge but it's going to take a few years and some time and some trust. The other issue is, what we find a lot of times is, is that network going to be stable? Is it going to be sustainable?
And so the problem with what say, a major carrier using somebody else's infrastructure is, they don't know if they are going to be around anymore.
Right. And then that's an issue, price and what the service is going to cost is an issue and then you still come back to the issue to the saying of, if there is only one provider then your cost isn't going to be very flexible or competitive. I mean...
So you know that's a -- I got to tell you, I am not -- wholesale works to some extent, but we haven't seen a lot of good wholesale amounts work in the US. And the issue of getting openness we have all said, well, there has to be wholesale.' Well, I think it's a combination. I think that you can have an open access architecture and still be a critical service provider and what I mean by that is, I can provide my own triple-play service. And you can compete on my network with your triple-play service, but you are going to compete on value and falling. Right? That's what we really want out of this.
So if I can keep the open access strategy on the physical infrastructure I am going to have a good product, if you have a better product then they are going to buy your product.
Then that is good for me because you are buying my infrastructure to deliver that better product.
So I am okay with that. Because now you have a business model that says you are covering your costs, you are paying for the infrastructure and services, you really have a sustainable model.
Right. Now, I know, one of the concerns I've heard, the best over the last couple of days, is we get into situations or we have seen situations in some states where they will be the driver of middle mile. But then they will also be the cherry picker of certain anchor on that station and what ends up happening then is a smaller company whether it's you know, a smaller company has been around for a while or is there a company that might even want to go into the business. Well, if you come by and you put the middle mile in, that's good. If you are going to put the middle mile in but you have also picked up all the anchor institutions, the primary tenants on the network, you have it, the net, the process. The organization has made life difficult for the player who wants to come in and be able to have a revenue opportunity. I mean, I guess I can get that one.
That's you know, and that's actually a pretty interesting assessment because I think one of the downfalls was stimulus in nature. I mean I think it's a fabulous program. I think it's doing wonderful things for the nation, but that model there which really is in a way somewhat anticompetitive. It wasn't really structured in a way. There was an investment on the other side and __48:22__ make investment on the last mile side, they made investment on the middle mile side. In the real context it is on the last mile, so if you take away all the value which you just said prior to taking the anchor tenants, you create a distance center for the last mile for the buyer to build out additional capacity.
So there is going to be some balance there.
And so I think a lot of the middle mile providers that are out there today, who are struggling with this model of revenue and sustainability or the gap, are going to have to create a balance where the local access providers to be able to attract them to use the infrastructure to be part of this process.
And one of these things and even NTI said this. An anchor tenant if they are connected through one of your providers that's what they really wanted to facilitate. So it doesn't have to be that the middle mile provider is the direct connection for all the anchors. They are facilitating the connection to those anchor tenants.
So I think in some ways, middle mile providers are going to have to deal with a partnership with their own class of providers to facilitate that.
Why is that that relationship between middle mile and the last mile is probably going to be the most problematic side of this whole issue? I mean you had middle mile projects that were funded irregardless of last mile. Then you have last mile projects. We are not sure we are really getting it back of them, but I assume that people proposals, but this disconnect and I have been writing about this for over a year now of the middle mile, last mile or as they say in Europe, they first mile and then the middle mile, but... you know really. So but it's a difficult -- to me it's a difficult nuts but you can take DC. I mean DC down the ground a few orbit, not the only urban community to get an infrastructure grant. They got 100 gigabit network and they basically said "We are going to use this to support the poorest parts of the city." Right? Well, the reality of life in America was in common anyway is that if you build that middle mile but you say that what's going to be served is the poorest of the poor on the last mile thing, who's going to go there? Because people who will be going there before Stimulus aren't going to go in there now because it is no more attractive than it was before. And I have got, I talk to people here, I talk to people about freedom to connect where they work just beside themselves in DC trying to get either a last mile provider who is competent or their ability to somehow provide the service and the city is saying because this is only middle mile, this is only middle mile. We can't serve you and we cant' help you. It's kind of a mess.
Yeah -- you know and unfortunately no program is perfect. Right! There is always__51:13__ and the fact is that their money would not -- it would have been difficult to get there in the first place.
But now you have some cat walk going in that direction helps facilitate. So, we're at the next stage, how do you execute the real strategy.
And that we're struggling with...
And that's we're trying to deal with the little bit with the Gig.U is we're saying that there are often ways to get the partners to come in.
And to invest, but you have to find the right mix and the right balance and you have to have a community advocate.
And you have to have that sort of engaged community to be able to get that done.
So, if we want to attract the nice people, let's say for example to build out or we want to attract -- a C-locker, a cable company or whatever it is. We've got to create an environment for and create__51.59__ one community. One of the things that we start to do __52:03__ carriers, once that we have realized we had to make the market for them.
Because the big carriers when you look at, they have _52.09___ plan.
Clarified you plan. They have the three-year plan. By the way, they have their __52:14__ plan.
So, they don't move on the dot.
You know they have -- you have to show them your way.
We have to reach for another investment before they are willing to make that next step with investment.
Right, that has been given for a while.
So, we have to do, I mean this is incumbent in all of us in the community as we have to demonstrate where there are alliance.
And that has to come in collaboration with the community, the business model strategy and partners. So, from our perspective here, what we have to do is, we have to do the market creation.
We have to demonstrate to them the value of proposition where the markets are so that they can make use of them.
So, let's see, we have about seven minutes only. We will talk about this one, this next topic. Small providers, one of the things that you RUS in particular, I think has as its whole market that is being worked with a lot of small providers. The FCC, for better or for worse, whatever you think about universal service fund has worked hard at getting world small mom and pop entities out there providing -- you know last mile phone service if will and support them in that endeavor. I feel like the out side is the smaller companies to me are one of the most tested in the community and I think they are also able to work and provide a good service without the same cost structure, because you have all the layers of your __53:40__ accepted you have with the big incumbent. The least partial __53:45__ are so __53:47__promising, they have built this stuff the sweat and blood and tears and no grant of money.
And you know, again I appreciate that it makes a lot of sense. In what you guys are doing will there be a -- you know a boot for the little, the smaller providers.
And that's another great question. I think the real thing that we are tying to create here is that community environment the faster side
That really enables to small to compete and the biggest barrier in our business when we look at this is infrastructure
So, if we can take away that barrier right, the core infrastructure piece.
Then we're really enabling every service provider to come in and deliver the services that they want to deliver.
So, I think in a way we manufacture that. We want a great environment with that's a really true statement. And the challenge is that with the -- you know small independence that is they feel that they had only everything and they have to compete at all levels. And the question we're really asking is you have to compete the infrastructure level is that really the service all you're competing or you're competing at the infrastructure level.
And we're also a globally is -- now the infrastructure should be a bit when you open it up, give us big vibes and that's were innovation occurs. That's where new applications and new services all come from.
So, you know in a way, if we create that test bud and expand that test bud in more than one community. What we're really saying is okay, this is going to happen in multiple communities, then you can deliver your services to all these communities in such a way you don't have to overcome that big infrastructure barrier.
Right! And even for large incumbent, I mean I've forgot __55:27__ you through middle line broadband cooperative. And they are saying that the smaller __55:35__ when we built a network. Then they built the network and they got small __55:37__ business __55:41__ seven years later __55:42__ figure out __55:43__ this was the history of the larger company has taken forever that realized that -- you are not the enemy, you are not a sort of kiss of death, but then having said that I think there is also, if you're going foster the small business development -- provider development, then maybe some of these smaller providers should get in on some of these aren't at peace because I mean that's what the only to playing. Just stay on the outside and say, here is one more program, on more_56.14_, it doesn't like, it doesn't respect us as well support us and rather than that moaning and groaning then just get in there with the community and the university and figure out how you will be in the project.
You know, it's fine you said that because that's actually one of things that we kind of promoted in RFP was local provider participation support engagement.
_56.37___. Our willingness is such that we can do a joint venture with them and they become part of the process.
We'd open it up. They can be simply used as the service delivery mechanism. And it's really true, is that the smaller community is the very local providers. They are more connected and this is about, I kind of go back to the model group. Google has been the global enterprise right!
And I love to do that and they've got community interest. I think they're in the grandest experiment ball and they don't realize yet or maybe they do, but in Kansas they have to talk about being hyperlocal.
They have to create a localized environment demand and that's not as easy as building a global demand.
Different mindset. Different set of operations.
And the people had noticed or the smaller carriers who do this everyday.
Because you're dealing with those, Jack over here, the coffee shop, that small business, grandma at home, that's what they do.
And they get emailed and they know by name.
And you know that sense of community is so powerful is part of the adoption. I think that really occurs and they need to be part of this process.
Right! Alright! So, we we're gonna down here we got about two minutes. What would be one, maybe two key pieces of advice --if our listeners as a university or listener is community activist who wants to get broadband in, what are the few things that help them deal with the __58.04__ process.
Well, from my perspective is really pretty simple it's you know I aggregate capacity in man.
You know, which means rally the community in such a way that there is a demonstrated ability to really consume...
And use. What's being built?
That's a big part of it. And if I were to take it from a more active a sort of perspective -- you know what are the uses, what are the used cases in the community.
What are the institutions going to do and provide as part of the community service. It's not just about connecting to internet.
It is about creating community asset leveraging the asset and we like to take a one step further and that's what we wan to put on the table for everybody that is listening. And it's about visual economic development.
How we built the digital capital in our communities?
Excellent! Well, Mark this has been an excellent answer to the whole lot questions that we did get out in the New York Times as today.
Right! That's what we were talking about.
So, that was good. I want to thank our audience for attending. I hope everyone has learned some really good stuff here. Send me email --find gigabit squared website, ask questions if you have them, but definitely get engaged. I mean if you don't play and you can't complain later, then you don't win the game because you are there and so, let's get people involved. Oh! I just want to thank our advertisers __59:30__ broadband and Cape Net both very good, small, actually, the providers who do really good work in their communities. So, for everybody -- thank you very much again Mark I appreciate you being guest on the show.
Great! Thank you very much for the opportunity.
Okay. Let's go to our __59:47__rest the discussion out here.
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