ScreenPlays – Let’s begin with a little background on when you began thinking about building this network and why.
Michael Browder – When we first started looking at some sort of communications system we were having some issues with our electric system being able to communicate with our substations during lightning storms and times of outage. We knew we had an opportunity to improve the level of service and the response to outages if we had a communications system that was more reliable. We were using the incumbent telephone company at that time for communications with our substations. We have 19 substations, so this was an important piece.
In 2002 when I was chairman of the American Public Power Association we were having a board meeting where the president of the Electric Power Research Institute for all the power companies in the United States was the guest speaker. He informed us that the year before power outages had cost industry more than power had cost industry. And I knew that had to be a big number just knowing what industry pays us in our area.
He went on to say that one of the things we could do to improve reliability and reduce the cost to industry was to have a much faster switching system that could automatically change circuits and so forth. And as he was talking about that I was thinking there was no way we could afford a system that would be so fast and robust that would allow us to do that.
That was in 2002. By 2005 we were providing fiber services to some of our customers. So in three years we had gone from me thinking this is not financially possible for us to do to where we were building out a fiber system and providing Internet, telephone and cable TV services to our customers.
SP – Was the fact that you were able to utilize fiber in that way one of the reasons that it became economically feasible?
Browder – Yes. As a matter of fact, when we did our business plans and all of our studies we saw we would be able to totally pay for the fiber system with revenues from cable, Internet and telephone and still offer a good deal for our customers. When we set out to do that we set out to have a better price than was generally available in the community. But we did not have the idea of being the low-cost provider. As it turned out, while our goal was to offer the best service level, in fact we have been a low-cost provider except when somebody wants to do some really cut-rate bargain stuff to a few people to get services to compete with us.
SP – What kind of competition were you facing in communications services from existing providers?
Browder – We had a standard coax system provided by a cable company that was also beginning to offer some triple-play services with the Internet and telephone. And the phone company was offering Internet, and they partnered with a small dish service to provide triple-play service. So we did have competition there.
SP – You started building this out in 2005, and now you’ve completed it. Did it take all that time to build it?
Browder – Well, in 2005 we were building out an Alcatel-Lucent BPON (Broadband Passive Optical Network) system, which has speeds up to about 30 megabits per second. But when we built the PON network we knew we could change the speeds on this by changing the electronics on the end.
It wasn’t too long after we started, maybe within a year, that Alcatel was providing GPON (Gigabit PON) services. With that we could provide speeds up to 100 Mbps. So we changed the BPON technology at that point and began building that out.
And then Alcatel came out with the ten gigabit service, and we went back and changed our system to where it’s now a 10 GigE system. Now we’ve got it to where any house or any business in our service area can get gigabit-per-second service. And it’s still over the same fiber system we built before. We’ve just changed the electronics. So it’s only recently we’ve had that level of service available to every customer.
SP – When did you actually complete the fiber infrastructure?
Browser – We completed that in 2006.
SP – Getting back to the competition, as you began implementing these services, did your competitors take steps to upgrade their networks or expand their services, or did they just try to compete on price?
Browder – All of the above. They tried to compete on price. The cable company especially has added capability. And the phone company has added capability, more reliable services than before, and faster services. But we’re still way out front.
SP – This is a small community. What is the population?
Browder – We actually serve a population of about 75,000. About half of the people are inside the city of Bristol, Tenn., and about half are outside the city.
SP – And that’s Sullivan County. Do you have the electrical franchise for all of Sullivan County?
Browder – No. Just about half of Sullivan County.
SP – You’re owned by the city of Bristol?
Browder – Yes. And we have an independent board that’s supported by city council, which under Tennessee state law has the responsibility to operate the electric system.
SP – How many households does that population translate into?
Browder – We have 33,000 electric customers.
SP – All in all, that’s a pretty small base to work from when you’re up against two other competitors. And yet you say that by building this out and offering these services you actually paid for the network. How has that happened? It’s an extraordinary story when you think about it, given the competition. Have you gotten to a high level of penetration?
Browder – We serve almost half of our residential customers with some of our fiber services. And of those people who have our services it works out to about 2.2 services per customer.
SP – Does that translate into about a 50 percent penetration of the marketplace at this point?
Browder – Almost.
SP – Obviously, that’s one answer to my question. This network and the services you’re offering and probably some other aspects of what you’re doing have proved very appealing to a large segment of the population, most of whom I assume were already getting services previously from one of your competitors.
Browder – Most of them were getting services previously. Now, we do serve some areas that are so rural that some of the services were not available there.
SP – What have been the key factors moving customers onto your platform?
Browder – One of them is the price for the package we offer. We offer a very rich package for a reasonable price. Another one is the level of service. When somebody calls us, when we schedule to install a service, we schedule it within a time period that we generally meet exactly.
A third piece is when we did our surveys of customers before we started, 94 percent of the people said it was important for local dollars spent on cable TV and Internet and telephone to stay in Bristol. So doing business with somebody local is important.
Our competitors really don’t have a place customers can go to in our community where they can walk in and see somebody and talk to them about how they want things done. When you talk to our help desk, people speak like people in East Tennessee speak.
Local service is really important. It’s amazing how some of our competition have tried to appear local since we’ve been in the business.
SP – Given that a lot of this penetration predates the move to 10 GigE with one gig service, what prompted you to spend even more money to go to this ultrahigh speed?
Browder – When we started in this business we made a commitment to ourselves to be the best service provider. That means the best products as well as being able to help the customer when we need to. And we’ve changed to an IPTV system, which was even more costly than changing to the 10 GigE system. That was part of it.
But in our initial reasoning we knew having high-speed data was really important to businesses and industry. We’ve been assisting in economic development for many, many years. This part of the world is really a beautiful place to live, work and raise families, and we were seeing people having to move away for data kinds of jobs. So our staff and our board felt this was a thing we could do to help economic activity in our community.
And then the other one was education. We have some good schools here, but we also have some very rural and small schools, and so to have opportunities that only a really high-speed data system can bring to the education system we felt was really, really important.
SP – Economic development and education seem to be recurring themes everywhere we look at reasons behind this kind of network development. What kind of impact have you seen since you built out this infrastructure on economic development, on companies moving in, on education?
Browder – One thing we can point to is a state-of-the-art printing facility that’s been printing newspapers here for a number of years. They use our data system, and they use our electric system. They said early on the reason for locating here was because of our high-speed data and our reliable electric system. So reliability is a really big, important piece for us.
We’ve seen a lot of people with businesses from home or people using telecommuting, including some of our employees, because of this system. Our employees operating our network from their home can get on their computers and do almost anything they could do in the office,. It really increases our reliability. And we see other people doing those same sorts of things using our system.
And then there are the school systems. Every school in our area now has gigabit available, and all of them are taking advantage of at least 100 Mbps service. The director of the country schools and the director of the Bristol schools are very complimentary of the services we’re providing. The teachers in those schools rave about what they’re able to get and use because of this high-speed data
SP – Do you find there’s use among the schools in terms of sharing data or even video as a function of having this network? Has it changed how they operate?
Browder – We have some schools where maybe one teacher can teach to everybody in the county or the city school system on that particular subject. And we also find the schools are sharing with people from outside the area that also have those kinds of facilities, where maybe they’re teaching the course in Bristol but somebody is taking the course in some other school system somewhere else.
So those kinds of things are happening where they’re sharing resources and sharing expertise and reducing costs. If you don’t have a lot of people wanting to take a particular course and you can spread it across several school systems, it makes a huge savings financially. And it helps get a best person to be a teacher, and you can do a whole lot better job teaching that way.
SP – You mentioned going to IPTV recently. How were you delivering signals before? Were you using it like a Verizon FiOS system with RF-modulated signals?
Browder – We were using a standard RF headend that’s generally used in the cable industry.
SP – Why did you make the move to IPTV, and whose system are you using?
Browder – An RF system has a limit to how much bandwidth you can have, so there’s a limit to how many channels you can have. As we started expanding into HDTV we got to the limit in a hurry. If we were going to be competitive with the people who use satellite technology we had to be able to do something different than the standard RF system. So we bit the bullet and purchased a system from Alcatel-Lucent that uses the Microsoft [Mediaroom] technology.
We didn’t set out to be on the bleeding edge of technology, just close to the leading edge. Occasionally it does fall over into the bleeding edge. But we also didn’t want to continue spending money in areas that we could see us moving away from in the future. The sooner we made the transition the less stranded investment we’d have.
We were buying brands of set-top boxes with the RF system, and they were really expensive proprietary boxes. We didn’t want to continue spending money on those types of set-top boxes when we realized we were going to something else. We quickly surveyed the industry and found out what we wanted to do and took that direction. That’s what we did when we moved up to the GPON and then to the gig piece of the GPON.
We knew when we chose the Alcatel-Lucent PON system that, because it doesn’t have electronics in the field, you could make real quick, inexpensive changes when you needed to. We can change the electronics at one house, and the house next door can still have the original electronics on it. We still have a lot of people that have BPON services. If they go to IPTV we have to change that, because the BPON doesn’t have enough capacity to serve that.
SP – That’s really interesting. So you’re running the legacy service simultaneously with the new stuff, and therefore you’re able to migrate as customer demand warrants. You didn’t have to go do a forklift and change everybody out.
Browder – That’s correct, and that was our original plan. We felt the speed and the technology would change as fast as computers and a lot of other technologies do. We didn’t know where it would go and how fast it would go, but we did know it would go higher, and we thought it would go higher in a hurry. So we tried to build a system where it was upgradable without it being a wholesale change-out to do it. And it’s worked. We still have a lot of BPON customers who are fine and happy, and until they need something different, we can leave it that way.
SP – When it comes to the highest capacity, the one gig, are you finding any residential customers who are willing to pay for that or are interested in that?
Browder – Not many. As a matter of fact, we only have one that’s interested now. And we’ve seen some places a lot bigger than us that don’t have many of those. People don’t really need it. But some people like to talk about what they have and like to be at the very front end of technology so they can tell all their friends, and we’re good with that. From what our research tells us, if we can do one gig and somebody needs 100 meg, they figure we can really do 100 meg if we can do a gig.
SP – 100 meg, certainly where I sit, would be Nirvana.
Browder – We serve a school that’s at the foot of the Appalachian mountain range. It’s a really rural school, and they can do things they never imagined before, like take tours of the Smithsonian Institution with a guide from Washington. Or they’ve even taken tours of the Pyramids with live guides there they can ask questions of. It really changes what you can do with education.
SP – When it comes to the business side on these kinds of bandwidth levels, same question. Is there any significant uptake yet on the one gig?
Browder – We haven’t had any yet. We’ve had people who are looking at us to put data centers here and to be able to do those kinds of things. So far the schools are the only ones that have made use of it. But we have people who are actively looking, and we think it gives opportunities. That’s where we are right now.
SP – Speaking of data centers I notice Deloitte selected the Bristol area as one of seven communities in the seven-state TVA region that are suited for a big data center type of installation. What has come of that? Is there any contemplation of that kind of center coming into your area?
Browder – We don’t have any signups yet. We do have a lot of people who are looking both at that site and some other sites here for different sizes of data centers.
As I said we have this printing facility that’s been printing seven newspapers for six years, and they’ve never had a blip either from electric or the fiber services we’re providing. Those things sell well to people who are looking.
We have gone to great lengths to be among the most reliable electric systems anywhere. And then when we got into the cable, Internet, telephone business, our goal was to duplicate that level of reliability in those services.
We find that many people who have traditionally been in those services don’t have the same level of service commitment as we do to the end customer. A lot of them have a really high level of commitment to service on their backbone systems. But they don’t have nearly as reliable a way to deliver services to the end customer.
We’ve been in the end customer business all our business life, since 1945. We buy power from the TVA. So our business is about the end customer. We’re like the local highways and the trucks that deliver stuff connecting from the interstate onto the local highways. We take packets and move them from wherever we get them whether from the air or a fiber system going through our area or from TVA’s transmission lines and take those and deliver through our systems to people’s homes. That’s our main business; that’s all of our business. And we set out to do that business really well.
SP – Certainly with respect to all the bottlenecks that exist on those local highways, it sounds like you’ll be seeing a lot of growth and development as a function of having put that in place. With ever more communities moving in this direction I assume the momentum has something to do with success stories like yours having an impact on other people’s thinking.
Browder – We’re generally always willing to share. We went to school on everybody we could find before we started in the business. They were telling us the good, the bad, the ugly. They were telling us this is what we did that worked. This is what we’d like to do different if we were doing it again. And we provided that same sort of sharing because we think that makes everything better for each of us.
There are 2,000 municipals that own their electric systems in the United States. It’s the group Chattanooga [another locality with an all-fiber communications system] falls into. Chattanooga had been in the phone business a long time, and we learned all the things we needed to do about getting a Class 5 phone switch. But after we got into the business Chattanooga tells us they actually used our business model to design their business model.
Everybody shares. As a matter of a fact I have a meeting in Chattanooga’s office next week where we’re sharing some stuff that we’ve done and trying to get their commitment. They still work with us. It’s really fun to not be in this competitive place where you don’t want anybody to know what you’re doing.
SP – There’s been a lot of uncertainty about building out such infrastructures, even with all the government stimulus money on hand to encourage communities to go for it. In fact, we’ve found a lot of people bulk at taking stimulus because they don’t know whether the investment is going to pan out in the long run.
Browder – We’ve never received a grant. We didn’t receive any stimulus money, although we did apply. But we’ve never received an outside dime from anybody. We borrowed money and built the system and started in these businesses.
Our business plan originally was to serve just 35 percent of the customers we passed, and we only intended to pass 20,000 of our 33,000 customers. But after we got started we saw that it was going to work, and we passed all of them without ever slowing up. A lot of those were really rural places who needed the service more than others.
SP – How did you manage that without getting held up by funding issues?
Browder – It’s important to have a business plan that gives you the flexibility to react to market conditions. We set the expectations of our service level pretty low in our business plan, but we also made clear that if we were a lot more successful than we would need this many more millions of dollars to expand.
When we hit those levels it didn’t look like we didn’t know what we were doing. We built the expectations so that if we said we needed a lot more money, it would be because this is a good business and it’s paying for itself.
SP – I imagine there will be a lot of communities going to school on what you’ve experienced. It’s quite a story, and we really appreciate your sharing it with us.
Browder – It was my pleasure.