Episode 17

Creative Partnerships and Funding Opportunities for Broadband Providers

March 5, 2021

Episode Summary

Kara Mullaley, Market Development Manager for Emerging Markets at Corning, discusses how broadband partnerships and creative funding opportunities can help bridge the digital divide in rural America.

Show Notes

You can learn more about Corning’s Community Broadband University at corning.com/cbbu.

 

Transcripts have been lightly edited for clarity and readability.

Stephen Smith: Kara Mullaley is the Market Development Manager for Emerging Markets with Corning. Corning is a major manufacturer, of course, of fiber optic cable, along with other equipment that providers need to deliver broadband. I heard Kara speak on a recent industry webinar, and I knew that I needed to have her on the show to come talk to us about some of the topics that she offered great insight on there. I think you’ll find a particular interest on her thoughts on partnerships in delivering broadband as well as various funding opportunities. And so here’s my interview with Kara Mullaley.

Stephen Smith: And thanks for tuning in today, my special guest is Kara Mullaley with Corning, and we are delighted to have her on the show today. Thanks for joining us, Kara.

Kara Mullaley: Thanks for having me.

Stephen Smith: So for those of our listeners who may not be familiar with Corning, you are certainly one of those manufacturers that you’re in the background there. And certainly from the consumer standpoint, people may not be familiar with you, those in the industry certainly are. But if you would take a moment and give us an introduction and an overview of Corning’s offerings, your scope of work, and and what you bring to the market.

Kara Mullaley: Absolutely. Corning has been in operation for nearly 170 years, and we’re kind of embedded in many of the different things that you touch every day. You just don’t know that we’re behind it. So it’s all based in ceramics. And so 50 years ago, optical fiber. We invented the low loss fiber that has evolved to the point that we use it today for all manner of communications networks. But we’re more than just cable. There’s an entire suite of hardware products, connectivity that is required to, you know, connect all of those different fiber strands to deliver the services and signals that are necessary to connect the world. So we’ve been in the cabling. We make the glass. We make the cable. We make the connectors. We make the hardware closures, even in home wall plates and things, jumpers in the central office. Everything you need tip-to-tip from, you know, the source of the signal to the end user are products that are in our portfolio from an optical communication standpoint. One of the things that I think people often don’t realize either, kind of a behind the scenes thing, is Corning was actually instrumental in the creation of what is now the Fiber Broadband Association. So we were one of the founding members of the FTTH council and have been a member of the board ever since. And that’s true in the US. But also our participation in all of the global fiber to the home councils is pretty prominent as well.

Stephen Smith: And that association is a real leader in the industry, certainly when it comes to advocating, just in addition to serving the members, of course, who are serving the broadband industry. But really also in the role of advocacy when it comes to shaping the conversation nationally. And I’ll let you talk about that for a second. But a great example of that is the recent RDOF auction through the FCC. The Fiber Broadband Association, I know has been very involved in following up on that. And there was a webinar this week about the low-Earth orbit satellite, Elon Musk’s Starlink getting so much of that offering. And they sponsored some studies on that. And just really trying to look out for the public’s well-being. Give us an idea of the scope of the Fiber Broadband Association.

Kara Mullaley: They really are. Advocacy is one of kind of the main tenants. Education is another. And generally people like to learn from their peers and so their shows and their educational curriculum and their Fiber for Breakfast series that they’ve instituted since Covid started really is about helping people share their stories, share their perspectives outside of exclusively the policy realm. Now, on the policy front, they are very active. You know, we’re very familiar with a lot of the studies that they put forth, contribute to white papers and investigation and research in many cases as well. And it’s really important. And I think what you saw in the RDOF with so many gigabit level speed bidders was really because they helped change the legislation to encourage more penalty, if you will, for the non-gigabit speeds. So that money that was being provided by the government would be spent on networks that are going to last. All fiber networks that are going to last or high speed networks that won’t be outdated in three or five years before the subsidies even run out.

Stephen Smith: Great point. Well, certainly the the impetus for starting this program, this podcast, was that trying to stay on top of the evolving news, so much is happening and so much is changing in the the rural broadband arena. How have you and your position with Corning seen the broadband activity change, say, over the past five years, particularly in rural America?

Kara Mullaley: It’s fascinating, I’ve been doing this now a long time, over 20 years, and what we’ve seen in recent history is there have been but I like to think of as pioneers — individuals that are either advocates or become their own broadband providers, if you will. There’s a guy that comes to mind, Mike Bosch in Baldwin City, Kansas. He created an entire company, a fiber broadband company, RG Fiber, because he wanted to be able to stay in his small town.

Kara Mullaley: And those pioneers, right, those fliers that were really out there blazing the trail 5-10 years ago are the ones that were the norm back then. Not that fiber was normal in the world, but they were the reason that any small community was getting anything at all outside of DSL at that time. And you see it also in folks like Chattanooga, right? EPB in Chattanooga were kind of pioneers in bringing fiber to their entire community. And what we’ve seen over more recent history is you don’t need to have an individual beating the drum for years and years and years to get something accomplished because people were recognizing the need, right? That’s why we’ve had more government subsidy funding. That’s why we’re seeing more people in the private equity realm willing to invest in fiber networks. Is that it’s not a flash in the pan. This is something that is needed. It’s going to be a sustained need for years and years to come. And the wave has finally caught up to those those pioneers and those early adopters, and now it’s becoming more mainstream. So the shift, I would say, in the last few years is folks aren’t going through multi-year studies. They’re not going through multi-year bureaucratic activities on how much might it cost and feasibility and those sorts of things. And instead, they’re choosing partners in the industry that can give them good guidance. And they’re moving forward much more quickly than they have in years past.

Stephen Smith: So you have seen not only these, I guess, these incumbent providers that you refer to there, but also some new entrants over the last particularly over the last five years into the rural broadband space.

Kara Mullaley: Yeah, absolutely. The the municipal folks have stepped up, you know city of (fill in the blank), have stepped up over the years to work alone or work in conjunction with a utility. Either city owned or private in their area to bring their own broadband networks, when the incumbent failed to do so at speeds that they were needing or requesting. Electrical cooperatives themselves outside of maybe a city partnership have instituted a lot of broadband activity here in recent years. Many electrical cooperatives were awardees in this recent Phase One auction, and many of them actually have to create kind of a subsidiary company to offer broadband services. Their charter in life as a cooperative, as a nonprofit, doesn’t necessarily allow them to scope into broadband delivery. And so there’s oftentimes a business entity that needs to be created in order to do that and create a little bit of a separation there. And one of the things that I think is really curious, and we’ll see how it plays out going forward, are some of these fixed wireless access providers that now, en masse, seem to be more interested in pushing fiber that much more deep in their networks, even to all fiber network in some cases. Where, again, we had a pioneer many years ago that was delivering microwave broadband to his community, exhausted his spectrum and decided to overbuild his existing footprint with fiber and then redirect that that wireless spectrum to other folks and grab more market share in his area. So we’ve seen it in pockets over the course of the last 7-8 years across all these different types of operators. But now it just seems like the tide has turned and more and more people are going to all fiber networks to deliver the speeds they need.

Stephen Smith: Well, it certainly has been proven to be, by far, the most reliable technology to get broadband out to the masses. Is that right?

Kara Mullaley: Yeah, it’s operationally cheaper to operate a all-fiber network versus any kind of electronics in the field where you need to power electronics in the field. And anything with a conductor, like a metal conductor, whether that be coaxial or twisted pair type of copper networks also require conditioning and more remediation work to keep them running smoothly. So operationally, I think it’s a much more effective, cost-effective network to run. But what we’re also seeing is that because of its lifespan and its durability and security, and there’s just a lot of little things, nuances that make it a better choice all around.

Stephen Smith: So, Kara, there is a lot of activity. There’s tremendous interest in and really as much momentum as I’ve ever seen toward solving this rural broadband challenge. Depending on what numbers you look at, you know, we’re at 20 million or 40 or 60 or whatever million people who do not have access to a quality and reliable broadband network. You know, as we’re sitting here recording this interview in February 2021, we have the RDOF auction, we see numerous states with their own broadband funding program either up and running or in the works. We see, you know, the ReConnect grants got funded for a Third Phase, and we see a lot of money and a lot of will it seems to really solve this rural broadband challenge. From your standpoint, speak to this momentum and what you think the outlook is for, say, the rest of this year. And certainly it’s all heavy on everyone’s mind that everyone needs reliable broadband coming through this pandemic. And we’re certainly not out of the woods yet, but, you know, a lot of people have gone home to work from home and telehealth and education. And so it’s much more important now. What do you see on the near horizon, and, you know, looking ahead for fiber and rural broadband in general?

Kara Mullaley: I think you’re absolutely right that the pandemic has certainly forced people to look at flexibility, working from home, schooling from home, telehealth, all those things you mentioned in a completely different light, right? It was a nice to have. If you wanted to work from home and you had a reliable connection, okay, well, and go ahead. Or maybe you still had pushback from the company you work for. But now it’s become a necessity in many cases. And it’s a lifestyle. I think people are not going to want to necessarily have to give up once the the fear of Covid relinquishes somewhat. But when you think about what does that mean for our industry? What momentum do we have? The decisions, I think, are going to be coming that much more quickly. It is no longer a nice to have; it’s a must have. So people are going to be biased more towards action rather than reaction and sitting there looking at the feasibility studies for years on end and discussing it with their board of directors ad nauseam. So I think you’re going to see that speed of decision making increase. And with that, I think, is going to be much more widespread collaboration. Whether that’s collaboration between peers, if you will, to understand how they built it, what they did, what lessons did they learn, but also collaboration within the vendor community. And when I say the vendor community, I don’t just mean the people who provide the product, but people who also provide the services. Those that are helping with design, those that are helping construction, those that are helping to market your services as a new entrant into broadband. Do you have a brand? Do you have a logo? What services are you going to offer from a speed and price point perspective? There’s just a tremendous amount of knowledge out there and entities that have these niche pieces that fit into the puzzle of delivering good broadband, not only from a speed perspective, but from an experience perspective, so that your end users have a good experience with your brand. And so all of these players are going to be coming together in new and different ways to make networks a reality for some of these new entrants. 

Kara Mullaley: And that makes us very excited, right? We like it when more people are interested in building networks. The challenge comes in what the natural constraints are in building a network. Naturally, there’s usually a bottleneck, if you will, in the early planning design phase. There’s also been, generally speaking, some kind of learning curve for the technicians. The people that are actually building the network, and so that labor component can be a bit of a bottleneck. And then even in some cases, if you’re not scheduling the work appropriately, the supply of products can create some downtime, too. So I think what we’re going to see is with many more entrants looking to build networks and build them faster, we’re going to have a bit of a labor crunch and a material crunch in the short term. And the labor can be the folks putting in the actual infrastructure in the ground. But it could also be your back office support. You know, getting your customer service experience people onboarded or identifying the company you’re going to outsource those works to. It could be your design, engineering staff or planning staff. It’s not only laborers, if you want to think of it that way, but labor in general, I think is going to be something people look at and figure out ways, do I do this in-house or do I outsource it? And if I outsource it, who do I go to? Who’s reliable? Who, of the outsourced community people, have the right capacity to support my needs as well?

Stephen Smith: I sit in on a webinar recently in which I heard you talk about two really important things that really led me to reach out and bring you onto the show, because I feel like our listeners who are looking at entering the broadband business — be they, you know, electric cooperatives or municipals getting into it, or even those incumbent telco providers, the community based folks who are, you know, looking to expand outside their service area — I feel like you had some very helpful lines of thought for them. And I want to dive into those for a minute. One of those is being the benefits of looking for partnerships. And I know that Corning certainly has, you know, worked with providers in that capacity. And you have some case studies and examples maybe that you might could share with us. Why you think partnerships and considering that type of framework is something that providers need to consider.

Kara Mullaley: Absolutely. I think partnerships, and, you know, our legal team doesn’t love the word partnership because you might work together on one thing and then maybe not the next. But legalese aside, I think that the puzzle pieces that are being fit together for a particular project can comprise of multiple different entities. And then you disband, and you all come together or different groups of people come together to tackle the next problem, depending on the needs of that operator or that town, depending on who’s building the network. You know, we’re in the midst right now of supporting Fujitsu on their build in Traverse City, Michigan. And that’s one where the city saw a need and worked with Traverse City Light and Power, their electrical arm, to devise a method. And they started this conversation years ago back in, I think, 2017 and didn’t start to break ground and really make it come to life until 2019. And they’re building a symmetrical gigabit plus type of network. And those types of collaborative efforts, you know, can happen that much more quickly when we really make the decision to move forward, right? And it’s not just a “what could we do” or, you know, “what should we think about for the future?” It’s a “we need to do it now. What’s the best way to get it done? Let’s move forward.” But we’ve seen other ecosystems come together to identify the challenge, figure out the right fit from a network perspective, what type of architecture might you want? What type of terrain are we dealing with? What’s the best solution? And we might be subject matter experts in the ceramics and in the glass and in the hardware, but we’re not necessarily the subject matter experts in boring or in hanging in the electrical space, or some of these other things. And so that’s where this idea of bringing the right people with the right skills to the table to help any end user entity accomplish their goals is really what we’re here to help do. Is to be a facilitator to bring the right people to the table to address the needs of, you know, any individual community or operator circumstances. 

Stephen Smith: Another area that you spoke on about thinking outside the box is finding sources of funding. And I know that’s a question that, you know, at times for a utility might be front of mind that we know our community needs it. It’s not a question of demand. And we know that we bring certain infrastructure to the table, especially if they’re an electric cooperative that will help support that. But what we’re concerned about is how do we pay for this thing? And you had some thoughts on finding sources of funding for those fiber builds that might not be the obvious most, you know, most traditional paths. Talk to our listeners about some of those ideas, some of the things that you’ve seen that have worked for fiber builders.

Kara Mullaley: Well, certainly the easiest course is if you’ve got your own coffers of cash where you can fund your own network and take the cash hit until subscribers are turned up and money starts flowing in to pay that back. Now, that might be accomplished through a loan or through just equity that you have. The more likely scenario, particularly with a lot of the listeners that are interested in RDOF and other things, has been government subsidies. And government subsidies have been local. They’ve been state. They’ve most recently in the news with a lot of commas, have been through the federal program and the FCC with RDOF. But those subsidies are, you know, not necessarily a huge chunk of change at the beginning to help you create a network, right? It’s going to be dispersed over the course of time. And you know how you choose to use that money — you should still figure out how to fund the original capital investment required to do that. And as I mentioned before, there’s private equity investment firms now that have been looking at broadband as a good long term investment, much like they have bridges and prisons and hospitals and other kind of large construction projects that you normally think of with with a P3 kind of model. And so, whether you’ve got a five million dollar project or a 250 dollars million project, there are equity investors out there looking for good, solid, reliable returns. And fiber broadband has proven to be one of those things that they’re willing to invest in. So I think you have grants, certainly. There are loans, certainly. There are these subsidies. But if you don’t qualify for those or you don’t want to go through the red tape of getting those, or if you’re unsuccessful in getting those, there’s still money to be had in the private sector, for sure.

Stephen Smith: So speaking of those subsidies, Kara, what are some of the ways that you have seen these broadband providers use those subsidies?

Kara Mullaley: Yeah, it’s curious. A lot of people think, you know, oh, I’m just paying back my debt that I might incur. I’m using the subsidy to pay off my loan for my CapEx expenditure. Which is in some cases, many cases, what people are using it for. Others might use it to just supplement the ongoing operational expense and that might be it, right? It’s just helping keep the machine running, if you will. When you look at some more creative thinkers, they’re saying, OK, my business case works at, I’m going to make up a number, you know, 40% take rate in my rural environment. But if I could garner 70-80% take rate, that’s where profits really start to flow back and my payback is that much sooner. And so what we’ve seen is some people are actually looking to use their subsidy money that they’re getting from the government to actually then further subsidize additional subscribers by reducing the dollar amount that they need to pay per month or providing initial installation upfront for free or. You know, including home Wi-Fi equipment in the cost of their setup or even devices, so that they have devices to use on the network. Whatever that may be, so that they then have more subscribers on the network that are paying some amount of money, maybe not exactly the ARPU they were originally intending, but that then helped spread the cost of operating the entirety of the network, and they become more sticky with those customers as well. And so potentially they turned into long term subscribers, not just short term subscribers, that that turn off onto the next thing in short order. So whether they’re using it to pay back their debts or they’re helping it to just maintain the operational costs and keep that machine running or actually looking at creative ways to boost their take rates and increase the people that they are servicing every month, you’ll see a lot of different ways to use that money, quite frankly.

Stephen Smith: So you mentioned earlier that, you know, Corning, in addition to being a provider of materials and equipment, that you’re really a resource to the industries. And one thing that I found to be so valuable is that you have a Community Broadband University that would provide a lot of information on various topics to those who are in the broadband business or looking to get into that. Tell us about The Community Broadband University: what it entails and what people might find there.

Kara Mullaley: The Community Broadband University was actually one of the things that we created during Covid because we weren’t able to go do individual customer outreach or trade shows in-person. And we really like it. It’s not just Corning people talking about our products. In fact, there’s very little sales stuff on the Community Broadband University. And we’ve invited a number of different people from all of these different parts of the ecosystem to participate and provide their perspective on different things. And so there are videos that are 3-10 minutes long. So you can watch a couple on your lunch break or listen to a few while you’re traveling in. They are low-production quality. I’m not going to say that that they’re high-production quality, but they are definitely meant to be short, to the point, impactful on a variety of different topics, whether that might be the business planning and the construction and the types of architectures, fiber broadband architectures, that exist and the pros and cons of those. How to choose a good distributor, how to identify if open access networks are right for your business. There’s a myriad of different topics. At the time of this recording, we’ve got over 50 videos out there, and we’ve got probably 60 or 70 more scheduled for this year. So if you’ve got a topic that you want to learn more about, feel free to send it our way and we’ll see if it’s on deck. And if it isn’t, and it’s something we think a lot of people might be interested in learning about, we’ll add it to the university. And that link, if you’d like to go find that link, is corning.com/cbbu for Corning Broadband University.

Stephen Smith: Excellent. And I’ve spent some time on that, and you do have a wealth of information there. And I can’t imagine what it’s going to look like when the size of it doubles or more by the end of the year. Kara, you’ve brought some interesting perspectives to our listeners today, and I really appreciate you joining the program.

Kara Mullaley: Thank you for the opportunity. We’re super excited about helping support broadband wherever it may go. Certainly, the digital divide is not going away any time soon, and it’s going to take a village to get us to to realize. You know, a shortening of that time span between when people have the ability to participate in the conversation, right? What we want to see everyone in our country be able to do is participate in the global conversations that are occurring. And when you don’t have access to broadband and you don’t have access to the tools and the resources that counterparts in the urban areas may have, you simply can’t participate at the same level. And we want everybody’s voice to be heard. And so that’s one of the main reasons why we’re so supportive of rural, urban, suburban, you know, telecom companies, cable TV companies, electric cooperatives, whoever you may be. We’re here to help bring that vision to reality.

Stephen Smith: Outstanding. Well said. Well, thank you again, Kara, and thank you for listening to Rural Broadband Today, where we take a look at the people and the issues shaping the rural broadband story across America. I’m your host, Stephen Smith, and this program is produced by WordSouth — A Content Marketing Company. Please share this episode with your network and help us tell the rural broadband story. Thank you for listening.

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