Episode 3

Investing CARES Act Money in Broadband

July 9, 2020

Episode Summary

Fred Johnson, CEO and Executive Vice President of FTC, has been appointed by Alabama Gov. Kay Ivey to the state’s Broadband Working Group. This group is tasked with providing input on how to use federal CARES Act money to increase broadband coverage across the state.

Show Notes

Transcripts have been lightly edited for clarity and readability.

 

Stephen Smith: And thank you for tuning in to another episode of Rural Broadband Today. This is a special episode as I welcome our guest, Mr. Fred Johnson. Fred is the CEO and executive vice president of FTC, which is the local telecommunications cooperative that I’m actually sitting on a gig network here conducting this podcast interview and how we run our company. And FTC has been a longtime partner for WordSouth and helps drive the connections that my family enjoys every day. Fred, welcome to the show.

Fred Johnson: Thank you, Stephen. It’s always a pleasure to be with you. Great business partner over the years.

Stephen Smith: Thanks, sir. Well, certainly in the news and what we’re talking about today is the CARES Act. It has allocated money across the nation to help the country to experience some relief and economic security from the outcome of the coronavirus. And in the state of Alabama, the CARES Act has appropriated 1.9 billion dollars, which our state has divided into ten categories, leaving about three hundred million dollars set aside for technology and infrastructure, which relates to broadband. Fred, you have been placed on the broadband working group by Governor Kay Ivey to take a look at how those funds might be used to help solve the rural broadband challenge. Give us a little bit of an idea and your thoughts on that. I know that the working committee has had at least one meeting so far, so kind of give us an update there.

Fred Johnson: All right. Probably the easiest way for me to do that — and it’s a very positive assessment. And I’ll try to make sure I’m clear as to why I think it’s a positive assessment. But I’ll speak, first of all to the process. I think the Governor was very wise to constitute a panel of stakeholders across the waterfront of the broadband community to help with the decisions. And as part of that, she chose Director Boswell of ADECA to lead the group. And ADECA has been so involved in what I consider to be a very successful program thus far of expanding broadband across the state of Alabama. I think it was a very good choice to let him lead this group because of ADECA’s expertise and resources that they can bring to bear. The first thing we’ve done, which I think is the part of the process that I’m very pleased with, is we’ve identified the various needs, and they’re really simple. Yes, we have an issue with access to broadband facilities in large portions of the state, mostly rural areas. But you also have the issue of affordability, because there are a lot of places in this state where you’ve got top-notch facilities, but you have an affordability problem and people are simply not able to afford the service that is available to them. And then you have a device-related issue. And on all three of those issues, the state of Alabama faces significant challenges.

Fred Johnson: And you really can’t approach the broadband issue primarily from a distance learning perspective in the middle of a crisis like this, without looking at all three of those areas: access to the network, affordability of the network, and then making sure that the schoolchildren involved have access to devices which actually allow them to use it in a desired way. And the task force has started out with the understanding of that and is doing its best to assess in connection with the Department of Education, what each of those needs are, and working on the best solutions for it. Now, we’ve got a lot of challenges. I’m sure you want to talk about those here in just a few moments. But I’ve got a very positive appreciation of the way things have started out under Director Boswell’s leadership. Again, I compliment the Governor on assembling a group of stakeholders with a very clear charge. And thus far, I’m pleased to report that I think we’re making progress without anyone getting particular interest ahead of the common goal, which is to make sure we take care of primarily our students, but yet also our workforce, much of which has been required to work from home. And so all of those issues factor in there again. But the primary one, of course, is the immediate need for education this fall. So that’s the best way I know to start out.

Stephen Smith: So what would you say the committee, the working group, has identified as the top three challenges, particularly as they pertain to education?

Fred Johnson: Well, I guess and keep in mind I’m giving you the provider perspective on this. So clearly, I go back to the three [inaudible]. First of all, their access to the system — facilities capable of delivering broadband at the levels you need to accomplish, for example, the state’s statewide virtual learning platform that was just announced last week. Then you’ve got the issue of affordability, which is a big issue and one that, quite frankly, I don’t mind championing when I get a chance as well, because that’s one that’s easy to overlook, but it’s still very important. And then, of course, at the end, you’ve also got to deal with that device issue. So from a broadband providers perspective, that’s naturally what I focus on. Now very quickly, you start getting into the weeds and start having to identify the answers to questions like, what should be the eligibility for assistance with affordability? What eligibility levels do you go by? Something like qualifications for free lunches? Do you follow the same rules with the Federal Lifeline program? All of those things are ripe for discussion and will be covered. And then I appreciate the challenges my educational colleagues have to face with this. You can’t just give kids a device. And that’s a common misconception that a lot of folks don’t quite understand. There are issues. Once you give a student in Alabama a device that is owned by a local education establishment, well, you’ve got some responsibility that goes on with that because that device can’t just be an unfettered device that anybody does whatever they want to with. So there are just a lot of challenges that have to be worked through. And regrettably, the time period for doing that is extremely short. But nonetheless, there are very real challenges, and you’ve got to address all of those.

Stephen Smith: Is there conversation yet about whether this money will work through the existing broadband grant program that the state developed where you were instrumental in helping make pass?

Fred Johnson: Well, that’s an extremely good question, and that’s where we have to start bifurcating the issues. So I’ll do the best I can, and I’ll try to do it simply first. And then if you want to drill deeper, we can. I think the easiest way for anyone who’s really interested in understanding this issue at a very granular level, you need to assume there are two completely separate paths. First of all, the legislature of Alabama, especially the late House majority leader, Ledbetter in the House, as well as Representative Shedd from over around Cullman. And then on the Senate side, Senate Pro Tem Marsh, Majority Leader Reed, Senator Clay Scofield, with the very good support of Minority Leader Singleton, have provided what I consider to be extremely good legislative leadership on all of the broadband accessibility grant programs thus far. And that work continues on a parallel track. And I’m delighted to see the level of legislative leadership and attention to detail on the part of our legislature on that part of it, which I define loosely as the grant program as it currently exists and as it may exist in the future. And I want to be very specific. Why do I appreciate their work? Well, first of all, they’ve taken extremely strident steps to make sure that they understand the root issues of providing broadband. They’ve done so in a way that I don’t think unfairly favors one provider or one technology over another. And they’ve done an extremely good job of making sure that Alabama taxpayer dollars go where they are needed and not for duplicative overbuilding or just artificial competition. Now, that’s a mouthful for me to say. It’s an even bigger task for them to have actually pulled off. But in my opinion, there are those that might disagree with me, but I think they’ve shown extremely good wisdom in formulating a grant program that effectively takes Alabama taxpayer dollars and gives them the most bang for the buck.

Fred Johnson: Now, like I said, that process is underway and continues, and I expect there to be some really good things come from that in the next few years as well. At the same time, Governor Ivey has got to deal with the issue of CARES funding, which she’s appointed this working group to help her with and do so in a very short timeframe that lends itself to immediate solutions. For example, we saw the announcement earlier this week about Wi-Fi enabled school busses, which I think is a very good step in the right direction for the immediate need. But that program, as it stands today, requires that dollars be spent, projects completed, everything completely done by the end of the year. Well, you can’t start from scratch: design, engineer, build, test, and put into service a robust wireline broadband network of any size in six months. You’ll do well to do it in two years, which is the typical guideline for broadband grants. So you’ve got two tracks. You need to keep them separately in your mind. I understand the legislature is doing what it does best and working through the appropriation and design of a grant program. And the Governor, I think, is doing an excellent job at working towards taking care of the immediate needs with as much of the CARES money as possible. And I hope that all made sense.

Stephen Smith: Yes. Yes, that did. Thank you for that explanation. When it comes to figuring out what to do with the CARES Act funding, particularly as it pertains to broadband, every state’s dealing with that. Do you know if there’s been any communication regionally, possibly between states looking at some best practices and maybe seeing what others are doing? Or is this timeline just too fast?

Fred Johnson: Well, I think it’s fair to say that states are paying attention to what their neighbors especially are doing. There is a dialog among the provider networks, of course, across the country comparing notes with what is happening in various states. But everybody is challenged by the central question of how can we best spend this money in a manner that is fully compliant with congressional intent, congressional legislation, and Treasury guidance within the timeframe specified. And again, I cannot stress enough, regardless of what Congress may or may not have intended, the rules are such that this money has got to be spent and spent in a hurry to relieve immediate needs. And I think there are plenty of opportunities to do that. But I also think you will see some states push the envelope and do things that may later be called into question. It is my opinion from everything I have observed, that Governor Ivey’s administration is intent on doing it right. And quite frankly, I compliment them on that. That seems to be a commitment from everybody involved.

Stephen Smith: WordSouth works with some clients who have recently, in their broadband buildouts, expressed a bit of a challenge in accessing material, maybe as much as a six-month delay. And that’s before all these states started looking at how to spend very quickly the CARES Act moneys to have a quick impact, not to mention the natural momentum that was already taking place to build new broadband networks. When you look at the material needs and the needs for construction crews, engineering talent, and network specialists, do you think we are prepared to spend this kind of money as a state and as a nation this quickly? What kind of challenges are we going to run into? And frankly, do you think it’s possible?

Fred Johnson: Well, you have nailed it far more accurately than you might think. There is no question about it. Prior to the pandemic, there was a very clear movement across — and I’m just gonna say rural America, because that’s our area of expertise. But there’s evidence that this was going on in areas other than rural America. But there’s no question that the importance of broadband is more clear. It was before the pandemic. It’s even more clear now. We had some very good decisions out of the FCC, which gave our industry a lot of stability and the ability to plan longer term. We had some extremely good public policy. Actually, one of them, the USDA RUS Reconnect program, which was shepherded through the House by Congressman Aderholt, put a lot of well-intentioned and well-designed money into rural broadband development. And you were seeing a ramp-up of it, just like you pointed out, before the pandemic emerged. Now you’ve got all of that on top of it that certainly crosses the urban-rural divide even more quickly. And you have supply chain issues that are tied directly, not to the enhanced demand for broadband, but to the global impacts of the pandemic, especially on the electronics end.

Fred Johnson: Then you have just the normal challenges that you have. I mean, let’s face it; there are only so many contractors that were serving rural America, rural telcos, and rural broadband providers, and they all had a pretty heavy demand upon their time. And that’s even worse now. So to get right to the heart of your question, it would be very difficult. And it is going to be very difficult to execute large construction projects on anything short of a somewhat longer than, I will say, normal timeframe. FTC, for example, is already looking at potential construction projects three and four years out, just so that we can make sure that we have provided contractors that are working for us, the ability to plan and count on us, even though we have a full construction schedule already scheduled for 24 months. So, yes, there are going to be problems. And yes, that presents a unique challenge to the CARES Act money which must be spent by the end of the year. But again, go back to those three things that I told you. You also got affordability issues, [inaudible] issues, and device issues that provide an opportunity for some relief there as well.

Stephen Smith: That’s true. That’s true. All this money does not necessarily have to be spent on building up new fiber, but helping people access that is already out there.

Fred Johnson: That’s exactly right. And, you know, in the midst of a crisis when you have immediate needs, when you have time limits, when everybody’s stressed to begin with, and when we’re having to do so many things remotely, it’s really easy to forget about things. But common sense, you have to keep a handle on it. It does you no good if you make sure that there’s a broadband connection into a home and that the family can afford it, but the child has no device to use in his home. There are so many people that have devices that they forget that it’s not just a device; it’s got to be the right kind of device. And that’s something that’s easy to forget, especially when you’re among the group that always has access to those devices. And so we keep ringing that bell every chance we get.

Stephen Smith: That’s a very good point. We’re having this conversation the first full week in July, and you’ve had only one meeting of the broadband working group. What is the next step for that group? What does that timeline look like? And what do you hope comes out of this group, as a report back to the Governor?

Fred Johnson: I would say probably the number one task at the moment — and I would certainly defer to Director Boswell and Finance Director Kelly and some of those folks because I understand and appreciate deeply the level of detail and caution that they are having to exercise to get this right so that Alabama doesn’t spend something that Congress eventually wants back, our Treasury wants back. But ADECA was already engaged in a very intensive study to try to understand the need, especially for facilities, better than is possible to do with all other available data. At the same time, and I must give credit where credit is due, to State Superintendent Mackey and his aides and staff in helping with that issue as well. So I would say that there is, what I consider, to be very good collaboration at the moment between the State Department of Education and ADECA at defining solvable problems. Let me use that phrase, “solvable problems” — better understanding what we can do without question and what may have the most impact. And I think you saw the first episode of that when we had the contract for extending Wi-Fi hotspots through school busses. That’s a good first step, and there are some more that will probably follow. So right now, I would say the priority is really on identifying the needs that can be met first while we simultaneously look for solutions on the slightly longer-term problems.

Stephen Smith: Ok, great. Has the Governor given the working group a timeline for a report? A deadline?

Fred Johnson: I won’t speculate as to what she may have privately communicated to ADECA, but most of the work is being done posthaste, just as fast as possible. And I would say that there are some de facto timelines. The first one would be there are some things that may try to be done by the time school starts for certain. And then if there is talk of legislative special sessions in either September, October, or November, incrementally, there may be some things that need to be worked out by that group prior to calling a special session. So that if the Governor should call the legislature back in to deal with any of these issues, they have as clear a picture as possible. But again, I think there’s some actually really good work going on at the administrative and legislative leadership level to make sure that that happens.

Stephen Smith: Good, that’s encouraging. Let’s take a step back in closing, Fred. And you’ve spent the bulk of your career working in the rural telephony business. And you were there when dial-up became the thing. And ADSL might be a thing; nope, DSL is the thing. Let’s put some fiber in and to the point that that connection is such an integral part of everyone’s everyday lives. And those who do not have that are definitely now at a disadvantage; it’s more clear now than ever. Stepping back in from your perspective of your career, how would you assess this moment that we find ourselves in with what really is a watershed moment with the greatest clarity that we’ve ever had of just how essential broadband connectivity is?

Fred Johnson: Well, you and I have worked together for many years, and you obviously know where my passions lie and you know what buttons to push. So I’ll try to answer you briefly so you don’t have to push the off button. But I have reflected quite a bit in the last few months over the impact that the founders of this cooperative and the founders of Sand Mountain Electric and some other critical infrastructure components had on me as a high school student. And we’ve also had to hire a number of new employees due to retirements and that sort of thing, and I always review the story of FTC with them. And it all comes back to this: in the late 40s and early 50s, there were men and women who saw the need for critical infrastructure if the region was going to prosper and offer an affordable and meaningful quality of life to those who wanted to live here, work here, and raise their families here. And because of that vision and that commitment to executing the mission that flowed from it, we’re here and we’ve done that. And now we suddenly find ourselves on the next cusp of the communications revolution. And it’s clear to everybody that broadband connectivity is just as important to the infrastructure, the economic infrastructure of the community over the next coming decades. We don’t have to talk about how many decades or a century or whatever. All we have to say is it’s as important to the coming decades as telephony, rural electrification, and rural water were back in the 30s, 40s, and 50s.

Fred Johnson: And FTC is fortunate. Within 18 months, we’ll have a 100% fiber network. We’re already there with 95% of our members, and we’ll be 100% within about 18 months. And so we will have delivered on that. And so naturally, our focus shifts to keeping that alive, breathing state of the art [infrastructure] for as long as we can see on the horizon. And then also looking at adjacent areas that don’t have the opportunity to take service from us, that hopefully with the right kind of public policy support that we can venture into in the coming years to extend that quality of infrastructure. But we’ve provided that infrastructure for all of DeKalb, all of Jackson, and all of Marshall County that we are responsible for that our existing footprint is in. And that is something for which we are immensely grateful to have had the opportunity to do. And we are committed to keeping it alive and breathing. So it’s a cool moment to be in the industry. It’s cool to look back and see the impact that vision had years ago. And it calls us to want to have the same kind of vision and dedication to the mission now for the future that they had for their future, which is our present. And so that’s the fun part of this job.

Stephen Smith: Great. Well, FTC certainly has a wonderful story, and we’re certainly proud to be part of that story and to be benefiting today from the hard work and leadership that those founding members, those founding board members and community folks who got out and did all the hard work to form this cooperative. Fred, hopefully, we can check back as this working group continues at the task. Here in a few months, we can do an update, and let folks know what Alabama is doing and look forward to some great things there. I appreciate you joining us today on Rural Broadband Today.

Fred Johnson: It’s my pleasure anytime. Take care.

Stephen Smith: And you’ve been listening to Rural Broadband Today. My guest is Fred Johnson, CEO and executive vice president FTC. Until next time, I’m your host, Stephen Smith. Thanks for listening in.

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