Getting up to speed. Connecting rural Iowa to high capacity, fast Internet service. We're exploring broadband issues with a State Senator, ICN Operations Manager and CenturyLink Executive on this edition of Iowa Press.
Borg: On the information superhighway speed dominates and capacity determines speed. It's like comparingIowa's vehicular Interstate 35 to a city street. More traffic, of course, moves much faster on I-35. And it's the same with the Internet connectivity. More capacity moves more digital information faster. But that comparison goes further. RuralIowapredominating with two-lane roads for moving motor vehicles is also where the digital pipelines tighten and in some cases never make it to the end user. Information moving much slower in many rural communities than in, say,WaterlooorSioux City. Governor Branstad is making broadband building a priority, calling it key for rural economic development. But, like most everything, saying so doesn't make it so. So, we're exploring the challenges with Marshall County State Senator Steve Sodders ofStateCenter, Ric Lumbard who directs the operations for the state-owned fiberoptic ICN, Iowa Communications Network and representing private industry, CenturyLink Public Policy Executive Michael Sadler. Welcome toIowaPress.
Thanks for having us.
Borg: And I need to say that, as our viewers have just seen, the ICN is an underwriter of Iowa Press. Across the Iowa Press table, Lee Enterprises Des Moines Bureau Chief Mike Wiser and Radio Iowa News Director Kay Henderson.
Henderson: Gentlemen, let's start with the name of this initiative. It has been called the Connect Every Iowan Initiative. Senator Sodders, how many Iowans currently are not connected?
Sodders: I don't have the exact number but we know that if you get out, especially into rural areas, the speeds are much lower and there are a lot of people who have learned that connected to high speed and affordable Internet access, that you can even go a couple of miles around the Capitol and you'll find that too. There are areas, just because they're sort of in that last mile, that they don't have high speed, good Internet services. So in a global goal that's what we're trying to do, we're trying to get it out to everyone.
Henderson: But is that possible?
Sodders: It's possible. I think if you look at, well, look at what we did in the 30s and 40s. If you take both what we did with telephones and what we did with electricity we made a conscious effort to get those out to the rural areas. And then if you go further, closer to what we have now, we did that with farm to market roads. And so this has to be that same kind of investment by Iowans because I think this is the next big thing that we need to do.
Henderson: Mr. Sadler, what is the market here? Is there a market for expanded broadband service? Or are there some Iowans who are just opting out because they don't want it rather than they can't get it?
Sadler: There is a market here. Obviously we've been doing business here for a long time and we've got a lot of customers inIowa, as do the 130 other companies in the state. The road that we run into is there is still a significant segment of the population that haven't adopted high speed Internet yet. That could be for a number of reasons. Maybe it is the cost, they don't want to pay it, they may not see the relevance yet of having high speed in their home or business.
Wiser: I want to ask this -- the way that the bills are structured that we have both in the Senate and the House, when you're talking about underserved you're talking about Internet speeds as opposed to geographic areas. So that means some people might not get it even if these bills are adopted. Why define underserved as 50 megabytes per second as opposed to where you live?
Sodders: Well, good question. And I believe that is the Governor's bill. If you look at the amendment that we'll be passing today on the Senate side, we have changed that a little bit. We have actually split up what is underserved and what is unserved. And in our bill, unserved is trying to get out to 4 megabytes down, 1 up and the other side is 3 and 30. So, in the Senate bill we split those two things up because there are really two different things.
Borg: I'd like to go back to something you said. You talked about the last mile around the State Capitol. That surprises me in downtownDes Moineswhere there is a last mile. I'd like to compare it to when I was growing up on a farm in northernIowa. Our farm didn't have, in the 1950s, electricity, early 1950s I should say, because it was the last mile and it wasn't, for investor owned utilities, economically feasible to extend the line to our farm. It just, the infrastructure wouldn't pay off and return an investment. So I'd like to ask you, representing CenturyLink, is it the return on investment is just not profitable to extend the infrastructure? Is that why you're holding back? Because it is private industry that has the responsibility now.
Sadler: I don't know that holding back is the right term. We do, we are judicious about how we decide where to invest our limited capital dollars. So we do look at return on investment as a piece --
Borg: So that is the factor. I'm not blaming you. That's business.
Sadler: Yeah, that is a factor. As you said, we went through the electricity wave, even telephone service, it took decades to get everyone a telephone. The Universal Service Fund helped get a telephone to every home. We have accomplished that. Now people are taking those phones out. So now broadband is the next wave of technology.
Borg: So, what do you need? Do you need government incentive? Or do you need, such as the REA, a government subsidized loan, REA, to come in and extend electricity -- do you need government to help somebody else? Or do you need the subsidy yourself?
Sadler: I'll answer that and I think I'm here kind of representing the whole industry so I'm not just talking about CenturyLink but maybe the industry as a whole. There's lots of different ways to deliver broadband. We've got local exchange companies like CenturyLink, you've got cable companies, you've got wireless companies, all offering a similar service. So we all kind of need different things. So I think it's more of a package of incentives and government options that we need to help connect every Iowan.
Borg: So you've heard that, Mr. Sodders. What does the bill that your championing in the Iowa Senate, what would that do? Would it subsidize a private company? Would it get the government involved in something like the REA loans?
Sodders: Yes, we basically have three things in the Senate bill. The first one is a tax incentive, a property tax incentive, which is similar to what the Governor offered. The difference between the two is the Governor had a property tax that kind of went on forever. You could build out and you would never get taxed on it in any city or county.
Borg: Never ends?
Sodders: Never ends. We in the Senate didn't believe that was good for cities and counties, they should have some control, so you'll see in the Senate bill that we do a ten year abatement, which cities understand, companies understand so that's what you'll see there. And so on top of that -- that really helps the larger companies, not so much your small Telco's. On the other side, we added a piece that helps more of your small Telco's, which is a loan program through IFA, Iowa Finance Authority, and that was because they said we don't have access to capital like maybe the bigger players do. So we have that piece. And so with those two pieces then we do a tax credit. And the tax credit can really go to either of them. They can look at a tax credit. So we have options in the Senate bill and all those things are still going to be worked out through ways and means as we move the bill forward.
Henderson: Mr. Lumbard, maybe you could help our viewers who are not as up-to-date with the terminology we've already heard. 50 MB, what does that do for you? That is the speed of the link that you have. What can you do at 50 MB that you can't do at 3?
Lumbard: It's a capacity issue and speed issue as far as how fast it takes you to download content. If you were to download Iowa Press on YouTube or something like that, how fast that data can come to you. Larger content takes longer amounts of time. Effective bandwidth shortens that window of wait. In the old days we'd dial up and we'd sit there and wait extended periods of time. This is really a speed and proficiency issue for Internet service within the users inIowa.
Wiser: Mr. Lumbard, one of the things -- I want to step back a little bit -- the ICN, tell us, because part of the legislation is leasing parts of the ICN. Can you bring us up to speed on what exactly is the ICN? And why hasn't it been leased so far?
Lumbard: Sure. I can address that. The state invested significant amounts of money many years ago in the process of developing a state distance learning network. And as all technology, things evolve and improve and expand and increase capacity. Well, now you have a state infrastructure that is very significant, latest and greatest with advanced technology and advanced capacities.
Borg: Just let me interrupt and then I'll let you go on. So, for our viewers who don't recall that or weren't even born at the time, that is fiberoptic cable that is buried alongIowaroads, highways and so on and it is fiberoptic actual cable in the ground lying there now.
Lumbard: That is correct. It is infrastructure in the ground. Now, the original formation of the ICN was designed to serve libraries, education, health care, state government, but there were also some preclusions that said we could not serve directly into the private sector, such as local cities or local county governments, we were precluded from servicing. And so although we have this fantastic asset in the state right now, there are some limits. So this conversation we're having with broadband is really saying, this is a huge conversation in the state, what can we all bring to bear? And what assets do we have that maybe don't take extra financial investment to get there? What can we slide out to answer this broadband issue in the state? So, if the ICN was able to go to the private sector and say, if we have ways to help, you may use it, you don't have to, but if these routes will help you maybe we could increase the broadband effectivity for the private sector in the state ofIowa.
Wiser: If it is so valuable though -- you tried to sell it last year and you got two bids and both those bids were rejected -- if it's so valuable why are more people, why didn't more people bid? Or what do you think the problems with the network are?
Lumbard: I would suggest to you that it was more valuable than the bids and that is why the bids were not effective. We had just previously, within the prior 36 months, operated in a federal grant called BTOP and it invested $26 million to advance the state network. And so the bids were not equitable with that type of investment in the state and so it simply wasn't a good fit for the amount of investment that the taxpayers ofIowahave invested into this infrastructure.
Henderson: Mr. Sadler, the Iowa Communications Network that we have been talking about has not been very popular with the private sector for years. Isn't this a lawsuit waiting to happen if some outside provider that has never invested in the state comes in and leases parts or all of the ICN? Wouldn't you at CenturyLink and maybe other carriers, file a lawsuit on competition grounds?
Sadler: I think the industry does have some concerns about how that arrangement could work with the ICN. Having said that, myself and Dave Duncan with Iowa Communications Alliance, both served on the STEM broadband committee that made recommendations to the Governor to develop these bills that we have been talking about. And I think the industry has been committed to try to find a way to craft the legislation that it can work, that we can be comfortable with it.
Borg: How would that work? You say you had concerns, you didn't spell them out. What are your concerns? And how do you think you could, CenturyLink, work with the existing state-owned Iowa Communications Fiberoptic Network?
Sadler: Sure, well as Kay kind of laid out, one of the concerns is will some outside player come to the state that has never invested here, all of a sudden be able to tap into the ICN and compete against providers that have been here for decades and have invested literally billions of dollars in this state? That is a concern of ours. I think there is language in the bill that gives a right of first refusal to the local companies. So that should help limit that opportunity for those kinds of transgressions to happen.
Borg: Well, be a little more specific, help me out. Maybe everybody else gets it. But you say CenturyLink, you mean you aren't only anIowaplayer -- CenturyLink has operations in many states. So you're hometown boys but you're also big people across the country. Who are the outside predators that you think might move in and haven't invested here?
Sadler: Dean, our industry is ultra-competitive. I couldn't even begin to list how many potential competitors are out there. I just read this morning that Google, a search engine, is now looking at other places to deploy fiberoptics and offer high-speed Internet. That is one potential predator, to use your term. There's tons of them. I really couldn't list them out for you.
Henderson: Senator Sodders, are you confident that you can iron out all of these legal issues and then come up with incentives, whether they are tax credits or tax abatement on the property that is installed, that actually does extend broadband service?
Sodders: Yeah, I think we can and we have been working with the industry on the right of first refusal. We also want to make sure that if someone decides to come off the ICN that they can't just cherry pick areas and only go after where they can get the biggest bang for the buck and then not service maybe a residential area because they won't make as much. So we're working on language on that. And I would also caution everyone, this is really a three or four year issue. This is a base issue this year. We're trying to do some things to get some base in that we know what we're going to do moving forward and we get some small, these are actually modest, probably, incentives this year. But if we really want to do this like we did electricity and like we did farm to market roads, Iowans are going to have to be bold and we're going to have to be bold and I think that comes in year two and year three, we need to start thinking about how do we really get this to the last mile?
Henderson: But if I'm a farmer watching this show and I am the only homestead within a four mile radius, is it realistic for me to think that a company is going to invest to extend broadband to me?
Sodders: Yeah, I think it is and the reason is, is there's more than one way to do it. We do still have, we have wireless, we have white space, there's a lot of technology --
Henderson: What is white space for those of us who don't know?
Sodders: White space is the -- I guess maybe you guys can explain it better than I can but --
Henderson: Mr. Tech, let's have you explain.
Lumbard: White space is the process, if you remember, that the FCC changed their legislation and went from analog TV to digital television in the UHF bands. White space is simply appropriating those digital channels now for data access instead of just digital television. And most cities have some space that is open in those local geographic areas, in those bands.
Sodders: And my understanding is you can go off of that in about a fifteen mile radius, is what I've been told. So there are other things out there and I think our bill also keeps it open for future technology so we've got to think about that as well.
Wiser: What are some of those future technologies? We're drafting legislation now about broadband, which many people are familiar with, what are some of the future technologies that we should be addressing?
Lumbard: I think wireless has to be a key element in this statewide and looking at this, not only just in the critical infrastructure of radio interoperability for critical responders and things like this, but also looking at statewide wireless endeavors that would power education, that would power residential aspects, short hop wirelesses in the state, things like this. I will say fiber is still the best asset to put in the ground and it is still stable, it is still solid, it is still current but then once you jump out of that and get into a residential area we can go fiber to the home, we can do different technologies with copper to the home that the local exchange carriers are utilizing right now and the equipment upgrades. So the same infrastructure in the ground may be there but we're able to do exponentially more throughput on the same fiber by using fresh electronics at the end of those fiber connections.
Borg: Mr. Lumbard brought up the name Google here a moment ago. Is that also a competitor, a potential competitor in new technologies for the ICN?
Lumbard: I think they have stepped into a space in other cities in the nation where they have simply done fiber to the home. So that is fairly traditional. However, having Google being the one doing that is non-traditional. However, the technology they're using is nothing really surprising to the industry.
Borg: Is that a -- it seems to me that CenturyLink is looking at potential competition with Google. Is the ICN? What would it do if Google came toIowawith that sort of technology? What would it do to communications inIowa?
Lumbard: I'll answer that two ways. Number one, understand that we are still focusing in our retail customers within the ICN, we're not expanding our retail customer base. We're still handling government, education, health care and that would be a far stretch for Google to step into that space in the state. They would primarily go after the residential space, to our friends in the independent Telco world where they would try to capture that amount of revenue that would happen at the residential level.
Borg: And expand a little bit more on the Google competition, if you will, Mr. Sadler?
Sadler: I'd agree. I think Google is more of a residential player, that is what they have done inKansas Cityand other places. Clearly they've got a brand name that people know so if they come to one of our cities like they have inProvo,Utah, we take that competition seriously. We're not afraid to compete. But we just want to make sure that any competition is fair. One of the issues you run into is cities have kind of gone out of their way to accommodate Google to come in and kept us under legacy ordinances that we have been fighting for years and that has been one of the potential problems that we face.
Borg: I see, you're saying unfair competition.
Sadler: Yeah. We welcome competition, just make sure we're all on the same playing field.
Henderson: Mike brought up the idea, are we talking about the right technology as the focus for this? I'm wondering if we're talking about spending state resources in the right way? There are some who argue if you're going to spend state resources it should be spent in concentrated areas where you could get the highest speeds possible and then that would bring in new business to the area. Mr. Sadler, do you think the state would be better off in makingDes Moines,Cedar Rapids,Council Bluffs,Davenport, the highest speeds possible as a business development incentive?
Sadler: I'll say two things. One, it appears to me that the Governor and lawmakers have a focus on the unserved and underserved areas as opposed to building up the urban areas of the state.
Borg: You say it's a mistake?
Sadler: Um, no, I think we need both. If I were laying out a plan from a state level I think I'd want to make sure I got access broadly first and then probably refocus on higher speeds in areas that already have it.
Henderson: Mr. Sodders, Senator Sodders, is that something that legislators will do next year, focus on getting the highest speed possible in the concentrated areas as a way of business development?
Sodders: Again, I think it's two-fold because I think A you have the business aspect, economic growth, those type of things, absolutely need that and it does bring bigger businesses and they want to come to the big cities generally. But think about all our smaller areas. I'm in a rural area,Marshalltownis not considered a big town, and it's also about drawing folks to those size towns and even smaller in some cases. And then the other thing we've talked just a little bit about is education. These things go hand-in-hand. So my daughter comes home fromWest Marshallschool and she gets on my wife's laptop and she gets on and does her presentations and all these things that they require now. Her best friend lives inLaMoille,Iowaand she cannot do it at her house. So high speed and affordable high speed shouldn't be about where you live, it shouldn't be a zip code. It ought to be that we get this out to all of our students, we've got to make them globally marketable. But also as that happens we bring in business. I think it's two-fold.
Wiser: Well, let me ask you, this brings up a point, is Internet a necessity for life now? And if it is, such as electricity or phone service, do you see an increased government role? And how would you feel about an increased government role in regulation in terms of Internet?
Sodders: Well if you're asking me I think it is. I think it's that next thing. We know people are dropping their landlines, we know they're going to cell phones. We know people want to watch House of Cards and they want to watch it fast without it buffering. So there's all these things going on and we also know education, if you want to be marketable across the world now I think this is, you've got to have this, this should be an essential service. I've got folks who maybe want to live inState Center,Iowabut work in a company inChicago. They like small townIowaand they're Iowans, we want to keep them here, but we want to give them access to working for a company anywhere in the world.
Wiser: Government subsidizes heat, for example, for people who can't afford it. Should they start getting into subsidizing Internet connections?
Sodders: Well, I don't know about that. I think what we're trying to do is by helping the privates and all these folks get out to these areas we're hoping we do it so that it is cost effective too on its own, that the companies can make it cost effective.
Henderson: But Mr. Sadler earlier referenced the effort to expand telephone to every resident involved some subsidization in the past. Do you think it's going to require a subsidy for the end user, not for the company, but the end user to get everyone on board?
Sadler: I think there could be some end users that would need a subsidy to make that leap to subscribing to broadband. We offer, CenturyLink offers a program for low income customers where we offer a lower rate if you have met certain requirements in terms of income. And even the take rate on that has been very low. So I think there's still a segment that just doesn't see why they need broadband in their home or business.
Henderson: Well, and part of the discussion, as Mike and I have covered legislative committees on this, is building the customer base. How do you build a customer base when you have people who just say, you know, my life is fine, I don't need that?
Sadler: I think adoption is a key piece to this puzzle of broadband access. As a company one of the other things we look at besides the cost to deploy is how many people are going to actually sign up if we build out to this new town or community? So as take rates go up that increases the chances of deployment to new areas as done I think through education, which the state could play a role in the education of the broad population of why Internet is important. You can't apply for a job anymore without having Internet usually. I order my prescriptions online, my medical prescriptions. My daughter can't live without Instragram or Facebook nowadays.
Sodders: But we have, if you look at both bills, both the Governor's bill and the House, in the Senate bill we have a digital literacy program and it will be deployed in the Senate side through the Department of Ed and because we recognize that, we have folks out in the country who have never had a computer and may say, I don't need one. But that might be because they've never had one, right, they're not comfortable. And so having a digital literacy program for those folks who aren't on there yet might be a wise way to get people to understand that this is important.
Henderson: You said you're going to delegate that responsibility to the Department of Education. A long time ago the state decided roads were very important and so there is a Department of Transportation. Do you envision having a Department of the Internet -- or an actual agency with people who have an expertise in managing the network?
Sodders: Well, that's why we have a chief information officer and that is also within this bill. We place the chief information officer of the state, which we already have, both within the ICN now so we have that connection and also with an interoperability board which is already established for that sort of connection both on the interoperability, which is your 911 services and all of those things, but then also the ICN and having that coordination is part of that.
Henderson: Mr. Lumbard, before we go, how much hasIowaas a state invested in the ICN over the duration of its lifetime?
Lumbard: Over the duration we can easily come up with numbers we could talk about that would be north of $200 million over its span. But I will tell you even now we do not receive any state appropriations for maintaining this. We receive our support from the revenues that we provide to education and health care and government and processes like that.
Henderson: And you got two bids which were in the range of $25 million --
Lumbard: $15 million and change and $1.00.
Henderson: So what is your assessment of the value of this network?
Lumbard: I think the bandwidth potential we have right now is greatly significant and would easily be north of $300 million if you were to try to take this out and duplicate this.
Borg: But you didn't get that sort of a bid.
Lumbard: No, we did not, you are correct.
Borg: Thank you very much. We're out of time. Thank you very much for spending time with us today. Next week on Iowa Press we're bringing you two editions of Iowa Press, speaking first on Friday with Board of Regents President Bruce Rastetter and President Pro Tem Katie Mulholland. And we'll bring you a separate, full edition of Iowa Press on Sunday as we sit down with Texas Governor Rick Perry, theLoneStarStaterepublican dipping his boots into the early 2016Iowacaucus discussions. So two editions of Iowa Press next week, same times thought, the first one Friday night at 7:30 and the second one with Rick Perry noon on Sunday. I'm Dean Borg. Thanks for joining us today.