Reading the Signals: What Broadband Policy Shifts Mean on the Ground - Episode 680 of the Community Broadband Bits Podcast

Christopher Mitchell (00:12)
Welcome to another episode of the Community Broadband Bits Podcast. Quite possibly the last one. ⁓ Which is not to say that I'll stop talking to people that are brilliant and sharing interesting stories, but I think this might be the last episode. Episode number 680 with Doug Dawson, the creator and the myth of pots and pans by CCG.com. ⁓

but the company CCG that's worked with a thousand different telephone and Internet service providers. Doug, welcome back to the show.

Douglas Dawson (00:46)
Well, Chris, I'm actually quite flattered if I might be your last one. You know, I'm very good at shutting things down. What do you know?

Christopher Mitchell (00:54)
Well, this is we're gonna we're gonna be renaming it. We'll be having an announcement soon, I think, but I think the week after this airs, we will be launching the new show and, you know, moving forward and figuring out how to adjust as we go. We had 680 numbered episodes of Community Broadband Bits. I think we started in like 2012, 2013, something like that. We have a number of bonus episodes.

Douglas Dawson (01:16)
⁓ this is impressive. ⁓

yeah.

Christopher Mitchell (01:18)
Yeah, we

came in at over 700 episodes. I'm pretty sure when you count all the, you were involved with some of the ones in North Carolina that were bonus episodes. So there's an exciting future ahead. fact, ⁓ we're not sure exactly how we're going to handle it, but if you're subscribed to this feed, you should start getting the new show automatically because we want to try and force it on as many people as possible. So we're going to be doing that.

Douglas Dawson (01:24)
yeah. yes. So yes. ⁓

Christopher Mitchell (01:43)
⁓ Today, we're going to talk briefly about a couple of items in the news. And then we are going to spend a bunch of time talking about how much it costs in terms of money to hook homes up to the Internet with fiber optics. And so it's a question that often comes up, know, like, does it cost $8,000? And is that common? Is that uncommon? Is that a lot? Is it a little? We'll go through that. So

⁓ But we wanted to start first ⁓ with Astound and G-Fiber with breaking news as we are recording this Which is dangerous because probably people will know a lot more and they hear it than we do right now But we're also going to talk about New Mexico's new program. That's like the Affordable Connectivity Program We're going to talk a little bit about portals and health care and how it's a little bit of training goes a long way For people to use those well, and then like I said, we'll talk about the cost of hooking people up. So

Doug, I'll just introduce it because I think you might not have seen it yet, but this morning I saw a news article suggesting that G-Fiber, which some people pronounce G-Fiber, which used to be Google Fiber, which was something that Google started in like 2010. So it's actually been quite a lot of time. They are joining forces with Astound. And remind me, what was Astound made up of? Five years ago, there was no Astound, right? There was something else. So what did Astound come from? Do you recall?

Douglas Dawson (03:03)
Yes, Astound put together three or four other smaller cable companies to build themselves. I don't remember which ones I can look it up, they, but, yeah, yes. And, and two or three other ones. Yeah. The one was up in the North West. Yes. So they did those. First of all, when I hear the G-Fiber, I just can't help but think of Gafal. Just so it's, it makes me laugh every time.

Christopher Mitchell (03:09)
It was RCN and Grande, think. And there's one out west I forget the name of.

Douglas Dawson (03:26)
⁓ It's not surprising because there's very few cable acquisitions left. The cable companies are all being gobbled up. That's what this is all about. I mean, the big one that's probably going to come up by May or June is Cox being merging with Charter. But the list is just shrinking. mean, the independently owned cable companies are just disappearing. And they're going down markets, smaller and smaller and smaller. You know, they want to convert these properties to 100 % fiber. And fiber is looking for economy of scale. The bigger they get, the cheaper.

cheaper

it is per customer, they are very good at their business. They have very highly rated customer service. Their customers like them, they have a really good brand name. The rumor is, because I've worked in some markets who compete against us down, and when you look at the national ratings of these various consumer agencies, they don't get a very high rating.

And so I suspect the customers are going to like this merger better. I have no idea with looking if the rates are going to go up or down. G-Fiber is pretty reasonably priced. There's a chance their rates might actually go down over time, which would also be a benefit, right? yeah, there's just, I the only large company left is, you know, is who? It's, I mentioned it too before the call. No, no, no, the one that's not been bought is,

Christopher Mitchell (04:37)
METRONET?

right. They're

T-Mobile now. Of course.

Douglas Dawson (04:42)
Yeah, yeah.

But I mean, there's almost all the cable companies. We're going to have a list of three big cable companies and these little tiny ones. That's all that's going to be left. And we're not even seeing it, but Comcast bought four or five little cable companies this last quarter. They're gobbling them up very quietly, right? So there won't be a cable industry pretty soon.

Christopher Mitchell (05:01)
Yeah. And what, from what I saw, which I still haven't had any confirmation or chance to talk to anyone about it, but it sounds like I think that, and again, dangerous because this will be more news by the time people hear this, but I think Google will no longer have G-Fiber. Like it'll be out from under there. think, I think it's going independent. ⁓ the management team of G-Fiber will be in control. It won't be a part of Alphabet. don't think, although Alphabet will have a minority ownership stake in it. and so I think this is like,

Douglas Dawson (05:27)
Sure.

Christopher Mitchell (05:29)
the ownership team or the management of G-Fiber will be kind of leaving the Alphabet fold going independent, I think with some with some ownership still, ⁓ but we'll be managing the whole enterprise of everything going together, which I think fits with what you were saying. That's the only reasonable way to go given the the market ⁓ impressions that people have.

Douglas Dawson (05:44)
Yeah. Yeah.

And the rumor that they were going to peel off has been circling for two years, so it makes perfect sense. I mean, they're large enough that they're a very solid standalone company. They don't really need the parent to protect them anymore. I mean, there's no doubt that they're profitable. So, yeah.

Christopher Mitchell (06:02)
So we have interesting news from New Mexico. New Mexico moved very rapidly to implement an Affordable Connectivity Program like service. Very similar, $30 a month. ⁓ It has the name of Low Income Telecommunications Assistance Program funded through a universal service charge, which will be ⁓ somewhere in the order of $2 is what is expected.

⁓ you know, there was already a charge on people's telecommunications bills that was like 50 cents, although you had noted in your article, it had previously been of more than a dollar at times. so a reasonable charge for people. then, ⁓ you know, somewhere between a hundred and 200,000 families will be able to be, ⁓ taking service from this program. about a $45 million program from the state of New Mexico. It looks like when it gets fully ramped up. so it seems like a pretty good.

Douglas Dawson (06:35)
Yeah.

Christopher Mitchell (06:52)
a step for a state to be taking. think New Mexico has been great on Internet access. They've been really, I think one of the better states, frankly, they have a bigger challenge than many. And I did just talk about this. I really enjoyed the interview I did on the Priorities Podcast on StateScoop which ⁓ came out last week as you're listening to this. So Doug, you wrote about it as well. What are your impressions?

Douglas Dawson (07:13)
First off, New Mexico is one of the poorest states. So if there's a state that needs this, I mean, they just have a lot of low-income residents. And so that's, you know, it's not an area where they have a lot of.

I mean, the entire terrain of the whole state's rough. It's like you have farmers and stuff supporting stuff. So it's just a rough, rough place to live in. And so it makes perfect sense there. ⁓ You know, the only concern I have about it is I think they have a whole lot more people who qualify than the 45 million will cover. So they're going to have to figure out what they want to do. Yeah. Yeah.

Christopher Mitchell (07:40)
No, it's a yeah, $45 million in your blog post, you said you

cited a number of 120,000 families, I think I'd seen maybe 173,000. So you're saying even that there's still many more than that.

Douglas Dawson (07:46)
Yeah.

But I think there might be 300,000

people who can maybe qualify. So they're going to have a future challenge. Now, not everybody who qualifies ever signs up. it may turn out that's a good number. And I'm pretty sure that they're going to limit it. This has not been clear yet. I think they're going to limit it truly to broadband and not cover cell phones. Because if they cover cell phones, it could get a lot larger. ⁓

Christopher Mitchell (08:15)
Well, it is interesting. They, I mean, they, they note

that for an Internet service provider to take advantage of this program, to get the money to then pass through that discount, service, ⁓ they need to be a Lifeline provider. And so I think they may say the telephone is served by the federal program of the Lifeline. And so the state would just focus on Internet access.

Douglas Dawson (08:30)
Yes.

Yes, yes. Or if they have Lifeline for broadband, which you can get, because that's actually merged, that's heading towards being only that. At that point, you'd be getting a $40 discount. So that's really not bad at all. So, no, it's wonderful program. I wish them all the luck in the world. And I hope this lures a lot of other states to copy of it, because it turns out that you can afford it. you know, again,

Just two years ago, their monthly rate on the bill was already $1.13, so it's only going to go up to $2. It's one of those things that's going up and down. I think that's one of the reasons they contemplated it. It had dropped to 50 cents. They're like, hey, we have a revenue stream here that we're ignoring. certainly some damn.

one of these right-wing think tanks is going to challenge it in court before it gets in because that's just like they challenged the federal USF. So they're going to probably have to get over that. this fund has been around forever. so obviously, they have already had the right to charge people. This is not a new thing. So that's the only drawback I can see is they might have to go through a court challenge just because we have the wackos out there that challenge stuff like this.

Christopher Mitchell (09:42)
I remember

when the Federal Communications Commission was thinking about this under Biden. And at that point, the chairperson was Jessica Rosenworcel. And I don't know if I'm misremembering some of her comments, but I seem to recall her saying something along the lines of they were deeply concerned about perhaps increasing the cost of people's home Internet access by two, three or $4 because of the burden that would impose on people.

Douglas Dawson (10:08)
Right.

Christopher Mitchell (10:10)
that we're paying into the fund. And I just, I just remember just being disgusted by those comments because the idea that, you know, Comcast raises their price by that more than that annually Charter does too. Yeah. And so like the idea that we shouldn't help out millions of people who have no access because some small group of people, so I'm sorry, some large group of people will be, you know, have, have their bill go up for a good reason rather than for like rather undefend defensible reasons in many cases. I just.

Douglas Dawson (10:21)
Every year. Every year, yes.

Christopher Mitchell (10:40)
I just, I recall that and I just think this is a, there's a total lack of leadership from DC on either party on this. So I do think states should be thinking hard about these programs because otherwise there's no relief coming for their citizens.

Douglas Dawson (10:52)
Well, on the flip side to the argument you just made is if those big ISPs pick up that many millions of new customers, they wouldn't need as big a rate increases. So they wouldn't necessarily need to keep doing the $3 rating. Maybe one year it's instead of three, it's two. And all of a sudden we're starting to cover it out of revenues, right? So the fact is that's a lot of new customers. That's a lot of new revenues for those companies. yeah. No, I just think, I think it's magnificent. It's about time that we have something like that. And because it's at the state, this may never go away.

You know, we're not at the mercy of ⁓ Congress changing their mind every three years, which is what killed the ACP.

Christopher Mitchell (11:27)
And the

last thing I would say, which we're not going to get into because anyone can go back to the many, many past shows where we've talked about it, but the States also need to create a more competitive environment. Like we need the States and the federal government to encourage policies that will actually result in more market competition. That's not going to result in a $30 product permanently, I don't think. And so we need a low income program, but for the millions of other, the tens of millions of other people who would benefit from competition.

⁓ This is not a situation where a state can just say we'll do our own ACP and then everything is done. We need policies that encourage more investment and real market competition.

Douglas Dawson (12:05)
And now I'm really disappointed because that was such a good topic for episode 681.

Christopher Mitchell (12:11)
⁓

Well, or episode one of the new show. The last thing I wanted to touch on this comes directly from ⁓ your post. You had saw these stories about in San Francisco where ⁓ medical facilities would basically push people out the door and say, like you could check.

Douglas Dawson (12:14)
There you go.

Christopher Mitchell (12:33)
your test results and in your information, your history, your medical history online on this portal. And they would give them information on how to like log in perhaps. And that wasn't cutting the mustard, it did not get the job done. And so there's a new intervention that they tried and it seemed to have positive benefits.

Douglas Dawson (12:48)
Absolutely. First, you know, and that's what doctors do. When I go to my doctor, they don't call me, don't mail me, they don't email me. They go to the portal and see what your test results are. The portal is also where you make your next appointment. And, you know, I don't even have to ever hardly talk to my doctor's office anymore. It all happens online. But what they found was people, yes. Yeah. Yes. Right. And it was taken care of.

Christopher Mitchell (13:06)
Yeah, no, when I recently had an issue with my prescriptions, I was all like, you know, portal and clicking buttons and just taking care of.

Douglas Dawson (13:15)
So, and I had the same issue. So, the trouble is they were walking out and they were giving people a little slip here, all your stuff's in this portal. Well, if you don't have a home computer or you don't know how to use a portal on your cell phone, it turns out about, they were finding about 15 % of patients never logged into the portal. Well, that means they're not getting the healthcare.

that the follow-up to your visits is actually the most important part of the visit. Here's your test results. You it says, your cholesterol's high, let's talk about it, but you're not hearing that message because they don't call and tell you. so there's a nonprofit group and they said, let's start training those people who don't know how to use the portal. So that's what they did. They have a 45-minute session and they get online with them, you like you and I are right here and they...

And if they have a phone, show them how to do it. They go step by step through one on one. So this is true help desk. You know, this is true digital equity training. And so, and what they found is the vast majority of their customers walk away from there knowing how to use the portal. And the reason this is important is that's not the only portal you have anymore. You have a portal for your mortgage. You have a portal for your student loan. You have a portal for your credit card and you have a portal for your bank account. Portals are the new world out there.

Christopher Mitchell (13:59)
It's one on one.

Douglas Dawson (14:25)
All these people have been shut out of the world because nobody ever taught them how to use it. We have this assumption that people know how to use computers. They don't. They don't. If you go to a portal and you've never seen one, you don't know the first button to hit.

They go, hell with this, and they put it away, and that's the end of it. So this is the real first step into people, because once they master the portals, I think they're going to be brave enough to go tackle other things, because that's actually not the easiest thing on the web. That's a little more complicated, right? You have to go through layers of menus and stuff. So once you can do that, you can do a whole lot of things on the web. I think it's amazing. And they said their success rate is extremely high. ⁓ So they're now looking, and they had a grant to do this, but now they're looking

They think that hospitals and doctors offices should just kick in and make this part of the fee of going to the doctor so that it's permanently covered because it's very much in the doctors benefits for people to use their portals. I mean, they're missing out on a lot of return visits because the people don't know they should come back. I mean, it's literally not so, so this is awesome. It doesn't matter. You we could have done this. Your banks could have done this with your bank portal. They don't do that either. They assume you know how to use it.

⁓ But you need them to use it because all the banks around me there's no lobby anymore. If you don't know how to use the portal, you don't use the bank.

Christopher Mitchell (15:40)
Yeah,

yep. Yeah, and then one other thing I would just add on to what you were saying too is that it's not even just the confusion. There's also this sense of if I click the wrong thing, am I going to mess something up? Am I going to break it? And so there's like, you got to get over that as well.

Douglas Dawson (15:52)
Right. yeah.

Yeah, no, so that's one of the best digital equity stories I've heard in years because it's so successful. They said that they're having 80, 90 % success rates. And then the people who don't succeed, they're probably gonna work with them a second time. So I think it's amazing. yeah.

Christopher Mitchell (16:10)
All right. So Doug, I was talking with a person and we're talking about, this was in relation to BEAD, although ⁓ the answer and the discussion won't really focus on BEAD, the federal broadband program. ⁓ But the question kind of came up like, connecting a home is $12,000 that I saw like in terms of a subsidy that the state was going to pay with federal dollars. Is that a lot? Is it a small amount? And so like, how does it, how does it work out? And the way I thought of it was that like,

⁓ It'd be useful if we had a kind of a rule of thumb, just so people have a sense of like, you what does it cost to connect most homes? And so you said that you have, this is not the first time you've been asked that question and you have an answer for it.

Douglas Dawson (16:54)
Not even close. I've been asked this question a hundred times. So let's just start at beginning. First of all, let's talk about when you say $12,000, what does that mean? That's the cost of building the fiber. It's the cost of building the drop to get to the person's house. It's the cost of the electronics at your house and signing them up. It's the cost of huts and stuff that have equipment in and a network that do all the talking to the house. And if you're a bigger, sure.

Christopher Mitchell (17:16)
Can I pause you for a second? So like,

there's like, there's like direct costs that are both labor and materials to connect the home, right? You just listed a bunch of those. And then there's like a share of shared costs, right? Like, because the neighborhood has infrastructure, but you're still talking about individual costs there.

Douglas Dawson (17:23)
Yes. Yes.

Well,

no, but if you build a brand new network, if you go to a new town, you have to build all these things. So when you decide to go to a new market, you have to build all these things from scratch. So you have to put the new HUD in. that's everything.

Christopher Mitchell (17:43)
So you're covering everything. You're not just talking about an

extension to a new home from an existing network.

Douglas Dawson (17:48)
No, no. So this is the all-in cost, because that's the cost that an ISP uses to decide if they can afford to go to a market. They look at the, they say, here's my total capital cost. And so if a small ISP says it's costing me $12,000 per passing, they're talking about all those numbers. So now that's what's in there. You the next thing that matters is, now we go out to the world when there's two different kinds of construction, aerial and barrier. They just have different costs. They just do. So let's start with, you're in Minnesota.

Christopher Mitchell (17:56)
Mm-hmm.

Douglas Dawson (18:15)
Southern Minnesota is probably the most unique place in the country along with South Dakota. It's actually cheaper there to bury than it is to put it on poles. The soil is literally 15 foot deep and I always had the joke there that you could bury a fiber with a tablespoon. So, I mean it's really easy to bury fiber so that you know, so you know because there's no, yes. Yes. Yes.

Christopher Mitchell (18:33)
And so to be clear, there's a lot of technologies for getting fiber underground. And in particular,

one of the most cost effective is the vibratory plow. And I think that's what you're talking about here. And you can do that in places where you have that real nice loose dirt effectively.

Douglas Dawson (18:45)
Yes,

they literally drive down the road with this thing that looks like a giant snow plow and they just put the fiber in the ground. So that's why it works in Minnesota. Most of the world, can't do that. So it costs more to build it in other places.

Christopher Mitchell (18:57)
And it's, I'll tell you, it feels like an earthquake coming through too. It's remarkable.

Douglas Dawson (19:05)
And so, and then in cities it costs a whole lot more. You have to literally get machines and bore under the ground and stick fiber through them. It's pretty costly. ⁓

Christopher Mitchell (19:14)
Yeah, you have to like take

permits and close down roads and the city doesn't require doesn't allow you to just shut down the lane of a road without paying some fee.

Douglas Dawson (19:17)
Yes. No. Right.

And so all that matters, and so that's really the next question. There's this construction methods. The aerial construction boils down to how good the poles are. If the poles are perfect, it's pretty darn reasonable. You just get up there and slap it in. But if the poles aren't perfect, meaning either they're too crowded,

or they're bad poles they need to be replaced, then the cost goes way up. so, because the guy who's connecting, if it's his fault that you need to add in new stuff, he's largely responsible for that cost. there's an FCC, by law, unless the poll is getting ready to fall down, then it's the poll owner's cost. That was a brand new change a few years ago at the FCC. now in rural areas, since you mentioned BEAD they're not usually too full. The problem in rural areas is the poles are old.

Christopher Mitchell (19:54)
by law.

Douglas Dawson (20:10)
My worst example is down around Four Corners, there was an electric co-op where all of their poles were bad. I think they were built in 1940 and they were all bad. So they were hoping that somebody wanted to come build fibers so they could get all their electric poles. Well, nobody's willing to do that for them. everyone's spending a fortune there to bury the fiber because they're going like, I'm not replacing your expensive ass poles. most of the world poles are decent, but nowhere are they perfect unless it was...

few crops where they're perfect because they literally replace a pole if it starts creaking a little bit but that's rare okay so yes.

Christopher Mitchell (20:43)
Right. But there's an additional

challenge, which we don't have to get into too much. But if you have to be on a line of a hundred poles, you can have a situation in which like 90 of them are in good shape and 10 of them aren't. And then you aren't necessarily on your own timetable to be able to deploy them. That's a real problem.

Douglas Dawson (20:58)
Oh, not at all.

And time is money. When I get delays, I keep racking up interest. I've already borrowed the money to build this damn thing, and now I'm paying interest, and I'm not getting the construction done. I'm not getting my revenue, so yes. So the next big issue is density, and that's where it really matters. So I live in Asheville, North Carolina. Here we have 600 miles of fiber. We have 38,000 homes. It's like $67 homes per mile here.

And there are cities where it's a lot more than that. if you go to, I'm sure in Minneapolis it's higher than that. ⁓ And so, know, so here that density means when I build a mile fiber, I have a lot of revenue opportunities. When I get to BEAD locations, which are the very end of it, ⁓ it's not unusual to see BEAD grants that I've worked on that are three, four, five, six people per mile. That's not very many homes.

If you get down to places when they say well there's places where you shouldn't build fiber That's because there's one home per mile and then you shouldn't because they have to pick up the entire cost of that mile fiber, right? So yes

Christopher Mitchell (21:58)
Right, and if I could jump in, one of the rules

of thumb that I've heard in the past was that if you could get three paying customers per mile, you could make it work. And that's, hard for a co-op to do it.

Douglas Dawson (22:07)
Well, let's get

to next thing is who's building. So whose building matters companies have always had a metric. They won't extend a cable company network fiber or their older technology HFC unless they have 15 to 20 homes per mile. They've had that metric forever. Some of them are at the 15, some of them are at the 20, but they've stuck to that metric.

And so if you're outside their area and you have 12, they're just going, no, not enough homes here. I'm not gonna build here,

Christopher Mitchell (22:29)
This is.

This

was actually written into franchise agreements over the years in which cities would basically require to build. And I've seen language like 12 homes per mile, 15 homes per mile or something like that, where they were obligated to build if there was more than that.

Douglas Dawson (22:37)
Yes, yes, yes.

Yes. Right.

Yes.

Yes. And so, so that was cable companies. Now they've gotten more hungry because they're starting to lose customers. And I think they're probably lowering that standard a little bit. But now let's talk about, I know three large fiber overbuilders, the kind of guys that have 100, 200,000 customers. Their metric is they won't spend more and each of them has a different number, but it's between 5,500 and 6,500 per passing. That's, that's the most they will spend out of their, because if they're now, if they get a grant,

the grant has to bring them down to that number. So they'll go to a grant area as long as it gets them down to their $6,500 number. And if they can't meet that, they simply won't go there. Now, they have higher standards than the rest of the world because they expect to make a very large margin compared to other people. A co-op may have that same number and they might be literally happy with $8,000 or $10,000 a mile because they might finance it over 30 years.

And they don't really expect to make a profit. If they break even, they're actually happy. They want to make their co-op bigger. Because if they make a profit, they end up having to give it back eventually or put in the bank and sit on it. And so co-ops will have a higher number. Everybody, most little companies don't know that number. They wait till they get an opportunity and then they do the math and they go, I can afford this or no, I can't afford this. But there is a number. They just don't know that number the same way the big guys do. And so that really comes down to interest rates.

your customer rates, all that matters because the question is can I afford, can I pay for this thing after I build it? Those things all, those are the two biggest issues that actually influence that number. So, good, sure.

Christopher Mitchell (24:21)
Can I frame that? So one

of the, one of the ways that I try to explain it to people sometimes is just ignore the technology. Just assume for a second that you're providing a loan to the home and it's like $5,500. And the question is if they pay you a hundred dollars or $80 a month then, and you have some amount of costs to service that, ⁓ how long does it take you to break even?

And so I assume for those big companies that are willing to pay $5,500 to $6,500, they're probably looking at four or five years until they get that, they've recouped that investment into the home, the loan to the home basically. And after that, they're on easy street and they're going to be on easy street for a long time because they're assuming no one else is really going to come after.

Douglas Dawson (24:53)
Yes.

And the co-op may not actually hit that break even for 25 years. When they finally pay the loan off, they go, we finally made it, right? So that's a big difference in philosophy, right? So again, a co-op with $80 rates can afford a lot more than a co-op with $50 rates. mean, it's just a matter of how well the revenues can cover. So that's the story. So now, let's get to the $12,000 number.

I have recently I did a study for a pretty large co-op who's never been in business before. It covers parts of five counties, but not any all of one of the counties, but it's big. Okay. They're all in cost, which is why I laughed when you sent me the email about this or about $12,000. That's their number. Their business plan doesn't, it doesn't work at $12,000, but they got a BEAD grant.

and the big grant is enough to get them down to where the business plan works. And so they didn't know what their number was because they've never even been in the fiber business. But once we did the math, we said you need to get this much out of BD and sure enough, that was the amount that they were able, even after the benefit of the bargain, it just, it works. Okay. So yes.

Christopher Mitchell (26:08)
Right, and so one other thing

that if they were not a co-op, they might have done would just be to like cut off the highest cost homes and that would lower that number to a more reasonable thing. But co-ops really want to make sure every last person is served.

Douglas Dawson (26:16)
Yes.

Yeah,

and they are building the entire co-op area and some of those homes are very expensive to get to. Some of those homes are probably at $100,000 to get to them. And some of those homes are probably only $3,000 to get to because there's a cluster of them, right? So it all averages out. So they look at the whole co-op budget divided by the whole co-op pass-ins and they want, I can make this work. Now...

Christopher Mitchell (26:36)
Mm-hmm.

Douglas Dawson (26:45)
Even for they to make it work, they have to get the customers they expect. If they don't, they're in big trouble. If they get more customers than they expect, they'll make a profit. So that's always there too. But the 12,000 is not an unusual number in rural areas. You're not going to see a number that high. In southern Minnesota, where I was just joking to you about, know, it's worth seeing it cost like eight or $9,000 because the construction is just relatively cheap. But, you know, we can't forget that around the country,

The labor rates in Mississippi are half the labor rates in Washington state. is, you know, anywhere from 60 to 70 percent of the cost of building a network is labor. So those labor rates are really important ⁓ to what it costs you to build a network, right? So building a network in Washington state could cost you 60 percent more than building that same network in Alabama.

just because the labor is so much different there. So, you know, it's hard to talk about $12,000 without talking about the part of the country you're in. In Alabama, that would be really expensive. And in Washington state, everyone would go, really? You can get it down to that. Because that does make a difference. But at the end of the day, go back to the big companies with the $6,500 rule.

Everybody has that rule. They mostly don't know that number, but it has to pay for itself. Nobody is going to build a network and lose money. so depending on where you live, depending on the type of construction, depending on your density, depending on your interest rates to borrow the money, and depending on your rates, there's an amount of money you have to get from a grant to make it work. And so there is no rule of thumb because literally because Alabama and Washington state are that different.

there's no rule of thumb because it's a very different number between the two and we're still talking about exactly the same network. So now what I've seen, I don't think you can make a BEAD grant work at three homes a mile, but you could make, could remember the ReConnect grants. I've seen ReConnect grants at three and four customers per mile because they gave you half of the money. don't, BEADs not giving you half of them.

So when they gave you half the money, that just bought you down further. So some BEAD is probably not going to cover anybody who's got less than six or seven or eight homes per mile. Below that, it's a really problem. But as you said, what people did indeed is, except for co-ops, they don't build a whole area. They go, I can do BEAD in this pocket where I do have eight homes per mile.

You know, so that's how people pick their deed service areas. If they were, I suspect we're going to find a few of them didn't do their math and they're going to go build it and lose their ass. I I fully expect that because some people aren't very good at this. But if you do it right, you know, have to make sure that you can pay for it. If you can pay for it, it was the right decision. Right? So there's no rule of thumb, you know, now that's $6,000 I talked about.

That's cities too. Years ago, AT&T and Verizon both said they could build a new home for $600 in a city. Now that was a fib because that just meant getting the fiber on the pole and none of those other costs. But they did it because they were over lashing fiber onto the existing copper wire. So they didn't really have any construction. I saw them build a street near to me.

And they came by in three short passes and I don't think they spent more than an hour and a half of labor on the street. So I don't think it's 600 anymore, it's probably 1100, but it's still very cheap to get that fiber on the poles, yes.

Christopher Mitchell (29:58)
I think, yeah, because...

Right. that, I mean, that gets

to an issue of like, let's assume for a second that I'm like, ⁓ you know, Chattanooga, Longmont, one of these networks that started long enough ago where we know that they've done well, they're paying off their loans. And so from their perspective, connecting a new subdivision or going outside of city limits to connect a home, I don't know that they necessarily need to incorporate the share of the core fiber that goes back to the hut.

Douglas Dawson (30:10)
Yeah.

Christopher Mitchell (30:30)
because that's already been paid for, right? In some ways it's already been amortized. And so for them is just the incremental cost of what is it added to the network. And that's where you start getting at that like maybe 1200, 1800 number, like that would be cheap.

Douglas Dawson (30:38)
Yes, it is.

Well, again, if you go to an area where you're not overlapped and you can't build it, you're not going to get to anyone less than $3,000 $4,000 if you're building from scratch. That's the cheapest you can possibly do. But again, yes, people, when they add onto a network, it's always incremental. When you come to a whole new area, it's all in. So that's also a big factor. Like this co-op I just mentioned to you, they don't have any customers. So that's a brand adventure.

Versus in the future, if they decided they had 900 more customers in that network, they would just look at them as a little pocket and have none of the core costs in it. So yes, so that matters too, yes.

Christopher Mitchell (31:15)
And so one of the,

one of the things people should also look at is, uh, there's, different numbers that can get confusing, which is to say that we're talking about $12,000. Now, if we're talking about a $12,000 payment from the state to the provider, that is a connection that didn't cost $12,000. $12,000 is basically the like $5,000 that the provider paid and then another 12. So that was probably a $17,000.

connection, right?

Douglas Dawson (31:43)
Yes,

yes, yes, exactly. So all that matters to the provider is the amount he has to pay for it. That number has to work and he has to get the rest from a grant. And if he can't get it from the grant, if he's smart, he turns the grant down. So I really believe some people got forced into lower amounts from benefit of being they took it anyway. And I think they're going to turn around and go, boy, did I make a mistake. I know one who already did that in the past, who took too little for a grant and they're regretting it. ⁓

Christopher Mitchell (32:11)
Yeah,

I can't imagine looking at how these numbers were forced down in the pressure. I mean, I think in some states we're still watching to see what happens where we are expecting a significant number of grants to be turned down, whether that happens immediately or over time. then people saying, you know what? No, just, can't make this work.

Douglas Dawson (32:11)
Now

I know several companies thinking about walking out during the contract negotiation thing. so, yes, don't know what happens then. We have no idea. Does it do an offer to somebody else or does it just automatically go to satellite? I hope not.

Christopher Mitchell (32:42)
I mean, I just, I still love that. Like, you know, there's, don't know if it's happened yet, but there'll be a point where like there'll be a snap of the fingers of the Trump administration and millions of people or more than a million households will go from being unserved officially to being served with no construction whatsoever. It's just that like, as of today, is considered not served. And tomorrow Starlink having, having the Starlink service will, make you served. And.

Douglas Dawson (32:59)
Yes.

Christopher Mitchell (33:09)
That's one of those things that just continues to drive me crazy, the logic of that.

Douglas Dawson (33:13)
Well, now let's not forget Starlink is threatening to pull out a BEAD. maybe those houses get nobody. And then in Western North Carolina, everybody has Amazon, LEO and they now ask for a two-year delay. Are they real? I don't know. mean, people here are not happy about this at all.

Christopher Mitchell (33:17)
Yes, which, I mean, if.

No, no, shouldn't be. it's just, you know, they're, they're, they've been, they've been railroaded into being ripped off of a promised investment in their communities. And, uh, yeah, I think the best thing that, Elon Musk could do for America, literally, I mean, like the way that he, the way that DOGE um, as, as, as amply documented the many ways in which it has screwed us, the ways in which the budget of the federal government has increased significantly from far from what DOGE was supposed to do in terms of cutting it.

Douglas Dawson (33:34)
No.

Yes. Yes.

Christopher Mitchell (34:01)
A lot of damage would potentially be reversed. Not all of it, not even most of it, but like if they would just walk away from BEAD, it would be so great for millions of people in rural America.

Douglas Dawson (34:12)
Yeah, I mean, they can buy it already. It's not like they really need the they're not going to really get anything out of it. So it's a it's a funny money game. It's just a sub. It's just great to check that down. That's all it is. Yeah.

Christopher Mitchell (34:20)
Yeah.

Well, I mean,

that's the thing, right? BEAD we're talking about a few billion dollars to, to start, which is it's real money, but we're looking at a 1.7, 1.75 trillion IPO, I think for SpaceX. Um, really gives you a sense that like, this isn't going to be a very big deal, uh, for, for their income.

Douglas Dawson (34:35)
Yeah, yeah.

No,

I really don't think they care about it at all. They might walk away just because they don't want to do the... They basically said they don't want to do the paperwork. If they're forced to do the paperwork, they might go, that's not worth it and walk away. Because it's a lot of paperwork for them to... They want it in like 40 states. That's a lot of paperwork, man. I mean, being reporting is gruesome. So they don't want to do it. So I think it's 50-50 that they walk away. yeah.

Christopher Mitchell (35:05)
Okay.

Well, that means that you'll be right either way. ⁓

Douglas Dawson (35:08)
Well yeah, exactly.

That's usually my best kind of guess.

Christopher Mitchell (35:16)
Are there any other predictions? I don't think I gave you a chance because we didn't do the Connect This! Show this year yet. So you never had a chance to do any predictions for the year. As we're winding down, is there anything you want to, at the last second, predict so you can get credit in the summer or the fall?

Douglas Dawson (35:31)
The one thing that I predict is I don't think they're going to get their act together. They need to fix the Universal Service Fund so badly and I don't think they'll do it this year again. I think they'll put it off for another year. There's so much chaos in D.C. and it needs to be fixed so badly. It's going to break on its own here pretty soon. They also...

Christopher Mitchell (35:40)
No, it's unimaginable.

Douglas Dawson (35:49)
The second thing was related to that. They were going to launch the 5G fund for rural America so we could start fixing the cellular coverage, which is far worse than the broadband coverage. We never talk about that much, but rural areas, cell phone coverage stinks. Again, good and flat places like southern Minnesota, really terrible where I live. It's just not here, right? So that's never going to happen this year either. It was approved. It was even approved by the new FCC. They're the ones that actually said, let's go, and now they're not going to go.

So I think that's a very interesting one of prediction is I think there's a really high chance that NDIA wins their lawsuit and we get the digital equity money back.

Christopher Mitchell (36:27)
I think so, but I don't think it happens until 2028, 2029.

Douglas Dawson (36:29)
⁓

before we actually see checks, it might be a long way out. But I think there's a decent chance for them to win that lawsuit because they lost, the government pulled away for all the wrong reasons and they're losing these same arguments in a hundred other places. So I think we're going to see that money back. It's a long way back from winning in court and actually getting checks. And there's so many organizations that got created and built for that.

Here's the best thing about that, just to change subjects, all these local folks have gotten involved in digital equity and they created all these nonprofits to do it. They're going to all try to keep going without that money. That money was only going to fund them for three years at most anyhow, so they had to find a permanent revenue stream. It is a big deal.

Christopher Mitchell (37:09)
You say only, but that's a big deal.

Douglas Dawson (37:12)
But now they're motivated to find those more permanent revenue streams anyway. And I think that a lot of them were failed, but some of them were going to succeed and keep going. So ⁓ digital equity is now a permanent part of our discussion. And for years, there was almost none of that work being done. Just like the training on the, we were talking about on the portals, that's what digital equity work is. That's exactly what it looks like. that's wonderful. We need that so badly. So yes.

Christopher Mitchell (37:34)
Let's do, let's do.

Yes,

we do. And frankly, we need it to save money because, you know, a person, a veteran who comes back from the Iran war and could use some training in some of these skills. Not everyone gets it, you know, like in their workplace or as they're growing up, but to be able to use their portals and things like that when they're coming back, it's going to be really helpful. And especially elderly people on Medicare and Medicaid for them to be able to using.

Douglas Dawson (37:41)
Yes. Yes.

Yes.

Christopher Mitchell (38:04)
using IT stuff will ease the strain on the budgets of these massive federal programs. So yes, we need to invest that one and a half billion dollars wisely and it will save us many billions of dollars in other expenditures. But Doug, I'm gonna ask you one other Grab Bike question. Go ahead, make your point. Okay.

Douglas Dawson (38:17)
Now, I'm going to throw one last thing before

we forget. Travis won the bet about BEAD. There were no lines connected in 2025.

Christopher Mitchell (38:27)
I feel like there's a little thumb on the scale when you, mean, you know, the Trump administration sabotaged the program. So yeah, there was no connections. Yeah.

Douglas Dawson (38:33)
I thought there would be. They did.

Well, in fact, my blog tomorrow is talking about that. they had a whole year. They added a year to the process. yes.

Christopher Mitchell (38:45)
I'm Arielle Roth, administrator for NTIA, just did a piece in the Wall Street Journal in which they let her say, and I should say the Wall Street Journal editorial page will let you say anything, anything at all, as long as it fits their agenda. But she said they streamlined the program, which is, it's just amazing what words can do. When you take a program that was about to build, mean, Louisiana would probably have thousands of people on the Internet today if they had just gone forward with the program. She halted that and then it makes sure that Louisiana has no one connected.

Douglas Dawson (38:55)
Yes, they will.

Yes.

Christopher Mitchell (39:13)
from the program and then takes credit for speeding it up. It is remarkable. But that's what she did. Congratulations to her for getting away with it. I doubt that she'll be one of the people who is accountable for what she's done. But I want to ask you about something else because you just reminded me of it. ⁓ I've been enjoying the winter, but unfortunately spring will come to Minnesota at some point whereupon my Verizon service will suck again. We've talked about this before on Connect This! I am a

Douglas Dawson (39:14)
Yes.

Yes.

Okay.

Christopher Mitchell (39:40)
postpaid, I am a frugal person who has a great postpaid plan. And so that means that my service from Verizon depends on the margin that they have on their cell sites. And over the years, that margin has shrunk and shrunk and shrunk to the point at which when there are leaves on the trees, I walk around my neighborhood in urban St. Paul, and there are many areas, street corners where I cannot get service, I have to walk another block or two before I can actually get service now because they are so low.

When there's no leaves on the trees, I don't know, there's much better capacity. tell me, Verizon seems to be dropping out of the fight. It seems like T-Mobile and AT&T are at war, and Verizon's just kind of going away. What is happening in that space to your knowledge?

Douglas Dawson (40:22)
That's my impression too. Now I'm on AT&T and AT&T bought a whole bunch of spectrum from EchoStar. Remember that? Just not very long ago. And they upgraded 23,000 cell sites in like three weeks. They've now got that all, it's software, but it, but, it turned on, the radios are already capable of it. So they turned on the new spectrum. My speeds went from 105 to 300 at my house.

Christopher Mitchell (40:34)
Is that software, just software upgrades?

Douglas Dawson (40:47)
for AT&T and 105 worked fine. mean, during the hurricane, I worked on my cell phone for a month and a half till I got my broadband back and 105 was fine, but it's not 300. that's kind of put AT&T, T-Mobile has been way ahead of the other two. This is bringing T-Mobile up to be very much even in many markets they're going to be ahead. New York, they were already ahead of them, New York City, and this is going to put them even further ahead. Verizon does not seem to be doing that. So they are about half those speeds and they don't seem to be

having any plans to get them up, except that they are very selectively doing that. They have gigabit speeds like in Detroit now. They have gigabit speeds in a couple of markets in California. So I think Verizon might be trying technologies to leap up, I think they're trialing them first. Because I actually have worked with clients there, and they're going, what's going on with my gigabit speed on my cell phone? So then we looked into it. But you can't find them anywhere else. I think they have a few trial markets.

One is near San Jose. So I think Verizon plans to catch up because if you don't, you lose. Verizon actually has the most customers of the three. That probably surprises you. They have more customers than the other two. Yeah. Yeah.

Christopher Mitchell (41:53)
No, I mean, I keep Verizon in part because

when I work in Indian country, Verizon is the best bet to be able to have coverage as I travel around.

Douglas Dawson (42:01)
Yes, right. ⁓ AT&T

is miserable on the boonies. my gosh, Yeah, they're... No, no.

Christopher Mitchell (42:07)
Yeah, and T-Mobile wasn't much better the last time I tried it. ⁓

but at the same, I'm just starting to think, wonder, I would still save money over having like a standard prepaid plan if I perhaps just put in a second SIM and I just have T-Mobile and Verizon and two postpaid plans. Switch between them.

Douglas Dawson (42:17)
Yeah.

You

are a cheap lad. You know, because if you go for a prepaid plan, they give you a higher priority on the sell site, know. So, yes, you would actually get better service. I don't know how much better, because that's, is that really true? That's theoretically true. I don't know if it's really true. Because I live in a hailing town and I can't get Verizon or T-Mobile at all at my house. It's zero.

Christopher Mitchell (42:28)
You

Yeah.

Well, I wonder if I get someone to.

Douglas Dawson (42:50)
People block for me, yeah. ⁓

Christopher Mitchell (42:51)
If I write, if I do a column

and experiment and then write about it, do think I can get ILSR to pay for my cell phone?

Douglas Dawson (42:59)
Yeah, I think it's a great

plan. That's episode 682, I think that would be...

Christopher Mitchell (43:04)
Alright,

well Doug, I really appreciate ⁓ your time today. I appreciate all the time you've given us across our shows. ⁓ As of right now, if everything goes according to plan, you'll actually be on the first episode of the new show. So it's exciting news.

Douglas Dawson (43:20)
Man, that's a double whammy, for it last and then first. This is one heck of a month for me, right?

Christopher Mitchell (43:25)
Yeah. Well, I also want to thank everyone else. This show never would have gotten where it was without Lisa Gonzalez in the early days, without members of the team. know, Ry's been an editor. Jordan's been editing it. We've had a lot of different folks step in over the years and to be able to make it happen on just an amazing collection of guests and all the listeners. So, ⁓ you know.

I've loved doing it and we're gonna keep doing it. It's basically the same show. Like I'm just gonna be doing the same shtick, but we feel like ⁓ a new name that is a little bit broader will be better. this name, people assume maybe it's only about broadband networks, but you know, as we did on this show, we cover lots of things. So we'll be ⁓ continuing to focus on the telecommunications, but the new name will be ⁓ more specific to the fact that we also cover surveillance and privacy and things like that.

So stay tuned. Thank you, Doug.

Douglas Dawson (44:23)
Thank you.