Subscribe to Newsletter
Tell a Friend
Print this Page
12/18/2009Interview with Kelly Dunne, chairman and CEO, DigitalBridge Communications and Bill Wallace, EVP for Policy and External Affairs
This Q&A is part of a series of about a ½ dozen interview held with organizations that are collaborating with Intel in securing Broadband Stimulus Sustainable Broadband Adoption program funding for a National PC/Broadband Bundle initiative to deliver deeply discounted PCs and broadband service to underserved and un-served populations and communities. Q: Welcome to both of you. Can you please introduce yourselves, DigitalBridge and your respective roles? A: Kelly Dunne: I am Chairman and CEO, and Bill and I are 2 of 3 co-founders of DigitalBridge Communications (DBC). Bill Wallace: I am EVP for Policy and External Affairs. We established DigitalBridge in 2006, with a focus on brinigng affordable broadband to underserved, rural and semi-rural, areas of the country. Since then, we have deployed in 15 communities nationwide, with speeds of 2 to 3 Mbps downstream with upgrades to 12 Mbps in the $30 to $35 range, with both fixed and mobile services on a WiMAX platform.
Q: How did DigitalBridge come about? What role does it seek to have in the rural broadband deployment and adoption efforts presently underway throughout the US?
A: We were working with OnePoint Communications, which was acquired by Verizon in 2000. Bill and I helped run Verizon Avenue for 5 years using new wireless broadband technology to bring broadband to underserved areas. We saw a huge opportunity in the 4G ecosystem (both fixed and mobile) to deploy in mid-sized and smaller markets, with capital costs at 1/10 or 1/20 of traditional solutions.. We saw this as a unique opportunity to bring leading technology to smaller markets at the same time or before bigger markets received such technology. We focused on smaller communities and were one of the first companies to roll it out in the US.
Q: Did you buy spectrum or lease it?
A: We actually bought spectrum right at the beginning in smaller markets in Idaho, Montana, and Wyoming that gave us 193 MHz of 2.5 GHz spectrum. Across the board, we have an average depth of over 100MHz with holdings across 6 states primarily in the 2.5 band and we are looking to expand that over the next 18 months.
Q: That's very exciting. Your efforts to date have been focused on small and medium-sized communities of up to 150,000 inhabitants. What do you anticipate the key challenges to be in your upcoming truly rural initiatives? How different are they from what you have experienced so far?
A: Yes they were mid-sized towns like Idaho Falls, Idaho. Our approach has evolved and with the stimulus effort, we tend to take a regional view of broadband and define what we call "broadband serving areas". So we can bring the service to a city like Idaho Falls, but extend it to the surrounding rural area with the same quality 4G broadband.
Q: When you establish a footprint around a particular mid-sized city, how wide a perimeter can you cover for that area? A: We actually deploy base stations needed to cover the area. It is very dependent on density; the less dense areas are candidates for stimulus program funding as opposed to tier 2 and tier 3 cities that we refer to as our anchor markets. Anchor markets are generally funded through commercially-raised funds, and the surrounding areas, if we are successful, will be funded through stimulus funds.
Q: The anchor markets would not qualify for stimulus funding, am I right? A: That is correct. And we are very excited about the program because for the first time, if the plan is successful, rural areas will be receiving 4G broadband before urban areas. We're going to be rolling out in areas that generally have been last;now they are going to be first. This is important: from what we've seen in these smaller, rural markets, since 90% of the people spend 90% of their time within a 90-mile radius. So combining the anchor market plus the surrounding areas is a differentiated approach to deploying broadband wireless technology that will give users a different broadband experience.
Q: One thing is to roll out the infrastructure, another thing is to acquire subscribers and make sure that the service is adopted. How different are the dynamics in insuring a successful uptake in rural areas from those anchor markets? A: I think it's all a function of capital expenditure, density and demand. Doing the upfront analysis to ensure you're covering the right number of households that have existing and potential demand and the ability to really focus your network deployment and create the right coverage mix. We've had very good success with markets that are already EBITDA positive, or turning positive within the next six months. Even with a fixed and portable model at this time, before deploying mobility, we have a business model that works in a wide range of city sizes-- from 150,000 people to as small as 5,000.
Q: These are towns, rather than rural areas so far! A: When we say towns, we can cover the actual town, and when we can get stimulus funding, we can cover areas outside of towns that have very limited options for broadband. For coverage, we find out that indoor installations can cover a two-mile radius, but outdoor antennas can extend to an 8 mile radius, covering close to a 100 square miles.
Q: In those remote areas, how do you market your service to ensure subscribers' maximum enrollment? A: We use indirect sales channels. We are partnering with the local PC repair shop, with the satellite TV shop. We are contracting with people that are members of the local community already. Now we do find the uptake somewhat higher in the rural areas, because they have traditionally been underserved. For example in Appomattox, Virginia, I think we reached32% penetration within six months. There's always some satellite, dial-up competition, and cable competition. Very few places in the country are truly un-served by some form of broadband. But we find places where the coverage is very spotty, or where it is expensive, in the $55 to $60 range, versus our $30 range, so it is just not affordable. And with portability, instant installation, and mobility aspects, we offer a very differentiated product that helps set it apart from traditional wire line services.
Q: For those dealers you're working with, this complements their business. What's a typical profile for those dealers?
A: Computer repair or sales shops, direct satellite TV installers, in many cases. The key is to affiliate with the right local partners, who are already part of the local community and with an existing market presence. Nobody knows the market better than people who live and work there. Our most successful markets are in many ways defined by the quality of the dealers we have in those markets.
Q: Can you describe a typical roll out in a low-density market? A: Initially, we do the upfront design analysis and radio network plan. Then we do the acquisition, zoning, permitting and finally deployment. Once the market is ready, there is a soft launch process, followed by a hard launch process. As we mentioned before, we do the roll out of smaller markets at the same time as the anchor market, leveraging our marketing campaigns spread over a wider area, because the people in the smaller markets usually read the same newspapers and watch the same TV and news as in the anchor market. Then we do direct marketing, launch events and for the first 6 to 8 months, we have a very intensive combination of indirect and direct sales. Once we achieve a certain penetration level, we move more toward more of an indirect operation.
Q: I am particularly interested in your launch events. Are they following a particular methodology? I assume you are doing that in close cooperation with your dealers. A: With the close cooperation of dealers and the city. Often times, the city will contribute vertical real estate or other assets. We really focus on the differentiated technology coming to the market before other markets. We involve the local sales team and we usually get very good local news coverage that is a great help to our launch events.
Q: Would you mind describing your relationship with NRTC, and how critical is that to your rural drive? A: The NRTC is very important to our overall strategy, particularly because with 1500 rural Telco and electric coop members, they represent probably the best distribution channel with the best marketing presence. They're covering 80% of the landmass from a county perspective, and represent 17 to 18 million billing relationships. These organizations have been in these communities sometimes for 70 to 100 years. Many of them are family-owned and run, they give back to the community, they're very well respected and connected, they have very good brand awareness and have an existing customer base that we can distribute our broadband service through. It gives us a very cost-effective channel through which to deploy and market. Other technologies like smart grid can also be deployed on a WiMAX platform for electric coops, for example. So there are many uses and synergies. NRTC is an ideal partner for those smaller, rural areas that we deploy into.
Q: This gives you an established reach into communities. A: We signed a distribution agreement that helps also standardize a 4G WiMAX roll-out across the member base that is very consistent and aligned with how DigitalBridge is rolling out as well as others in the industry such as Clearwire, so that there's a standard, all-IP platform that allows interoperability across small markets, mid-markets and larger markets.
Q: There has been an investment by NRTC into DigitalBridge. That's quite an innovative arrangement, or do they have a tradition of investing in organizations like yours? A: There is a significant investment by NRTC into Digital Bridge. They have a great track record of doing this, and really selecting the technology that best suits the needs in their members' communities. Broadband and broadband wireless is obviously a huge opportunity for them. What they are doing here with us replicates what they were able to do in two other markets: the first one being Direct TV. The same distribution channels and member base were responsible for the first 2 million Direct TV subscribers ten years ago; they also rolled out satellite broadband with WildBlue, investing in WildBlue that was recently sold. That operation was responsible for several hundred thousand subscribers for WildBlue satellite Internet service.
Q: Did you approach them, or did they approach you? A: That's a great question. Some of their members that we had worked with referred them to us. They were looking for a wireless investment and strategic partner. They heard from their members that DigitalBridge was far and above the best one to partner with.
Q: You suggest on your web site that you want DigitalBridge to become I quote "an integral part of the communities that we serve". Why? How do you propose accomplish that? A: That really focuses on understanding the community. Traditional telecom providers have lost their way in this area in the fact that they became very centralized and very focused on bigger markets and internal organizational items as opposed to really understanding, living, breathing the markets they are in. DigitalBridge sponsors local football games, and participates in the life of the community. We stand side by side, and focus on understanding the needs, the wants, the directions and opportunities in a market. That allows us to grow and succeed as well as meet the needs of the community. You get there by being present and being seen as the local service provider every day, every moment.
Q: You also joined Connected Nation's initiative, "Every Citizen Online", and its national PC/Broadband bundle effort, in cooperation with Intel and a variety of vendors. How is this going to help Digital Bridge? What's in it for you? A: We have submitted 158 stimulus applications and one sustainable broadband applications that incorporate a PC rebate. We think that in addition to solving one of the main obstacles to broadband adoption - which is the price of the monthly service - it addresses a second important barrier to adoption, the price of the hardware and the PC. By providing rebates of up to $175, we can break down that second barrier, particularly with regards to school children. We love the idea of being able to serve children who can use the same laptop at home and in the classroom. The short answer is that we expect it can give a boost of adoption, of market share, probably in the 5% range, though we don't have a way to prove that. Time will tell.
Q: You mentioned schools. Have you been taking advantage in any way of Universal Service Fund and e-rates? A: We have not. We looked at e-rates, and it's just been a matter of focus. It is fairly time- consuming to get into that program. We try to maintain our strategic discipline focused on last mile to consumers and businesses. We've seen a tremendous change in the market with netbooks and affordability of end-user devices. This concept of being connected through multiple devices wherever you are is really key. We've been very encouraged especially in the last six months, by the number of devices that are 4G WiMAX-enabled, and the cost is rapidly becoming affordable, which is going to be a great accelerator for the demand.
Q: You came from Verizon. It seems that the price point for the best affordability potential has been estimated between $200 and $300. That's where netbooks are right now. This program does not cover netbooks, but it gives you access to a much wider range of brands and technologies, really a full-featured device that gives the user a much richer experience. A: And at the end of the day, a quicker adoption because of that richer experience.
Q: So what are the expected outcome and the impact on your model and your uptake? A: We think a 5% incremental increase on adoption is a good expectation. That would be in the neighborhood of 40,000 incremental subscribers. We're very encouraged to see more embedded WiMAX chips in the netbooks and laptops, which drive the ubiquity and quality of the service. It is exceeding our expectations in many markets on both the throughput side and the coverage in these markets.
Q: That's a very exciting agenda! Who would you say is your major competitor at this time? A: As far as the mid-sized and rural markets are concerned, we are really the only 4G provider out there. We look to work in cooperation with the likes of Clearwire, but we go to much smaller markets than they do. We see ourselves cooperating greatly with them down the road. But in the smaller markets, it is usually smaller cable companies, DSL to some extent, while in some areas, no one else is there.
Q: What about Open Range Communications or Main Street Broadband?
A: Their market with the RUS grants is pretty well defined. They know where they are going to be. We don't target other people who are doing 4G right now; there are plenty of places to do 4G right now. We own on average 109 MHz of spectrum in each market, few operators have that capacity.
Q: How many jobs do you envision can be created? A; It's really a forecast; we did it market by market. We think it is probably well north of 500 direct jobs, both in the deployment side and sales side. The other thing we have to keep in mind is the indirect creation of jobs by giving people affordable broadband access at home. They can telecommute, and that can be an exponential factor.
Q: Any particular message that you would like to leave with our readers as a conclusion? A: I would just like to emphasize how well WiMAX operators match the goals of the stimulus program: they offer rapid deployment of affordable, 4th generation broadbandwith 2 to 4Mbps downloads today and a path to 12Mbps, creation of jobs, and deployment of a capital structure that gives you more bang for the buck. On a cost-per-household basis, we can cover 5 to 10 times the number of households for each federal dollar vs. many landline alternatives. That's a great investment! The time is now. We as 4G operators have a unique window to really set our own future and leverage these technologies that are available to us right now, and change the broadband landscape, especially in the smaller and rural markets where they need it the most. As a cooperative industry, we really have to roll out these networks as fast as we can.
back
Related Items:
• Communaute de Communes Roissy Porte de France
• W2i Digital Cities Convention Returns to London
• Phila. to buy EarthLink’s wireless network that was meant for citywide Wi-Fi
• NTIA/RUS TO OPEN SECOND APPLICATION WINDOW FOR BROADBAND STIMULUS FUNDING
• Joe Mefford, Statewide Broadband Director, ConnectKentucky
• Digital Inclusion Forum Inaugural Meeting
Comments
No records were found.
Post new comment:Only registered users can add comments.
Please Log-in
| 
