Joint Performance Review (JPR)

To call this meeting to order. So let have everybody here I would like to introduce first here what we have to have a consideration for to pass the minutes from the last meeting the right here motion second. That. All in favor. All opposed thank you very much so today we are very fortunate to have Mr Tom black with us today from the was the chief technical officer from the broadband development group we had planned on having a Lou McAllister who we've seen throughout this broadband process but he is in the hospital today And so Tom has driven up from McKinney Texas to join us and kind of give us a primer on on the broadband plan all the things that went into it so we listened a little bit to lots of conversations but I think Tom may be able to bring us some new new information some new light so we can look at this in a different and figure out where we want to be the only so Tom if you have a little button there you can press that. Introduce yourself and you'll be recognized okay Center in English thank you for the call that up to just because that Mike from here are very not very good as I better that's right okay thank you. Thank you for the introduction Luen I worked on this project almost full time for the last six months or so and again apologize that glue isn't here for continuity sake but I've been deeply involved and and not working on this project so hopefully I can. Explain and answer questions of this presentation is a part of the one of the deliverables of one of the documents that we provided at the end of this project apologize the slider or quite dense or kind of designed for a person to read and digest and cruise and there are a little love. detailed maybe for a presentation but I'm going to go through it and just you know try to hit the key points and and answer questions just so everybody has a copy of this report on their desk okay thank you thank you all right. Okay the project had four major parts of first of all the first part was for us to do an assessment of the current coverage of broadband in in the state of Arkansas figure out a a true picture of who has a broadband and who doesn't secondly to do an analysis of what it would cost to provide broadband to those who don't have it today. thirdly to make some program recommendations on how to most efficiently and effectively Fund that build out and then lastly we uh there was a major component of community outreach or by we met with citizens and community leaders in every county of the state to hear their feedback and also to explain the situation with broadband and this project. Okay so first going to just focus on that first part who has broadband today and who doesn't so first thing you have to define is a what do you mean by you have broadband or you don't what is the threshold of level of service by which you say you're underserved or your satisfactorily served and give a very key point that I would like to convey is that you know this is very much a moving target in the upper left hand of this slide just kind of shows the speed going up as time progresses from left to right with various federal programs not too many years ago just a few years ago the federal government subsidizing broadband build out for ten megabit service they then increased it in other programs subscript programs twenty five more recently it's been at a hundred and the very large rule digital opportunities fund or the Ardagh programs is the the largest of the programs to date of you know were awarded service up to gigabit so that's a very large ranged from ten megabits to a gigabit that's a factor of a hundred difference in speed so who do we consider served an answer what what speed is considered too low. so it's a moving target federal programs reflect that in the upper right there's another a chart there's a guy named Nielsen engineer whose track to the speed of home broadband over the last thirty years starting from less than one kilobits of dial up modems going through DSL and cable modems and ultimately the fiber to the home and he's shown over thirty years a very steady progression exponential growth and speed compounding sixty percent a year and you know that comes to you know fifty times increase every decade. So the key thing about choosing a speed today is to realize that any speed we picked today is probably going to be considered in the broadband gap in the future is going to keep increasing unless we think twenty twenty two is somehow magic year when the need for more speed suddenly comes to an end we've satisfied of all demand and there's no reason to expect that there will be more I suspect if you went back ten years or or twenty years people probably felt that way and and yet new applications came along that drove the need for more more bear with so are one of our key assumptions in thinking about how the state should fulfill the need for broadband is to recognize that yes there's a there's a speed is appropriate for today but is going to keep moving and we you know we have to assume it's going to keep increasing. Okay For today for now there's a very strong consensus view around this idea of about a hundred megabits per second the FCC kind of does a scenario or describe how that kind of been with would be used by family today and basically all of the current federal programs are aiming at that one hundred megabit speed there's a little bit of argument about whether the up link also should be a hundred Meg or of twenty megabits is sufficient but but really around this hundred megabits is really the consensus view and you know we certainly agree that just about everybody would be satisfied if not with today's applications that they had at least a hundred Meg. So using that as a threshold to say who is served or not served we. Undertook an effort to build the most accurate view of that that we could with all the data available so we started with FCC for seventy seven so those who are familiar with that this is a form that all as P. submit to the SEC twice a year it on a census block basis and they basically tell the FTC what speed of service they offer in that census block so this is really the authoritative sources the source by which the federal funding programs or have been based and so we use that as our starting point. Now. there's some problems with that one is the date of this published if you go to the FTC site look at their national broadband map it's all based on data from Q. three of twenty twenty of course we're getting close to Q. three of twenty twenty two so it's a couple of years out of date so that's one issue with that. There's been a widely held belief and studies done that say that the FCC under or over estimate coverage or alternatively they underestimate the size of the broadband gap and one of the key reasons is that you know the. With the argument is that when ISPs. Five one customer in a census block that served by a particular service rate let's say it's a hundred Meg the assumption is that that census block is fully serving or might be ten more households in essence Walker answer and we drill down and look at a very granular level at the household level we saw we saw examples of that some census blocks especially as you get a role they get larger in area and there could be homes that are pretty close to a point where a telephone company has service they can deliver a high speed there could be someone else a couple of miles farther away from the telephone company of and they get a much lower speed but the FCC would not today distinguish that they would just see the whole block as served by the high speed reported by the ISP so because of that affect there's been there was a study done by a company called broadband now which is a consultancy and they've they said that the broadband gap is about twice as large as the FCC thinks it is from their map of Microsoft two monitors the speed of downloads to their servers they claim that the gap is about three times larger so that was kind of the I believe going in that we would that would be what we would find as well and so it's also why we don't just accept FCC for seventy seven data as the final story it's a starting point so that's where we started. I within the process outlined at the top of this chart we're we took that baseline data and then we reached out to service providers in the state and ask them to send us more recent FCC for seventy seven reports or other data about their broadband coverage it could have been internal of coverage areas of from from there geospatial maps it could be address by address speed availability or actual fiber route maps and that sort of thing so we got all all kinds of those data and we use that to update the FCC for seventy seven based on math. Now so that largely increase the amount of coverage from FCC mostly because EFCC Davis couple years out of date and ISPs have been busy you know adding coverage. But we also didn't accept of the data has given we looked at all of the census blocks and we filter them and we said look if the block is reported as un served it probably is underserved because service providers should have an incentive to say when they're serving a block because if they don't that block may become eligible for future subsidy and the introduction of a competitor in the market and that's not something most of them would want to see happen so we sort of said look if the block is underserved we will accept that it's unserved if it's claimed to be served and we looked at and said if it served by two providers at least a hundred Meg we're gonna accepted it probably a service I'm likely to providers are not serving the location but everything else the census blocks were a single provider a claim to that. One hundred mega better service was available we did a direct primary research to validate that how do we do it we use a service of through Amazon web services whereby you can list a global network of gig workers we gave them scraps to go to service provider websites enter addresses and look up and see if the service provider was offering the service at a particular speed or not. And so we did About a hundred twenty five thousand address lookups that's pretty large a sample of the areas that were in question and we use that data we checked it twice we had two people check it if they agreed we accept the results they disagreed we had we checked again ourselves. And so the net effect of all these corrections and adjustments or that we found forty five thousand households of wrongly reported as covered with hundreds with one hundred Meg so we reverse those and said they were in the gap that they were not served and on a very positive note we found eighty seven households that according to the twenty twenty vintage of FCC data were marked as unserved we determine in fact they did have service based on the provider maps so That of the net of that was that some surprising to us while we expected to find a larger broadband gap then is in the four seventy seven map we found that the gap in Arkansas they actually closed up a bit since point the verses the FCC map by with coverage of an additional forty two thousand homes so I just wanted to kind of you know explain the process that we went through to get to an updated broadband coverage map for Arkansas. Okay. and so if you look at those maps side by side one left the blue areas are census blocks that are served by one hundred Meg according to FCC for seventy seven and the one on the right is the updated map So we a decrease the number of underserved homes from two hundred fifty one thousand for per the FCC to two hundred and nine thousand or about seventeen percent of households. So based on of. An updated view of where we needed to add broadband coverage in the state we of ran some scenarios to calculate what what it would cost to build out the unserved areas. so we look at three scenarios and just wanna explain what those are quickly so the first one on the left says that the gap you know currently based on our corrected an updated map is two hundred and nine thousand households. If you then. deduct from that those households that are covered by grants that have already been awarded. The remaining households that do not have service today nor a grant for future coverage at a hundred Meg or higher are is a hundred and ten thousand households so about a hundred thousand households have been covered by grants that have been awarded to date. We can look at a middle scenario third a third of the case and we said you know what if we discount the coverage from grants for wireless based coverage and the reason for that is that you know we have concerns about whether those wireless coverage areas are you know going to stand up over the long term as I said you know we if if the demand for bandwidth continues to grow at a fifty times every decade will ten years from now a hundred megabits at the bottom of the scale that we see today we fifty times greater B. five gigabits will be the bottom of the scale. So it's hard to imagine but that's what had been happening for the last thirty years. and so we don't think you know most wireless technologies or any that we know of are going to be able to keep pace with that in the long run Furthermore wireless in general will suffer the problem of incomplete coverage invariable coverage so people farther away from a wireless base station will get a lower data rate just like on your cell phone if you're farther away from a cell tower your data rate is lower than than if you're close by. and a law and some of these areas were won by starling but there are satellite based service and Hello if you know this but you know the starlink satellite the the satellites are not stationary like to dislike were used to you normally point to a point geostationary satellite of the equator at a fixed spot in the sky and as long as you've got a hole through the trees or over your neighbor's house the you can see that one spot you're good what was starting the state the satellites are stationary in the sky there lower in orbit to reduce delay which is a good thing the tough thing is that they're no longer station or there's that being around and a constellation and so your dish actually has to steer and find the best satellite and constantly track it. And so because it has to steer around it needs eight three hundred sixty degree view of the sky of about twenty five degrees off the horizon. Well I think a lot of people live in homes in Arkansas that are under a canopy of trees that are not going to get in the satellite signal at all they're certainly not going to be able to pick it up in a you know three hundred sixty degree circle so we think a lot of people will not be able to get service from satellite and with the trust real tower based wireless you know you can model that you still don't. In leased in wooded areas or hilly areas which is a lot of Arkansas you will not get a hundred percent coverage that will be some homes you can can get can see the tower can get a signal and get service others will be blocked by trees or hills. So based on that reasoning we kind of said look you know wireless may go in and it's been awarded and will be built out and it might it may be fine for a good percentage of users with decent service from today's for today's needs but it won't be a hundred percent coverage most likely and it won't be you know profit. This high risk that it will run out of gas in the long run terms of speed so it's very possible that some of these areas that were are going to be doubt built out with wireless now will in the future need to be upgraded to fiber anyway so we went ahead and and kind of put that in as a third center the reality is that. The focus is on scenario to which is the the minimum case because most of the new federal funds that will come along will be precluded from use in areas that have already been awarded a grant even if that grant was for wireless service maybe you wish you with fiber and not wireless but as of now as we understand of the federal programs they won't be eligible for the new funds so scenario two is really the focus in the near term those are households that are not covered today do not have a grant for future covers and therefore will be eligible for coming federal funding. Okay so that's a hundred and ten thousand households. Importantly you know we just want to say that. It's not just speed and and cost we believe that the scoring system for looking at proposals or applications should have a number of key factors yes current speed just give me a minimum threshold for suggesting a hundred by twenty as a minimum to start. But again because it's a moving target it's not sufficient to just meet and you today we really want to understand how is the infrastructure that's installed going to involve an and go faster and keep up with demand over not just a few years but you know a few decades. The quality of coverage matters you know it's not just speed but it's how what percentage of the people in the coverage area are going to be covered and is there any very ability to that coverage or is everybody going to get the same amount of space the quality of the coverage matters of course time is of the essence everybody wish they could snap your finger and have broadband in their home today if they don't have it. and some technologies will deploy faster than others and so that's a you know an important factor to consider. Performance risk is important one of the big criticisms of the federal our top program is that you know they were pretty loose on the qualifications of the people that they allowed to go when the money and go deployed so that's performance risk company performance risk and then there's also technology will form its risk so those are things that should be factored in and of course the all of those factors trade off on costs. This is too much but I charge to go through so when a pass that went over skip to the next one So this is just getting to the point about the long view and I know there a lot of uh advocates for a wireless technology maybe some of them spoken to you did you know the the bumper sticker for wireless is it's cheaper and faster to deploy people are desperate they want it now and so the argument is I can erect a tower. Shootout radio signals and get people online very quickly and more cheaply than you know running fiber on telephone poles and trenching and dealing with with a you know a physical medium reaching out to each house. So I am by the way I've no just my personal background worked in that business for fifteen years a bill systems sold number around the world and so you know very familiar with the marketing pitch on on fixed wireless you know and it can be a cheaper and faster and but it's very much a case by case of we look to add you know some scenarios of modeling of modern wireless systems and it gets very challenging in. In the in the the wooded and held areas of Arkansas you just you just don't get very high percentage of coverage because of the extractions and you get I need to put in a lot of cells to try and overcome all of those hills and trees and that drives up cost and then in the you know in the southeast you know wireless has a much better chance you know there. A wide open does not you don't have the force and trees the lands flat and so that is the ideal place for fixed wireless may have a better opportunity one of the challenges there is that you know home density is very low and so you know it's tough to make the economics work with the cost of erecting a tower and getting fiber backhaul to that tower and spreading the cost over you know fifty homes still makes it very tough and not on an overall basis not clearly advantageous over fiber secondly if the federal we'll secondly the the keyboard of the slide is that if if the wireless technology doesn't have the needed capacity in five years or seven years or ten years they were going to be back to over building that area with fiber again anyway so we're gonna spend the money now for wireless then we have to spend it again for fiber we think it's better if enough funds are available to go ahead and go for the premium solution go for the fiber to the home of the route and You know as R. as you'll see a we think the of funds available are going to be enough to cover that so it's not clear that there's a really strong reason to make a trade off of a supply side possibly from you know time to market. Okay. Just on this point again we're not anti wireless we do want to be technology agnostic here but. If one of the requirements of the technologies that can scale to say ten gigabits per second it's gonna be hard for wireless providers to prove how they're going to do that that's not deployed today that doesn't exist you can't find that whereas with fiber it exists every day it's deployed widely and you know so there's both practical commercial implementations and theoretical basis to believe fibers going to meet the needs of broadband on for very very long time. Now with that said there are two networks in the world that really matter to consumers for the foreseeable future one is wireless and one's fiber or fixed broadband to the home and the other complementary technologies we're going to see both all the time fiber is never going to serve your mobile phone while you're driving down the highway. And for a lot of industrial applications agriculture opera Creek applications where you've got tractors in the field that are that are connected to the internet or you've got sensor networks that are spread across areas of those things are modest speed connections over broad areas or room for moving devices so we're going to need this canopy of wireless coverage that's always going to be needed. But in the home we're going to need much higher speeds at a fixed location and that's where fiber you know really prevails in this study was about broadband to the home and so that's where fiber comes in but yes both technologies are needed and are complementary. Okay. So what we've of recommended is that an initial targets be be set at a hundred by twenty has a minimum preference for higher speeds and for some metric uplink speeds. Our fibers preferred because of for Mmhm as being of the most future proof technology. Okay. Broadband gap the next part was to. Estimate what the cost would be to build out that gap so this is a process that we went through for that we took the covered scenario okay we're going to focus here on the on zero two. we didn't use a software that looks down into each census block group so the analysis is done to the granularity of a census block group. And for each group we looked at where are the homes that are under served and we built a least costs we simulated the build out of a least cost fiber network to serve those gaps those household in the gap. And then we calculated the cost estimate for the equipment and most of the cost is in the landing of the fiber. and. Came up with a total cap acts a capital expense requirement for each census block group and then of course those groups can be added together to see the budget for a county or added together on a statewide basis. we then took the cap backs for each area and plug that into a simple internet service provider financial model and just simply ask the question based on expected market uptake rates based on expected market prices for the service what what if any subsidy would be required for a private company to invest in building out that fiber while achieving the return that they would need you know to justify or motivate that investment. So we used of a fifteen percent I R. R. threshold and plug these capital amounts into that model and we did this on a census block groups by census block group basis to come up with an overall budget model for building out this network. This coverage. Now we do the subsidy into we calculated subsidy in two ways so everyone is as I described based on the internal rate of return then we also looked at in a simple way and just said well what if the state just a provided seventy five percent cap acts. Just look at a flat rate model so Talk about why we do that. So this these are the two models the flat rate at the top so this would be in a idea or you can figure out you know so so you need a million dollars to build out census block B. and so the idea would be of no that's based on our our you know bottom up. Fire deployment equipment deployment capital calculation you know what if the state provided us seventy five percent of that capital and the ISP picked up to twenty five percent of the bill so there's some pros and cons for each method so what happens is also a chart on this in a second what happens is in areas where there is the subsidy would not be very great the areas where low cost areas to build out seventy five percent effectively over subsidizes the what the provider would need to make a decent return so that's a pretty low cost area to build out the states as well your seventy five percent the state will basically giving away a lot more than what have been necessary for the provider to make the return on that investment themselves in fact there are some areas that we calculate our estimate wouldn't need any subsidy but they just haven't been built out yet for whatever reason. and so that the good the good so the good thing about that is if you think of areas that that Maybe don't really need a subsidy for the for a good business case for the operator but they still haven't built out if you just go with an I. R. R. based subsidy you would just say well there's no service be available for that that you can do that on your own you get no subsidy while they may just sit there idle and not be built up and that doesn't really achieve the objective of getting service to everybody why are operator's building out areas that work. Well they may may not have access to capital maybe they have other lines of business there have under more competitive pressure they're putting their capital there may you have a you know opportunities to make a higher return in other areas you know you don't know the reason but if you want to see if they will see those operators build out of those areas subsidy may be necessary to spur that deployment even if you know based on our rate of return they technically might not need it. On the other hand in high cost areas. We're may cost twenty thousand dollars to serve one home. The operator will sable G. okay I'm fifteen thousand the state would provide I have to put in five thousand they still will not make money but that five thousand so on a flat rate seventy five percent in high cost areas the subsidy may be insufficient to motivate deployment. So we look at it both ways to kind of bracket you know but the expectation is. Welcome back to that in a second on this slide this shows the roll up of that calculation a statewide basis so ordered for that scenario to where we build out only to those households that which are not covered today and don't have a grant for future coverage at a hundred ten thousand households thirteen thousand climbers of fiber estimated a cost of six hundred one million dollars success based capixaba the additional cap acts to connect homes that elect to subscribe service so six hundred eighty million total when you have those two together the success based capital comes over time as a subscriber sign up for service. The. when we calculate the subsidy using a poor fifteen percent IRR subs NO I will we we get two four hundred twenty nine million dollar subsidy that's three thousand nine hundred dollars for per home passed if we calculated based on a simple seventy five percent match of then the program comes to five hundred ten million dollars total or four thousand six hundred forty six dollars per on bass so to. It on the one hand it costs more and yet it probably would not Clause high cost homes to be served. So it kind of brackets the expected budget. This is just showing the same thing just real down just to explain that we while the date is rolled up on a statewide total basis you can also drill down and look at a county or look at an individual census block group this is the parent or forest area of Arkansas it's green blocks are areas that are served the red areas are areas that are underserved and need new investment and so we run the fiber simulation model and and came up with a budget to build that out and then we calculate the subsidy in two ways one based on the minimum required for the provider to get their fifteen percent return of the other being a simple seventy five percent match and so we we come to our budget for this census block group of four hundred ninety five five or seventy K. is kind of the subsidy range You'll note that. The product the the internal rate of return for provider if they use their own money to invest the six hundred and eighty Hey they would receive only a two point four percent return so therefore they would pass on making that investment it wouldn't be what they need to do to run the business of and whereas with the four hundred ninety five K. subs is a subsidy in reducing the amount of upfront cap acts from the provider within achieve a fifteen percent return and would therefore be incentive to go and do that build out. Okay. Okay this is a chart that again just explains the two subsidy calculations so this is every census block. Hi group ordered from least cost per home passed to most cost per home passed. In the the Orange Line is the seventy five percent fixed up to be in the gray line is the I are are based city so if you look on the left hand side that these are the homes are least cost to serve and you can see about the first twenty thousand or so based on the cost of the capital in the rate of return in the business model for an operator it would appear that no subsidy should be required. And yet that's what the state offers them they'll probably continue to sit idle maybe will eventually be built out because they should be profitable but they haven't been built out to date and so this is a case where are offering you know subsidy at that level would probably not accomplish the goal and so some kind of incentive to the operator to make it exceedingly attractive for them to build out may be required and so to seventy five percent model hopefully put some kind of an upper bound on on what would be required to motivate deployment in those areas. As the cost per home passed increases as we move across the right what happens is out there in about nine The first ninety thousand or so households what happens is in the the lines start to come together and we see that seventy five percent is needed at about the ninety thousand most expensive household in order for the operator to receive their return so. and then as you cross over that you get into the high cost households in that you know the last ten thousand or so and it really hockey sticks up in cost per home passed and so in that area A you see the gray line goes moved to the top and so higher subsidy is likely to be required in those areas because seventy five percent even at that level would not be enough for the operator to get a return. Given the expected you know revenue from from the cut the number of customers that they would serve. So if the idea of the the two subsidy calculations is to kind of put a bracket on it ideally what will you know what you'd like to see happen is a competitive process so that's a market based forces will drive the subsidy down toward the hi are are based curve the great Kerr that is a lower overall cost to the state. and you know it's. More in line with the idea of giving another subsidy for the operator to have an attractive business but avoiding you know. Providing funds you know even beyond that that will cost the state more to get those areas built and they ought to have to pay. Okay. So that's that's the two of the subsidies and so if we can focus on just the middle scenario here on number two to cover to build out a hundred percent of the homes. in that gap that's a hundred and a one hundred ten thousand homes that's the thirteen thousand kilometers of fiber six hundred one million dollar budget plus the eighty million of success based cap acts so the subsea range based on those two types of calculations but the budget and about the four hundred twenty nine to the of five hundred ten million range. I don't know if it's in this short version of the material but in the long report we do look at In the amount of funding in the largest of federal programs the I. I. J. B. program and if little of if Arkansas got its proportionate share of that fund You you would estimate of that Arkansas would get up to about a billion dollars out of that fund and so. we think there's a good likelihood that you know a fiber a build out to fill the the broadband gap in that scenario two is likely to be enough funds available to do that. this of just discuss something I've seen in some of the articles that summarize the report you know it goes back to this hockey stick curve you know those last ten thousand homes the cost per home passed really goes up a lot especially just due to a home density that there's more fiber per home connected in fiber you know forty thousand dollars a mile and it adds up so does those more sparsely populated areas you know become you know much more expensive to connect so you know we just took that sorted order and said look what if we I didn't have enough budget and we wanted to get as many households covered as possible well you would cover the ninety percent of the old lowest cost households first not withstanding the politics of that but the just from the point of view economics covering the most households for calendar and and just it and and so you know if we fill that gap for of a hundred ten thousand households which is. Are you about seventeen proof of sorry not seventeen percent about. Y. eight eight or nine percent of of Arkansas households if you cut that back and and by one percent of the total households in Arkansas about ten percent of of the gap household the budget you know could be cut maybe thirty to forty percent in terms of of of subsidies so it's just a classic you know hockey step or you know eighty twenty rule whatever you wanna call it but it's just the issue that you know that ten percent most expensive of of the households are going to cost you know thirty to forty percent of the total. Okay. so that kind of summarizes of to the first two portions of the project one was to better assess the broadband gap get a tour of the picture of coverage then secondly to estimate what it's going to cost with the budget to fill that gap and then the other part of the program was to make some recommendations about how to A direct of funding two in the most effective way so. You know in terms of overall goals you know one is certainly time will bridge that gap as as fast as possible so the process you know needs to. Incentivise and drive rapid deployment as much as possible secondly. you know we believe this is infrastructure it's like roads it's like water it's like of electrical service its infrastructure that needs to go in and last of four of decades and so you know we really feel very strongly that we don't know if this money will continue to be available this is a once in a generation opportunity feels like it. never happened before so we don't you know that's what we lean toward technologies or solutions that are going to have you know the ability to keep up with the ever growing an insatiable demand for speed for for broadband. A clearly any recommendations would need to be in line with federal funding programs need to be eligible eligible for those funds the I. A. J. A. the program is is the big program it's a forty two billion dollar program and we thank you you know could provide up to a billion two Arkansas so for sure you would be compliant of any program you know what to make sure we have eligibility for those funds Need to be cost efficient. when you get maximum benefit and you know has to be feasible to administer that has to be a program that is You know something that that that can be handled with a reasonable amount of staff and budget for administration. So. The program characteristics of of the recommendation are you know in terms of applicant eligibility we you know we studied about six or seven other state programs in detail kind of look to pick you know cherry picked those for a while we thought were the best practices applicant eligibility you know we think make it as inclusive as possible bringing as many of potential participants who want to build out broadband so should be open to public private partnerships municipalities utilities you know what from co-op's internet service providers telcos cable because anybody with the with the with the where with all should be welcome to participate. The eligible households would be those served by under one hundred megabits nuts or our maps have been based on. The geographical units are down to the census block group level now in some areas the census block groups get very small and as you get in more dense areas more urban type areas where there are still blocks that are unserved it'll make sense to combine since spot groups as so that the number of overall projects and awards to administer are you know tenable. We are recommending that bill that requirement the last three years. our office just to give you by comparison they require. Forty percent of awarded areas to be built out in three years and then another twenty percent each subsequent year up to six years so they allow up to six years for the bill and and then additional years for any new households that were built during that period of the of the grant so it's a it's a you know it's also one of the criticisms of that program is is that it's too generous and the time frame so we're recommending three years and we have seen more aggressive programs up to two years but especially in light of supply chain labor shortages of with all of these fiber build outs going on within within three years as a pretty aggressive target. We are suggesting that applicants subsidize twenty percent or more and you know again a competitive process would hopefully drive that down in areas that are lower cost so that the subsidy required well drive up the amount of their contribution but drive down the amount of the subsidy so um in high cost areas that will work in high cost areas you know we'll have to have you know we think what to look at higher than seventy five percent subsidy and that's very consistent as well with the guidelines that we've seen from the Federal B. program where they're talking about a seventy five percent subsidy as the maximum amount they want at least a twenty five percent match so this is consistent with that but they also have said that. High cost areas will be an exception so they also recognize that in high cost areas the subsidy you will probably need to be greater than seventy five percent. some programs have had or do have a maximum grant value we don't we're not recommending that we just think that the cost to build out will. Set the price and if it is a competitive process then you know that will keep that hopefully within a viable on a range of we think there should be operating requirement for ten years for a minimum for any service provider that that is given an award they should sign up to that We think the success based capital should be included so again the success based capixaba means the incremental cap acts that gets spent you spend a certain amount of money to get fiber available on the street and then first households actually signed up for service there's an incremental amount of cap extra go out get the fiber from the street in the home and but the electronics required and so that's that that's an additional piece some programs exclude that we don't think there's a good reason to exclude it because it's a real cost and you know the whole idea here is to make the business case Bible for these providers so that with a subsidy they'll be incentivized to deploy so we think we think that part of the cap back should be included. And then the fund distribution model universally every state we looked at Is using a reimbursement based grant so that you know funds are dispersed you know based on actual money expended in the proper way and in compliance with the program after the fact so. Those are two characteristics to make this a scalable process you know it we don't think you can just take opened proposals from for hundreds and hundreds of projects that are done in any particular way that providers want to do them we think we should have a prescribed scoring system that Put everything on a level playing field and gives an objective way to compare alternatives for deploying House networks in this project. you know it's really up to the the state alternately to decide what factors they want to put into the scoring rubric and what how they wanna wait them the certainly the speed is as important the future proofing we think is should be highly weighted the quality of the coverage we talked about obviously will reward applicants who can deploy faster. We do think that best practices for managing the qualification of providers best practices from from procurement which states very practice that as professionals that area we thank you definitely definitely want to you know make sure that we minimize or manage the risk that others in performance issue by companies that are that are granted awards. The level of contribution of course that'll to me coming down to the cost of the state if the provider role provided greater contribution the state provides less subsidy and so that's obviously it's the cost aspect. additional you know to the extent of that you know the state values you know community support we think it's very good for the success of these programs to have cooperation with the local local government and you know permit the permitting process and and cooperation to help assist operators giving This deployed you know the to the extent that proposals are endorsed and backed by local community leaders government leaders is important affordability programs are important you know the FCC has affordability programs as part of Of their funding programs that give a direct subsidy to the consumer. you know operators that can go beyond that and show how they're you know having or affordable service option is very important and in fact in the program it's required of that applicants and recipients of the program funds have of at least one of the affordable option of the very services they want to offer not up to the. States to define what they consider affordable so that's something that that would need to be defined and a you know a proposals from operators you know that B. I will definitely be a factor of four that a those proposals. a lot of states have also awarded points or and given incentive two providers that are engaging with the community and helping people with the adoption of broadband so could be helping seniors with more hands on assistance or it could be you know whatever Engagement they might have with the community to help with the digital literacy and other kinds of of of programs. you know project readiness Should be evaluated you know operators that have ready plans you know the more detailed their project is more credible it is you have a detailed schedule their budgets they have financial models how far along are they you know all of those things would be a factor in weighing Competing proposals. So to drive toward the the lower cost subsidies you know we we recommended that you know we try to engage market forces to the extent possible to try and create some competition now in the art off program the FCC you know literally ran an online reverse auction so we put a maximum subsidy out there and then competing providers bid down the amount of the subsidy and and multiple rounds ten twelve thirteen rounds of bidding We you know that's I think beyond of what a state program can be expected to do but. we still of you know I think the idea would be to have a few rounds of competitive bidding so you know pro projects can be to defined of applications can be accepted of best bids can be announced on a preliminary basis and then subsequent rounds of competitive Of a building and we're suggesting three rounds to keep it you know fight night and to try and drive quickly to you know the best of the best offer and so the idea is you want to be sure the those providers most advantage because of their installed infrastructure and and their installed you know people in ability to execute make sure that they they are you know welcome to compete and are incentivized to compete We also would say to front in this process with a challenge process on the map no the map is we think it's the most accurate map of this been developed and it's based on the best available data. But you know new build outs are happening every day not every provider participated in submitting their coverage data and so there's undoubtedly you know additional refinement and when it comes down to you know time to subsidize a build out in an area that's where the rubber really meets the road and any provider that believes they have service in an area where we're about to subsidizing. Possible competitors come into play you know we certainly want to provide a window for any final corrections to to the map and those who need to be you know validated and confirmed. So that's kind of you know the general process defined program engage the potential providers and help helping to round out that program make sure there's broad participation and interest challenge process to get the a map as correct as possible and then take a few rounds of competitive bidding and get to the best possible price and then move on to awards and implementation. Of the final part of the project was the community outreach and just summarize that you know we interviewed twenty eight service providers in the state we did three hundred twenty five in person meetings thirty choosing in meetings spanning all seventy five counties we collected eighteen thousand surveys and about ten thousand speed tests and we just worked with all the local officials that we could reach out to and we had great support and we met a lot of people we we collected data and send a report more we surveyed you know what's important to people was the main reason that they don't have internet interestingly you know about sixty percent people came to these meetings I didn't have service available but there is another thirty percent so that the reason they didn't have internet wasn't due to availability because of affordability so that's you know certainly of important dimension of the program. This is just a just a quick graphic that shows the the the points where we collected speed tests around. Round the state. so that's all provided in the report. Okay that was being or uninterrupted blow through on the presentation so we're an hour and so thank you very much that was very informative and and the thing is is that it's all information we're going to need as we move down the road we do have a couple questions here one is center center Johnson. Thank you very much madam chair appreciate your indulgence of Mr Fiske I have a couple simple questions I'm over here sorry a. I'm working on a project in my district that's for water. And the water utility has checked with at least one and maybe more broadband providers about if you're gonna be digging holes in the ground and putting water piping also put conduit run fiber optic cable they actually had one that said this is a vendor said they would pay four dollars and sixty six cents per foot would pay not charge would pay for sixty six foot to install and bury the conduit for the broadband other words they want to get the business and they'll participate in a. The. Is that something you can factor into your formula of competitiveness because if if we can send the same crew out there digging two parallel holes and and putting that conduit down and solve two problems of the community at the same time I would hope that we get some kind of goodie points for that is that something that either has been or could be calculated into your formula. Yeah and I think the you know of a provider in that area to you know or under another area that wanted to collaborate you know with the another project that's doing a big knowing you know digging a trench I mean that should the benefit of doing that you know would score in terms of you know community supporters are talked about and should we should come out and and the cost as well because that's going to reduce the cost of the project so you know I think Everyone should be encouraged to participate and whether that's driven by the community themselves you know a community broadband efforts or whether it's provider working in partnership with the city or state or another utility company to do that you know that the benefit of doing that should be reflected I think and and and what they put forward in their application well I believe the utility is committed to some kind of a bid process so it would just be a sole source although that sounds like a reasonable offer to me but again it does it would go to I'm glad you concur with that but I just wanna make sure that when it comes to those either making decisions at least you would calculate in it they are serving a parallel need in the community and the shift problem yeah I know there's a general principle of did once in this idea that you you know when you're putting in roads. You know that you're digging a trench to run utility services or putting up utility poles or what have you Check try to address multiple needs but the challenge is always this ordination thank you very much mysteries thank you madam chair yes. Okay let's see Senator Hammer. Recognized thank you ma'am share on full ma'am. Thank you on your on your punch list as far as the awards do you do anything to check the current status of the providers as far as their financial obligations that are outstanding team of their subs or what do you do to assure that whoever's get money is. Financially secure taken care business. We didn't dive down into that level of of implementation in the procurement process I think we're simply saying that the state. Has. Very good best practices for the procurement process that looks at subcontractors and looks at the you know the in the rating of the company in the credit rating and and all of that and we think the we think that she is a necessary part of the process and I think one of the criticisms of art office that they were pretty lands and whether a qualified some of the vendors and there's been some fall out expected me some more fallout where people just don't have the ability to execute for whatever reason financial or. Okay our resources no I just ask you put some thought into that because of justice thank you Sir the the second thing is refresh my memory the ones that we did we put some contracts on hold until this process for some awards put on hold while this park process played out or can you refresh my memory where we are in that I don't think he knows about that okay all right of then the other question would be did that shall take into account on your estimates anything for inflation I know in discussion about you know the cost of schools you know it's just gone out of sight so do you have a plus or minus factor in there in your restaurant there is an inflation factor in the I ask the financial model it's probably not as aggressive as we're sitting at the current time so you know one one might. Want to rerun that ma we've given the model spreadsheets To the broadband office so they can certainly do what ifs calculate all of that all right thanks thank manager. Okay let's see. Representative Godfrey. Thank you senator thank you so much for your presentation are you doing most of your work within for the department of commerce yes and manager at the proper time can ask a question of the Department. Of the Department commerce certainly but I don't know if they have anybody here not. Jett are you here would you like to come up and. Thank you. Jim Hudson chief of staff proper commerce. Thank you so much and I know that there's been lots of conversations about this project but this is the first time in front of the committee I'm so I'm just wondering if you could talk kind of big picture about the initial and just the contract I know there's a lot of conversation about and why we choose to go with this particular group and the costs and it was significantly higher in cost and then some of the other bids that came in and that the department and originally it had maybe some some interest in going in a different direction so I'm just wondering if you can speak to since then if you if the department has been happy with the progress of of working with the group if we feel like the two point two million dollars has been worth it even though that was the highest Bed that came back sure represent I think when we announced the recommendation for the contract award last fall secretary Preston was a fully endorsed selecting that B. G. as the as the vendor I think we've had a good a good relationship with them throughout the process of them doing the study they have sought our input we've given our input I've seen that input incorporated into their work product I'll tell you that the quality of the report as being demonstrated today its extensive as thorough as well foot noted I think we have something that we can use for the long haul here in terms of the big picture you know we're gonna have to take the recommendations that are really kind of a study level and then a collaborative conversation with you I'll see with with the governor's office as well how do we take those recommendations begin refine them down and actual plans and you were they've given us some choices you know which choices we want to go with Ferguson using as an illustration fifteen percent rate of return on the match versus a twenty five percent match which which way we will approach that we need to talk about that I think in time just to indicate as well the inflation issues that senator Hammer brought up you know there's inflation in general the economy and then there's inflation in this part of the economy and technology and fiber and talking to Is peas and the folks are out there doing the work there is just scarcity a product and I think they've got lead times of twelve to eighteen months that's going to affect pricing as well so we make sure that we we set the budget for this thing we set a realistic budget those things are considering right now but but to answer the question we're satisfied we think the state got its money's moneys worth and you know we're very pleased with the work great thank you so much for the update thank you madam chair. Thank you Mr Hudson. Senator Rice. Thank you thank you for being here they appreciate you work on S. I'm sorry I had to step out of the room for a little bit but if you covered is just having a go back watch video It you mention about the different. ideas or projections sometimes being twice as much as three times as many under served or the need. out there. On the one that you're showing the wired areas. Did you cover how much at a disadvantage or does that put that area at a disadvantage saying that they have it because I serve a very rural area that you mentioned long ago wooded and we said would mountain or whatever that that's it I'm getting even larger area that So again my coverage I have coverage but it's for my tower that's already on the mountain being to a dish on my barn a half mile away. But to have my all to my house the. And and I've got pretty good coverage for a hundred Bucks a month. The people that live down that valley and the people in the mountainous areas don't all have that access. They have what shown on the maps if required service they have all. You do not given that up their phone service and they're internet that they would have kept probably the phone service had they had. Any kind of internet that worked or was reliable are we at a disadvantage because it showing we have something there now did you cover that. So I want to clarify and make sure stand your question what do we mean by it shows that you I'm talking about a wired area wired area is that is is in their calculations that there's something there now is that considered as not having any internet. Well what we are considering having some flow what we looked out for the threshold here was do they have at least one hundred megabit per second internet so they've got wired internet DSL for example at ten megabits or two megabits and we would consider them un served and eligible for subsidy a new deployment to there's not a disadvantage rural Arkansas that has wired service it is is basically not at all the optional because it it doesn't stay far as purely based on okay available one hundred megabit service and so the wired infrastructure is old and not functional you would not have one hundred megabits or any other day I talk about with with the GM before on is you know we've approved councillors approved multi millions of dollars to areas that needed to the upgrades. Because according to federal data on the what what you show of an but they had internet. Income those out in the rural area would like to have even half of what the heck. But they can be within just a few miles of those populated areas and they've got nothing so that's I'm just trying to make sure that that yes they are realize is is not being used marginal they don't have anything I mentioned multiple times some of the deficiencies or criticisms of the federal R. dos program and one of them is what I call the Swiss cheese program which is that they the the and they had some Cocula from formula right they were they. calculated which census blocks would be eligible for our dollar funding and part of the I mean it was a complicated formula part of it was proximity to a populated area so you could be in a rural market just outside of town and maybe they considered it not eligible for are not because it wasn't. You know by you know the theory of the calculation is that they're close enough for provider will probably be able to serve them verses somebody's farther out and unlikely to be certain so what you end up with is someone really really role made to get service because they got a got a got a grant and somebody maybe in the middle of town doesn't. because they're cutting their calculations didn't make them eligible what we're proposing here is a comprehensive approach which is based on the area of the award so if us of our wars granted for census block group Date the requirement of the winner of that war is to build out a hundred In that awarded area so as not only just a subset based on it all if you're underserved or unserved. That's the difference that we want to try to dress you and I appreciate you present your verbiage I can even I can understand them that's that's that's pretty simple thank you for that. Representative right. Thank you Mr chairman server the massive generational braid Fund in new X. plane that just a little bit. Of the as part of the. Every structure or was it an instruction vested in jobs act the I. AJ the big federal The New program forty two billion is out as as been allocated to specifically this purpose to go to the states to give grants to the states who will in turn give grants to. However that whoever they want to give them to in order for the purpose of getting you know broadband build out. So that's and it just put it in context forty two billion as far by far the largest Fund the previous largest was art off of which an art office you saw was is the biggest contributor in this chart that you see going from a gap of two hundred nine thousand two hundred ten thousand biggest proportion of that hundred thousand is from are often are off was a nine billion dollar program so be it is more than four times bigger. So we think we think we need. How to finish the job. Senator Hammer thank you ma'am chair couple questions but apologize for asking his questions well go up that should be in the agency Paul judge for that I was told by one provider that is pretty aggressive in getting it out there already that they don't mind multiple providers in one area because it actually drives up the enrollment by creating two options did you account for any of that in your calculations or can you speak to that theory or opinion well I mean. The. I'm not I mean we look at areas that don't have any providers in terms of you know subsidy programs you know if if if over permitted and and there were enough funds. you know there's it's too it's a two sided coin you might want to go into some areas and allow new entrants to go and compete market based competition I hear you're saying a provider themselves that say they don't mind competition but I would say that's a minority view I think most people in the telecom business like having a monopoly if they can of you know if you are a new entrant like a wireless provider that's over building incumbents you're going to tend to have a more view of competition is good because you're coming from the outside and trying to you know get in. but you know I think competition is great but going all the challenges and it's like any utilities like electricity or streets or anything else you don't have any water providers are in your house. You know and and and you know I think I'm California you know they subsidize a lot of solar and now the people that got solar are paying for are contributing to the rate base for the electrical and it's driving operates on everybody else so you you know you you with with this kind of universal utility like services you know you get into the challenge of you know from an awfully I'm going to I can get her purse by conservative representative customers my market area five split that then you know becomes a question of whether that high fixed cost infrastructure can be paid for with only half the customers. Okay but it's very it's also very tech you know in in the internet just a weird to weird thing it's different it's not quite like water because you can't have more than one internet pipe in your house feasibly you know you can have one coming from the satellite you can have one coming from a tower you can have one coming from fiber in the road so it's kind of a unique beast and frankly difficult to get your arms around me of the the economics and competitive dynamics of that all right and then the other question was the the ten thousand they're going to be the most costly to get the services to you'll have to segregate out their surveys to see how many of those ten thousand actually wanted or needed or even participated in the survey process could you get down that far in the weeds or we we we didn't do that analysis I suppose it could be done but we didn't do that okay all right thank you the manager. Okay Senator Blake Johnson. The manager of is the main difference between your map and are not off now these this ten thousand speed tests. That what your Mason jar our map is a so the the FCC map was refined in a couple of ways one is we we incorporated actual network coverage data from providers directly. So like when string return Coxon people act that gave us network of coverage maps that gives address lists they gave us Bible planned network you know map so we use that as one method of correction of the FCC map of second method is we Well as a discuss we went into an Amazon service and we did a hundred twenty five thousand address checks to confirm whether areas that claims to have service actually had service available address by address so those were to another a third thing I didn't talk about it but we also looked at certain areas that. Those were surrounded by coverage but were marked as as unserved and we We have not really well we we we found places that we thought probably were served in those remarks unserved and and we identified those in the manly would check them and and condoms covered if they were so those were the three the methods that we use to to refine the FCC map. Follows. So. In center wrasses case where it says wired. But they don't have coverage one of those three checks is wrong so when you say aye says it's wired referring to the FCC map says the area is served by something. on that map. So okay so that may have. Where the amount. Okay. Right here. Okay so. This map So you know for every since we went through every census block a hundred a hundred thousand or hundred thousand census blocks in the state and You know if you can visualize literally built a table and for each census block. We marked it and said is that block covered by the any of these previous federal funding programs a camera or a card off enormously distinguish between what we expect the wired or wireless coverage with sort of two shades of purple there the NTIA program USDA so um and then the green areas are areas where service. Neither the FCC maps of the area served or we got new map data from providers saying that serves now the thing is is each census block is not. Exclusively one color the map okay only show one caller because it's a flat map but the but you could have there could be areas that are already served but were also awarded and our grant for example or there could be an early that's got both and are not grant and foreign grants or for sure there are a lot areas that are unserved today. But. Are covered by one of these grant programs so the way the map Oakleigh ends up being colored kind of depends on the order in which these layers are displayed. This is got the grants sitting on on the top so there are areas underneath the grant colored programs that are already served or or any or or and and answer. So in his case it wouldn't be telephone line that would be considered. This this chart actually doesn't doesn't say what technology is being used what what color is the area of the map you're referring to if I can ask. Yes purple areas so if I took the purple layer offer this map underneath is probably Brad is probably marked as answer and on the lease of an interactive map here with a little work. So this is an online version of that map so you can kind of drill into a. When you drawn far enough there it shows the individual census blocks and so you can click on any particular or a box or just randomly pick one here. And then it showing the information about the overall County so This Is Searcy County talks about how many households in there are unserved twelve hundred seventy nine how many fiber miles we recover required to serve it capital dollars required the motor for household basis and then it kind of gets into the subsidy amounts so. So that that rolls it up you know where I clicked on the mouse for the county level but you can also in real to drill down into it and look at it on the A county level or certain the census block group level. As well as down to the individual census blocks the block I clicked on it is you know this this ID and it since blood group I clicked on and it's got this idea that it goes through and shows how do you for seventy seven data Clark said whether the it is covered by a C. S. Just because we're a block by block with some we have details. Thank you. Do I have any other questions. The other. Thank you so very much my pleasure was helpful. So I think we all learned a lot we all need to be knowing more and more as we move forward and and our plans for the future and sorry that Lou couldn't be here but we appreciate you driving up from McKinney Texas join us it was a nice drive wasn't very close a month that. So anyway but we appreciate you being here thank you so very much thank you thank you very much. Okay so couple of other things then everybody needs to know is one of the things that he talked about was the affordability so there's access of affordability and Education so one of the things that has of theirs there is going to be a lot of money out there for affordability programs for for folks so I I think that we have to figure out make sure that everybody knows how to apply for those programs that's going to take education as well and also the digital ledger literacy is a really important thing it's one thing for people to be connected but the other thing is is that we need to make sure that everybody understands how important being connected is whether to grandparents or businesses or whatever and we all got used to those hot spots but that just really isn't enough and so many so many folks are. Use totally there a mobile phone but that probably isn't the the ultimate in being able to be connected for all kinds of different things into it's great to be able to be connected on the phone but not for everything so I would a lot of blood work to do here I think this is exciting were in the middle of all up and off a lot of states are doing that I really think that we have all gathered really good information probably ahead of so many of the states around the United States as far as the participation we have something solid that we can work on and appreciate you all do all the work that you put into this broadband development group thank you very much privilege thank you thank you okay I think that's it and this meeting is adjourned.