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Over the last several years, many regional middle-mile wholesalers have sprung up across North America. Middle-mile players fill a big gap in enabling low-cost data centers and driving “new economy” business and job development to rural areas.
One of the more successful and growing wholesalers in the middle-mile space is Mid-Atlantic Broadband Communities Corp., a southern Virginia-based operator.
Dave Keller, VP of Sales and Business Development, attended the Capacity North America 2016 conference in Toronto where he gave me an insightful briefing on MBC’s strategy and the opportunities/challenges faced by middle-mile providers.
|Dan Baker, Editor, Top Operator: Dave, what was the impetus behind forming MBC?|
Dave Keller: Dan, it was really a matter of data center economics. AOL was in Northern Virginia and the DC area, a market area close to the “blast zone”, and they were looking for diversity and lower costs.
So AOL looked at southern Virginia whose economy was hurting due to declines in both textile and furniture factories. In fact, plenty of unoccupied manufacturing space was available to convert to data centers.
When AOL asked the incumbent about connectivity in southern Virginia, they learned that DC connectivity was 7 times cheaper than it was in rural areas.
At the time, local politicians and business leaders in southern Virginia were clearly worried that the region did not have the infrastructure available here to be part of the new economy. Meanwhile, they knew economic development money might be obtained from the Tobacco Commission and other sources.
So the planets lined up for us: the political and business leaders in the region eventually hired our CEO, Tad Deriso, in 2004 to build a fiber network to help drive economic growth in southern Virginia.
Today we have 1,800 route miles of fiber that connect lots of businesses, business parks, county government seats and schools. We are now a key linchpin in the growth of the local economy.
|It’s a great success story. And by the way, how did you get the right-of-ways to get rolling in the first place?|
Dan, we worked out a great relationship with Virginia Department of Transportation (VDOT) who allowed us to bury most of our facilities in their right-of-way. In turn, we support them with the fiber they need for their cameras and their intelligent transportation system/highway safety needs.
|What do you see as your mission as a “middle mile provider”?|
We are a pure wholesale provider. We sell absolutely no retail service, so you can’t buy phone service or dedicated internet access from us. We support many national and regional partners and do so very cost effectively. Those customers include many of the national wireless and broadband players you hear about in the news.
One of the content companies attracted to the region is Microsoft which built a large data center in rural southern Virginia. To date, Microsoft has announced capital investments that have had an economic impact of $1.9 Billion and over 250 jobs.
Of course, the data center itself is highly automated and requires new skill sets different from manufacturing. This led to workforce initiatives with our local higher education center to partner with CompTIA to provide industry certifications for IT and data center training, which has been a big benefit in attracting other data centers to our region that require skilled, certified workers who are familiar with working in a data center environment.
|How much of your growth do you figure is companies wanting to move out of the big city, and move to a rural or suburban area.|
It’s a mixed bag, Dan. There’s a huge data center ecosystem in Ashburn (Virginia): lots of companies love being in close proximity to the massive fiber infrastructure and top talent that lives in and around Ashburn. Yet, content giants, government users and enterprise customers can be attracted to more rural locations because it allows them to drastically reduce costs on power, taxes and labor force.
In Southern Virginia, we inherited a robust and diverse power grid, legacy of the big textile and furniture manufacturing business that used to be here. We have great relationships with Dominion Power and the electric cooperatives in the region.
We’ve even attracted international business clients. For instance, a UK based manufacturer, Hardide Coatings, has expanded their business to the US and opened up a facility in southern Virginia. The incentive for them was access to quality workforce, operating closer to their US customers, and access to MBC’s high capacity fiber network which allowed them to connect via the cloud to control their Virginia operations from their UK headquarters.
Another customer of ours is a Virginia-based broadband and wireless operator. A customer will come to them looking for, say, a 50-site solution, so we supply the southern Virginia transport connectivity, a piece of the broader footprint.
|Being a not-for-profit telecom makes you unique.|
Yes, we are staffed with an experienced team of telecom industry veterans seasoned with some regional talent. Every dollar of profit goes toward investing in the network, supporting educational and social initiatives, and providing economic development grants to help bring jobs and investments to the region.
We don’t have any shareholders, just an independent thirteen-member board of stakeholders: business leaders, economic development professionals, utility and technology executives.
So there’s quite a bit of governance and oversight on the budget — we are a unique entity, for sure.
Another mission of ours is to work closely with the local economic developers, as we connect business parks across the region with fiber. Tad and I also make house calls on prospective enterprises thinking about locating in the area. We advise these firms and answer their networking questions.
|What about competitors?|
New competitors entered our territory thanks to the middle mile network built as part of rural broadband grants from the Tobacco Commission and federal government. Some of those provider businesses have thrived and others have been consolidated over the years. In Southwest Virginia, Citizen’s Telephone Cooperative got some grant funding as did Bristol Virginia Utilities (BVU).
One key strategy of ours is to offer a broader regional footprint. For instance, today we market to companies looking for connectivity from Atlanta to Ashburn. To deliver on that, we formed a company called LIT Networks (stands for Local to International Transport) to connect with partners who operate smaller, regional fiber networks in three states which include North Georgia Networks (NGN), ERC in North Carolina, Ridgelink, Bristol Virginia Utilities (BVU), Scott County Telephone Cooperative (SCTC), and Citizens Telephone Cooperative.
|Curious: what software powers your back office?|
Well, on the network side we use Ciena 6500 equipment and recently acquired Cyan equipment for layer 2 transport services as well as the Infinera DTN and DTN-X platform which powers our Dense Wave Division Multiplexing regional and long-haul network.
NetSuite is a big part of our back office and manages our CRM. It’s not a pure telecom product, but we use it in inventory tracking, and one feature we like is its ability to keep track of our assets when we need to notify or gain approval from a grantee such as the Tobacco Commission or NTIA. We also use the platform for accounting and billing.
Remember, too, we have quite a few contract relationships we need to monitor. For example, we use many local fiber contractors in Virginia and North Carolina who do the splicing work.
|What about the ILECs in your region?|
The ILECs are in a tough position in southern Virginia. Because of their rural footprint, there’s not much incentive for them to invest in upgrades to their facilities.
Now, there are exceptions. CenturyLink received some Federal Connect America and USF funding to build out their infrastructure over the next 5 years. Obviously, we’re hoping that will lead them to build out their DSL infrastructure and expand residential broadband in the area.
We want to see broadband growth for residents since we do not offer those services directly and work with Wireless ISP customers to try and fill in holes. We are currently running a trial of TV Whitespace technology in partnership with Microsoft and their Affordable Access Initiatives group to connect school children without broadband at home to educational content and school resources for homework.
|Big carriers like Verizon have made massive investments in wireless. Do you see big carriers in your territory?|
Yes, the Tier 1s have a strong focus on wireless. The big issue we see for them is there are many hard-to-cover areas in our footprint because of the terrain. While there are wireless services on the major highways, if you go off the highway, the economics are not so easy.
They can’t really afford to put a tower up in some areas because of low population density, but they do cover the highways very well.
|Thanks for this very nice briefing on the middle mile provider business, Dave. What’s the future look like for Mid-Atlantic?|
Sure, Dan. One of the developments we’re very excited about is the new subsea fiber networks coming to Virginia!
As you know, most of the main subsea fiber cable landings between UK/Europe, South America and the United States today are in New Jersey, Florida, and Canada, but there’s nothing so far in the Mid-Atlantic. There have been two announcements so far (MAREA Cable from Bilbao, Spain to Virginia Beach, which is being built by Microsoft, Facebook and Telefonica; and BRUSA from Brazil to San Juan, Puerto Rico to Virginia Beach).
When those cables land in 2017 and 2018, we believe it will drive a lot of new business from international companies. MBC has a good deal of fiber infrastructure in the ground today, and we hope to leverage the new international capacity coming to Virginia into new economic development opportunities. The next few years are going to be quite exciting, I think.
Copyright 2016 Top Operator Journal