Brightspeed, Ziply CEOs unpack fiber deployment challenges

USTelecom on Friday hosted its annual Broadband Investment Forum, in which ISPs and policymakers came together to discuss the most poignant issues in the industry.

One of the sessions featured Brightspeed’s new CEO Tom Maguire and Ziply Fiber CEO Harold Zeitz, who shared their respective approaches to fiber deployment and how they view the broader competitive landscape.

When Brightspeed began operations last fall, its initial goal was to try and hit as many households as possible, said Maguire. The operator has outlined plans to reach 1 million passings by the end of 2023 and 3 million within five years.

“So we were looking for the biggest bang for the buck,” he said, which meant focusing on cost per homes passed, aerial fiber placement as well as leveraging plug and play technology for deployments.

As Brightspeed moves into its second year as the fifth largest ILEC in the U.S., it’s shifting toward a “marketplace perspective,” where it can go into a particular market and see if it can grab a high penetration rate, which in turn can “help us deliver additional trends down the road.”

There are also roadblocks to consider, as Maguire noted Brightspeed currently has “somewhere in the neighborhood of 50,000” locations that are held up by permitting.

He referred to permitting constraints, pole attachment agreements and other roadblocks as “permission” issues.

“The economics will always be our primary yardstick in terms of where we’re going to deploy, just to try to get as many households as possible, but the permissions are really becoming problematic,” Maguire added.

Zeitz echoed Maguire’s thoughts on build hurdles, noting Ziply over the course of eight months has had about 70,000 locations held up by pole attachment authorities.

As for deployment plans, he thinks Ziply can get fiber to about 85% of the ILEC footprint it acquired from Frontier in 2020. The company is building in a way to “not encumber a municipality too much at one time” by choosing “to build parts of towns across and then fill out.”

Even though it’s “more economical” to finish work in a market in one go, Ziply found this approach also aligns with the time it takes to get projects approved.

“We’re also now building in, we call it the edge out [of our network],” Zeitz said. “And in that area we have a different set of criteria, we look at cost much more closely.”

And thanks to the FCC’s national broadband map, “we know exactly where someone else has fiber and we don’t build where someone else has fiber.”

“We look at that as a shotgun approach to try to hit as many areas as possible,” Maguire added. “Because you don’t just want to hit a dead end and not be able to move forward.”

The problem with LOC

The execs touched upon the Broadband Equity, Access and Deployment (BEAD) program’s letter of credit (LOC) requirement, which both Brightspeed and Ziply oppose.

The NTIA’s current requirements state BEAD applicants must provide the agency with a LOC from a bank as evidence they have at least 25% of the grant dollar amount in a cash bank account. The applicant would then need to set aside that capital for the duration of a BEAD-funded project.

Zeitz pointed out while the LOC sounds “like an innocuous thing,” it can actually add “a couple of hundred dollars” to a build.

Aside from the LOC, he said BEAD deployment costs go up when you take into account the Buy America infrastructure requirement and the prevailing wage rate for workers.

“And when you think our typical build is sub $1,000 dollars, we’re talking about those three things add like 35% to the cost of the build,” Zeitz explained. And ISPs as a result have to lower their estimated passings target.

Brightspeed has run into the same situation with the LOC and other BEAD hurdles.

“I think we have about 1.2 million households in our footprint that are BEAD eligible. We’re not going to be able to hit 20% of those just because of the letter of credit requirement,” Maguire said.

He noted he’s been to Washington three times in the last two weeks rallying against the issue.

“Having private equity folks hang out over my shoulder kind of helps in that regard, they’re very focused on that and understand all the math,” Maguire said, also echoing Zeitz’s concern about the Buy America requirement.

“Besides the cost element, there’s also the practicality of it. Some of the equipment we need is just not available in the states.”

Further, Zeitz views the LOC as “kind of ironic,” because the money is going to the banks “as opposed to [for] building more fiber.”

Some industry groups have called for alternatives to the LOC, such as performance bonds or private financing options. But Maguire noted those adjustments may not be enough for some ISPs.

“A lot of smaller companies, mid-sized companies, we just don’t have that capability to go out there and do what we need to do to secure a 10% bond. The economics just don’t work,” he said.