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An exclusive interview with CapeNet CEO Alan Davis

What value does CapeNet bring besides adding price pressure on Comcast?
Prior to joining CapeNet, Mr. Davis was founder and lead general partner of Nashoba Communications, a cable television company that was ultimately sold to Cablevision.

Internet competition heats up as OpenCape activation imminent

Following our exclusive interview with Cape Cod Community College President John Cox regarding his institution’s selection of Comcast for its high speed broadband Internet, we sat down for an exclusive virtual interview with CapeNet CEO Alan S. Davis. CapeNet is the firm selected by OpenCape to build and run their regional fiber optic broadband network.

Prior to joining CapeNet, Mr. Davis was founder and lead general partner of Nashoba Communications, a cable television company that was ultimately sold to Cablevision. At Nashoba he personally supervised the construction of a 1000 mile cable system which included the first fiber optic backbone for a cable system in Massachusetts. His full biography is available on the CapeNet website.

One of this nicest things about the medium of a hyper-local news site is that we can conduct an extensive interview without the constraints of column inches or broadcast time. This enables us to publish the entire interview and to show you our guest’s responses verbatim as he submitted them.

The Interview

Cape Cod Today: The OpenCape network cost $40 million in Federal and State funds. Is this just another spectacular waste of tax dollars, as some of our readers have suggested?

Mr. Davis: The government can find lots of creative ways to waste tax dollars, but often they get it right. Thanks to federal and state funding, we’re creating a superior fiber optic infrastructure that will compete with Verizon and Comcast and produce more broadband choices for the region. When buyers have more choices, buyers win.

Right now, Comcast and Verizon have a virtual stranglehold on our region. Did you know they even have a federally-blessed agreement to market each other’s services?

Well, they weren’t competing with each other anyway, except for the biggest users. In our region, Verizon has the lion’s share of wireless customers and Comcast has the wired broadband. This has allowed them to dictate prices and avoid upgrading their ageing infrastructures. Wireless service is spotty and expensive. 4G service is seen less often than the endangered spadefoot toad at the Cape Cod National Seashore. And wired broadband is unreliable.

The current federal government believes that the solution is more competition. They’ve funded more than 120 networks that are similar to ours around the country. The nearest ones are being built in western Massachusetts by Massachusetts Broadband Institute and in Rhode Island by OSHEAN.

In case you have any doubt that these new fiber networks are shaking things up, look at all the places around the country where huge telecom companies are suing and lobbying to shut these projects down.

Any business that is happy with what they’re getting from Comcast or Verizon today doesn’t need to change a thing. For everyone else, there’s a new kid in town.

Cape Cod Today: When will the OpenCape network go live?

Mr. Davis: Otis Air Guard Base will be live within the next week or so. For other customers, we expect the network to go live around the end of May.

Cape Cod Today: Will the network go live over the entire service area or are you bringing it up in phases?

Mr. Davis: It will go live over the entire service area. Small fiber optic segments aren’t very useful. For fiber to matter, it needs to be an end-to-end fiber optic network that connects into the global Internet. The OpenCape network connects to the world in both Providence and Brockton.

Cape Cod Today: With how many entities have you now signed contracts for service over the OpenCape network?

Mr. Davis: I can’t talk about specifics that might give our competitors an advantage but I can tell you we have signed contacts with about a dozen customers and we’re actively engaged with dozens more. This is a totally new network, so it’s normal that companies want to give us a chance to prove it works before they jump on board.

Cape Cod Today: We keep hearing the comment that CapeNet is OpenCape's ISP. What does that mean exactly?

Mr. Davis: It means that CapeNet will be providing Internet access to its customers over the OpenCape network. That’s the simplest explanation. CapeNet is the network operator and we sell many flavors of broadband service, just like Comcast does.

That’s where the similarities to Comcast end. We operate an Open Access network, meaning any law-abiding service provider can use the OpenCape network to deliver last-mile services. By contrast, Comcast and Verizon don’t do that and can block competition. We can’t, and we don’t want to, because as the operator of the new network, we make money if other service providers use it.

Cape Cod Today: We've had IT companies come and go here before -- how can you assure our readers that we won't be left holding the bag for a startup company that disappears?

Mr. Davis: No company can ever assure that it will not run into financial difficulties. That said, CapeNet is not an IT company. It’s a small but well-financed telecommunications company offering a broad array of proven services that are in high demand. And if initial customer interest is any indication, we expect to be financially successful. We’re tiny compared to Comcast which, by the way, is bigger than Amazon and Disney.

We’re privately held, so we’re not ruled by shareholders or vulture capitalists. Though small, we have the right industry experience and relationships, so nothing Comcast or Verizon does surprises us.

In the unlikely event that CapeNet were to run into financial difficulties, the network will survive because all of the assets are owned by non-profit OpenCape on behalf of the entire region. No one is going to pull down all the fiber and it won’t sit unused. We have a 25-year renewable lease to operate the network, but if we were to fail another operator would step in.

Cape Cod Today: What happened to those free things that people kept talking about?

Mr. Davis: There’s some unfortunate lingering confusion about that. The only free thing ever offered was running fiber from the network into the wiring closets of 72 Community Anchor Institutions – CAIs. Some people thought this also meant free broadband. It doesn’t. It means fiber connectivity to those locations. This connectivity to the network is a very big deal. It can cost $60,000 to build just one mile of fiber, so those 72 connections are extremely valuable and the region had a lot of input into choosing the lucky recipients. We expect to grow and extend the network over time, but 72 CAIs got a huge jump-start.

By the way, the entire network was built with free money in the form of grants. But the $32 million federal construction grant to OpenCape requires payment for any broadband services provided over the network including to the CAIs.

But the CAIs already pay a lot today, for inferior service.

Cape Cod Today: How much business would you estimate you’ve lost as a result of the delays in completing the OpenCape network?

Mr. Davis: Delays, caused principally by slow utility make-ready and winter storms, caused us to lose several hundred thousand dollars in revenue. As you can imagine, we’re very motivated to get the network lit.

Cape Cod Today: Are you selling the same things as Comcast?

Mr. Davis: Yes and no. We’re not offering residential services such as triple play, and our business services, while similar to Comcast, are delivered from a faster and more reliable, technologically advanced fiber optic network.

We’re also offering VoIP, dark fiber, wavelengths and managed backup. Comcast does offer some VoIP and all I will say is, once you try it you’ll probably want to call us.

Cape Cod Today: What value does CapeNet bring, besides adding price pressure on Comcast?

Mr. Davis: Apart from price pressure and competition, the real value that CapeNet brings to the region is a superior fiber optic network, which for one thing means a capacity per fiber – per fiber – of 100 gigabits per second. Each gigabit is 1000 megabits, so that’s 100,000 megabits per second, about 65,000 times faster than a T-1 line and about 400,000 times faster than a typical DSL line.

Plus, because of the way the network is designed, our services are inherently superior.

Upload speeds are guaranteed to be as fast as downloads. Companies that use Comcast know what I’m talking about every weekday afternoon. Companies that use Verizon DSL, if they can even get it, know what I’m talking about all day, every day.

Our network architecture is also more reliable. It’s designed with more geographic diversity, ring architecture and two termination points to the global IP network to ensure fewer outages and faster recovery.

The fiber itself is ridiculously hard to cut. I hope no one is going to run outside and try it, but you’d work up a sweat and get your cardio for the week before being arrested. In the unlikely event of a fiber cut or equipment failure, traffic automatically reroutes itself. If you're on a phone or computer, you won't even notice it. This is called sub-second failover.

And we offer on-net backup and disaster recovery, on-site battery backup and dedicated versus shared circuits.

Cape Cod Today: What percentage of your prospective customers are seeking competitive bids from Comcast or other providers?

Mr. Davis: Virtually all of them are seeking competitive bids. As a result, they’re starting to see the clear differences in their choices.

Cape Cod Today: How competitive are your prices?

Mr. Davis: Our prices are very competitive, especially for the higher bandwidths now being requested by many data-intensive, commercial and non-profit organizations. Coupled with our symmetrical bandwidth and superior survivability, we offer a meaningful new alternative in the region.

We also don’t want to lose a sale on price. During this first year of operation, while we gain momentum, every sale will be virtually case-by-case, with the most aggressive pricing we can manage. As more customers come on board, our costs per customer go down. And you know, the cost-per-bit of data transport never goes up, so that works in our favor over time.

Cape Cod Today: Cape Cod Community College indicated that CapeNet had provided a pre-construction quote prior to the college selecting Comcast as their ISP. The college is paying Comcast $4,500/month. What terms had you proposed to CCCC and for what services?

Mr. Davis: We offered a three-year contract at the rate of $4595 per month, for the same 500 megabits per second offered to the college as Comcast. This was last summer, while the new fiber network was still in the midst of construction and we couldn’t guarantee a delivery date. Of course we would have preferred to win that sale, but it happened almost a year ago, not recently, as some news coverage suggested.

Here’s the important thing and you heard it loud and clear: the college stated they would never have gotten those prices from Comcast in previous years. That’s the result of meaningful competition. With more choices and more leverage, the buyer wins. I’m confident you’ll hear more from the college and CapeNet.

Cape Cod Today: Comcast made a rather comprehensive Service Level Agreement with CCCC. What is CapeNet’s SLA and how does it compare to Comcast’s?

Mr. Davis: Actually Comcast’s SLA is very standard. SLAs are always long and complex since they’re written by lawyers who get paid by the word.

The point of an SLA is to guarantee performance and compensate a customer for loss of service. Our SLA reflects our confidence in the new network and goes beyond the expected.

We’ll stack and aggregate reimbursements for outages and sub-par performance, up to 100% of a customer’s bill. Buyers would love to see Comcast match that and we hope they do.

Cape Cod Today: How much bandwidth does a college, school, hospital or a town really need? How does that compare to what is available right now?

Mr. Davis: High schools are now typically requiring 100 megabits per second, and with the widespread use of tablets becoming the norm, we expect that number to quickly grow to 200 or 300 megabits per second. We’re seeing hospitals requesting speeds for up to 1 gigabit per second, as well as wavelength and dark fiber applications.

Cape Cod Today: Isn't Comcast already on the state buying schedule while CapeNet isn't? That makes it easier for public entities to buy from Comcast. Does the state support buying services on this network?

Mr. Davis: CapeNet isn’t on the state buying schedule however we’ve partnered with IT companies that are, so we can effectively achieve the same result. If we see a need to get on the schedule ourselves, we’ll do it.

Cape Cod Today: Regarding CapeNet’s technical support, will you be operating your own call center or contracting with a third-party call center?

Mr. Davis: Given the manageable-size customer base we expect to have initially, we’ll be utilizing a third-party call center. That may change as we grow over time. Regardless, CapeNet will still be a large part of the day-to-day managing of the network and interacting personally with customers, both pre-sales and post-sales.

Cape Cod Today: For on-site or network repairs, from where will your service crews be dispatched?

Mr. Davis: We’re still finalizing some details, but it will be a short driving distance to the service area. I’m guessing you asked because outages are so common today and wait times are painful for repair and restoration. In typical situations like a telephone pole being knocked over, our service is automatically re-routed, so our service is uninterrupted and customers are unaffected.

Cape Cod Today: Do you plan to have any on-Cape resellers?

Mr. Davis: Yes, we already have resellers and wholesalers who are out talking to prospective customers, on-Cape and throughout the region. We’ve added a tab to our website listing them and we’re talking to more.

Cape Cod Today: How do resellers fit into the OpenCape/CapeNet ecosystem?

Mr. Davis: Having a well-supported team of resellers is what enables a small company like CapeNet to operate. We don’t want to do it all ourselves for two reasons: it isn’t the open-access model, and we’d have to bloat into a huge company with enormous staff, beholden to shareholders, sort of like our competition.

Cape Cod Today: How would most businesses buy services from this network?

Mr. Davis: We expect most businesses to buy through our resellers because they have existing relationships.

Cape Cod Today: Which prospective customers would work directly with CapeNet and which ones should be working with resellers?

Mr. Davis: It’s totally up to the customer since we don’t compete with our resellers. The customer always gets the best price, no matter whom they choose to work with.

The types of companies that choose to work directly with CapeNet tend to be large enterprises and entities with complex needs that require significant bandwidth and engineering advice.

Cape Cod Today: Your site mentions that your resellers can “provide high speed broadband services to businesses without direct connections to our fiber backbone.” If a business is not on (for example) Route 6A, how would they access the network through a reseller?

Mr. Davis: We could arrange a lateral to be built from Route 6A to the business seeking service. But, like I said earlier, installing end-to-end fiber is expensive, and it’s a barrier for smaller companies because we have to recoup at least part of that investment.

So we leverage advanced technologies such as Ethernet over Copper or Ethernet over high-speed wireless to reach greater distances from the fiber network.

In those scenarios, the optical signals travel over the fiber network and only the last mile is covered via existing phone lines or high-speed wireless. The resulting service is still light years better than what’s available today, and in most cases is faster to provision than end-to-end fiber.

Cape Cod Today: Are you or any of your resellers offering a pre-priced package – like the Comcast business package – for a local business that wants your services?

Mr. Davis: We don’t, though we’re always assessing the value in it. Often, packaged services are simply a way to force customers to pay for extra things they don’t want.

Packages are also commonly used for residential services, which we don’t sell. We already offer, a la carte, the most popular services such as high-speed Internet access and VoIP. And if a customer wants more than one service, we save some money and are able to pass those savings on to the buyer.

Some of our resellers do offer suites of turnkey services now including CapeNet broadband.In those cases, there’s a solid value-add.

Cape Cod Today: There has been no news published on your website since Cape Cod Today’s January 7, 2013 article. Why did the flow of news slow to a trickle around the end of November?

Mr. Davis: We use multiple means of communication in addition to our website, including Twitter, LinkedIn, e-mail campaigns, outreach and public speaking. We also invest a lot of time supporting our resellers in their outreach efforts.

There has been some press coverage in the past few months that we didn’t add to our website. In a few cases it was print-only, and there was no online source to point to. In other cases, the coverage was so inaccurate that we didn’t want to proliferate it.

You won’t see a press release from us every time we feel like crowing about a sale, but we’ll certainly issue them for truly newsworthy events. We’re planning a major event to celebrate the official launch of the network and a second event in September. We’ll post details and dates on our website, and via all our communication vehicles.

You also won’t see us using mainstream advertising this year because our target customers are very specific. Many will be reached via resellers. And, keep in mind, we’re a tiny company with no revenue until customers are using the network. We’ve been heads-down getting the network built and getting our resellers up to speed.

Cape Cod Today: Isn’t this the time to be building anticipation as the service is poised to go live?

Mr. Davis: Yes, and that’s why we welcome the opportunity to answer your questions.

Cape Cod Today: At different points in the OpenCape timeline mention was made of municipalities cooperating on hosted solutions such as permitting, dog licensing … etc. Is that project part of CapeNet’s agenda? If so, what progress has been made on that front? How many town governments are committing to such services?

Mr. Davis: That’s not part of the CapeNet agenda. I’d ask that you talk with non-profit Open Cape.

Cape Cod Today: What will the local broadband landscape look like at this time next year? In two years? In five years? Why do you think?

Mr. Davis: Good question. We expect increasing competition over time for an increasing number of customers and increasing need for more and more broadband usage per customer.

Why? Because we’re already living in a global economy that has enormous impact on every aspect of our daily lives. To keep our workers from moving away to big cities in search of jobs, we need an information super-highway, not an information-dirt-road.

We believe this new network will be the single largest catalyst for a healthier regional economy. It will attract employers and jobs. It will enable workers to telecommute. Our local governments will save money and work more efficiently. It will improve communication between emergency first responders.

It will also empower our schools to take advantage of the latest technologies and attract the best students and faculty. It will improve our experience of health care. It will revitalize downtown areas and improve quality of life.

It won’t happen overnight but I can say it all in three words: This changes everything.

Competition is King

As we concluded after our interview with CCCC’s President Cox, the competition for high speed broadband is about to heat up here on the Cape. It was already established that Comcast plans to fight hard for every account. Now we have heard from the feisty new kid on the block.

No matter who wins the Cape broadband crown, an atmosphere of robust competition means lower prices and better service for the entire Cape and Southeastern Massachusetts.

OpenCape/CapeNet has a long, challenging road ahead of it. With a global competitor like Comcast and a relatively weak competitor in Verizon, CapeNet may very well find a comfortable niche in the area’s broadband ecosystem. However once these competitors define the local broadband market, there will be additional opportunities if another strong competitor like Google Fiber decides to expand into the Cape market.

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