On Infrastructure

Infrastructure

I come from a family of makers and builders. My father builds furniture and houses, like his father before him,  and I build infrastructure, specifically, telecommunications networks. My current project is a fiber to the premise network in the City of Santa Cruz, California, and then, out to the rest of Santa Cruz County.

While houses are large objects, they are only measured in square feet. Infrastructure spans square miles and this increase in scale includes a unique set of factors to the builder.

At Cruzio, we’ve been told in all earnestness more than once that “anyone with a pickup truck and a pair of pliers” could set up a fiber network so why couldn’t we get fiber to them way up in the mountains next week?

Infrastructure doesn’t happen in the weeks time frame. Months, if you are lucky, years normally. Here’s how it works:

Route Engineering

All infrastructure starts with the route, which is the path the pipes/wires/roads/rails take to get from their source to their destination. The first step in any project is to determine the best, safest, most efficient route and to engineer the plans needed by the municipalities to grant permits and to the building contractors to submit bids.

While Geographic Information System (GIS) tools have made this easier, it still requires feet on the ground to map the entire route. If you are building underground infrastructure involving pipes or cable conduit, you need a reliable map and inventory of all the existing pipes and conduits in the ground because you need to plot a route which does not go through them. This is harder than one would think because, surprise, municipalities and utility companies do not have accurate records of what they have put underground. This means that you need to survey and locate all existing assets in the ground because the last thing anyone wants is for a water/sewer/power/gas main nobody knew was there to be punctured by a backhoe or by a horizontal boring machine.

Aerial assets strung on existing poles are much easier to map and survey with regards to the actual route, but also add significant engineering work up front. Each pole needs to be evaluated to make sure there is enough space for your cable (pole space is leased by the linear vertical foot) and that the pole can carry the weight (cable can be really heavy per linear foot). If there are 60-100 poles per mile, you can see how this engineering can add significant cost and time to finalizing the route.

One of the interesting things about infrastructure is that you don’t know how much the project will cost to build until the route is established. Establishing the route can cost tens or hundreds of thousands of dollars. Only once the route is set can you get bids from contractors as to the actual cost of building the project and start getting your construction permits from local planning agencies.

Financing

Infrastructure is enormously expensive to build. Underground infrastructure costs  more than aerial. In Santa Cruz County, with our combination of high labor costs (prevailing wage) but generally “soft” geology, underground fiber can cost upwards of $200,000 per mile to build. In the city of Bend, Oregon, where my father now lives, and which has lower labor costs but a hard, volcanic geology, underground fiber would be much more expensive because boring a hole through what is essentially miles of obsidian costs a crazy amount of money.

Underground fiber, which can be built out using horizontal boring machines, is cheaper to build than anything “wet” requiring pipes, which need ditches and three levels of inspection: ditch before pipe, ditch and pipe, pipe after ditch backfill. Depending on where the ditches are being dug, it can easily cost over a million dollars a mile to build out a water or sewer system.

Banks aren’t really interested in infrastructure construction loans per se and it’s not hard to see why.

Any infrastructure project which defaults leaves the bank holding a bunch of pipes or cables with very little intrinsic, salable worth. If a borrower defaults on a home loan, the bank will have no problem finding a new buyer. If a borrower defaults on a sewage project, the bank is the owner of a sewage system with no potential buyers and no interest itself in running a sewage system.

There are a number of ways to mitigate the risk of default. The original telephone and cable companies, known as the  “incumbents”, were given monopolies in communities, guaranteeing a profit on the investment to build out their networks. “Wet” infrastructure such as water and sewage is usually built and maintained by municipalities and funded though municipal bonds or through loans and grants (in California) by the Infrastructure and Economic Development Bank, or IBank.

The IBank isn’t specifically tasked with funding of Internet or telecommunications infrastructure. The California Advance Services Fund, or CASF, provides grants and loans to “telephone corporations” to “bridge the digital divide.” CASF funding is focused on what are called unserved or underserved areas in the state where there is either no or slow broadband. There’s usually a solid business reason those areas are not served by the incumbent telephone or cable companies, which basically boils down to there not being enough customers in the area to pay for building out the service. The state of California maintains broadband coverage maps which determine what areas are unserved and underserved. When the coverage maps were first compiled some years ago, they were pretty inaccurate in many areas due to poor information, but over time have been refined  through the efforts of telecommunication carriers and local broadband coalitions such as the Central Coast Broadband Consortium.

Construction

After the time consuming up-front effort to engineer a route, secure financing and then line up the necessary permits and inspections, the construction begins. This is usually the shortest, most straightforward part of a large infrastructure project. Builders are good at what they do, and because they usually get paid by the project (as opposed to by the hour), they build as quickly as possible and don’t fool around.

Infrastructure Requires More Infrastructure

The funny thing about infrastructure is it requires more infrastructure to keep running. For instance, Cruzio builds broadband infrastructure, but we also run our own internal power company to provide backup power to our facilities, and our own internal telephone company to run phones at our various remote facilities and so on. You’ll notice the same thing with railroads (the electrical wires running along the tracks) and highways (the call boxes on the side of the road, the CCTV cameras and sensors in the roads). All of that adds significant cost to staffing and running infrastructure once it is built.

Good People Build Good Stuff

There are a lot of good folks, in government and out, working on local infrastructure here in Santa Cruz County. Residents of the County are traditionally suspicious of development and slow to rally around needed infrastructure work. The County is about $200 million behind in necessary water infrastructure, about $400 million in transportation infrastructure, and thousands of units behind in housing, especially affordable housing.

The challenge for the public and local governments is to overcome the public reluctance to develop and the sticker shock at the cost of what needs to be built. Two sad but true facts about infrastructure: it’s necessary, it’s damned expensive. Folks are going to need to agree on what to build and how to pay for it.

 

To learn more about the ins and outs of broadband infrastructure, follow local consultant Steve Blum’s blog for the ongoing saga of how California state and local Central Coast broadband policies and projects progress.

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