Kerem Durdag is president and chief operating officer of GWI, an internet service provider in Maine. He was interviewed by Fierce Wireless’ Editor in Chief Linda Hardesty on December 13, 2021 at Fierce’s Digital Divide Summit.
Durdag talked about different methods to finance and operate a municipal broadband project, including revenue bonds and B-Corporation status.
This transcript was lightly edited for brevity and clarity.
Fierce: Hi, Kerem. Thanks for being here today.
Durdag: Thank you for having me; a pleasure, a distinct one.
Fierce: So, you are the president of a company called GWI, and I thought I'd just start with asking you to give us your elevator pitch on what GWI does in terms of municipal fiber networks.
Durdag: Sure. So GWI has presence in the state of Maine and state of Vermont. And we are actively building out in metro areas, in rural areas. We do residential and commercial, and we exist in these two universes of building our own networks through private capital and then municipal broadband networks.
The thing that is an anchor point for us in the municipal broadband network world is that we bring in the merger between public funds that drive public asset ownership, together with the private expert piece. And a combination of that results in a network that is very much tuned toward the public good. And at scale, for universal access, affordability and transparency of pricing. We are incredibly maniacal about inclusion, and equity is massive for us. We want it to be for everybody. We believe that internet access and internet service is a human right, frankly, so that's our oxygen. That's what drives us.
We've been around for a quarter of a century, been doing good stuff together with our partners and obviously the consumers at large. So, that's the world that we operate in. And we believe that if assets are funded by public monies, that the community should own it. It's their money. They should own it and they should own it well, and they should work with good partners who share the same kind of DNA. They share the same kind of ambition, drive and desire to make sure that these public assets are of the next 3, 4, 5, 6 generations.
Fierce: I noticed recently that Comcast bought a couple of small municipal networks in Massachusetts. And I don't know if there are a lot of these small municipal networks in the U.S. and how they're distinguished from your company. Because I believe you said there aren't too many companies like yours.
Durdag: So, I think we are rather unique. I'm not sure if we're the only one, the only B-Corp telecommunications company in the United States. But I think we're fairly unique in working with municipalities where we're designing it, constructing it, operating a network on their behalf and providing services on that network. And at the same time also help them figure out how to create the financing stack on it. And the financial stack is obviously a function of utilizing and leveraging the federal and state dollars and together with municipal revenue bonds. So municipal subordinated debt, and essentially creating a financial structure, financial model that allows those municipalities to own the assets. But work with partners like ourselves to bring in the expertise, to operate and provide services on it. So in terms of that kind of a cradle-to-the-grave kind of a solution, I think we may be unique.
I don't think we're the only one, and certainly municipal broadband in the United States has taken root over the last decade. There are some great examples of it. And I believe as a function of the financing and the funding that's coming through the federal agencies in the state, I think you're going to see a little bit more of that. I think the telecommunications industry is going through a once-in-a-generation tectonic, reinvigoration, a reinvention. So I think that is what's happening. So I think we’re very unique, certainly as a B-Corp.
Fierce: So, let's break it down a little bit. You're unique because of the financing. So, why are revenue bonds important?
Durdag: Municipal revenue bonds are an important vehicle because the project in and of itself is the one that's the driver. The revenue that is generated from that project helps underwrite the bond. So, the full faith and credit of the towns are not at risk. The taxpayer is not at risk. When a municipal revenue bond is enabled as part of that project, the taxpayer is not affected from any kind of deleterious tax burdens. It's the project in itself. And there is a very successful project that has shown that this is viable and validated. It's in Vermont. The entity is called ECFiber — 30,000 passings, 1,700 miles of fiber. They've got some very, very happy customers there.
The key thing to remember about our municipal revenue bonds is you need three years of operating history to show that the revenues are generated, the take rate is on track, the costs are managed, and everything essentially follows a trajectory of growth in a financial model that is analyzed and validated. So, you need that first three years as a catalytic push to make sure the revenue bonds work. But the cost of money is something that those financial models can bear, especially when you're talking about larger swath of rural areas. And obviously, again, it comes back to that ownership, the municipality. That project is owned by the public, operated by a private entity like ourselves or any other capable ISPs around the country. So, in the Northeast corridor, there are various mechanisms where municipalities can create a utility district. In Vermont they're called communication union districts. In Maine they're called broadband utility districts. So, you can create essentially a utility district that provides the architectural mechanism for that municipal revenue bond to be applied, and it works.
Fierce: Then also, you've seemed to indicate that it's advantageous to be a B-Corporation, and I'm not sure if everyone really knows what a B-Corp is.
Durdag: So, a B-Corp is the physical, tangible manifestation of companies, whether they're part of the conscious capitalism movement or whether they're of the people-planet-profit movement, it is the tangible manifestation of a corporate entity that holds public good plus private initiatives at the center of its decision-making process. It's the Good Housekeeping seal of approval. I believe for the economics of the 21st Century, we, as a B-Corp, are beholden to five things. We're beholden to the community. We're beholden to the environment. We're beholden to our employees. We're beholden to our vendors, and we're beholden to our stakeholders. Each of them has an equal role around that table. And that decision-making process, that rigor is actually from a corporate governance point of view. So, we have metrics and benchmarks that we report to the board. Now, one can say, why do all of that?
Well, you do all of that partly because you have the discipline to be able to say, we have the public good at heart. And at the same time, we can be a private, for-profit company. Then you create that essential mechanism for the consumer to engage in a way that allows their DNA to be matching with ours. Now, the telecommunications industry over the last 30, 40 years has gotten some atrocious net promoter scores, or other equivalents thereof. We are saying, there's another way to do this. Let's win back the trust of the consumer. Let's do it in a way that is transparent, that has a driver of trust and dependencies on our core capabilities, right? A deep sense of decency, sincerity. Whatever we do, we need to be sure that the communities are the center of that decision-making, and a B-Corp does that in a rigorous, auditable fashion.
So if somebody says, Kerem, great job on your mission statement, great job on your vision statement, but really what's going on over here? That person, that stakeholder, that community can hold our feet to the fire. And we have to respond to that. And this is a rigorous method, right? So, you get a certification that’s good for three years. You have to reapply to get it again. So, in the manufacturing business, it's the ISO certification. If you're in the med device business, it's the FDA certifications. This is a certification for corporate governance in the 21st Century that allows us to be part and parcel of the society. And we, GWI, believes we have a financial, moral, ethical obligation to the consumer that we will do good things for them, and we'll do it together with them.
And that's what a B-Corp does. It allows that bridge of trust. And I think to some extent, that's the way it should be, right? Agendas and capabilities should be transparent because at the end of the day, what we're trying to do is the elemental building block of civilization. Why wouldn't we want to be beholden to the community and to the planet together with all the other drivers that make us a successful business? So that's why we believe it's really, really important. I mean, we have Patagonia as a good example. We have Ben and Jerry's, there are other companies that have done this and done this really well. And I believe it's the way of the 21st Century. The corporate good has to be part and parcel of the societal. Those days of the 19th, and 20th Century post-industrial age, where the company tells society what to do, are long gone.
Fierce: Somewhat of a good segue to my next question, which is, some of our viewers may be interested in doing municipal broadband. And I wanted to ask you about the inevitable attacks that you probably have suffered from incumbent broadband providers. They don't like municipal broadband a lot of the times. And they tend to call it “over building.” So, any tips or words of advice about that?
Durdag: One is we focus on open access. There needs to be competition. That's an underpinning of participated democracy. So, it has to be a network that allows for open competition, which is open access. We're huge believers in that there are drivers like belief in net neutrality, data privacy, affordability, the fact that there shouldn't be pricing that's hidden behind bundling. There should be transparency. Those are things that empower a consumer to make an educated and forward-leaning decision. So, we believe that is one way to be able to do that. The second thing is this main focus. We have a maniacal focus on making sure everybody has universal access. Everybody in that community, municipality, utility district, whatever the project is about, everybody needs to have access.
I think an intentional desire and focus on inclusion equity is the order of the day. It's our responsibility to do that. And I think those are the ways that you make sure that the incumbents are held at bay.
And at the end of the day, it's fiber, fiber, fiber, whatever we do. And I call upon all our brothers and sisters, the 2,000 ISPs that are floating around the United States, doing this all of us believe it's fiber, fiber fiber, because whatever we are doing has to survive for the next 20, 30, 40, 50, 60 years, we are doing things akin to the rural electrification program and the national highway transportation system.
Fierce: Oh, we could probably talk for another 15 minutes. But, I'm sorry that we have to end our conversation here. Thank you so much. It was really great talking with you.
Durdag: Thank you for having me. It's very, very kind of, you appreciate it.