This has been a year of extraordinary events for everyone, but for those near the recent fires out West, it has been even more so. As a regional fiber provider with network in Oregon and neighboring states, Hunter Communications has had to deal with not just the COVID-19 pandemic, but raging wildfires across its service territory as well. Grain Management took a majority position in the company this past spring, and Hunter recently embarked on an FTTH journey as well. With us today to talk about those experiences and its view of the marketplace overall is CEO Michael Wynschenk.
TR: What are the origins of Hunter Communications, and how did you get involved?
MW: Hunter was founded in 1994 by Richard Ryan who had significant experience in the industry from the construction side. The company became active in the municipal fiber network movement and built the first municipal fiber network in Oregon for the town of Ashland around 1999-2000. Hunter received its license to operate as a CLEC around 2002 and started doing E-Rate projects providing fiber and Ethernet services to schools around 2004. After 2010, fiber-to-the-tower became a growth business and the company expanded into California shortly after that. Richard discovered what many in the industry realize when they start expanding: the capitalization costs are significant. In 2018-2019, he looked to find a partner to take the business to another level. In August 2019, the firm reached agreement to be acquired by Grain Management, with final closing in April 2020, resulting in Grain owning 75% of Hunter. I joined the firm as CEO shortly after close.
TR: What does Hunter's infrastructure look like today and what types of customers do you focus on?
MW: We have 2100 miles of fiber from Northern California up through the state of Oregon, with highest concentration in the Southern Oregon footprint. Hunter has not been in the residential market until recently, and 95% of our customers and our revenues are from the business side, rather than consumers. Historically, we’ve been a fiber builder, providing FTTT IRU’s and IRU and leases to government entities and K-12. The journey now is densification within the enterprise segment, continue growth within SMB and education markets, and most recently into the residential market with FTTH.
TR: What markets are you targeting for FTTH, and what approach are you taking?
MW: We are building out in Medford, where our headquarters are and are pleased with initial customer response. We have enjoyed early penetration of almost 20% market share in neighborhoods selected within the first 45 days of going to market. We have made significant progress in homes, passed with further expansion scheduled this year and next. Our offer is outstanding; we are providing 1Gbps symmetric services at $99/month with no data caps, price for life, no contracts, free installation and Wi-Fi router included. Our “low end” offer is 500/100. We really want to make it as simple as possible for customers to convert to our fiber solution and, based on results and net promoter scores, we are pleased with our progress.
TR: How does your current infrastructure help you in that buildout?
MW: Previously, Hunter would build out fiber past many neighborhoods, while focusing strictly on the connections for business customers, schools, hospitals, and such. That mileage of fiber is now an advantage, since we are currently building the extensions and the drops to the home. That means we can offer aggressive pricing and very good solutions at an extremely competitive rate because our cost to build is less than for a newcomer into the marketplace.
TR: After Medford, do you plan to expand your FTTH reach into other markets where you have a deep business presence?
MW: Yes, exactly. Grants Pass and Klamath Falls are the two natural expansions. But we also were selected by the Eureka School District in Northern California to build a fiber network, and when that build is done we will be leveraging it for commercial and residential customers. We have expansion plans to enter other strategic markets in Northern California and throughout Oregon over the next several years as well.
TR: For wireless backhaul, are you starting to see 5G drive demand yet?
MW: I would not describe Southern Oregon as rural. It is more rural than where 5G currently is being deployed, and therefore that market hasn't taken off yet. But for fiber to the tower in the markets that we serve, 60% of all cell phone usage is running across our network. Those are not direct contracts though, because as a small entity we provide IRUs or leased services to those who own those contracts.
TR: Southern Oregon has been suffering through some major forest fire activity lately, how has that affected your area?
MW: Unfortunately, the fires have really devastated two of our communities in particular; the towns of Phoenix and Talent. Current numbers are as many as 2500 residential structures destroyed and the school district is estimating about half of its students' families have lost their homes and much of that was in lower-income, affordable housing. Hunter Communications is active in the public-private partnership to restore Phoenix and Talent. As part of Operation Recovery, we are providing those businesses that exist and remain open with free internet. We are working with the community on how we can provide free residential internet as well when the community gets rebuilt to enable people to move in and quickly connect again to the world.
TR: With the disaster so close to home, how has this affected Hunter Communication’ directly?
MW: This experience has caused us to realize our true role as a smaller local provider of internet. If we are going to say that we are uber-focused on local markets, this is the time we need to prove that. We take that responsibility very seriously. About half of our employee base evacuated multiple times, and we have had a few employees lose their homes — even as they are busy rebuilding our network. Can you imagine employees restoring networks not too far from where their own homes were severely damaged or in some cases, completely destroyed? We have set up an employee relief fund to assist those who have been impacted, from family counseling, to covering extra costs incurred by our employees as they opened their homes to family and friends. The last 60 days has been difficult, but our leadership team, employees, and Board members rallied during the most difficult hours to take care of each other and our customers.
TR: What happens to a fiber optic network in a forest fire? How has your own infrastructure fared and what is it like operating in an active fire area?
MW: The amount of damage is significant any time this transpires. When the poles go down, the fiber goes down, and where the heat is overwhelming the fiber itself is melted. We've had large areas of fiber lost. Much of our plant is aerial, but even if it's underground, access points and other infrastructure can be damaged. The pole damage causes the biggest delays, and the power companies worked hard to replace the poles. Our network impact in Phoenix was about 20 miles of fiber, and that took us somewhere between 7-10 days to restore. In Butte Falls, we were working right along with the firefighters on providing communication services to their command central and getting our customers back up quickly. At times, we were literally stringing fiber along the ground and marking it clearly. From a public safety standpoint, the areas were also viewed as a potential crime scene because there was concern arson was involved. So even while we were restoring, we had to be very careful what we touched and didn't touch.
TR: What lessons do you think the industry should take from Hunter’s wildfire experiences?
MW: I think we are looking at how to efficiently incorporate underground fiber more than we do now. But I think the real benefit that we had in Phoenix, Talent, and Ashland was redundancy. Redundancy with good latency levels really has to be a significant part of any network strategy. The fire started in the afternoon of September 8th. By 3:00 AM in the morning the following day, we were able to activate our backup routes. Normally, the routes in this region go from north to south. What we have is an alternative southern route into Southern Oregon. Public safety, town halls and those businesses that were able to operate were able to still have wired services because we had the southern route, in addition to the primary northern route. The lesson is that as we continue to expand beyond Southern Oregon we need to make sure we have a thoughtful geographic route diversity strategy. I wish I could say this is a once-in-a-50-year situation. But unfortunately, I think that in the current environment, the industry needs to take a very close look at what the infrastructure looks like and ensure redundancy really is incorporated. And as we recover, it is important to have a public-private partnership because these communities are devastated. We cannot flip a switch and have them suddenly rebuilt. With the displacement of these families and the impact to both them and their employers, it will take a number of years before we can say that we have passed the impact of this wildfire.
TR: How has the COVID-19 pandemic affected Hunter and its ecosystem?
MW: I think we've been very cautious with our approach. Most of our employees are working from home, as is most of the community. In Oregon, we were fortunate in that the impact was not as tremendous as it was in other parts of the country, in part because of the strategies that the state and the counties employed. But we are concerned about what the predicted second wave is bringing. The pandemic has definitely been a driver to get our fiber-to-the-home strategy executed faster.
TR: How has the acquisition by Grain Management impacted Hunter’s evolution?
MW: I was attracted to Hunter because it was clear to me Hunter had the core for what could be a very successful organization, but there were missing pieces that we are now addressing. We now have access to capital to execute an expansion and densification strategy. Our experience with Grain has been most positive relative to receiving strong data analytics with strategic decision making: where to expand and how to leverage existing infrastructure. How does a small company become a larger company, while retaining its culture and its people during the transition? How do you turn the infusion of funds into value for employees and for customers? How does a small company select the right partner to acquire it? And how does that partner create a capital structure, supported by an active board, to enable the company to achieve what its goals are and what it can achieve? The selection of that financial partner is critical.
I think we're as good an example as any. There are a lot of infrastructure buyers out there, but I think most are not quite as interested in localization and leveraging the existing management teams that are in place as Grain has demonstrated with its acquisitions over the last couple of years. There is trust put into the local leadership, and then I think Grain brings in a set of data analytics and process to take what was a family-run business and elevate its decision-making and provide the capital required to expand to fulfill the mission. Even while the COVID-19 pandemic and the wildfires going on, we are creating an identity to take the culture that existed and leverage it to increase the velocity of what is possible for Hunter. As one example, from the first six months, we were able to invest in software that can now turn around in an hour a proposal that would have taken us three weeks before. Sometimes local businesses make decisions on an emotional scale. Grain provides a different kind of platform to enable well-thought out strategies that are executable.
TR: Thank you for talking with Telecom Ramblings!
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