Technology

Economic Development, Features, Features, January 2016, Technology, Workforce Development

Now Entering Silicon Holler

Two of the poorest and most rural counties in the state, and country, also have some of the fastest Internet service

Two of the poorest and most rural counties in the state, and country, also have some of the fastest Internet service

How fast is your Internet download speed? Twenty megabytes per second? Thirty? A hundred? If your download speed exceeds 100 mbps, you’re zooming past most of the rest of the nation. The national average Internet speed as measured by cloud service provider Akami in its 2015 State of the Internet report was 11.9 mbps. Worldwide, the average speed was 5 mbps. In rural areas, speeds are generally considerably slower, if there is service at all.

Cruising the Internet at those speeds in Jackson County or Owsley County, however, will get you run off the information superhighway. Those two counties – two of the poorest and most rural counties in the United States – have some of the fastest Internet speeds in the world: up to 1 gigabit per second.

And it’s not just in a handful of places in Jackson and Owsley counties. Thanks to a six-year, $50 million effort to run fiber optic cable throughout its service area, the People’s Rural Telephone Cooperative (PRTC), based in McKee in Jackson County, can deliver that 1 gigabit or 1,000 megabytes per second Internet speed to every home, business and school in the two counties.

Keith Gabbard, CEO,  People’s Rural Telephone Cooperative

Keith Gabbard, CEO,
People’s Rural Telephone Cooperative

Keith Gabbard, chief executive at PRTC, told a crowd gathered Oct. 22 for a “Gig launch ceremony” that PRTC had been in the fiber business for some time before deciding in 2009 to go with an all-fiber network.

“As of now, 100 percent of our customers have fiber available,” Gabbard said. “Every home and business has a fiber connection, or can have one. What we’ve done here is pretty impressive because we have it to every single home and business, not just in this town (McKee), but to every place to the farthest holler out. Everyone has the same capability.”

Fiber optic cables transmit data via pulses of light sent through glass or plastic strands slightly larger than the diameter of human hair. Traditionally data has been carried via copper wires that conduct electricity. In the early days, of course, the only “data” carried was voice data. With the growth of the Internet, phone lines and dial-up modems gave way to coaxial cable and high-speed routers. Coaxial cable is a thicker copper wire surrounded by insulation, like the one that probably runs to your modem or cable box. Ethernet cables like the one connecting your computer to your network contain copper strands that carry the data.

From copper to fiber, step by step

Copper tends to experience electrical leakage and is subject to electromagnetic interference, however, and its bandwidth – a measure of how much data it can carry – is less than fiber optic cable. Copper also needs a more extensive network of junction boxes to boost the signal as it travels over long distances.

On the downside for fiber, most computers are built to handle copper connections. Since any connection is only as fast as its slowest point, having fiber optic cable run up to your home or business only helps to the extent that the equipment inside the walls is maximized for speed. That said, the higher bandwidth of fiber optic cable means you can have a lot more going on inside your walls – a business, for example, could have multiple simultaneous videoconferences, multiple large data downloads, an entire phone system – and the outside wires can handle the traffic.

It wasn’t that long ago, relatively, that Jackson and Owsley counties had no phone service at all. The PRTC was formed in 1950 and used money available in the form of low-interest loans through the federal Rural Electrification Administration to construct a telephone network. Customers were owners of the business, and profits went to pay off the loans.

In an interview, the PRTC’s Gabbard said over the years the cooperative replaced and expanded the copper network repeatedly as the population grew and spread. The updating and maintenance were constant, he said, and as Internet use grew the PRTC heard from customers that they wanted better service.

In the 1990s, PRTC partnered with four other small Eastern Kentucky companies to form Appalachian Wireless. As part of the effort to build that cellular network, a 375-mile ring of fiber optic cable was installed. Fast forward to the mid-2000s. As PRTC considered ways to upgrade its Internet service, that fiber optic cable looked like a pretty good starting point.

The PRTC funded construction of its fiber optic network through a combination of timely grants from the Rural Utilities Service arm of the U.S. Department of Agriculture, loans, stimulus money from the American Recovery and Investment Act of 2009 and the PRTC’s own capital. After spending $50 million to complete the project, PRTC has about $19 million in debt outstanding. Money to pay that back will come from user fees, as well as the successful Appalachian Wireless business, Gabbard said.

Appalachian Wireless serves its own customers and collects fees from Verizon, which also uses the wireless network. With few other wireless providers willing to build their own networks in the mountainous terrain, the wireless business model is strong enough to help support PRTC’s broadband initiative, as well. That’s helped keep the PRTC from having to raise rates to cover loan servicing costs.

Gabbard said the availability of the loans and grants, plus stimulus money, presented a “once-in-a-lifetime opportunity.”

Mule power helps close digital divide

Mixing in traditional means as it moves to the modern cutting edge, People’s Rural Telephone Cooperative based in McKee has used a mule named Old Bub to help with its last-mile installations of fiber-optic based gigabit Internet connectivity to all its customers in Jackson and Owsley counties in Eastern Kentucky.

Mixing in traditional means as it moves to the modern cutting edge, People’s Rural Telephone Cooperative based in McKee has used a mule named Old Bub to help with its last-mile installations of fiber-optic based gigabit Internet connectivity to all its customers in Jackson and Owsley counties in Eastern Kentucky.

Fully 70 percent of the fiber optic network in Jackson and Owsley counties runs above ground. As it turned out, even the highest of high-tech networks had to rely on the lowest of low-tech methods for installation. At points in the tougher terrain, a mule named Old Bub pulled the cable from pole to pole. Some photos of the operation made the rounds via e-mail earlier this year.

The image of a mule pulling fiber optic cable through the mountains probably seems like a fitting juxtaposition to those not aware of Kentucky’s efforts to close the digital divide. The PRTC’s gigabit network stands out as an example of a fully local initiative, but the state has announced its own plans to improve and expand broadband access.

The KentuckyWired I-Way broadband initiative aims to provide reliable, high-speed Internet service to every county in Kentucky. The estimated $324 million project will build what’s known as a “middle mile” fiber optic network. State officials likened it to building a highway through the state. That highway will have some 1,100 “nodes” at government user sites, including five Kentucky Community and Technical College System sites in Eastern Kentucky.

The I-Way will provide tiered access to speeds up to 400 gigabits – yes, that’s 400,000 megabits – per second. Adequate end-user equipment will be essential to using such capacity, and it will be up to local communities to build the “last mile” – to connect individual homes and businesses to the nodes.

The recommendation to build such a statewide open-access network was one of many that came out of the Shaping Our Appalachian Region (SOAR) initiative co-chaired by former Gov. Steve Beshear, a Democrat, and Republican U.S. Rep. Hal Rogers, whose district encompasses most of Eastern Kentucky. Partly as a nod to that impetus and partly in response to the severe economic downturn in Eastern Kentucky due to the dramatic decline in coal jobs, KentuckyWired construction will start at the eastern end of the state and over the next three years extend 3,400 miles across the state to all 120 counties. Work in the 54-county SOAR region is expected to be finished in summer 2016, with the rest of the state completed by late 2018.

High speed for … jobs in the hollers

The kick-off celebration for KentuckyWired was held Aug. 31 at Hazard Community and Technical College. Beshear said the project would bring much-needed Internet access to all communities.

“The potential for every Kentuckian to tap into the global economy, compete for higher paying jobs, collaborate with researchers around the globe, take classes online, or access increased medical care make KentuckyWired one of the most important infrastructure projects in our state’s history,” Beshear said.

Rogers added that with the capacity and connectivity “the only limit is our creativity. It’s up to us to put this resource to work for economic diversity, job creation and improved opportunities for the people of Eastern Kentucky.”

Jared Arnett, executive director of SOAR, called the extension of broadband service “a literal economic lifeline” in today’s increasingly digital economy and said it can’t reach communities fast enough.

KentuckyWired is the state’s largest public-private partnership. A consortium led by Macquarie Capital of Australia will provide the bulk of the funding via the issuance of debt and equity. The General Assembly approved $30 million in direct state funding in 2014, and the federal government is kicking in another $23.5 million. In August, the Kentucky Economic Development Finance Authority approved the issuance of $232 million in revenue bonds to finance a loan to the consortium, KentuckyWired Infrastructure Co.

Payments on the debt will be made via the state transferring its current lease payments for Internet service to KentuckyWired. In essence, the state and local governments – anyone with a node – will be paying KentuckyWired to use the Internet.

This setup actually has PRTC’s Gabbard slightly concerned. The way things are worded now, local governments and school districts in the PRTC’s service area would end up being among those 1,100 KentuckyWired nodes, and could be told to use the KentuckyWired fiber network instead of the PRTC’s. That would cost PRTC money. Gabbard said he hopes the PRTC can work with KentuckyWired to avoid building a parallel fiber optic network in Jackson and Owsley counties.

Jackson, Owsley jobs only ‘a starting point’

The potential for high-speed fiber network duplication in one of the poorest parts of Eastern Kentucky carries a hint of irony given the overall lack of investment in the region historically. Nevertheless, from an economic development perspective it might not be possible to have too much of a good thing. The emergence of fracked shale gas in the past decade means significantly fewer coal jobs, but plentiful broadband brings better chances to create a diverse patchwork of technology jobs that can help fill the void – and create an entirely new economy centered around technology.

Jeff Whitehead, executive director of Eastern Kentucky Concentrated Employment Program, said the PRTC broadband project and KentuckyWired “takes the lid off of the potential for both economic development and for what people can do from their homes.”

EKCEP, based in Hazard, provides job training, employment assistance, career counseling and tuition assistance for half a million people in 23 Eastern Kentucky counties, including many hit hard by the loss of coal jobs. In 2015, Whitehead said, the PRTC gigabit network has led directly to some 110 new jobs in Jackson and Owsley counties. Almost all of them are for companies based out of state – one employer is based outside the United States – and involve customer service work done remotely, often out of one’s home. The average salaries for these jobs are around $20,000 a year, but most have benefits.

“That’s not knocking it out of the park at this point (in salary), but they are still jobs you can do from home and not have to spend gas money,” Whitehead said. “We’re not satisfied with that; it’s a starting point.”

Down the road, he said, fast broadband service could lead to more and better-paying technology jobs, the ability to do remote job training, and ultimately lay the groundwork for a new generation of locally grown technology entrepreneurs who will be job creators of the future. Eastern Kentuckians prefer not to have to leave their families and their connections to the land to find work. Being connected to the rest of the world via the Internet could mean fewer locals will have to leave, and it could draw in new people who need that connectivity but don’t want to live in a big city.

Isolation ends; school’s never cancelled?!

Local schools are already benefitting from better connectivity. Owsley County Schools Superintendent Tim Bobrowski said the gigabit network has allowed the district to expand the use of “virtual schools,” or instruction over the Internet. As a result, a district that formerly had to make up in the summer an average of 20 snow days per year now can engage students at home, via online programs like Blackboard and Edgenuity that allow students to complete coursework for up to 10 snow days. Additionally, students who get suspended can continue classwork from home as opposed to just sitting at home not learning.

Owsley County Schools officials are working on a plan to get laptops like Chromebooks into the hands of some classes next year – as many as two grades per school, Bobrowski said.

As limited as Eastern Kentucky’s economy has seemed in recent years, the possibility broadband brings has people excited. Change won’t come overnight, but already the region’s eagerness to embrace the economic opportunities technology has to offer is changing perceptions.

Some locals are still buzzing about a story that appeared in mid-November on medium.com’s tech-focused section Backchannel. The author profiled Bitsource, a Pikeville company that aims to turn former coal miners into code writers and make a profitable business out of it. The story by Lauren Smiley – “that lady from California” – showcased local entrepreneurship and, perhaps as importantly, local pride.

Hilda Legg, a former administrator of the USDA’s Rural Utilities Service and a past co-chair of the Appalachian Regional Commission, said the gigabit service in Jackson and Owsley counties could also serve as a point of pride as well as a practical way to connect a historically isolated area to the rest of the world. She praised the PRTC not only for having the foresight and willingness to take on the risk of building the fiber optic network but also for promoting it and showing customers how it can help them.

Legg has been called a “broadband evangelist” and she isn’t shy about describing the PRTC’s gigabit network as a blessing. Appalachia has a history of relying on help from outside – be it from mining companies to provide jobs or government programs to fight poverty. Broadband, Legg said, has the potential to change the way locals see themselves.

“We can’t have generation after generation looking to the outside for help,” Legg said. “We’ve got to work at changing the way we look at ourselves and this beautiful, abundant region. I hope it will embolden residents to broaden their opportunities. Quit looking at yourselves in terms of what you don’t have, but rather look at yourselves for what you do have.”

Most of the rest of America – even larger cities – don’t have gigabit Internet service, she said.

Fast Internet service isn’t an elixir for curing the unemployment, drug abuse and attendant health issues that persist in Appalachia, Legg said, but it can be an important tool.

“If you remain isolated, you don’t tend to be able to raise yourself up. It will take time and there are no simple solutions,” she said. “But you have to start with pride in what you have.”

December 2015, Features, Technology

Data Breaching Now Its Own Industry

databreach

As the business world evolves to embrace electronic medical records, growing e-commerce and other 21st century benchmarks, cybercriminals have advanced also in the sophistication and frequency of their schemes.

We read it in the headlines with alarming frequency, how some hacker has stolen customer credit card numbers or other personal information from another retailer, insurance company, financial institution or the government.

Somehow, these faceless cyberthieves manage to breach the carefully constructed firewalls we individuals, business managers and IT professionals have put in place to seal our digital lives. As the business world evolves to embrace electronic medical records, growing e-commerce and other 21st century benchmarks, cybercriminals have advanced also in the sophistication and frequency of their schemes.

If the seemingly biggest, best and brightest can’t fully defend their data, what’s a medium-size company to do when contemplating the safety of its business and personal information?

Jason Falls, Senior Vice President  of Digital Strategy, Elasticity

Jason Falls, Senior Vice President
of Digital Strategy, Elasticity

“I’m not one of those people who think we should live in fear,” said Jason Falls, the Louisville-based senior vice president of digital strategy at Elasticity, a St. Louis digital marketing and advertising firm. “But there’s certainly a level of awareness and best practices we should tolerate because it keeps us safer.”

The issue appears to be growing rather than abating. Anecdotal evidence seems persuasive that not only is there a problem, but it’s potentially a very costly one. Reuters reported this year that retail giant Target Corp. agreed to a $10 million class-action settlement for its holiday season 2013 hacking scandal that exposed the credit card information of millions of customers.

Anthem Inc., the country’s second-largest insurer, responded to a data breach in February affecting 80 million of its customers and employees by offering free credit monitoring and identity protection services to those affected. With a typical identity theft protection services price tag ranging from $10 to $30 per month, covering 80 million customers would be sickeningly expensive.

“It used to be the case that cybercrime was more malicious sabotage or disruption of service,” said Cody Shakelford, a business systems architect with Boice.net. “Now it’s a billion-dollar industry.”

Today’s threats are something even the most prescient of experts were unlikely to have anticipated 35 years ago when the Bureau of Justice Statistics, an arm of the U.S. Justice Department that tracks crimes cyber and otherwise, was established in 1979. The agency’s website reports in 2005 (its most recently available data point) that 68 percent of businesses victimized by cybertheft lost $10,000 or more.

More recent data suggest attack rates and loss costs have skyrocketed the past decade. The Ponemon Institute, a cybersecurity consulting firm based in Travers City, Mich., says U.S. businesses are attacked 17,000 times a year at an average total cost per successful strike of $6.5 million.

Given the economic windfalls such attacks are likely to net, the growth trend makes sense.

Brent Cooper, President, C-Forward

Brent Cooper, President, C-Forward

“There’s a saying, ‘Why do banks get robbed? Because that’s where the money is,’” said Brent Cooper, president of C-Forward, a Covington-based IT firm. “We have all these computers, but we haven’t elevated security to the importance it should be.”

Who are hackers?

If cybersecurity is a war, then the same key strategy often mentioned in military circles recommends itself to the online battle: Know your enemy and understand their goal.

The term “hacker,” though technically correct, may carry the outdated connotation of a youthful prankster playing video games in a basement who might execute malicious code on government or business websites to further a political agenda.

Today’s cyberthieves, however, are more like villains from James Bond movies: determined, sophisticated and, if not armed, sometimes connected to foreign governments.

The psychological forces motivating hackers are complex.

“In terms of the hackers, you’re going to have people who do things for personal reasons,” explained Ian Ramsey, chief information security officer with the Louisville law firm of Stites and Harbison. “So you have people who steal information and then they post it online in order to get back at people. It’s just personal motivation – that actually goes on quite a bit.”

An example, Ramsey said, would be the hackers who released information earlier this year about the identity of thousands of account holders of the website Ashley Madison, whose ads said it enabled members to find sexual partners outside their marriage.

“They think it was an inside job,” Ramsey said. “They think it was employees who were disgruntled (because) they felt that Ashley Madison as a company was doing something that was dishonest to their clients, and they didn’t like it.”

Thus, the hackers’ motivation was personal satisfaction rather than financial gain.

But many who perpetrate cybercrimes are in it for the money.

“It’s run-of-the-mill criminals who have figured out the Internet,” Falls said. “They’re trying to figure out credit card information, bank numbers, things of that nature.”

And what they can do with information can be shocking.

Matt Smith, Vice President of Information Security, Integrity IT

Matt Smith, Vice President of Information Security, Integrity IT

Matt Smith, vice president of information security for Lexington-based Integrity IT, said that even if discrete bits of information are captured, they can add up to identity theft.

“Something might seem harmless, but when you put it with two to three other pieces of information, you start to put a puzzle together,” Smith said, “and you see things of value that could be used against you.”

Cooper recounted a case where a hacker was able to get into a CEO’s email and find out he was away on business in the Bahamas. After phoning the company’s chief financial officer, the hacker posed as the company’s bank and requested a wire transfer for a large sum of money.

“From reading the email, they had just enough details to make the request seem plausible,” he said.

Fighting the battle on three fronts

Ordinarily, waging a battle on
multiple fronts does not make for a winnable strategy, but when it comes to keeping one step ahead of the cybertheft set, sources advise keeping three things in mind: infrastructure, software and people.

“Making sure each ‘leg’ is able to handle the burden of a fast and public Internet is crucial for both individuals and organizations as the world speeds toward a digitally connected and Internet-dependent ecosystem,” said Patrick Goodman, chief product officer at Red-e-App, a Louisville-based tech startup that offers a secure mobile app to communicate with workers who lack access to company email.

The infrastructure realm, Goodman said, covers all hardware a company uses to access its software, whether it resides on a company’s servers or is based in the cloud, such as Google business apps.

Cody Shakelford, Business Systems Architect, Boice.Net

Cody Shakelford, Business Systems Architect, Boice.Net

Shakelford said a reliable routine for securing a company’s hardware should start with installing antivirus and antimalware protection software and keeping it and the computer’s operating system fresh with the latest patches and security updates.

Biometrics protection, such requiring a user’s fingerprint or retinal scan to unlock mobile devices, are two of the newest developments in hardware-based security. But they won’t prevent access by a user who compromises a company’s security via the most common method: a phishing email, where the hacker sends what appears to be email from a reputable source to trick the recipient into divulging log-in credentials.

Once a username and password is compromised, “ransomware” can be installed to encrypt an individual PC or a company’s entire network. The hacker then offers to unlock the system – for a price.

“There’s really no way to unencrypt the data once it’s been encrypted,” Cooper said. “There have been four police departments that have paid the ransom because they didn’t take the precautions to secure the network.”

In ransomware attacks, Cooper said, the only remedy is to wipe the computer and restore the data from a backup.

The key to good prevention is tailoring a security solution to each specific client, said Amy Justice, a senior security and compliance consultant with SDGblue in Lexington.

“We might recommend encryption for a laptop an employee is using or a data backup plan,” Justice said. “If we advised a dental practice, we would use the HIPAA security methodology, which would be different from those we would use if we were advising, say, a copy shop.”

The prevalence of such attacks means one of the most crucial components of online security is the variable that may be the hardest to control: people.

Sarah Cronan Spurlock, Privacy and Data Security Group Chair, Stites & Harbison

Sarah Cronan Spurlock, Privacy and Data Security Group Chair, Stites & Harbison

“Educating employees and your workforce generally so that they are aware of security issues” is crucial, said Sarah Cronan Spurlock, an attorney with Stites & Harbison who chairs the firm’s Privacy and Data Security Group. Both she and Ian Ramsey are certified information privacy professionals.

One of the specific things to teach your employees about security is likely the most basic: Change your passwords often, use complex passwords, and don’t use the same password for multiple sites.

Ramsey recounted an experience that underscores the importance of password security and how it can affect people at all levels of an organization. While presenting some 70 senior executives at a conference in Atlanta, Ramsey showed a slide called, “The 20 Worst Passwords Ever Used.”

“People got up out of their seats taking pictures of this slide and I think there’s a reason why,” he said. “Most of them saw the passwords they or their staffs were using up there.”

Features, Technology

Electronic health records: After the pain, revolutionary gain?

On the Kentucky front the roughly $537 million that state and federal programs have paid doesn’t come close to the expenses hospitals and medical practices have incurred trying to implement EHR to proscribed federal standards.

On the Kentucky front the roughly $537 million that state and federal programs have paid doesn’t come close to the expenses hospitals and medical practices have incurred trying to implement electronic health records to proscribed federal standards.

While the ongoing transition to electronic health records promises to bring revolutionary advances in care in Kentucky and elsewhere, to say it has been neither easy nor cheap is a massive understatement. Dr. David Bensema, chief medical information officer at Baptist Health, and Cheryl Brown and Dr. David Danhauer, information technology leaders at Owensboro Health, readily attest to both of the latter points.

Implementing electronic health record technology has been frustrating and expensive. Thankfully, four years ago Kentucky became the first state to issue payments through its incentive program for meeting federal Modifications to Meaningful Use (MU) in The Health Information Technology for Economic and Clinical Health Act that created the HITECH incentive program and also secured funding for the Kentucky Health Information Exchange.

President Bush in 2004 set the goal of electronic health record (EHR) implementation by 2014, and the American Recovery and Reinvestment Act of 2009 provided financial help and incentives.

Commonwealth healthcare IT personnel do praise the state’s foresight in establishing the Kentucky Health Information Exchange (KHIE), a central resource to help hospitals and physicians implement electronic health records technology. However, at a point at least two years from finishing, those same IT professionals and many physicians express great dissatisfaction with current EHR systems and the priorities the federal Center for Medicaid and Medicare Services (CMS) is dictating to developers.

CMS defines the MU standards providers must demonstrate in stages to earn incentives and avoid penalties.

“Meaningful use,” as defined by HealthIT.gov, consists of using digital medical and health records to:

• Improve quality, safety, efficiency and reduce health disparities.

• Engage patients and family.

• Improve care coordination, and population and public health.

• Maintain patient information privacy and security.

It is difficult, meanwhile, to pin down the exact cost of implementing electronic health records into provider operations. Bensema and Danhauer each estimate their respective healthcare systems to date have invested well over $100 million on software and third-party packages. Costs soar into the hundreds of millions when factoring in the time to orient physicians and allied personnel to the program interfaces, reporting mechanisms and added procedures to follow, Bensema said.

Federal and state MU program incentive payments have been valuable to the participating providers.

As of Oct. 1, the Kentucky program has made 4,860 payments totaling $200.2 million to providers, according to KHIE, and federal MU incentive programs at the Center for Medicare and Medicaid Services have injected another $337.6 million into Kentucky.

Dr. Steven Stack, Medical Director, Saint Joseph East Emergency Department; President, American Medical Association

Dr. Steven Stack, Medical Director, Saint Joseph East Emergency Department; President, American Medical Association

Nationally, CMS has invested over $30 billion in incentive payments, said Steven Stack, medical director of the Saint Joseph East emergency department in Lexington and current president of the American Medical Association.

“That sounds like a lot of money, but put it in context,” Stack said. “Over that same time period, the U.S. health system is estimated to have spent close to $9 trillion.”

On the Kentucky front, Bensema said, the roughly $537 million that state and federal MU programs have paid doesn’t come close to the expenses hospitals and medical practices have incurred trying to implement EHR to proscribed federal standards.

“The most transformational thing in decades”

Are EHR systems worth all the cost, fuss and frustration?

Despite the controversy and all the criticism providers express over EHR and the MU program, the answer to that fundamental question appears to be: “Yes, absolutely.”

“EHR is the most transformational thing to happen in medicine in decades,” in Danhauer’s view. “It has caused more change in healthcare than anything capturing news headlines.”

Dr. David Danhauer, Information Technology Leader, Owensboro Health

Dr. David Danhauer, Information Technology Leader, Owensboro Health

Once the dust settles over this period of fundamental change, Danhauer predicts most providers will wonder how previous generations functioned without the shared information that EHR enables.

Despite the criticisms of EHR systems in general, “the medical staff makes certain our office hears about it,” Brown said, when Owensboro’s system goes down or is temporarily off-line.

Stack’s response is even more succinct: “The majority of physicians do not want to go back to paper records.”

No one argues that the information that MU programs want captured is not valuable, Bensema said. Providers agree that EHR is an enormous benefit and will eventually realize its potential as an indispensable tool in patient care.

There is argument, however, that CMS is trying to accomplish trying too much at once in its Stage 2 Meaningful Use objectives.

Despite complaints about Meaningful Use and EHR technology, Kentucky hospital systems are moving forward with ambitious plans to introduce full electronic connectivity and shared data under one system. Bensema outlined the structured plan Baptist Health’s IT team will implement through 2016 to connect the commonwealth healthcare giant’s hospitals and affiliated physician practices under a single integrated EHR system.

“Baptist Health will be a fully unified electronic system by 2017,” he said, with a period of system refinement to follow.

Dr. David Bensema,  Chief Medical Information Officer, Baptist Health

Dr. David Bensema,Chief Medical Information Officer, Baptist Health

The resulting ability to organize and share patient history, imaging and medication information among hospital services, primary care providers and specialists, Danhauer said, will have an enormous impact on raising patient care quality in Kentucky by reducing medication errors and unnecessary duplication of services.

The data that EHR systems collect will enable public health entities to better track trends in diagnoses and disease, Brown added. When it successfully attested to Stage 2 MU in 2014 and 2015, she said, one of Owensboro Health’s accomplishments was transmitting public health data to two organizations.

However, many physicians are dissatisfied presently with the way EHR implementation is being handled. And Stack said the cost of complying with MU standards currently outweighs the current value of EHR systems.

Bogged down by too much at once

Meaningful Use objectives, dictated from the CMS and tied to a system of financial rewards and penalties, have come under criticism from the American Medical Association and other national and state medical societies.

Stack has presided over a series of AMA-sponsored Internet town hall meetings titled “Break the Red Tape” (bit.ly/1kbBVV9), which have given voice to its membership’s concerns over the current state of EHR technology and the rate at which CMS is expecting MU standards to be accomplished.

“Doctors want EHR systems,” Stack said. “But they want systems that support the way they conduct patient care.”

Physicians and healthcare providers, as a general rule, are voracious adopters of new technology, he said.

“They snatch up the latest smart phones, tablets, minimally invasive scopes and surgical tools, and any other technology on the cutting edge of care delivery,” Stack said. “So it is unusual to see this group be so critical of new technology that has so much potential to benefit the industry.”

Problems are wide-ranging, but it all boils down to one basic issue. The current generation of certified EHR technology is not delivering on its promise. Instead of improving patient encounters, the tech is slowing physicians down, Stack said.

“Instead of defining a very small number of high-use instances where data must be transmissable – lab results, imaging, prescriptions – EHRs are concentrating on the minutia and trying to standardize care across specialties, regardless of whether the information is applicable or not,” he said.

Following a patient encounter, MU objectives dictate that physicians key in text, navigate complex on-screen menus and wade through complicated dashboards. All that data entry interferes with direct patient care, which is what the doctor cares most about, he said.

“Current EHR mandates focus the energies of providers in the wrong direction,” Stack said. “It has reduced highly skilled professionals into deskbound clerks and typists.”

EHR systems need to evolve, Danhauer said, so that documentation takes about the same amount of time as it does to record orders on paper, but seamlessly with fewer flaws and more clarity.

Why isn’t EHR as smart as my phone?

According to current complaints, he said, most EHR systems are “inelegant, user-hostile and still lack interoperability with other EHR systems, which must be a priority.”

“It’s the exact opposite of the experience providers have with smart phones. For example: These devices are designed to be intuitive, easily understood by users and require little prior exposure to quickly know how to use them,” Stack said. “EHRs, on the other hand, take individuals with extensive educational backgrounds and hands-on experience with advanced technology, and paralyzes them with programs rife with a lack of intuitive functionality and interoperability.”

One of the fundamental problems is that the MU program, though well-intentioned to spur adoption of EHR, has created a “false marketplace” that serves the demands of Meaningful Use rather than physician needs.

“Any physician accepting Medicare and Medicaid payments is required to purchase EHR under threat of penalty,” Stack said. “But the programs themselves aren’t designed to accommodate the needs of the user, the physicians and allied health personnel, but rather the data-gathering interests of the CMS.”

Meaningful Use dictates a “one-size-fits-all” approach to patient care, he continued. It’s important that EHR systems reflect how providers interact with patients.

Physicians have expressed their frustrations by dropping out of the MU program during implementation of Stage 2, Stack said. Doctors have been willing to shoulder the penalty of not attesting to Stage 2 objectives because it’s more affordable than trying to keep up.

Dropping out of the program is not a viable long-term solution, Bensema said. Eventually the penalties catch up with those who start late. The AMA’s general argument is not against the ultimate goals of Meaningful Use but that the program is trying to accomplish too much at one time.

“No one is arguing that MU objectives aren’t worth achieving,” Stack said. “But after creating MU Stage 1 out of whole cloth, Stage 2 was initiated before there was any critical evaluation of how Stage 1 was working. And CMS has chosen to continue down this pathway without any attempt at course corrections based on feedback from EHR’s primary users.”

One of the goals of “Break the Red Tape” is to gather that feedback from physicians regarding the current state of EHR technology.

Already facing doctor shortages in some rural communities, Kentucky is in danger of losing a whole generation of physicians if MU is not modified and its timeframes relaxed, Danhauer said. Provider shortages are already bad enough in the commonwealth, he said, without disenfranchising experienced physicians in their 50s and 60s by trying to force them to change their entire way of working on a dime.

KHIE is a valuable resource

Cheryl Brown, Information Technology Leader, Owensboro Health

Cheryl Brown, Information Technology Leader, Owensboro Health

While concerns about EHR are shared nationally, Danhauer said the General Assembly demonstrated great wisdom in establishing a state sponsored health information exchange program. In fact, Danhauer and Brown credit much of Owensboro Health’s success in attesting to MU Stage 1 and Stage 2 to invaluable assistance from KHIE.

As an early adopter of EHR technology, Brown said, the Western Kentucky health system would not have been successful without KHIE.

“They were our gateway for critical information on systems, interoperability and organizing our system so that we would meet MU objectives,” Brown said. Having a central authority in Kentucky for health information systems clearly has made the transition to EHR a lot easier than it would have been had Owensboro tried to go it alone.

“Our partnership with KHIE has been nothing less than phenomenal,” Brown said.

In October, CMS announced it is modifying MU Stage 2 attestation requirements for 2016 and extending MU Stage 3 deadline for providers until 2018. The AMA was still assessing the details of the 70-page release and deferred comment.

At Owensboro Health, Brown welcomed the modifications, saying the new requirements are easier to attain. Modifications relax standards involving third parties such as requiring patients to use Owensboro Health patient portal to ask for information.

“We have no ability to force patients to use that portal,” Brown said. “So meeting the Stage 2 requirement that a percentage of our patients use that portal was a standard over which we had no control.”

ROI can’t be measured … yet

It is difficult to appreciate the potential returns on investment at this stage because they are still years off, Bensema said.

Baptist Health assembled a value realization task force to compare the system’s current rate of expenditure against the revenues it could gain by recouping lost charges, improving workflows as the technology refines itself, improving patient outcomes through shared information, and other factors. The task force made a conservative projection that Baptist Health could save a minimum of $18 million annually after EHR is implemented and refined.

“That figure was on the low end of the scale. I believe it’s likely to be much more,” Bensema said.

Despite today’s challenges, Danhauer said, a subset of Owensboro Health’s patient population is very engaged in that system’s progress to full EHR implementation.

“There is a generation of people who are accustomed to conducting business and managing finances electronically,” he said. “They want their health information, lab results and X-rays in front of them with their doctor or surgeon answering their questions.”

In the long run, he predicted that it will be the patients, not CMS, who will drive healthcare’s embrace of EHR.

“We’re already seeing it happen,” Danhauer said.

Features, features, October 2015, Technology

Louisville: Cyber sector contender

Louisville could be one of the nation’s emerging tech centers.

It might seem unlikely, given that Louisville Mayor Greg Fischer’s own Competitive City Update in 2013 ranked Louisville 11th among its 15 peer cities in percentage of the workforce with technology jobs. A spate of recent initiatives, however, are giving business and civic leaders the sense that Louisville could be ready to close that gap – quickly.

DawnYankeelov

Dawn Yankeelov, president and founder of Technology Association of Louisville KY

A feeling of momentum was tangible Aug. 20-21 at the city’s first TechFest, a semiannual conference and trade show that drew 300 registrants, 34 sponsors and 19 exhibitors downtown to discuss the future of tech innovation in the city. It was put on by the Technology Association of Louisville KY (TALK, talklou.com), a three-year-old group tied into the Technology Councils of North America (TECNA), which is a network dedicated to advocating for technology, local networking, identifying workforce talent, and professional education.

TALK founder and president Dawn Yankeelov, president of Prospect-based PR/marketing firm Aspectx, said she hopes events like TechFest will showcase how much tech is already brewing in Louisville and be a “big tent” the entire tech community can enter.

“The tech community here is quite broad. On one hand, you have a big selection of startups, and on the other, large tech companies like Zirmed and Genscape,” Yankeelov said. “Then you have incredible discoveries being made in the healthcare space, like Neuronetrix’s FDA-approved work to combat Alzheimer’s. And even our familiar market leaders, such as Humana and others in (Louisville’s) healthcare industry, are using mass analysis of population healthcare data to make care delivery more proactive and efficient.

“They are great examples of where Louisville is going as a tech-driven community. TALK, and by extension TechFest,” she said, “gives us a chance to unify and encourage the tech community already developing here, and raise the flag for Louisville as an important Midwest outpost for Silicon Valley companies.”

KentuckyWired and Google Fiber

Mike Hayden, KentuckyWired program director

Mike Hayden, KentuckyWired program director

Some recent studies have ranked Kentucky dead last nationally in Internet connectivity. But the commonwealth soon could become one of the nation’s most wired states, thanks to the combination of the KentuckyWired initiative and the potential entry of Google Fiber to Louisville.

KentuckyWired’s initiative will bring ultra-fast Internet speeds to every one of the state’s 120 counties with a $324 million optical fiber network, funded by $30 million in 30-year state bonds, $20.5 million in Appalachian Regional Commission funds and the rest from the equity market – Australian investment firm Macquarie Capital signed a public-private partnership deal to provide the rest of the money (see “Statewide Broadband By 2018,” The Lane Report, April 2015 bit.ly/1dodVuR).

Significantly for Louisville, the project will bring “lit” optical fiber into downtown from four routes: northern, eastern, western and southern.

KentuckyWired’s “middle mile” network will directly upgrade 1,100 government and education sites around the state. But access to the massively faster speeds and capacity it will offer should be a big attraction for tech companies looking to grow, according to Mike Hayden, program director of KentuckyWired.

“The average capacity of a standard T-1 line is 1.5 megabytes (of data) transmission per second,” Hayden said. “KentuckyWired will average around 1,000 megabytes a second, for the same price. Other communities have done this, but they have been just a town or a neighborhood – little islands of connectivity. Considering that 29 states have laws making it illegal for the state to lay their own fiber, what we are building is a big deal.”

The commonwealth still will need local Internet service providers to link to KentuckyWired’s capabilities and build out the “last mile” to people’s homes and businesses. That’s why the announcement last month about Google Fiber potentially entering the Louisville market was met with such fanfare. Google Fiber, which is currently working on a feasibility study of the Louisville market, promises to bring 1,000-megabyte – gigabit – level connectivity through the last mile.

Google Fiber now provides gigabit service for $70 a month in three cities: Kansas City was first in 2013, followed by Austin, Texas, and Provo, Utah. Construction is underway in Atlanta, Charlotte, Nashville and Raleigh-Durham, N.C. Louisville is among a “next tier” of communities being assessed along with Portland, Ore.; Phoenix; San Jose, Calif.; Salt Lake City; and San Antonio, Texas.

A combination of KentuckyWired and Google Fiber services would give Louisville some of the best, most affordable Internet service in the nation by 2018, Hayden predicts.

Tech companies need investment funds

Louisville-based Jason Falls, senior vice president for digital strategy with social/digital PR firm Elasticity, is a founding member of Louisville Digital Association, a professional organization for marketing tech and social media marketing. Tech growth in Louisville is heating up, Falls said, but has a long way to go to catch neighbor cities like Indianapolis.

“One of our biggest problems is the investment community: Our angel investors are not willing to take risks on businesses they don’t understand,” he said. “For instance, Louisville had a great company created here – Backupify – that had to move to Boston because they didn’t have investor support here. We don’t need to keep repeating that mistake. We need a base of investor support, and coordinated help in general from the business community.”

That message, so often repeated in the tech community, is getting through.

James Seiffert, of the Stites and Harbison law firm, presented at TechFest about a potential new multimillion-dollar “double and triple bottom line” private equity fund for Louisville now being studied by Strategic Development Solutions and Economic Innovation International Inc.

DBL/TBL funds, as they are known, aim not only for traditional dollar profits but additional “bottom line metrics” such as community benefit or environmental responsibility. SDI’s website identifies DBL/TBL fund goals as market-rate returns to investors; investment in projects or businesses that create jobs and economic opportunity within low-income communities; and support for environmentally friendly and sustainable green buildings and activities.

Working together in various markets, SDI and EII have built DBL/TBL funds that, combined, surpass the $2 billion mark. And they hope to create a similar, multimillion-dollar fund in Louisville.

According to Seiffert, JP Morgan Chase, the Kentucky Cabinet for Economic Development, the University of Louisville, Kentucky Science and Technology Corp. and Kentucky Highlands Corp. all have expressed interest in funding a $250,000 study to assess whether the right investor pool can be created in Louisville. An affirmative finding would be an important step for a city that does not now have serious investment funds dedicated specifically to tech as its own vertical.

Lisa Bajorinas, director of the Kentucky Innovation Network, is quick to point out, however, that many tech entrepreneurs do find success getting funding from Kentucky accelerators dedicated to tech development in certain fields. Those focused accelerators include XLerate Health, for healthcare technology; Innovate LTC for aging-care technology; and Village Cap Ag Tech, with an agricultural tech focus.

Public entities help fill finance gap

Tech companies benefit also from the Kentucky Economic Development Finance Authority’s formation of Kentucky Angel Investors, an accredited investors group interested in putting money into Kentucky-based companies of all kinds. Fiscal 2015 was the group’s second year, and membership is up to 69 registered investors who meet regularly to hear pitch presentations.

The state is making it easier for tech investors with the Kentucky Angel Investment Act Program, which offers tax credits of up to 50 percent for investments in qualified companies that create jobs and promote development. Very popular immediately, at least 160 investments so far have been approved for 150 investors who’ve received tax credits of $3 million, according to Jack Mazurak, a spokesperson for the Kentucky Cabinet for Economic Development.

Kentucky is one of only four states that match federal grant money for startups from the Small Business Administration – up to $150,000 for Phase 1 companies and up to $500,000 for Phase 2. Last year, the state awarded 24 companies more than $6.8 million in matching funds on $12.4 federal grants, Mazurak said.

Many tech companies have also found support, Bajorinas said, through Kentucky’s longer-standing capital sources such as the Commonwealth Seed Fund, Enterprise Angels, Enterprise Angels Community Fund, Kentucky Enterprise Fund, and VenCap Kentucky.

“Tech is an exploding area of development, and one that we want to maximize for Louisville and the rest of the state,” Mazurak said. “We want to be sure we are removing as many obstacles as we can to developing here. As technology itself continues to evolve, the financial and technical barriers to entry for tech entrepreneurs are going down. We want to be part of that – encouraging entrepreneurs at all levels and ages to pursue their business dreams.”

A TechTown branch in Louisville?

Dreaming about a future in tech should start young, before children have a chance to decide a tech career is beyond them, according to TechTown, a non-profit designed to engage kids ages 7 to 17. The first Tech Town, in Chattanooga, Tenn., has been a beacon of STEM curriculum in the area; it has a vast facility capable of handling 400 students a day, and even adults for their “night out at TechTown” events.

“We take kids of every income level, from the lower-income schools to the private-school kids with their blazers on, and we sit them down beside each other,” said Paul Cummings, TechTown founder and a speaker at TechFest. “Our facility is full of the latest equipment, and the teachers are world class. By the time (students) have left after their program with us, they will have written their own computer game, or made a 3-D animated film, or designed and programmed a robot, or created an app.

“They’ll see that anyone can do it, including them,” he said. “And it makes them think differently about what is possible for their lives.”

The notion to bring Cummings to Louisville occurred when Yankeelov met him at a conference and suggested he begin working with Tech Councils to find expansion cities, starting, of course, with Louisville.

With the first TechTown successfully operating in Chattanooga, Cummings, a successful tech entrepreneur and investor, is looking to invest $750 million with his partner Cordell Carter in up to 200 locations globally, building them within 10 years. Currently he is looking at Portland, Ore.; Seattle and Tacoma, Wash.; New Orleans; Nashville; Gulfport, Miss.; and Washington, D.C. His speaking engagement at TechFest coincided with numerous meetings with area leaders about the project.

Getting TechTown to Louisville will take coordinated public support and foundation funding for a building and programs. However, Bill Weyland of City Properties is spearheading an effort to work on potential locations. Currently under consideration are potential sites at the Oak Street Corridor, near Spalding University; a location on one of the University of Louisville’s campuses; or maybe in Liberty Green, a multiblock mixed-use development located between UofL’s downtown medical complexes and NuLu, or a number of others.

Weyland also is funding a feasibility study to determine what foundations, individuals or organizations would be interested in helping fund the Louisville TechTown Foundation.

“We’re hoping that $2 to 4 million in investment can come from TechTown, and our market would match that with money from the foundation,” Yankeelov said. “If every thing goes well, we could be looking at opening in 2017.”

Talk of TechTown coming to Louisville has “turned a light bulb on” for the community, she said.

“People have seen this project happening and thought, if this is possible what else could we do? It was a key factor in getting the attention of Google Fiber; and it shows the city is taking a step in the right direction to develop a strong tech-savvy workforce,” Yankeelov said. “It is a sign Louisville is stepping forward, finally getting national attention, and will no longer be considered a ‘mid-tier’ tech community.”

Fertile ground for growing tech companies

“Louisville should blaze a trail so everyone follows us. If we leverage it right, we can do what Austin (Texas) did,” said Andrew Prell, CEO of Silica Nexus, a Louisville-based augmented-reality gaming company.  Prell is actively working toward a day when Louisville could be a global hub for augmented reality game development, and his company could be the “anchor tenant.”

It’s not as far fetched as it sounds. Prell was one of the early pioneers of augmented reality in the 1990s, with his company, Agora Interactive, rising to become one of the world’s two leading companies creating augmented reality, multiplayer, multilocation games.  Though that company has since dissolved, Prell says advances in devices, fiber capacity and programming have created what will be the new dawn of augmented reality – for the masses.

His new company, Silica Nexus, has a 14-person team and 120 volunteer developers creating what he calls the world’s first massive multiplayer, walk-through, cross-screen, cross-device, augmented reality game. The game can be played with everything from an Oculus headset to a simple Google Cardboard viewer to a high-end simulator.

He hopes to grow Silica Nexus, and one day organize a global augmented reality conference in Louisville that will put Louisville on the map as an AR hub.

Prell is not the only one who sees great things on the horizon for Louisville’s tech community. Others, like Yankeelov, point to the thriving Louisville tech community’s explosive growth in tech events, education organizations and hacker/maker confederations such as iHub Nucleus, Louisville Startup Weekend, KidTech Summit, Code Louisville, Level One, Louisville Build Guild, CIO Practicum, Louisville MUG, My Mobile Ville, Louisville Hardware Startup Meetup, and Louisville Cocoaheads.

Bajorinas points to announcements in the last six months of growing Louisville companies that have been acquired but plan to stay and expand as proof Louisville has staying power as a city that can grow tech companies. Specifically, she cites tech firms Stonestreet One, a Bluetooth software development company, and Indatus, a data analytics software and hardware provider, as part of this group. She also notes that recently acquired NicView, OPM Financial and Deyta are companies that use technology as their backbone but are considered members in other industry verticals.

Falls highlighted the continued growth of startups such as investing intelligence app company LikeFolio, business communications app creator RedeApp, and mobile video production app company Switcher studio, as proof that tech-driven companies can develop and grow comfortably in Louisville, too.

“You can feel the pace of innovation speeding up,” Falls said. “Our local tech industry is already running 10 times faster than it was just five years ago. If we keep up this level, I think we are on the front end of ‘hockey stick growth’ on the growth charts. If we can grow and build our tech community, if we can polish and combine our development resources, I think we are on the front end of an explosion of development.”

Features, Features, Sales, September 2015, Technology

Putting Your Money Where Your ‘Like’ Is

Brothers Andy, left, and Landon Swan of Louisville have been creating successful companies that give clients information on how to invest in the stock market for 15 years. Their latest is LikeFolio, which searches social media comments by users and their network of connections to steer them to invest in “what they know,” which is what multibillionaire Warren Buffett advises.

Brothers Andy, left, and Landon Swan of Louisville have been creating successful companies that give clients information on how to invest in the stock market for 15 years. Their latest is LikeFolio, which searches social media comments by users and their network of connections to steer them to invest in “what they know,” which is what multibillionaire Warren Buffett advises.

If there was one thing Andy Swan knew as a young law student at Boston University, it was that he hated law. What he really wanted to do was something in the world of investing.

So in 2000, he dropped out of law school, joined his brother and former Bellarmine University roommate Landon Swan, and they started their first online financial tech portal. Two successful startups and two corporate sales later, the pair are now on their third financial tech education company, Likefolio.

Likefolio is an online service that helps users invest in companies that they and their connected networks “like.” The tool searches users’ social media activity, also that of their online friends and their networks, mining data to find the companies they are talking about most. It provides stock performance charts of those companies to users, gathers press reports and general social media sentiment about popular companies, and connects users to additional financial research resources.

“It was a no-brainer, really,” Andy Swan said. “A lot of brokerages sell (their services) well to 55-year-olds who are close to retirement. But they had a hard time reaching out to investors under 35. It only made sense to turn to social media, which tells us so much about what companies young investors are connected with in real life. It allows them to feel more confident, because they understand what they are investing in.”

LikeFolio shows users information on the top publicly traded companies most talked about on their networks. It also predicts how a portfolio of their securities worth $10,000 would perform over a period of 12 months.

LikeFolio shows users information on the top publicly traded companies most talked about on their networks. It also predicts how a portfolio of their securities worth $10,000 would perform over a period of 12 months.

The company has three employees in its Louisville main offices and a small staff in Argentina. Although TD Ameritrade acquired Likefolio in 2014, the Swan brothers still operate the company and are poised to grow it even more.

Andy Swan handles marketing, product development, media appearances and his popular financial blog andyswan.com/tumblr. Landon handles back office operations, coding and content creation.

Andy Swan said the strength of Likefolio is its versatility, especially the multiple ways their product is available to users. Individual memberships in Likefolio are free, and anyone can join. For TD Ameritrade customers, Likefolio services are integrated with their platform, with the ability to fully access millions of company mentions in social media.

A strength of their product, the Swans believe, is in how Likefolio’s components are able to smoothly interact with each other and easily be used by clients – the programming nuts and bolts known as an application program interface.

“Once we realized the main value of our API, especially for the TD Ameritrade audience, things really started to grow,” Landon Swan said. “By tapping into Twitter, we can read consumer confidence and be a leading indicator of where the market is going to go. We’re basically polling 20 percent of America every day: That’s how many people use Twitter. We are able to search millions of mentions and pull together information in a way that investors can use.”

The Likefolio platform is also available as an app in the Android, iOS and Google app stores. The free app offers many of the same functionalities of the web-based version, and is also free for any individual investor.

They began as boys

Financial education began early in the Swan family, with their father allowing them to invest small amounts of their own money, and plotting out investment performance on graph paper.

“My father bought my brother some Cisco stock as a present when he was 15 or 16, and it just went crazy in valuation because it was the ’90s (when the Internet first was building out). That really got us interested,” Landon Swan recalled. “By the time we got to college, we got good at trading penny stocks, even though they are pretty volatile. Then, we graduated to more traditional stocks.”

With Internet access by then the norm, people were just beginning to trade online; and day trading became a much more plausible profession.

“We were on a bunch of investing chat rooms at the time, and our friends started to ask us if they could pay us to show them what trades we were making,” Landon said.

The request spawned their first company in 2000, DayTrade Team, a non-stop video streaming broadcast featuring Andy first, then their employee Nick Fenton, narrating what was happening minute-by-minute in the market. With a non-stop camera on his computer screen, they were tuned to Think or Swim, the world’s largest trading platform for active traders. Users could then split their screen with their own investing platform to make their own quick trades. Day traders loved the new service, and soon they had over 1,000 subscribers each paying $1,200 a year for the privilege.

They successfully ran the company until 2007, selling it to a private company in Phoenix, which they declined to name.

Not content to rest on their earnings, the brothers didn’t stop there. They created another online financial services company in 2007 called MyTrade, which the two describe as the next logical step in streaming and aggregating financial information. They created an exclusive Twitter stream for active investors, who would share information about their complex derivative trades as they made them, sharing market intelligence and strategies with each other.

This proved to be so popular that the company was sold less than one year later to the Think or Swim division of TD Ameritrade, which allowed the company to scale up even more quickly.

When they sold their second company, the Swans thought, what’s the next logical way to educate investors? The answer was social media affiliations, Landon said, and that’s how they ended up with the idea for Likefolio, one of their most successful companies yet.

What’s next

Looking to the future, they are working on a mobile trading option that will allow TD Ameritrade customers to buy and sell stocks quickly from their smartphones. And, as they build out more sophisticated ways to parse the data in their system, they hope to sell more detailed and customized programs for institutional investment companies around the world.

They plan to do it all with Louisville as the company’s home base.

“Kentucky is a great place to live, and it never crossed our minds to build our company anywhere else,” Andy Swan said. “We are lucky to have a very loyal employee base that has been with us from the beginning, and we have the right tools to grow our global reach.”

Agribusiness, August 2015, Features, Technology

Precision agriculture cuts costs

ag1

Five 12-row combine harvesters working in tandem at Seven Springs Farm in Trigg County reap some that operation’s 11,000 to 12,000 acres of soybeans. Intensive use of Precision Agriculture technology allows Seven Springs to efficiently raise more than 32,000 acres of grain crops a year currently. “We’re always on the cutting edge,” said founder/managing partner Joe Nichols.

Agriculture technology is 10 to 15 years into a growth spurt that is revolutionizing the efficiency of grain crop operations and especially benefitting Kentucky farmers who raise corn, soybeans and wheat on rolling, irregular landscapes where conditions can vary not only from field to field but from row to row.

Most tractors, combines and implements rolling across farmland circa 2015 are computer-controlled, Internet connected and have automated GPS-guided steering accurate down to the centimeter. On the fly, equipment accesses the farm database and self-adjusts to soil conditions while planting, harvesting or applying fertilizer and various other inputs – then updates the cloud-based network.

Watering systems can be monitored and operated remotely from a desktop computer, laptop, mobile device or smartphone. On-farm crop storage systems improve harvest logistics, then manage grain moisture content for quality and volume until contracted delivery times arrive or the grower decides the market has ripened.

Agribusiness operations all over the nation are gaining efficiency as technology improves every year. However, the geometric grain-growing grids typical in the Plains of Kansas, Iowa, Illinois and Nebraska are less challenging to manage and derive less benefit than the undulating, creek-carved fields farmed in the commonwealth.

That shapely Kentucky land might be more beautiful, but those curves create overlap and waste – 10 percent, 15 percent or more – every time machinery makes a pass in the field. Swath-control systems, however, weed out waste by very precisely avoiding overlaps of expensive seed, fertilizer, pest control or other inputs.

Seven Springs Farm has $28 million in equipment to work more than 32,000 acres of grain crops as well as raising tobacco and 10,000 head of cattle plus operating an excavation business.

Seven Springs Farm has $28 million in equipment to work more than 32,000 acres of grain crops as well as raising tobacco and 10,000 head of cattle plus operating an excavation business.

Swath control’s impact in the commonwealth “is astronomical compared to what it is in the Plains,” said Joe Nichols, founder and managing partner of Seven Springs Farm, one of the state’s largest operations, near Cadiz in Trigg County. “It’s returning money more quickly in Kentucky than anywhere else in the United States.”

Big payback increasing land values

Tim Stombaugh, a biosystems and agriculture engineer with the University of Kentucky, said Extension county agents estimate 75 to 80 percent of commonwealth farms have adopted swath-control strategies – even though the large-scale farm equipment necessary to do so can easily run into multiple six figures.

“Some of it is a real no-brainer,” Stombaugh said. The financial impact of swath control on operations can create a positive return on investment in the first year.

Precision Agriculture, as current technology-intensive farming is called, increases production. Although the weather remains beyond man’s control and impacts harvests from year to year, USDA figures show corn yields growing significantly in the past quarter century. Annual average yields that ranged from around 100 to 130 bushels an acre in the 1990s increased to a range of 129 to 164 bushels in the 2000s, and since 2010 have ranged from 123 to 171 bushels per acre.

The trend line for average U.S. soybean yields also has risen steadily – from around 35 bushels an acre in the mid-1990s to nearly 45 bushels this year, according to USDA statistics. USDA stats also show winter wheat yields trending higher as well – for the long term – from roughly 40 bushels an acre in the mid-1990s to around 45 bushels, even though the all-time high U.S. average yield of more than 47 bushels an acre occurred in the 2000-01 season.

Precision farming’s bigger benefit today, accord to members of Kentucky’s increasingly high-tech agribusiness sector, is that ever-improving technology nearly eliminates waste of seed, fertilizer, insecticide, herbicide, crop spillage and spoilage, fuel and time.

“We don’t run a farm. We run a business … and the product is food,” said Nichols. “We use technology for everything.”

He is a very big fan of swath-control systems, which have brought dramatic savings in the cost of inputs – the seed, fertilizer or other soil augmentation, insecticide and herbicide – that are significant for 30,000-plus acres. Wheat fields get five “passes” by some form of equipment in a growing season.

“It took us from 15 percent overlap to 2 percent to 3 percent,” Nichols said, thus a 12-13 percent savings on input costs.

“Swath control has changed land values in Trigg, Christian and Caldwell counties,” he said, referencing a section considered to have some of Kentucky’s best grain crop soils. “Now you can farm it just like you would a section in central Illinois.”

New equipment every year – every piece

Seven Springs, Trigg County’s second largest private employer with 86 positions, farms regionally on around 35,000 acres. Like other large agribusiness operations today, it owns some but leases most of that property. It has a 10,000-head herd of cattle, burley and dark-fired tobacco, an excavations business, an events facility and its own restaurant, Nichols said, but primarily Seven Springs grows grain crops.

It produces white and yellow corn, double-cropped and full-season soybeans, wheat and grain sorghum. This year there is more than 32,000 acres of corn, soybean and wheat. Individual grains’ plantings can increase or decrease by several thousand acres from year to year. For example, there is corn on 8,100 acres this year compared to about 10,000 acres in 2014.

“It varies,” Nichols said. “We just always do what the market tells us to do.”

Seven Springs is “on track to produce 4.3 to 4.4 million bushels of grain” this year, he said. “We’re having a good crop.”

Lots of technology-enhanced equipment makes it possible to operate effectively on such a large scale.

Nichols estimates the value of Seven Springs Farm’s machinery, implements and equipment at $28 million. It includes 20 tractors, 10 planters, eight combines, four sprayers, six self-propelled loaders, three bulldozers, two trackhoes and two bucket lifts – each less than a year old.

“We trade about $10 million annually,” Nichols said.

Some of that total is a result of increasing the number of machines to keep up with growth in crop acreage, but most of it is “trade” literally: Like many large agribusiness operations, to keep up with the latest technology and keep operations at top efficiency and profitability, Seven Springs trades in all of its tractors, machinery and implements every year.

“We’re more prone to buy what has the best resale value,” Nichols said.

Beyond the mechanical hardware, Seven Springs has $1 million worth of GPS software. In 2008 it built new offices designed around its computer servers and ran its own T1 Internet line 8 miles from town to ensure adequate and ongoing connectivity.

Additionally, the precision agriculture technology Seven Springs uses includes 25 center-pivot watering systems that farm managers monitor from their smartphones, Nichols said. It has 2.35 million bushels of on-farm grain storage, 1.8 million bushels of which has monitoring systems

The grain bin systems that track the condition – hence the value – of harvested crops can all be monitored by desktop computer, laptop, tablet or smartphone.

Better harvest logistics, less loss risk

“I’m seeing more automation in monitoring the grain storage environment,” said Sam McNeill, a UK College of Agriculture associate Extension professor and ag engineer based at the Research and Education Center in Princeton, Ky.

McNeill’s focus is on “the value chain from the field” for crops: what happens when growing concludes or “post harvest engineering.” That includes getting grain from the field, grain drying and
storage methods, how it’s handled, transportation to grain elevators,
discussion with elevator managers and operators through their storage period and more.

At harvest time nowadays, McNeill said, farmers focus on getting crops in out of the field as fast as they can when conditions are deemed best. On-farm storage systems can speed the work significantly and preserve market value if the alternative is driving truckloads to an elevator where harvest season can mean long lines for unloading.

Other variables that come into play, he said, can include the contract an agribusiness is holding for its crop – a major farm-management category unto itself. On-farm storage systems give operators the option of holding grain for three months, six months, or other lengths of time to fulfill contracts at the correct time or waiting to sell at the point they decide the market price is the best they can get.

The drying systems used with on farm storage also give farmers more control and lessen risk, McNeill said. Controlled heated airflow lowers moisture enough to alleviate potential spoilage but not so much that it excessively shrinks the volume of bushels sold.

The alternative to the drying system is leaving a crop in the field until its moisture level is appropriate, during which time a grower “risks a storm laying it on the ground,” he said.

Storage monitoring systems have sensors on wires that place them at strategic locations throughout a bin. It gives a farm manager continuous information on a stored crop’s condition without having to physically visit a bin, climb a ladder, gather samples and analyze them.

Storage systems let operators focus on timely harvest, which becomes increasingly important the larger a farming operation is.

“The vast majority of the acres”

Kentucky still has many small farms. The 2014 State Agriculture Overview from the USDA National Agriculture Statistics Service reports the commonwealth’s 76,400 farm operations totaled 13 million acres, which is an average of 170 acres apiece. It does not break out the averages for grain farming operations.

Large farms such as Seven Springs are a small minority in terms of numbers, Stombaugh said, but they work “the vast majority of the acres.”

Most Kentucky farms are family operations and small – their operators also have outside jobs to make enough money to support themselves and their families. For grain farming operations to generate enough money to be a family’s primary source of income and cover living expenses including health insurance, Stombaugh said, it must be a minimum of 750 acres.

According to Nichols, 750 acres is not nearly enough.

They agree, though, that agribusiness economics clearly is pushing operations to be ever larger. And the large operations have strong motivation to pursue the incremental gains Precision Agriculture technology offers.

A large grain combine harvesting a field can process $30,000 to $40,000 worth of gain an hour, Stombaugh said. A 2 percent gain in efficiency means a $600 to $800 an hour return.

Combines, tractors, sprayers and other equipment today have grown “very highly integrated, very highly computer controlled,” he said.

An implement’s main controller area network bus monitors and responds to engine speed and the transmission gear to adjust output rate for seed or the spray pressure levels for each nozzle in booms that can spread more than 100 feet. It monitors fuel input and mixture for the engine to control and lessen emissions. It’s all networked together and linked to the farm’s master computer.

Farmers took “most of the low-hanging fruit” that improved equipment technology offered in the period five to 10 years ago, according to Stombaugh.

“We’re off the steep part of the curve for what technology is going to gain us,” he said.

The focus in pursing further gains from agribusiness technology is shifting now toward the databases that farm operations in Kentucky and elsewhere have been building since then.

“We definitely are a Big Data player,” Stombaugh said. “We’ve now got 10 to 15 years of data to work with and can develop long-term strategies.”

The question individual operators and hundreds of members of the agribusiness technology sector are examining now is: “How can I use that (data) to make management decisions?” ν

Mark Green is editorial director of The Lane Report. He can be reached at markgreen@lanereport.com.

Agribusiness, Economic Development, Features, Features, Technology

A Successful Return to Diversity

AlltechKyAle

Alltech in Lexington is one of the area’s larger operations and is involved in both brewing and distilling.

As recently as 125 years ago, small breweries and distilleries were everywhere in Kentucky – and everywhere else. In cities like Louisville and Lexington, some individual neighborhoods had multiple beer makers, and stills were nearly as commonplace across the counties as trees.

Today’s so-called “craft” distilling and brewing resurgence enjoys plenty of promise and attention in the commonwealth, but what’s happening is at least somewhat akin to how this sector operated in the late 1800s. The new paradigm it’s heading toward is quite familiar and has long existed in other local-minded marketplaces.

“I think of it as the coffee shop mentality,” John King, executive director of the Kentucky Guild of Brewers, said. “Each neighborhood should have a neighborhood coffee shop people can walk to. What’s happening with beer – it’s the same thing. I think that’s going to be the new thing: People are going to start being neighborhood breweries. You can be in a neighborhood and produce OK beers, and it’s fine because people want this convenience.”

Craft distilleries similarly bring something slightly different but more intimate and accessible than the traditional, established distilleries. Whereas a trip to the Buffalo Trace Distillery in Frankfort is an experience of tradition and culture, visiting a smaller maker such as Corsair Distillery in Bowling Green is more intimate and unusual – certainly a nod to Kentucky’s distilling heritage, but with a modern twist. And in more urban Newport only a block from the Ohio River, New Riff Distilling is celebrating its first anniversary as what owner Ken Lewis envisioned: a small distillery with old roots bringing something new to Kentucky’s bourbon tradition.

Growth in Louisville’s Whiskey Row by major distillers like Evan Williams, Michter’s, Angel’s Envy and Old Forester is driving an impressive level of bourbon tourism there, according to Fred Minnick, author of “Bourbon Curious: A Simple Tasting Guide for the Savvy Drinker.” But there is a taste for something more among some visitors.

“The smaller distilleries offer a genuine experience and an intimacy that’s sometimes lost at the larger facilities,” Minnick said.

Corsair is an example of a distillery that is doing a bit of both. While its intimate tasting room and $5 tour is the epitome of small-scale craft spirits, its distribution reach extends into 32 states; it also has a distillery and craft brewery in Nashville.

Copper-And-Kings-750-Gallon-Copper-Potstill---By-Ron-Jasin

Louisville’s Copper & Kings American Brandy Co. recently expanded its distribution network and is now sold in 15 states.

Copper & Kings American Brandy Co. in Louisville, a small craft distillery focused on barrel-aged brandies, recently announced expanded distribution of its American Brandy and absinthe products into seven new states: Arkansas, Louisiana, Massachusetts, Mississippi, Oklahoma, South Carolina and Texas.

Second Sight Spirits, a small, artisan distillery in Ludlow, Ky., opened in April after Northern Kentucky natives Carus Waggoner and Rick Couch returned to the region, after working together at Cirque du Soleil in Las Vegas. It is distilling gin and rum with plans to add bourbon.

A larger operation, Lexington’s Alltech, has its feet firmly in both brewing and distilling – a “brewstillery,” as it has been called. The former is headlined by its Kentucky Ale production and the latter by the Town Branch Distillery. The Alltech Craft Brews and Food Fest is one of the region’s top beer festivals, and this year’s event served up a new distilling wrinkle: the REBELation Brewing and Distilling Symposium, featuring some top names in both beer and spirits.

Sam Calagione of Delaware-based Dogfish Head Brewery and Greg Koch of Colorado-based Stone Brewing Co. led sessions on the brewing side, while Bill Samuels Jr. of Maker’s Mark was a headline distilling presence. Meanwhile, Alltech continues to expand distribution and is in the process of expanding production.

‘A historic chapter of American brewing’

The brewing side, which currently produces about 60,000 barrels per year, will add 45,000 barrels of capacity when a new brewhouse at Alltech’s Cross Street facility goes into operation later this year, Alltech public relations representative Danielle Palmer said.

But that’s only the beginning. Another planned brewhouse on Angliana Avenue will eventually do 200,000 barrels with total capacity in Lexington eventually reaching 245,000 barrels per year, Palmer said. And an Alltech brewhouse slated for its Dueling Barrels site in Pikeville will begin construction soon and is likely to be completed by fall 2016.

Expect a new look at the existing facilities as well.

“The original brewery structure at Cross Street (in Lexington) will undergo a facelift that will allow visitors and anyone passing by to view brewing operations through two of the structure’s walls, which will be made of glass, much like the design of Town Branch Distillery, where (passers-by) can see the stills,” Palmer said.

With Alltech already distributing its craft beers to 25 states and six countries – numbers that are quickly rising – and its spirits to six states and four countries, it’s clear something big is brewing in the Bluegrass.

“We are living in a historic chapter of American brewing, with a new craft brewery opening every 16 hours in this country,” Pearse Lyons, president and founder of Alltech, said in a prepared statement. Ireland native Lyons has master’s and doctoral degrees in fermentation from the University of Birmingham in England and attended UB’s British School of Malting and Brewing.

“New distilleries are appearing everywhere, too, as domestic whiskey sales have soared by 40 percent in the past five years,” Lyons said. “This clearly is a brave new world for brewers and distillers, one in which the opportunities are everywhere for entrepreneurs willing to seize them.”

An hour west on Interstate 64 in Louisville, a boom is taking place as well. Against The Grain earlier this year launched a new $1.7 million, 25,000-s.f. brewery. Beers from that destination craft brewery now are being distributed to nearly 40 states and several countries in western Europe.

Northern Kentucky is returning to its deep brewing roots. The region’s river cities are home to Braxton Brewing in Covington, and Ei8ht Ball Brewing and Wiedemann Brewing Co. in Newport with Bircus Brewing in Ludlow and Darkness Brewing in Bellevue opening later this year.

New breweries continue to open all across Louisville, Lexington and in far corners of the state. King said 22 breweries are now in operation in Kentucky, with a possible three to five more before the end of 2015, including the new Louisville location of Danville-based Beer Engine.

“I know of, at minimum, six or seven that are in the planning stages,” he said.

One of the breweries announced most recently will be Righteous Minds Brewing Co. – it is partnering with the Capital Plaza Hotel and will be Frankfort’s first craft brewery.

Craft beer outpaces overall market

The Brewers Association reports craft beer producers claimed a double-digit (11 percent) volume share of the national beer market for the first time in the modern era in 2014. Craft brewers made 22.2 million barrels of beer and estimated retail sales of $19.6 billion. However, because craft beer retails for higher prices, craft brewers had 19.3 percent of total dollar sales.

“With the total beer market up only 0.5 percent in 2014, craft brewers are key in keeping the overall industry innovative and growing,” Bart Watson, chief economist, Brewers Association, said in a release. “This steady growth shows that craft brewing is part of a profound shift in American beer culture – a shift that will help craft brewers achieve their ambitious goal of 20 percent market share by 2020.”

Craft brewers clearly have re-energized the U.S. beer market, which in 2014 measured about 200 million barrels, a traditional measure containing 31.5 gallons each. There now are more than 3,000 commercial beer makers, not counting brewpub restaurants, after industry consolidation had reduced the count to fewer than 100 breweries by the late 1970s.

By the Brewers Association definition, a “craft” brewer must employ traditional methods, have less than 3 percent of U.S. production – a very large number – and be less than 25 percent owned by a large brewer. A recent count found 21 Kentucky craft beer makers.

Earlier this year, the Kentucky Guild of Brewers scored a political victory with legislation to limit large out-of-state breweries from effectively buying control of distribution in the state. LouisvilleBeer.com reported that beer distributors owned by ABInBev, the world’s largest brewer company, had dropped 195 non-InBev brands. Bluegrass brewers fought for and won an equal playing field with passage of HB 168 – a small win in the bigger picture but one that poises Kentucky breweries for a better future.

“It made us a name for ourselves,” King said. “I think it’s going to open a ton of doors. It lets people know we have an open door in Frankfort to go in at any time.”

Craft distillers growing, but face hurdles

Craft distilling is seeing similar growth and traction in the commonwealth, not surprising given the ongoing global boom in the popularity of premium Kentucky bourbons.

There is no absolute line of demarcation between craft distillers and their bigger brethren, but two trade associations, the American Distilling Institute and the American Craft Spirits Association, which each have Kentucky members, both place the divide at annual sales of 100,000 proof gallons. For bourbon makers who age their spirits in charred 53-gallon oak casks, that’s less than 1,600 barrels.

The number of state-licensed distilling companies had grown from 10 to 31 in three years, according to a 2014 economic impact report commissioned by the Kentucky Distillers’ Association. The report did not differentiate between craft and traditional operators, but said at least 19 qualify for the state’s new Class B distillery license for makers of less than 50,000 gallons annually.

Though it did not specify craft distillery numbers, the KDA’s study said its members reported craft distilleries employ 127 people with salaries totaling more than $4 million and that they have invested about $30 million in land, buildings and equipment since 2008 – with another $25-$30 million in investments planned the next five years.

Many craft distilleries are sticking with tradition, such as Kentucky Peerless Distilling Co. in Louisville, which is using the family name of a bourbon distillery begun in the 1880s in Henderson, Ky. To generate revenue during the years required to age whiskey in charred barrels, they are first selling “moonshine,” but there also are craft distilleries that focus on producing flavored moonshine and other products in lieu of bourbon.

Bourbon must age a minimum of two years – and much longer to be considered a “premium” form of the spirit. The overhead expense to produce, store and pay taxes on spirits with no means for income to offset cost is, to say the least, prohibitive for a small distillery. To that end, there are distilleries such as the aforementioned Corsair that create unique spirits of all kinds using a variety of experimental ingredients, from hops to oatmeal, and niche distillers such as Copper & Kings. Many of these smaller distilleries, such as Peerless, will work their way toward bourbon and rye as main products. (Peerless Rye has a hoped-for release date in winter 2016.)

A Bourbon Trail of their own

As a companion to the KDA’s well-traveled Kentucky Bourbon Trail, a Kentucky Bourbon Trail Craft Tour now connects the dots between the eight of the commonwealth’s craft distilleries. One of the first craft spirits makers in the state, Limestone Branch Distillery in Lebanon, was founded by Stephen and Paul Beam. Yes, of that Beam family.

Stephen Beam recalls getting a chilly reception when he first decided to open Limestone Branch in 2008.

“We tried a few different communities, and some were just not overly interested” in having a craft distillery. Some didn’t even return his calls before his concept was welcomed in Marion County. “Now I think everybody’s chomping at the bit to have one.”

Of course, financial resources presented a challenge for Limestone, as did creating income opportunities. The Beams came up with a unique marketing partnership, though, and the distillery has an exclusive product in its MoonPie-flavored spirits.

Limestone Branch also sold a half interest in its business to St. Louis-based Luxco, whose distilled product and liqueur line includes Yellowstone bourbon – a classic brand with a Beam distilling family heritage – that
Limestone has added to its product offerings. Limestone Branch will begin distilling the original recipe for
Yellowstone and aging product early next year, giving it another niche that will help carry the craft distillery into the future.

The long-term goal, Stephen Beam said, has always been to create bourbon and rye whiskey, in keeping with the family tradition.

Meanwhile, the craft boom and specifically the Craft Bourbon Trail will continue to feed it customers, some of whom are seeking unique spirits and others who simply want to take a day trip and get a taste of local fare and history.

The Craft Bourbon Trail “has been fantastic for us,” Stephen Beam said. “We get a lot of positive comments that it’s a breath of fresh air, that there’s a little different feel to it. They get a little bit of a different feel and taste.”

Responding to changing tastes

The newest craft brewery in Kentucky is White Squirrel Brewery in Bowling Green, which opened in mid-May with three house brews in a tiny site near the downtown square. With a one-barrel system and three two-barrel fermenters, Sean Stevens opened the brewery with home-brewing friends Damon Wilcox and Jason Heslin. Growth is the goal, but there’s no room on location to do so.

“We’re already scratching our heads,” Stevens said. “Our main problem is going to be capacity. That is going to be our biggest challenge.”

But the goal isn’t to follow in the footsteps of Alltech, Copper & Kings or Against the Grain – the goal is to make good beer, serve good food and serve Bowling Green, specifically their neighbors. That’s where the localism of the craft movement comes full circle.

Stevens said local carpenters built White Squirrel, a local artisan created the signature tap handles and local artists created portraits of famous people reimagined as white squirrels – from Col. Harlan Sanders to Abraham Lincoln – to give the brewery and restaurant a unique feel.

“I think the local movement is going on everywhere,” Stevens said. “It’s all about keeping it at home. People are tired of big box stores; they’re tired of the chains. I guess their palate is changing, and they want more.”

That, in turn, opens the door for local craft brewers and distillers to come into the marketplace. And while there is only so much shelf space – and only so many mouths to drink the products – the two craft industries so far seem poised to coexist, and even excel, quite nicely.

Heck, Louisville’s Goodwood Brewing, which formerly was a production brewery loosely associated with Bluegrass Brewing Co., recently rebranded with a commitment that every beer will be touched by wood. With a corner taproom readily available to Louisville’s NuLu and Butchertown neighborhoods, it’s sort of a local nod to Kentucky’s distilling history and one that ties brewing and bourbon together.

“I wouldn’t say distilling and brewing rival each other,” King said. “They’re kind of our cousin. We started both with the same goal. We may not want to be the big boys but we both are big fans of the artisanal aspect.”

 

Advanced Manufacturing, Education, Features, Technology, Workforce Development

Manufacturers Help Colleges Improve Tech Training Curriculum with KY FAME

KY-FAME_Toyota-Classroom-24-copy

The Kentucky Federation for Advanced Manufacturing Education program, which now has five active chapters around the state and others in development, arose from a collaboration initiated in 2009 by Toyota Motor Manufacturing Kentucky in Georgetown with Bluegrass Community Technical College in Lexington. Students are shown learning advanced technical skills in a classroom Toyota built at its TMMK campus.

Pioneered six years ago, a quickly expanding system of Kentucky employer-educator partnerships is paying student workers to learn advanced manufacturing skills that can maintain growth in the state’s increasingly significant industrial sector.

It’s an Americanized update of the apprenticeship approach to workforce development that German and Japanese industries have relied on successfully for generations – and it was created in central Kentucky.

Manufacturing is one of the fastest growing sectors in Kentucky’s recovering economy, said Josh Benton, executive director of workforce development in the Kentucky Cabinet for Economic Development. And the growth of career opportunities among Kentucky’s leading manufacturers is developing well ahead of the recovery of other industries, Benton said.

National studies chart a constant and steady rise in career opportunities in every state, according to Greg Higdon, president and CEO of the Kentucky Association of Manufacturers.

The commonwealth’s manufacturing gross revenues are up over 12 percent since 2009 with global exports fueling a large portion of the sector’s renaissance, Higdon said. Data show some U.S. manufacturing career growth is due to many companies bringing production operations back to North America, he said, but a more significant reason is that skilled workers from the baby boom generation are reaching retirement age.

However, human resource departments at company after company are finding it difficult to locate qualified job candidates in their locations to fill these well-paying open positions, Benton said. It’s a common concern among KAM and cabinet leaders that there are few applicants with the skill sets to perform today’s highly specialized tasks.

“Employers realized that we have fallen behind from the days when a company posts a job opening and is overwhelmed by qualified applicants,” Benton said.

The good news is that Kentucky’s private-sector manufacturers have taken a leadership role in addressing this issue, said Kim Menke, external and government affairs
manager for Toyota Motor Engineering and Manufacturing of North America. Menke is a lead spokesperson for a unique partnership between manufacturing firms and the Kentucky Community and Technical College System that has captured the attention of neighboring states and the U.S. Department of Labor.

This collaborative is the result of an employer-educator partnership (EEP) program pioneered in central Kentucky six years ago. The concept has been met with such enthusiasm in the private
sector and at the state government level that the Kentucky Federation for Advanced Manufacturing Education (KY FAME) is expanding throughout the commonwealth.

Kentucky’s solution to a national problem

Student workers in the KY FAME program spend two days a week in the classroom and three days a week at paid jobs with participating manufacturer partners, who help develop 18-month curriculums that lead to an associate’s degree and a full-time job.

Student workers in the KY FAME program spend two days a week in the classroom and three days a week at paid jobs with participating manufacturer partners, who help develop 18-month curriculums that lead to an associate’s degree and a full-time job.

With reported U.S. manufacturing job openings topping 1.5 million, the model is spreading beyond state borders, too. Toyota has applied it to its other manufacturing sites in North America, Menke said, adding, “We are changing the paradigm of how we use education to meet the current and future needs of manufacturing.”

The experiment that eventually grew into KY FAME started at Toyota’s Georgetown plant with the participation of Bluegrass Community and Technical College.

Benton labels KY FAME the “next generation in technical training” for achieving a career track in advanced manufacturing. Dianne Leveridge, Ph.D., director of technical programs for the Kentucky Community and Technical College System, agrees.

Today, KY FAME is a partnership of regional manufacturers and college educators developing degree programs that constitute a pipeline of qualified candidates for high-technology careers in manufacturing, Leveridge said. Students accepted into a KY FAME-based degree program will be employed by a company while attending college classes.

A key feature of this partnership is that it’s employer-led, she said. Companies identify to KCTCS professors their general needs for skilled specialists and, together, they craft an academic program that combines educating students on core concepts of manufacturing and professional behaviors with on-the-job experience and training. The usual weekly schedule has student-employees putting in three full work days at their sponsor firm and two full days in specialized KCTCS classrooms.

“Manufacturers will tell you that they were accustomed to luring talent away from each other,” Leveridge said. “KY FAME offers a better approach. The partner firms in a KY FAME chapter agree to participate in the education and preparation of students and create the pipeline of skilled professionals from college to their ranks.”

Gov. Steve Beshear formally adopted the pioneering program as a statewide initiative after being urged by Toyota Motor Manufacturing, 3M, Link-Belt and other leading manufacturers in the region. KAM and the Cabinet for Economic Development gladly added their support, said Higdon.

“The efforts of industry leaders and educators to craft this initiative is a critical component to developing a work-ready constituency coming out of our secondary and postsecondary education system. Soon Kentucky will have graduates ready to go to work in the modern manufacturing sector,” Higdon said.

By fall 2015, Leveridge said, the new KY FAME chapters will begin their apprenticeship-type operations in Louisville, Northern Kentucky, Greater Owensboro and the Lincoln Trail area of Elizabethtown and Bardstown.

KY FAME became a freestanding entity in January. Gov. Beshear appointed a state board and announced three new chapters had formed; the fifth came in May. Planned next steps are to establish KY FAME chapters in Paducah and Murray in the west, Bowling Green in the south and Maysville, Pikeville and Somerset in the east.

Concepts come from Toyota and Germany

The basic program concept itself is not new, Leveridge said. The EEP partnership that grew into the Bluegrass Chapter of KY FAME has been an evolving experiment in central Kentucky since 2009. KY FAME’s genesis arose from two particular threads, she said.

The first, and arguably most significant, occurred about six years ago.

Menke, who was in on the development, said Toyota recognized early on a need for a new approach to employee training. Typical of the company’s organized and efficient management style, he said, the company established measurement benchmarks and approached potential partners about creating a solution. In this case, the need was to develop the best program to produce globally competitive advanced manufacturing technicians in their area.

Toyota, along with other central Kentucky manufacturing industry partners such as 3M and Link-Belt, approached educators at Bluegrass Community Technical College in Lexington to establish the Bluegrass Manufacturing Collaborative in 2009.

Leveridge became involved through her role then with the University of Kentucky’s College of Engineering as director of Project Lead the Way – an effort to encourage secondary school students to become interested in science, technology, engineering and math studies (STEM).

“We knew at the time that (Kentucky private sector) manufacturing and technology interests needed to extend a hand into secondary and higher education, but we were still unsure about what that approach would look like,” she said.

In the first two years, a cohort of students began enrolling into initial Bluegrass Manufacturing Collaborative education-training classes sponsored by Toyota. As that training cohort evolved into an organized program, other manufacturers committed to sponsor students as well.

The foundation of the degree program is based on the Toyota Way and its 11 fundamental elements: five core manufacturing exercises and six personal behaviors. Core manufacturing concepts include a safety culture, the “5-S” system of efficient workplace organization, “lean” system thinking and problem-solving skills, Leveridge said, emphasizing that any general list is an extreme oversimplification of the educational curriculum KY FAME presents.

For example, safety culture involves much more than obeying workplace safety rules; students learn to think critically about their work environment and identify risks, she said. And the “5-S” efficiency system originates from a Japanese philosophy on organizing and sustaining a productive work environment.

Professional behaviors taught focus on basic workplace skills such as effective team work, communications, taking initiative, developing productive workplace relationships across departments and other dynamic workplace practices, Higdon said.

“I don’t think we can emphasize enough the importance of developing professional skills. The old days of walking in, punching a time clock and standing at one machine are over in the manufacturing sector,” he said.

“There is a perception that workers in manufacturing don’t need skills because the machinery does all the work, but nothing could be further from the truth. It is critical for workers to bring critical thinking and teamwork to the table to ensure that the machinery continues to produce high-quality products in the most cost-efficient manner possible.”

Students in the first cohort who completed the program earned associate degrees in applied science in industrial technology.

The point is to develop employees who actively engage themselves in the progress of their company, Leveridge said. Firms want employees who contribute; they don’t want automatons who only want to perform tasks day-after-day and return home.

The initial program that developed, she said, was delivered, taught and implemented by Toyota within a “college classroom environment,” but with an approach different from the traditional classroom.

Menke described the classroom as a simulated high technology manufacturing environment where core concepts are taught by demonstration and presented with a practical application so that they are a skill set.

This employer-educator partnership evolved in five years into the KY FAME program.

Toyota’s model has been the most influential aspect of the KY FAME partnership, Benton said, but Kentucky has learned a great deal also from its developing relationship with the German Chamber of Commerce.

Germany’s dual system of education and hands-on experience “mirrors the KY FAME model very closely,” he said.

Employer-led academic degrees

Benton and Leveridge both stress that the degree programs developed through the EEP partnership aim to not limit the ambitions of students. The concepts taught “can be a leaping off point for students to transfer into bachelors and masters programs in engineering and business,” said Leveridge.

Most of Kentucky’s state universities are on board with KY FAME’s goals.

“It’s a unique program and a definite change over the way that education is delivered, since it caters directly to the needs of the workplace professional,” Benton said.

Because employers lead the program, educators and real-world managers are collaborating in a more deeply integrated way than ever, Leveridge said, including the monitoring of specific students’ progress.

“If a student can’t report to work for whatever reason, that information is shared with the school,” she said. “Conversely, if a student is having difficulty grasping an academic concept in class, the educator informs the employer.”

The real-world application employers provide for skills being taught in class helps faculty as well as students make the connection between concepts presented in school and what is done in the workplace.

“Education and employer are both invested in the success of the employee-student,” she said.

Meanwhile, participation in KY FAME requires that employers reimburse their student-workers with a fair wage, which they can apply toward their education costs for the program. This reduces participants’ student debt, Benton said. Some finish their degree with no student loan debt.

AMT program arose similarly

Another main element of the KY FAME template was incorporated last December, Leveridge said, when the KCTCS Board of Trustees adopted the Advanced Manufacturing Technician track within the system’s industrial maintenance technology program.

Also developed as a partnership between Toyota and BCTC, the AMT program grew out of a common need among manufacturing firms for employees with the skills to operate, program and maintain the new generation of digital automation technology. AMT student instruction, such as how to program an assembly line robot, takes place uniquely at TMMK’s sprawling Georgetown site where Toyota built a 12,000-s.f. classroom to simulate a modern manufacturing floor.

The 23 firms that participate in what is now the Bluegrass Chapter of KY FAME all have ongoing needs for specialists skilled equally in mechanics and in manipulating computer programming processes.

Terry McMichael, maintenance focus team advisor at 3M Manufacturing in Cynthiana and Bluegrass chapter president of KY FAME, has been involved in the AMT degree program from the beginning. He hired the first sponsored student to complete the five-semester program. Two more 3M-sponsored students are now working toward AMT degrees.

“We have been following the progress our students as they moved through the program, and they are each developing a firm grasp of the skills we need from them,” McMichael said. “We recruited them directly from the high schools in our local community, and I’ve been very pleased with their performance.”

Menke said this program began with training students in industrial maintenance because the skills were an immediate need the partner firms shared.

“The requirements for a multiskilled maintenance professional are fairly uniform across the board,” he said. “But when you look at other firms specializing in tool and die production, that requires a whole new level of skill sets.”

Keeping complex and expensive production machines operational, trouble-shooting breakdowns and repairing them can no longer be accomplished by ordinary mechanics, Leveridge said. Socket wrenches and screwdrivers are still used, but perhaps more important is an understanding of programming processes and problem-solving skills.

The AMT degree program aims to create a pipeline of Kentucky professionals with this specific skill set plus an ability to innovate, especially in identifying and implementing cost-cutting improvements. These kinds of professionals are in high demand, Leveridge said.

It has been exciting to see manufacturers embrace the idea with such enthusiasm, said McMichael. All of the active KY FAME chapters will have AMT degree programs beginning in the fall.

McMichael views the willingness of all these manufacturers to work together as another critical benefit of the KY FAME partnership. The Northern Kentucky chapter could soon have about 75 companies committed to participate.

“All that experience, all that involvement in one place,” Menke said. “Everybody brings something important to the table. Think about what that means to Kentucky’s reputation as a global manufacturing leader. Implementing these shared ideas raises the standard of manufacturing quality in Kentucky and produces a population of professionals other companies want to hire.”

When the Northern Kentucky chapter hosted a KY FAME open house to recruit qualified high school students, firms such as Hahn Automation, L’Oreal, Wagstaff and others set up demonstrations. The technology on display clearly had an impact.

“Parents called in after that asking how they can get their kid into the program,” Leveridge said.

This consequence will be a long-term boon to the retention and growth of existing companies in the commonwealth and to attracting new firms to establish here, Menke said.

Features, Features, Technology

Red e App: Getting the private mobile message

Louisville tech startup Red e App is finding a responsive market for the mobile business messaging platform it created for workplaces whose employees who aren’t desk based, and thus harder to communicate with.

Red e App, a four-year-old Louisville tech company, has developed a private business communication product that operates via employees’ mobile devices. Amee Kent, marketing director, Patrick Goodman, chief product officer, and Jonathan Erwin, founder and CEO, and another 15 employees for Red e App work from a renovated building in the NuLu district near downtown.

Red e App, a four-year-old Louisville tech company, has developed a private business communication product that operates via employees’ mobile devices. Amee Kent, marketing director, Patrick Goodman, chief product officer, and Jonathan Erwin, founder and CEO, and another 15 employees for Red e App work from a renovated building in the NuLu district near downtown.

As a contained business communication app, Red e App addresses multiple issues that arise from relying on email and other older traditional modes. It is secure; companies control employees’ access, removal and can wipe their data; outsider can’t see or send into the system; every message is read-verified to ensure it’s not missed; and it uses employees’ devices rather than the company’s.

Founder/CEO Jonathan Erwin said the growing company has raised $2.5 million from about 20 investors and expects to raise another $4 million to $6 million in 2015 and early 2016 as it continues to scale up.

Red e App began in March 2011 with three employees and had 18 in its NuLu workplace in mid-April, which Erwin said moves the company slightly past being a start-up – the indefinite time period when entrepreneurs are trying to assemble the financial means and a team to bring an idea to market and begin operations.

“We’re scrappy, but we’re early stage scrappy,” he said, smiling broadly. While still working very actively to attract investment capital, the company has transitioning from the idea-and-fundraising stage to true operations.

“To graduate from ‘start-up’ is to grab the baton,” Erwin said, and truly begin running.

There are many smart investors looking for people with great ideas, and there are many people with great ideas, he said, but investors’ goal is finding those who have not only an idea but business skills.

“Do you have the perseverance and the stamina?” Erwin said.

Some 40 organizations ranging in size from 30 to several thousand employees now are using Red e App for their business communications, which can range from informing scattered personnel of their work schedules to revising everyone’s employee handbook without printing and distributing any physical pages. Users include General Electric Appliance Park in Louisville; Papa John’s International; Hosparus Hospice of Louisville, which has 400 employees; Seminole Gaming, a Florida-based operator of seven casinos, and Rio Tinto Group, an Australian mining company

“We are having some of the biggest companies in the world calling us,” Erwin said.

“Match the technology to the user”

Prospective users include any business with employees who either don’t have an email-friendly work station or are too physically active to check it. This broad potential market encompasses hospitals and clinics, manufacturing, food service, retail, warehouse, transportation, hair salons and much more. Communication becomes more difficult as a business’ number of employees grow and especially when they are never all in the same place at the same time.

Of course, communication still must take place regularly.

 Sample screen shots of Red e App messages.

Sample screen shots of Red e App messages.

The means to accomplishing it vary widely: Work shifts are posted on bulletin boards. Message trees are executed through layers of managers to front-line workers, by mouth, phone call, text message and email. Closed-circuit television presents talking heads, graphics and other video. Dedicated company Internet portals present new information and reference material. Copies of printed messages are stuffed into pay envelopes.

Email is today’s most common method, and it can be effective. But many employees do not have email and many others have inboxes that are hopelessly overflowing.

The result of these various problems, said Patrick Goodman, chief product officer at Red e App, can range from message distortion in tone or content to non-communication. Even in an office workplace where everyone has a desk and company computer and email – where the typical day begins with coffee, email and responses – a manager who sends an important email can have to spend too much time following up to see if everyone received, saw and read it.

“The problem is to match the technology to the user behavior,” Goodman said.

Success came after “the pivot”

Red e App has evolved significantly since Erwin began with a general notion of developing a mobile-based messaging product. He had been involved in hosting.com, a former Louisville digital technology business acquired by a private investment group in 2009.

Apple had introduce the iPhone and its “applications” in 2007. It followed that in 2010 with the iPad tablet, and this new universe of smart phones, tablets and the mobile Internet propelled a blooming of new businesses such as Facebook, Twitter and others.

The general economy may have still been staggering from the late 2008-early 2009 recession and economic crisis, but Internet-based business was “in full swing,” Erwin said.

“I knew I wanted to be in mobile,” he said, and began his business in 2011.

As he and Goodman met with and presented to various businesses in Louisville, however, they got feedback that the business market wanted a private mobile messaging platform – not the public system Red e App was developing. They realized they need to make a big pivot.

This somewhat painful dawning occurred in 2012, Goodman explained, when human resource managers with a local healthcare company complained that they had no way to communicate with 80 percent of their employees.

“You realize the market wants something different than what you have,” Goodman said, and this came about the same time the start-up also was facing its own major issue: “We have to make some money.”

“The pivot,” as Erwin and Goodman call it, occurred, and Red e App then began to hit its stride.

Valuable input came from the operators of a Louisville hair salon, Goodman said, who explained that email was not only too expensive for them, but regular employee turnover made it difficult to keep up with having new accounts activated and turned off through their IT service providers.

Additionally, company email accounts were subject not only to streams of non-work messages, such as when workers sign up for marketing deals or sports reports, but also to spam and even to security threats, such as phishing campaigns.

“When you get a message on Red e App, it is always about work,” Goodman said. They designed in read-receipt for every message that “you can never turn it off,” he said, because managers too often are told their messages either weren’t seen or never arrived.

Silicon Valley wouldn’t understand

Since the app system was designed from the outset to be very secure, Red e App messages comply with the federal Health Insurance Portability and Accountability Act of 1996. This allows healthcare personnel to use it to discuss or pass along private medical information, even attaching images of scans.

Red e App employees collaborate on the company’s private business communication tool, which operates on mobile devices to provide work messaging and file sharing for companies with workers who do not have or regularly use an office work station. Companies using Red e App include manufacturers, restaurants, hair salons and transportation services.

Red e App employees collaborate on the company’s private business communication tool, which operates on mobile devices to provide work messaging and file sharing for companies with workers who do not have or regularly use an office work station. Companies using Red e App include manufacturers, restaurants, hair salons and transportation services.

While individual employees must download and install Red e App on their own mobile device, they may gain access to their company’s private channel only after the employer has provided Red e App with a unique identification. The employer’s control over individual user accounts includes the ability to wipe all company messages from a user’s mobile device and close the company channel when an employee leaves.

Red e App has a special alert tone to notify employees of emergency conditions.

Goodman said that Kentucky’s overall work environment with a higher proportion of healthcare, manufacturing, distribution and other non-desk, non-office jobs played a role in the creation of Red e App, a digital tool one might expect to originate from Silicon Valley.

“This technology could not be born on the West Coast,” he said. There are simply fewer workplace communication issues there, and the work culture is so different that potential investors probably wouldn’t relate to the need for the product.

However, research consistently finds that communication problems top the list of employee dissatisfaction issues, said Amee Kent, marketing director for Red e App.

Pricing varies somewhat based on industry and how that industry is accustomed to budgeting for operational expenses, Kent said. For example, manufacturing usually approaches such costs on a per-employee basis, but restaurants and retail typically budgeting by the store.

Red e App’s pricing per user per month is similar to most Software as a Service models and less than implementing email, Kent said. It is free for individuals to download, and the employer pays for the service. Pricing starts at $5 per user per month and is discounted based on employee volume.

Mark Green is editorial director of The Lane Report. He can be reached at markgreen@lanereport.com.

Features, Features, Technology

Statewide broadband by 2018

Imagine downloading an entire movie in just a few seconds, or a business sending massive 3D printing files around the world. That’s the kind of jumpstart Gov. Steve Beshear hopes to provide with the Next Generation Kentucky Information Highway, a plan to extend high-speed broadband service via fiber optic lines to all 120 counties by 2018.

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In December 2014, Gov. Steve Beshear and U.S. Rep. Hal Rogers announced a contract with Australia-based Macquarie Capital to bring high-speed Internet connectivity to the state.

In December 2014, Gov. Steve Beshear and U.S. Rep. Hal Rogers, the Somerset Republican who since the 1980 election has represented most of the commonwealth’s Appalachian region, announced a contract with Australia-based Macquarie Capital to bring high-speed Internet connectivity to the state. The project will include more than 3,000 miles of fiber in all 120 counties, and Eastern Kentucky will be the first priority area.

Rogers and Beshear have spearheaded the Shaping Our Appalachian Region (SOAR) initiative, aimed at improving economic development and public infrastructure in the Appalachian region. Having long endured fewer jobs, lower incomes and lagging infrastructure, Eastern Kentucky in the past few years has lost half the coal mining jobs that were among the best paying to residents there. SOAR’s aim is to move the economic needle broadly upward.

Across the state, most home Internet services are delivered via telephone lines or cable TV connections that don’t qualify as broadband service today – defined now as download speeds of 25 megabits per second rather than the 2010 benchmark of 4Mbps. Businesses in some large cities have fast options for Internet service through telecommunications providers, but at a high cost and not at the level this project will provide.

The project is designed to address the fact that Kentucky ranks 46th in broadband availability, and slow service is still a reality in the 23 percent of the state’s rural areas that do not have access to broadband of any type.

The contract with Macquarie, estimated at $250 million to $350 million depending on how much existing infrastructure is used, will target Eastern Kentucky first for fiber optic installation and connectivity.

The state will support the project with $30 million in state bonds and $15 to $20 million in federal grants it is getting specifically for this job. In the recent omnibus federal budget, the Appalachian Regional Commission was awarded $10 million to improve broadband in central Appalachia. There is no additional cost to taxpayers under the public-private partnership Macquarie Capital has signed has signed on for; it will pay the rest of the costs with the anticipation of obtaining a return from the fees charged to future customers.

It begins along I-75

The project will start the building of broadband fiber-optic lines across the state by taking advantage of existing lines and infrastructure, partnering with local telecommunications companies, local governments and major carriers to deliver the network more quickly and reduce construction costs. Work along Interstate 75 from Northern Kentucky south to Williamsburg near the Tennessee border will form the “spine” of the network, with other work occurring simultaneously in Eastern Kentucky.

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The state will support the project with $30 million in state bonds and $15 to $20 million in federal grants it is getting specifically for this job.

Ultimately, more than 100 key properties will be connected, including universities, state government buildings, and community and technical colleges.

“We’re laying the first bricks for what could be ‘Silicon Holler,’ Rep. Rogers said. “This new Super I-Way is the cornerstone of SOAR’s mission to diversify the economy in Eastern Kentucky with improvements in business recruitment, fast-tracking telemedicine in the mountains, and adding high-tech advancements in education.”

It then will be up to local communities to upgrade or add service to homes and businesses in each county and city.

“That’s where SOAR comes in. We want to be sure to get it to the business community to promote job creation,” said Lonnie Lawson, president and CEO of the Center for Rural Development in Somerset, and head of the SOAR Broadband Working Group.

The contractor was scheduled to submit a not-to-exceed cost estimate at the end of March, Lawson said. He expects that about 85 percent of the fiber optic cable will be mounted on utility poles and the remaining 15 percent buried, primarily in cities and places like the University of Kentucky’s Coldstream Research Campus in Lexington.

As an auxiliary benefit, Beshear notes, cell phone coverage is expected to improve as mobile data companies will be able to use the new fiber optic cable network to add capacity and broaden coverage areas in the state that experience poor cell phone signal reception.

The Next Generation project is designed to build the “middle mile” of a high-speed fiber optic network.

Comparing it to the interstate highway system built in the 1960s, Brian Kiser, executive director of the Commonwealth Office of Broadband Outreach and Development, said the broadband network will be a high-speed highway for data through the hills and hollows, the rolling bluegrass and the Pennyrile.

The “last mile” is comparable to the city streets and driveways connecting homes and businesses to the interstate. Private companies – telephone and cable TV providers primarily – deliver last mile services in most cases.

“It’s an interstate-type system,” Kiser said. “We are going to build the main pipe and let people patch on to it.”

The fiber network will operate at gigabit speeds, or 1,000 megabits per second – 40 times faster than current broadband. However, technology already in development could someday boost that speed to an astonishing 400 gigabits or 800 gigabits per second, according to Kiser.

Brian Mefford, CEO of Bowling Green-based CNX Inc., a consulting company that helps municipalities package their assets like rights of way and utility lines, is working with Western Kentucky University to assess assets in its 28-county service area to prepare for local Internet service network upgrades to take advantage of the fiber optic middle mile project.

One of the things that makes this project unique is the public-private partnership aspect.

“We’re advocates of the third way, the public-private partnership,” Mefford said. “It doesn’t have to be all public (sector), and it doesn’t have to be all private, and there are ways to combine the strengths of each.”

The public-private model could extend to the final-mile installations and upgrade as well, he said. The lower cost of the state’s coming Internet backbone could attract other commercial carriers who would find it financially viable to extend service into areas where it doesn’t exist. It will be up to the communities to make the most of the connectivity offered by the project.

Leveling the economic play field

High-speed Internet is about more than being able to binge watch the latest hit show or film from Netflix. As companies and organizations come to rely on software-as-a-service business models and cloud computing, high-speed Internet is seen as a vital utility just like power, water and sanitation infrastructure.

“ ‘The cloud’ has become this big buzz word in technology, and if you don’t have access to high-speed, high-capacity broadband, there’s no cloud for you,” Lawson said. “You have to be able to get to the ‘big pipe’ to be able to do cloud-based services, and that’s where industries are going across the board.”

The fiber network will operate at gigabit speeds, or 1,000 megabits per second – 40 times faster than current broadband.

The fiber network will operate at gigabit speeds, or 1,000 megabits per second – 40 times faster than current broadband.

Kiser compared it to the early days of electrification, when companies wanted to locate near power lines.

“Now the question is, ‘Can you provide us with high-speed Internet and how much (capacity) can you give me?’” Kiser said.

A recent Federal Communications Commissions ruling that broadband Internet service was a utility, to be governed by the same regulations as telephone service, most likely won’t impact the Next Generation project much, if at all, according to several of those involved. Under the ruling, Internet service providers must treat all traffic the same, and not give access, speed or capacity priority to their own subscribers or content.

In its Internet service ruling, the FCC reported that 17 percent of all Americans, or 55 million people, lack access to the redefined broadband speeds of 25MB second for downloads and 3 Mbps for uploads – the 2010 standard required 1 Mbps uploads. Only 8 percent of urban Americans lack access to broadband service at its new standard, while 53 percent, or 22 million people, in rural areas do not have access that type of connection.

Raising the broadband standard to 25 megabits per second further highlights the current substandard state of service in Kentucky

“Under the new guidelines we have very little broadband, certainly in Eastern Kentucky, because most folks don’t have access to that kind of speed,” Lawson said. “When you look at the new definition, Eastern Kentucky is almost a blank slate.”

Boosting education, economic development

Creating an infrastructure capacity for competitive jobs in a global economy could help stem the brain drain from the mountain regions of the state. At the University of Pikeville, Howard V. Roberts, dean and professor of the Coleman College of Business, said the broadband initiative will “will empower a new economy. It will allow many people to create businesses and work globally in their home environment without leaving, which we would like to encourage.”

Better Internet access could also open doors for the university to offer more classes online to a statewide – or even global audience.

TECH_Statewide Fiber Layout Map“With online learning and virtual campuses, an initiative like this will give us the opportunity to make some changes in how we deliver courses,” Roberts said. “We can connect those courses with students who otherwise might not consider attending the school.”

For clients of Teleworks USA, the state program that connects job seekers with work-at-home employment such as customer service and call centers, reliable high-speed Internet service is vital.

Some employees have lost jobs because of Internet outages at their homes, according to Jeff Whitehead, executive director of the Eastern Kentucky Concentrated Employment Program, which operates Teleworks. The agency has placed about 48 people in the past six months and previously placed Eastern Kentucky workers with companies doing customer service for Amazon and Cincinnati Bell, and conducting research by phone for Ipsos, a French company. One worker has risen from a customer service job to managing other work-at-home customer service staff for Apple.

High-speed broadband is considered a game changer for the kind of work people in small towns across the state could do.

“You can start raising the bar. There are companies that do bookkeeping and accounting services for small businesses online that pay a higher wage,” Whitehead said. “That kind of connectivity opens the window for us to expand our jobs.”

Prepare for high speed

Some cities already are looking at ways to prepare for the coming middle-mile solution. Lexington issued a Request for Information for potential gibabit-level service providers that could connect the city’s residents and businesses with the Kentucky Information Highway project. According to Ookla, an Internet metrics company, Lexington now has an average Internet speed of 16.2 Mbps, which ranks 38th among towns and cities in the commonwealth.

A pedestrian crosses the road in front of the Macquarie Group Building in Sydney, Australia. Macquarie Group Ltd. had surplus capital of A$3.4 billion.

A pedestrian crosses the road in front of the Macquarie Group Building in Sydney, Australia. Macquarie Group Ltd. had surplus capital of A$3.4 billion.

Mayor Jim Gray said higher Internet speeds will drive business activity and economic development in health, education, manufacturing, technology and research sectors. The city is looking from a company interested in a commercial solution, according to Scott Shapiro, senior advisor to Mayor Gray.

“There are some models for doing this but not very many,” Shapiro said. “So the mayor’s fiber team issued the request for information to aggregate the private-sector interest in helping Lexington build a fiber optic network.”

The goal is to meet growing business and residential demand.

“Companies that utilize lots of bandwidth are the kinds of companies that should be here in Lexington. Whether they’re in the tech sector, or research and development, or the medical and health fields, there are few companies these days that don’t rely heavily on the Internet,” Shapiro said. “We want to encourage these companies, and we don’t want the existing infrastructure to be a barrier.”

Lexington is hoping the draw of a university city with a young, highly educated tech-savvy population will attract service providers willing to invest in the city.

“One we reason we issued the RFI is that this market is evolving rapidly, and we wanted to understand the companies and the models that are out there,” Shapiro said. “Lexington is a market we think is going to be of interest to the private sector.”

Gary Wollenhaupt is a correspondent for The Lane Report. He can be reached at editorial@lanereport.com.