The Opportunity in Broadband for Rural Electric Coops

While most urban areas have ready access to high-speed internet connections, that opportunity is still missing for much of rural America. According to the Federal Communications Commission, nearly 40 percent of rural Americans still lack access to broadband Internet service, defined as 25 megabits per second download and 3 Mbps upload speeds. And 20 percent of rural Americans lack access even to service at 4 Mbps/1 Mbps, a standard acceptable for not much more than checking email.

Research shows that broadband accessibility and adoption are critical keys to increasing rural incomes and lowering unemployment. Farmers depend on broadband to access the commodity and weather information they need to compete in the global economy. Rural medical providers need broadband to access records and treat patients in remote locations. Without these robust connections, rural communities are at risk of losing the young workers and families that will form the next generation of rural and small-town Americans.

Within this landscape, more and more rural electric cooperatives are learning that their existing distribution networks can lend themselves to highly efficient deployment of broadband. Based on the distances that define rural America, one way to effectively build a broadband network is to use an existing electric co-op infrastructure.

Bringing Broadband to the Ozarks

One rural electric co-op that has already begun providing broadband to its customers is Ozarks Electric Cooperative. Headquartered in Fayetteville, Ark., Ozarks recently made the move into providing communications services. The driver was Ozarks’ desire to deliver highspeed broadband access to its current electric customer base, which comprises 74,000 meters, 93 percent of which are residential.

“About 50 percent of Ozarks’ member locations do not have access to broadband today,” said Randy Klindt, general manager for OzarksGo, the subsidiary providing the broadband service. “Our project will bring broadband to some members for the first time and bring affordable and faster broadband for the membership that already has some level of service.”

“Ozarks sees this build-out as being strategic for its long-term growth and critical to serving the needs of its members,” said Tamra Reynolds, CoBank’s regional vice president for electric distribution in the southern region, who helped Ozarks obtain the financing for the expansion. “They also believe in being a leader in the state, so CoBank’s ability to put this deal in place in just a couple of months was key.”

CoBank provided a construction loan for phase one of the build-out, which is now well under way. The targeted area for phase one, around Fayetteville and Springdale, is the most densely populated in Ozarks’ territory in northwest Arkansas and northeast Oklahoma, and thus is expected to be the most cash-flow positive, which will help fund future expansion. Broadband service will be brought to other areas in five additional phases of construction.

“The reaction of our membership has been very positive,” said Klindt. “Members are signing up for the service rapidly even in competitive areas. We frequently receive phone calls asking for later phases to be accelerated, and some members have offered to pay more to be connected.”

“Supporting an electric distribution cooperative to enter the communications sector aligns closely with our mission to strengthen rural communities,” said Rob West, executive vice president of CoBank’s infrastructure banking group. “Ozarks has been a CoBank customer-owner for 15 years and has very strong credit quality, so this project offered a prime opportunity to deliver on our mission.”

A Variety of Opportunities for Co-ops

The example of Ozarks Electric shows how electric co-ops can partner with CoBank to help bring broadband to their communities. The bank understands that no two solutions are identical, just as no two co-ops or service areas are identical, so it is continuously looking at new ways to work with its customer-owners.

Electric cooperatives are a natural option for bringing broadband to rural areas, especially given the lack of incumbents providing this service in these areas. These co-ops have existing relationships with their members and a long history of reliable, cost-effective service, as well as a proven record of project management and construction. Given these factors and the necessity of broadband in rural communities, the number of electric co-ops branching into broadband seems likely to continue to grow.

RANDY KLINDT is the general manager for OzarksGo.