Broadband Partnerships: A Key to High-Speed Success for Rural Electric Co-ops

September 2018 -

Partnerships Offer Rural Electric Co-ops Options for Entering Broadband

Broadband Partnerships
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Broadband communications is coming to rural America. But the pace of progress remains slow.

In its 2018 Broadband Deployment Report, the Federal Communications Commission (FCC) says that steps taken in 2017 have restored the pace of broadband deployments after having dropped by more than half in the wake of its 2015 Title II Order that regulated broadband Internet access as a utility.

But the FCC’s steps – removing barriers to infrastructure investment, promoting competition and restoring the longstanding bipartisan light-touch regulatory framework – still aren’t enough when it comes to rural America. As of year-end 2016, 24 million Americans – most in rural areas – still lacked fixed terrestrial broadband. More than 92 percent of urban Americans have access to fixed terrestrial broadband versus just 73 percent in rural America.

This digital divide continues to hold rural America back in nearly all aspects of everyday life: healthcare, education, business investment and general economic development, farm income, civic engagement and even property values.

But there is good news … in several areas.

A recent study conducted by Purdue University estimated that the State of Indiana would realize a net benefit of $12 billion if rural broadband investments were made statewide. Clearly, the net benefit doesn’t tell the entire story. The study also shows that anticipated customer revenue would not be adequate to cover total system costs, so investment incentives are necessary. Still, rural broadband investment yields a significant societal benefit.

And, rural electric cooperatives are entering the broadband space in increasing numbers. They are finding that their existing distribution networks can mean efficient deployment of broadband for their members.

Despite the societal and aggregate financial benefits, and the start-up efficiencies, launching a broadband venture is hard work. It’s costly and entering a new industry poses an assortment of operational, technical and organizational, among other, challenges. That said, it provides a host of benefits – for the co-op, its membership and the community – when it’s done thoughtfully and with foresight.

Some co-ops entered the fray opportunistically, recognizing an opportunity for new revenue streams and growth after constructing a fiber backbone to serve their own communication needs. Others entered after identifying their community’s specific need. Yet others entered because they sought to live up to what they see as their fundamental responsibility as a cooperative: bringing services to those that don’t have service.

The type of service didn’t matter to Consolidated Telephone Company (CTC), a Brainerd, Minnesota- based telephone cooperative, when it agreed to help Lutsen, Minnesota-based Arrowhead Electric Cooperative launch its broadband venture: “When we learned of the Arrowhead project, we had a lot of interest in doing what I think co-ops do best – bringing services to those that don’t have service,” says Kristi Westbrock, CEO and general manager of CTC.

The CTC/Arrowhead example stands as one of the more unusual partnerships we have seen of an electric cooperative seeking help getting into broadband. Examples of other types of partnerships – both traditional and non-traditional – abound. And what’s clear is that help is out there. Countless organizations of all types willing to lend their knowledge, equipment, employees and other resources to electric cooperatives that are interested in taking the plunge.

This year, CoBank’s collection of broadband interviews focuses on how electric cooperatives can enter the broadband space through successful partnerships.

Some of the partnerships have revenue sharing arrangements, such as the one between Orcas Power & Light Cooperative (OPALCO)/Rock Island Communications T-Mobile, another atypical combination of interests.

“This is a very unique partnership in which each side brought its particular strengths and capabilities to the table. OPALCO/Rock Island focused on building the fiber backbone, constructing towers and maintaining connectivity. T-Mobile focused on providing core LTE equipment and ongoing core technology,” says Foster Hildreth, OPALCO’s general manager.

There are other more traditional partnerships, such as the one between Co-Mo Electric Cooperative and Callaway Electric Cooperative. These Missouri-based co-ops created their partnership as a result of their common membership in Central Electric Power Cooperative, which is their mutual generation and transmission (G&T) provider.

“Co-ops working with Central Electric have a long history of shared services and ‘Cooperation among Cooperatives,’” says Tom Howard, Callaway’s CEO and general manager. “Co-Mo Connect, which is Co-Mo’s broadband brand, began a few years prior to Callabyte Technology, which is Callaway’s broadband subsidiary. We watched Co-Mo Connect grow into a successful company and Callaway had a desire to follow Co-Mo’s business model via Callabyte.”

Also included here are interviews with industry advocates and experts on topics such as business structure and taxation, and legal issues, such as easements and antitrust. The issues can be complex, but as these interviews show – again – knowledgeable and experienced partners can untangle the wires and make a world of difference.

All of our interviewees provided their time and knowledge in the cooperative spirit of ‘neighbors helping neighbors.’ They have a sincere interest in helping rural broadband grow and once and for all closing the digital divide. I thank them for their contribution to this publication.

We hope this year’s collection of interviews will be helpful and enlightening for any co-ops that have an interest in bringing broadband service to their community. As ever, CoBank stands ready to do its part to help.

Bill Laduca
Sector Vice President
Electric Distribution
CoBank

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