Unlikely Broadband Partnership Yields Start-up Efficiencies and Ancillary Benefits for San Juan Islands Customers

September 2018 -

The San Juan Islands – an archipelago between Washington State and the southern tip of Canada’s Vancouver Island – redefine rural living. While the San Juan Islands are indeed rural – distant from a large metropolitan area and sparsely populated – they are known more for tourist activities such as whale-watching and kayaking than farming or ranching. The islands are accessible only by ferry and airplane in a setting that provides significant challenges for providing utility services  – electricity is delivered via submarine cables – including broadband.

Orcas Power & Light Cooperative (OPALCO), a member-owned, nonprofit cooperative utility, has provided energy services to the San Juan Islands since 1937. In 2015, OPALCO acquired Rock Island Communications to deliver broadband services to the islands’ customers. In partnering with T-Mobile to deploy fixed wireless and improve cell coverage throughout its service area, Rock Island discovered that T-Mobile could also be a valuable partner in its broadband initiative. John Donner from CoBank’s Electric distribution team sat down with Foster Hildreth, OPALCO’s general manager, and Gerry Lawlor, vice president, Fixed Broadband with T-Mobile to discuss how this unlikely broadband partnership began and the benefits it has provided.

John Donner: How did OPALCO/Rock Island and T-Mobile cross paths and decide to work together?

Foster Hildreth: OPALCO and T-Mobile each owned wireless spectrum in the same band – 700MHz band 12 – which was purchased from the same seller. OPALCO’s original plan was to use the spectrum to improve mobile communications on the islands for the safety of our lineman and residents.

Gerry Lawlor: Under FCC rules, each party using the same spectrum had to coordinate to avoid network interference. From the start, it became clear that we needed to work with each other in order to meet our respective goals.

JD: Is this a unique partnership or has it been replicated elsewhere? Will it be replicated elsewhere?

FH: 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. As far as we know, there are very few partnerships across the country that pair an electric cooperative with a telecommunications provider.

GL: This partnership provides a great operating model. T-Mobile wants to partner with other co-ops on similar structures where we can help to accelerate broadband business models in suitable communities. The model may not be identical to what we have structured with Rock Island, but there are definitely characteristics here that we feel can be duplicated in other rural markets.

The utility is in an excellent position to leverage its existing infrastructure to deploy communication for its grid while quickly deploying broadband services to its community.
JD: What does each entity bring to the partnership?

FH: OPALCO/Rock Island has the advantage of a strong local presence, which allowed us to build infrastructure with the support of the community. The natural beauty of the San Juan Islands is one of the primary reasons people choose to live here. For an unknown entity without local knowledge and relationships, constructing towers would have been very challenging.

GL: Each party contributed to the cost of building out the network and provided human expertise, both upfront and on an ongoing basis. OPALCO enabled T-Mobile to build upon its existing infrastructure within their right-of-way. We also each share spectrum as part of the ongoing service offering.

JD: What do you each get in return? How are revenues shared?

GL: We realized upfront and recurring cost savings and created a recurring revenue share model on sales of certain products, such as mobile handset sales and TV service. At the same time, we realize this is not a one-size-fits-all solution. T-Mobile will structure different partnerships that address the various scenarios we expect to see.

FH: Many OPALCO members are able to get broadband services much sooner under this partnership than if they had to wait for fiber to be delivered to every home. One of our primary goals was to deliver broadband service to the islands. Partnering with T-Mobile helped us deliver on that goal faster and less expensively than had we done it alone.

JD: Are you competitors in any aspect of the business?

FH: Essentially no. We both support each other’s core business. In structuring any partnership, we see more value in creating a broader mutual arrangement instead of bifurcating the market.

Making sure the community has a sense of ownership in the effort is important to the long-term success of any project.
JD: What are some of the key provisions in the contracts between the two entities?

GL: We have a 20-year agreement in place with the ability to extend further, as needed. We don’t expect these to be short-term arrangements in any location given the nature of the investments needed to be successful. Fiber is a longer-term investment. But given the insatiable demand for mobile services in line with fixed services, the wireless side will see ongoing investment.

JD: What makes this broadband partnership work? Is it the location, competitive environment, demographics?

FH: Each party truly delivers its respective strengths to the partnership. The utility is in an excellent position to leverage its existing infrastructure to deploy communication for its grid while quickly deploying broadband services to its community.

GL: T-Mobile prides itself on tackling pain points for the consumer. We are excited to tackle pain points on a community-wide basis to see real benefits for rural America.

JD: What has been the biggest challenge in working together?

FH: Honestly, there haven’t been any major challenges. T-Mobile continues to be a great partner and brings additional benefits such as Internet of Things (IOT) devices for smart metering and early small cell 5G testing, enabling more capability to reach further into our network.

GL: This partnership has been a win-win for each side. Dealing with anything unexpected was easily overcome.

JD: How important is branding – local and national?

FH: Having a local brand was very important for our community. The original Rock Island was a locally owned ISP, which had been in business for 20 years. It had a very loyal following. Building our broadband around the Rock Island brand after OPALCO purchased it in 2015 was the right approach for the community.

GL: Combining the Rock Island and T-Mobile brands was a good fit. Again, making sure the community has a sense of ownership in the effort is important to the long-term success of any project.

JD: How does the partnership support low-income members?

FH: Introducing LTE to the equation was an immediate boost to lower income members. The key is to get broad and rapid deployment of services so as many people as possible can reap the benefits. This produced a better rate of return that enabled wider deployment of fiber into areas normally deemed too expensive.

GL: Delivery of fixed and mobile services throughout a community gives everyone – especially those with lower incomes – the opportunity to enjoy numerous savings on their monthly telecommunication bills.

Foster Hildreth is the general manager at Orcas Power & Light Cooperative (OPALCO), which distributes power to 15,000 meters across the San Juan Islands in far northwest Washington State. A seasoned financial manager, Mr. Hildreth joined the OPALCO team in 2006 and took the reins as general manager in September 2014. In his role, he oversees all of OPALCO’s departments and functions, including engineering, business development, accounting and finance controls, reporting and member services, communications, capital projects, and hiring key personnel. Mr. Hildreth earned his bachelor’s degree and his master’s in business administration and finance from the University of Southern California.

Gerry Lawlor is vice president, fixed wireless for T-Mobile USA. In this role, he is leading an innovative national effort to deliver Fixed Broadband services via LTE and Fiber by leveraging unique spectrum, technology and industry relationships in the utilities market. Gerry was previously the executive vice president of Rock Island Communications in San Juan County. In this role Gerry drew upon his global experience in the U.S. and abroad to streamline operations and develop industry-first partnerships to benefit the company and the communities it served. For example, frustrated by slow DSL connections on San Juan Island, Gerry partnered with Orcas Power and Light Co-op to bring faster technology by leveraging the utilities infrastructure and one-of-a-kind relationships with mobile and fixed-line operators. Mr. Lawlor has a background in finance having traded and sold fixed income and derivative securities for Banc of America Securities and Goldman Sachs & Co. Before moving to the Pacific Northwest from New York, Gerry was the Chief Operating Officer of Razor Risk Technologies (an Australian public company).

This interview was originally published in Broadband Partnerships: A Key to High-Speed Success for Rural Electric Co-Ops.