COLUMBUS, Ohio—No matter how loud the clamor from
people who wanted it yesterday, your co-op can’t rush into the broadband business. In fact, it might decide not to enter at all.
Such was the case with
Henry County REMC, where CEO Shannon Thom said "the initial feasibility study said it's really not feasible."
"The two major roadblocks were dollars and cents—where does the money come from?" said Thom. While the New Castle, Indiana-based co-op could borrow funds, the outlook for return on investment wasn't encouraging.
"Our feasibility study said we weren't going to go positive until 23 years in," Thom told a Sept. 6 panel session at the NRECA Regions 1 & 4 meeting. "Basically, until that fiber is depreciated you're not going to start seeing margins, which makes it very difficult."
Another stumbling block was that there's already competition in the densest areas of Henry County REMC's service territory. Thom said that meant the co-op would have to go head-to-head against existing companies, meaning fewer customers signing up for co-op service. Or it could stay out of those areas, which didn't help the business model.
And those who do sign up have to be willing to pay the price. Fiber-based broadband is considerably faster than DSL, which makes it more expensive. As it turned out, many folks were unwilling to pay extra.
"We surveyed our members a number of times using different methods," said Thom. "When we took all of that data and compiled it, 87 percent of the members we talked to said, 'You guys need to be doing something in this area.' But in contrast to that, 86 percent of them said they don't want to pay any more than the DSL they're paying for now."
NRECA, NRTC and Ericsson partnered on "The Value of a Broadband Backbone for America's Electric Cooperatives: A Benefit Assessment Study,"
available on cooperative.com. Also check out several
co-op broadband case studies.
Read more news on rural broadband:
5 Takeaways From NRECA's Study on the Value of Broadband for Consumer-Members
Broadband 'Not a Luxury,' USDA Official Tells Co-op Leaders
Indiana Broadband: State Commits $100M; New Study Shows Value of High-Speed Access
Electric Co-ops Get a Big Boost for Rural Broadband Efforts in FCC Auction