“What we are sitting on is transformative.”
Ron Holcomb is on Capitol Hill in Washington, D.C., telling congressional staff about how a number of member-owned, not-for-profit electric cooperatives are embracing a new phase of their core business: improving the quality of life in rural America, this time through broadband internet access.
Earlier this year,
Tipmont REMC in Lafayette, Indiana, accelerated its broadband commitment when it bought its local fiber competitor.
“If there is a better investment, I can’t think of one,” says Holcomb, Tipmont’s president and CEO. “An essential service co-op, that’s what we have to become.”
It’s an increasingly familiar refrain lately, as some electric co-ops across the country study, plan for, and initiate projects to bring broadband to their unserved or underserved communities.
More than 100 electric cooperatives are deploying broadband, and another 200-plus co-ops are exploring the option and conducting feasibility studies, according to NRECA research.
Several states have passed or are passing laws addressing potential legal hurdles for electric cooperatives to get into broadband. And many states offer loans and grants that co-ops can leverage for connectivity projects.
Huge new federal programs aimed at boosting rural broadband are making billions of dollars available to co-ops and other providers, while national media reports and access advocacy groups are referencing the promise of electric co-op engagement in rural broadband with increasing frequency.
“I do believe we’ve reached a tipping point for general acceptance of the potential role of co-ops in solving this problem,” says Brian O’Hara, NRECA regulatory issues director for telecom and broadband. “We’re very much considered a part of the equation.
“That certainly doesn’t mean co-ops must be the solution in every case,” he adds. “But there’s been a noticeable realization at the local, state, and federal levels that what electric co-ops bring to the table is uniquely valuable in working to bridge the digital divide.”
The stakes are significant.
Lack of reliable high-speed internet access means many of the small towns, farm communities, and remote populations that co-ops serve risk being left behind in key areas like education, health care, jobs, and commerce.
A recent NRECA study estimates about $68 billion in economic value will be lost to the estimated 6.3 million co-op-member households without broadband if they remain unserved or underserved over the next 20 years. Similarly, a 2018 Purdue University study commissioned by Indiana Electric Cooperatives and Tipmont REMC and funded by CoBank found Indiana can expect to reap $4 in economic gains for every $1 invested in broadband.
Electric co-ops get that.
“They’re in a position, not unlike 80 years ago, to make a real difference in their communities,” O’Hara says. “Their success hinges on critical pieces coming together.”
CHANGING STATE LAWS
Co-ops and statewide associations in several states have worked to amend or rewrite outdated or inadequate laws that could hinder cooperative broadband projects.
In Indiana and Missouri, co-ops successfully pressed to change laws that could have forced them to revise easement agreements with landowners to include running fiber-optic cable over their existing infrastructure.
Passage of the easement bill was “a crucial step in bringing high-speed internet service to rural people across the state who desperately need it,” says Caleb Jones, CEO of the
Association of Missouri Electric Cooperatives. “It took a true grassroots effort to make this happen.”
In fact, co-op clout is a key factor in paving the way for broadband access, says Scott Bowers, vice president of government relations at Indiana Electric Cooperatives.
“There is more hope that this problem is going to get solved because co-ops are leading and actively engaged,” he says. “We’re crossing obstacles off the list.”
This year in Mississippi, Gov. Phil Bryant signed a law that allows electric co-ops to pursue broadband. In a state that ranks near the bottom on internet access, the bill passed the legislature overwhelmingly.
After the bill was signed, nearly all of the state’s 25 electric co-ops indicated they would be looking at options for broadband.
“We’ve listened and paid attention to the fact that there is a great need not being met in the rural parts of our state and other states,” says Jason Siegfried, president and CEO of Southern Pine Electric in Taylorsville, Mississippi.
The 70,000-meter co-op is in the midst of a feasibility study that will inform a broadband strategy as early as this year.
“We recognize that co-ops are getting into the business in other states and having success,” Siegfried says.
Texas co-ops are pushing for legislation that, like in Indiana and Missouri, will address delivering retail broadband without revising easements.
“We can install fiber on the pole for electric system communications, but we can’t deliver broadband without obtaining a new easement,” says Darren Schauer, general manager and CEO of
Guadalupe Valley Electric Cooperative. “If we can get legislation passed, we can take those resources and apply them to building additional fiber.”
The co-op began providing fiber-to-the-home to its south central Texas territory in 2013 and plans to serve 14,000 members by year’s end.
In North Carolina, dual easement use is just one issue electric co-ops want state lawmakers to address. A bill making its way through the legislature would alleviate the easement concern, lift the state’s 20-year ban on electric co-ops using U.S. Department of Agriculture (USDA) grants for broadband service, and allow co-ops to use their fiber networks to enable retail communications.
Nelle Hotchkiss, chief operating officer of the statewide
North Carolina Association of Electric Cooperatives, says constituent feedback during the 2018 elections has helped their cause.
“The legislators on the campaign trail last fall heard it loudly and clearly,” she says. “The consumers in rural North Carolina are tired of waiting for affordable, reliable, high-speed broadband.”
State funding programs begin
States have also begun to create broadband loan and grant programs to offset or defer the enormous upfront costs of building out fiber infrastructure.
In March, Tennessee Gov. Bill Lee awarded six electric co-ops nearly $6.3 million in state broadband accessibility grants to connect rural residents.
“The biggest hurdle with broadband remains funding,” says Trent Scott, vice president of corporate strategy for the
Tennessee Electric Cooperative Association in Nashville. “It’s expensive. Yet the co-ops are structuring projects in such a way that they can be successful. Grants and low-interest loans from the state or federal government will have a big impact on the speed at which we can deliver broadband to people in underserved areas.”
Indiana recently launched a $100 million grant program to get broadband built in areas the state defined as unserved.
“Gov. [Eric] Holcomb’s announcement, as well as the significant support of the Indiana legislature, is pretty indicative of how Indiana policymakers view the role that electric co-ops can play,” says Bowers of the Indiana statewide. “They are looking to electric co-ops to help solve the connectivity problem and not just in Indiana.”
Federal initiatives grow
At the national level, the Federal Communications Commission (FCC) this year plans to auction about $100 million from its
Connect America Fund (CAF) to get internet access built in unserved or underserved communities. Another auction is slated for 2021.
The CAF program was opened to electric co-ops for the first time in 2018, and the FCC awarded 35 co-ops about $225 million to be doled out over 10 years.
Electric co-ops’ efforts got another boost last year when the USDA created ReConnect, a rural broadband program that’s part of the Rural Utilities Service (RUS). Congress has allocated $1.15 billion for ReConnect grants, grant-loan awards, and low-interest loans specifically for rural broadband.
Congress also authorized a new annual $350 million grants-and-loans program for deploying rural broadband in the 2018 Farm Bill. Projects in areas with fewer than seven meters per square mile may qualify for grants covering up to 75 percent of the cost.
Agriculture Secretary Sonny Perdue traveled last year to tiny Hamilton, Alabama, to present
Tombigbee Communications, Tombigbee Electric Cooperative’s broadband subsidiary, with $2.98 million from the
RUS Community Connect Broadband Grant Program. The co-op serves about 10,000 meters.
“To compete in today’s global marketplace, we must remove the infrastructure gaps in rural communities,” Perdue said at the event.
‘WELL PAST EXPERIMENTAL’
In a year tinged by weak agricultural commodity prices, trade tensions, and the historic federal government shutdown, farm loan defaults loom large over rural America’s economy.
Many co-op leaders believe broadband internet access is needed now more than ever, for everything from precision farming to online employment and purchases, in the communities they serve.
Waiting for third-party providers is often not an option.
“It is clear for the co-ops who want to go into the business and solve the issues of not having rural broadband that there are ways to do it,” says Gary Wood, CEO at
Central Virginia Electric Cooperative, which received CAF funds for its upcoming fiber buildout. “It’s still up to the co-op.”
Michael Callahan, CEO of the statewide association
Electric Cooperatives of Mississippi, says his state’s low population density has kept most broadband providers away. Some areas have only about two households per mile of line, far below the 35 one cable operator insisted on, he says.
So, since the enactment of the easements law, a handful of co-ops have been hard at work on fiber projects.
“I’m excited,” Callahan says. “All across the spectrum, co-ops can participate and make broadband better in the state of Mississippi.”
Likewise in Tennessee.
“Conversations are being had in co-op boardrooms across the state,” says Scott of the Tennessee statewide. “All of our co-ops are looking at broadband to determine if that is the right thing to do to best serve their members.”
Bowers at the Indiana statewide sees broadband as a way to stem a tide of outward migration from dozens of the state’s rural counties.
“Strong communities must have good job and education opportunities. Broadband is an essential piece of that now,” he says. “If you have a service territory without broadband, it can be very challenging to attract residents and keep the ones you have. If your customer base is shrinking, what is that going to do to your affordability component?”
Mike Williams, CEO of statewide association
Texas Electric Cooperatives, is more blunt.
“You can’t sell electricity to people who don’t live there anymore.”
He sees the economic benefits as a key factor in a co-op’s broadband decision.
“In Texas, some family farmers have to work another job to continue to farm. Broadband gives you the opportunity to do that,” he says. “We have communities that are not doing well. We can give them this critical infrastructure so residents can to continue to live and work there.
“It might even encourage young people, who leave and have gotten used to Netflix, to come back and be part of their communities.”
NRECA Chief Economist Russell Tucker says it’s tempting to get caught up in the rush of co-op broadband, but he cautions a go-slow approach in most cases. He says a key entry point is investing first in backbone infrastructure and communications that will improve a co-op’s system and can be leveraged, after careful study, to provide connectivity to members.
“When we talk about bridging the digital divide, it’s certainly important to focus on the role of the electric co-op,” he says. “Broadband backbones are necessary to optimize operations and adapt to changing consumer behavior. And if a co-op makes the decision to go forward with broadband, they can be a major step toward providing services either directly or through a third party.”
So is co-op broadband at a tipping point?
Time will tell, but Bowers says he sees an increasing number of co-ops that are “well past experimental discussions.”
“With the amount of investment and effort put in, I think this has become the reality for electric co-ops across the country.”
Williams agrees. “Everybody’s talking about broadband. Co-ops are doing something about it.”