Cooperative role in providing broadband – what, who, how, where and why?

The University of Wisconsin Center for Cooperatives has published an in depth report on what’s happening with broadband and cooperatives – especially in Wisconsin – but they use one Minnesota example (Arrowhead Electric Cooperative) and regardless of location, the driving factors leading to the need and opportunity for a coop to provide broadband is similar.

The report provides a number of examples of what cooperatives have done. In the end, they determine there’s no one-size-fits-all solution but I think the range of solutions included are helpful to anyone in a cooperative looking at their options or anyone looking to persuade a cooperative to look into providing services in their area.

I’m just going to outline some of their high level observations.

Why would a cooperative get involved in broadband?

There is a perceived connection between potential for future community and economic development and access to broadband. A National Agricultural and Rural Development and Policy Center publication concluded that rural median household income grew at nearly twice the rate where broadband technology was adopted in households compared to where it was not adopted. 1

Unmet infrastructure need in rural communities is the major reason both telecommunications and electric cooperatives were organized in the early part of the 20th century. The business model which drove investor-owned firms did not support the capital intensive investment required to develop infrastructure in sparsely populated rural areas. Cooperatives were developed to meet the demand for reliable utility services that, both then and now, are critical to modernization, innovation, and future economic development in rural areas.

How can it make financial sense?

According to the National Rural Electric Cooperative Association, 42 percent of the nation’s electric distribution lines are owned by electric cooperatives. These lines cover 75% of the U.S. land mass to reach just over 12 percent of the nation’s meters, an average of 7.4 customers per line mile. This is much lower than investor-owned utilities, which average 34 customers per line. Public owned utilities, or municipals, average 48 consumers per line mile.20 Because electric cooperatives are organized and operated to provide service to member-customers rather than a return to investors, they have been able to develop and maintain the infrastructure to serve rural, sparsely populated rural areas.

How does it serve the mission of an electric cooperative to provide broadband?

Electric cooperatives’ primary mission is to deliver electric service to member-owners in a financially responsible manner. Boards setting the strategic direction for the cooperative have the fiduciary responsibility to assure that mission can be met into the future. However, as the necessity of broadband access grows, the lack of high speed internet is increasingly a problem for members.

In addition, technological changes that are affecting the architecture of the electric grid increasingly are making questions about broadband access more directly relevant to the electric cooperative’s own future operations. By upgrading the communications technology that is part of the cooperative’s electric infrastructure, a “smart grid” will allow cooperatives and their members to better manage energy demand and distributed energy functions that allow customers to contribute to the grid.24

Other values may also drive a cooperative board to explore providing broadband access. Many cooperatives are guided by seven cooperative principles, one of which embraces a concern for the community. In the case of electric cooperatives, management or boards often participate on local economic development boards and committees. The cooperative’s electric infrastructure is critical to community economic activity, which in turn maintains the cooperative business and supports future growth. The overlap between the electric cooperative membership and the community aligns the service goals to members with a service orientation to community.

They have a nice graphic on the spectrum of opportunities that cooperatives have to get involved with broadband in the community…

Steps to create change that might help drive the move to provide broadband…

Kotter’s eight stages for strategic change are:

1. Create a sense of urgency

2. Build the guiding coalition

3. Form a strategic vision and initiatives

4. Enlist a volunteer army

5. Enable action by removing barriers

6. Generate (and celebrate) short term wins

7. Sustain acceleration 8. Institute change

Pipestone County Broadband Feasibility Study: building broadband will require grants

With funding from the Blandin Foundation, Pipestone County worked with Finley Engineering and CCG Consulting on a study that would look at if and how the county might take on bringing better broadband to all corners of the county.

Here’s the executive summary of the Pipestone County Broadband Feasibility Study – check out the full study for greater details and next steps…

Finley Engineering and CCG Consulting submit this report of our findings and recommendations for the feasibility of finding a broadband solution for those parts of the county without broadband today. The county is typical of many rural counties where a substantial part of the county has or will soon have good broadband, including fiber, while other parts of the county have little or no broadband. The county is a textbook example of broadband haves and have-nots—with those without broadband living close to others that have it. This disparity will eventually harm those portions of the county without broadband and you can expect those areas to suffer lower housing prices and become places where families and business don’t want to be located.

Our study area looked at the feasibility of bringing broadband to the parts of the county that are not expected to have fiber construction over the next few years. We looked at three different business plan scenarios for getting broadband to everyone: 1) building fiber everywhere, 2) a hybrid plan that has a mix of fiber and fixed-wireless broadband and that covers the whole study area, and 3) a plan that just brings wireless broadband to the rural areas. Finley Engineering developed estimates of the cost of deploying each network option and CCG used these costs in the financial business plans to see if there is an economically viable model for providing broadband in the rural areas.

For each scenario we looked at a number of different options. For example, we looked at the difference of funding the project with municipal bonds or with commercial loans. We looked at different levels of customer penetration, including calculating the breakeven scenario, which determined the number of customers needed for the business to always be able to cover costs and remain cash positive. We also looked at the impact of the most import variables in the forecasts including customer pricing, interest rates on debt, and having the projects partially funded by grants.

Our analysis shows that it is not feasible to build broadband in the study area without some support from grants. That is not a surprising finding since the cost of building broadband to rural areas is high. This is particularly pronounced in Pipestone County since the areas we studied are entirely rural and don’t include small towns that might reduce the cost of building broadband. The analysis also shows that it will require more than the 50% grant offered currently by DEED if somebody wants to build fiber to the rural areas. We’ve seen this same result in other rural counties since the cost of building fiber to farms is so high.

It looks more feasible to provide wireless broadband to the study area. We know that is not the result the county was hoping for, but the Finley analysis provides for a fiber-fed wireless network that can provide speeds of at least 25 Mbps download to rural homes in the county. That would solve the immediate crisis for homes with no broadband. However, once built, the county will have to continue to push in the future to eventually get the network converted over to fiber.

The county has already taken the first steps of presenting these study results to potential service providers. Hopefully one or more of them will be able to seek grant funding from Minnesota DEED in the upcoming grant cycle this fall. But if that doesn’t happen then there are steps the county can take to be prepared to support a grant filing for next year.

Nobles County: an inside look at a broadband feasibility study

Telecompetitor recently posted a profile of Nobles County and their journey toward better broadband…

To fix this situation, Nobles County set out on a public-private partnership journey, that would eventually involve the state of Minnesota, the Blandin Foundation, Finley Engineering, and Lismore Cooperative Telephone Company. Finley Engineering was honored to be selected by Nobles County to support this effort and help bring quality broadband to their community. The end result aims to eventually provide a state-of-the-art fiber-to-the-premises (FTTP) network that will bring ultrabroadband service to the citizens, farms, and businesses that dot Nobles County. This Minnesota community is well on their way in achieving this vision.

So they set out to learn more with a feasibility study…

The Blandin Foundation, a Minnesota-based private foundation, advocates for strong rural communities and provides funding to help meet that mission. Nobles County applied for and won grant funding from Blandin to perform a rural broadband feasibility study for their community. The Blandin Foundation provided one-half of the cost of the feasibility study, with Nobles County providing the rest in matching funds. Nobles County turned to Finley Engineering to begin that process and with their partners, Finley performed a study to determine how to bring broadband to this community in need. The result of that study identified a feasible plan to build a fiber ring throughout the county and begin bringing broadband to unserved and underserved communities through a hybrid FTTP and fixed wireless access network. Results of this study were presented to potential providers, including Lismore Cooperative Telephone, who partnered with Nobles County to fund, construct, and operate the hybrid fiber and fixed wireless network. Besides performing the feasibility study, Finley Engineering was selected to complete a State of MN broadband grant application, and engineer and oversee construction of the network.

That helped to set them up for a broadband grant…

The state provided $2.9 million in matching grant funding to contribute to the construction of the fiber portions of the network. Nobles County contributed a $1 million grant and a $2.5 million loan to the cause and Lismore committed to also invest in the construction of the network. The total budget for the project was about $6.5 million. The goal includes building the fiber ring and laterals to tower sites, providing a hybrid fiber and fixed wireless access initially, but eventually providing FTTP service, funded in part from the fixed wireless service revenues.

What did they learn?

All stakeholders in the project report are pleased with the progress so far. There are some key lessons learned from this evolving project. They include:

  • Initial feasibility studies are crucial, and Nobles County cited working with professional fi rms like Finley Engineering and their partners as an important critical step.
  • There are many partners and stakeholders involved in a project like this and open and transparent communication throughout all steps is vital to success noted Nobles County officials.
  • Involving the community early on played an important role in success factors. Nobles County enlisted local community members to participate in the early studies, surveying community members about the need for broadband.
  • Fixed wireless access technology has vastly improved and it is now a very viable technology to bring quality broadband to unserved and underserved rural communities.
  • Grant money and other support funding mechanisms are required to bring quality broadband to very rural communities.

Yellow Medicine County Broadband Feasibility Study: wireless is a temporary solution, grants needed for fiber builds

With funding from the Blandin Foundation, Yellow Medicine County worked with Finley Engineering and CCG Consulting on a study that would look at if and how the county might take on bringing better broadband to all corners of the county.

Here’s the executive summary of the Yellow Medicine County Broadband Feasibility Study – check out the full study for greater details and next steps…

Finley Engineering and CCG Consulting submit this report of our findings and recommendations for the feasibility of finding a broadband solution for those parts of the county without broadband today. The county is typical of many rural counties where a substantial part of the county has or will soon have good broadband, including fiber, while other parts of the county have little or no broadband. This disparity in broadband coverage will eventually harm those portions of the county without broadband and you can expect those areas to suffer lower housing prices and become places where families and business don’t want to be located.

Our study area looked at the feasibility of bringing broadband to the parts of the county that are not expected to have fiber construction over the next few years. We considered three different study areas looking at different parts of the county. We then looked at two different business plan scenarios for getting broadband to everyone: building fiber everywhere and building a hybrid network that is a mix of fiber and fixed wireless. Finley Engineering developed estimates of the cost of deploying each network option and CCG used these costs in the financial business plans to see if there is an economically viable model for providing broadband in the rural areas.

The primary purpose of the study was to determine the breakeven penetration level for each scenario. This represents the number of customers necessary for the scenario to always remain cash positive throughout the life of the financing. This analysis told us the following:

  • It does not look to be economically feasible to immediately build fiber everywhere without significant grant funding. This is not a surprising finding and is directly the result of the high cost of building fiber to farms.
  • The scenarios that mix fiber and wireless technology look feasible. The scenarios can work even without grant funding, but some level of grant funding make the scenarios safer for an investor.

The wireless network designed by Finley is intended to supply at least 25 Mbps download to rural homes in the county, which is a significant improvement for those homes with no broadband. Some customers will be able to get speeds faster than that on the wireless network.

However, implementing a wireless network would not be a permanent solution. All of the broadband trends in the country show that the amount of bandwidth needed by a typical home will keep growing, and at some point in the future the wireless network will become obsolete in the same manner that happened in the past with dial-up and DSL broadband.

The report discusses the next steps the county needs to take after digesting the results of this study. These include such things as looking for a partner to bring broadband to those areas without it today. The goal would be to have a partner by next year to hopefully be ready for future state grant funds.

We note that as this report was being written that the county announced a tentative agreement with Farmers Mutual Cooperative to bring fiber to a significant portion of the county. The county has agreed to provide $4 million in funding subject to the Cooperative being able to find grants and other funding needed to build the project. If completed this project would cover a little less than half of the parts of the county that don’t have broadband today.

Murray County Broadband Feasibility Study: fiber in stages may be possible over years, fixed wireless already available

With funding from the Blandin Foundation, Murray County worked with Finley Engineering and CCG Consulting on a study that would look at if and how the county might take on bringing fiber to all corners of the county.

Here’s the executive summary of the Murray County Broadband Feasibility Study – check out the full study for greater details and next steps…

Finley Engineering and CCG Consulting submit this report of our findings and recommendations for the feasibility of finding a broadband solution that meets the state broadband goals of 100 Mbps download speeds for those parts of the county without fast broadband today. The county is typical of many rural counties where a substantial part of the county has or will soon have fiber to residents, while other parts of the county will be served by slower broadband technologies.

Our study looked at the feasibility of bringing fiber broadband to the parts of the county that are not expected to have fast broadband to homes and businesses over the next few years. The areas served today by Woodstock Communications already have fiber. Redwood County Telephone Company will be building fiber to customers in the Walnut Grove area and thus that area was excluded from the study. There is fast broadband provided by cable companies in the towns of Slayton, Lake Wilson, Currie, Fulda, Avoca, and Hadley and those towns were also excluded from the study. That leaves a study area consisting of the rural areas served today by CenturyLink and Frontier Communications including the towns of Iona, Chandler, Dovray, and the Lakes area.

The studies looked at the business plan for bringing fiber to the service area. The vast majority of the study area has (or will soon have) fixed wireless broadband. This technology can deliver broadband connections in the range of 25 Mbps download, and sometimes faster.

However, we know the county’s goal is to eventually have fiber everywhere and the current wireless broadband is not a permanent bandwidth solution. Broadband trends show that the amount of bandwidth needed by a typical home will keep growing, and at some time in the future these wireless networks will seem too slow and become obsolete in the same manner that has happened in the past with dial-up and DSL broadband.

Our analysis shows that it is not economically feasible to build fiber everywhere in the rural parts of the county using the existing Border-to-Border grant program—the 50% grant matching in that program is not high enough to create a sustainable network. However, it would be possible to fund fiber using these grants if the percent of the grant matching is increased above the 50% level used in awarding these grants today. It might also be feasible to build the fiber in stages over multiple years to get the needed grant funding.

It is likely to be a challenge for a service provider to building fiber today since almost all of the rural area is served with newly-built fixed wireless technology that is capable of delivering speeds of at least 25 Mbps download. Any potential fiber provider is going to worry that many households will be satisfied with that level of broadband speed.

Five Buckets of Federal Funding for Rural Broadband – A Primer

Conexon recently distilled a list of five buckets of federal funding for rural broadband. I’ve pulled out the basic below, I’d encourage you to check out the original article for more details.

CAF II Auction
Geographic Area: High cost census blocks unserved by 10/1 Mbps in price cap carrier (e.g., AT&T) study areas where either the price cap carrier turned down a statewide offer of funding, or a census block was part of the 1% of the country deemed too costly to fund through the offer to price cap carriers, or where a bidder in the rural broadband experiment auction provided the FCC with additional information demonstrating an interest in participating in the CAF II auction.
Process: The FCC will conduct a national, multiple round, descending clock auction in two stages in which competing bidders commit to make available to locations in census block groups voice and internet service at a level ranging from 10/1 Mbps to Gigabit service.

Omnibus Appropriations: Rural Broadband Pilot
Geographic Area: Areas where at least 90% of the households do not have access to 10/1 Mbps (a threshold which may be re-evaluated annually).
Process: TBD
The author proposes some interesting process measures.

Remote Areas Fund (RAF)
Geographic Areas: Census blocks unserved by 10/1 Mbps that do not receive a winning bid in the CAF II auction.
Process: The FCC first identified the RAF as the 1% of census blocks that, according to the Connect America Cost Model, would be the most expensive to serve. To date, no funds and no concomitant obligation has been offered to any company for serving these areas. The areas were added to the CAF II auction, with the funding for the areas capped below the cost model calculation. These areas comprise the largest part of the auction in terms of reserve price (over $4 billion) and are the most likely to remain unserved, unbid, unfunded after the auction. The FCC’s current intent is to take all areas that are unfunded in the auction, and add them to the RAF. How the FCC will attract providers to areas that attracted no winning bids is the puzzle.

CAF III
Geographic Area: High cost Price Cap Carrier service territories.
Process: In 2015, the FCC offered price cap carriers six years’ worth of funding over a five-year period to make available 10/1 Mbps throughout the high cost areas in each state. That funding ends in 2020, to be replaced by a competitive bidding process. The FCC may well use the CAF II auction format, adjusting the definition of unserved and lessons learned from the CAF II auction process.

Rate of Return and ACAM-based High Cost Program
Geographic Area: Rate of return carrier study areas.
Process: Still mostly a legacy program to support small rural telephone companies for the provision of voice service, the program has slowly been in transition as the FCC attempts various carrots and carrots approaches to tease out 4/1 or 10/1 or 25/3 Mbps service. The funding mechanisms are complex, closer to a regulatory accounting art form than a set of business decisions. In essence, this is a political program more than an economic program – more money per household than any other FCC program and more support from Congress than any other FCC program.

Broadband Market Survey for Lake Shore Community – good model

Bill Coleman and I (mostly Bill) have been working with Lake Shore community to help get a picture of what better broadband would look like in their community. One of their first steps has been to create a broadband survey. I’m sharing it for three reasons. First – if you live in Lake Shore, please take the survey – it won’t take 10 minutes to complete.

Second – I thought it would be a good model for others interested in working on a plan. It’s a one-page survey so you don’t need to take it to read all of the questions. Here’s the introduction to give you a flavor of what you’ll find…

The City, working with a group of interested residents, recently formed a Committee to actively seek alternatives for expanding our Internet options.  One of our first steps is seek your input about current Internet services.   Additionally, the Broadband Committee is in discussions with Internet providers.
Please be assured that by completing this questionnaire you are not obligating yourself to purchase any services, either now or in the future.  Your response to this questionnaire will remain confidential; your response will help us find the best solution for improving Broadband Internet access in Lake Shore.

Third, it’s a good excuse to remind people that the Blandin Foundation offers help to communities looking to improve local broadband access through – Community Broadband Resources Program, which is technical assistance and general support to help you explores next steps toward better broadband.