Articles

The One-Two Knockout Punch for Broadband — Co-ops Partner With Local Government

There is a strong case for local government partnering with co-ops to deliver broadband to under-connected areas, especially if the cities or counties own their public utilities.

by / May 1, 2017

Though the chances of a broadband stimulus program similar to the one at start of the Obama administration are looking slim, going back further in history points to a tactic that very well might accelerate community broadband deployments. Are local governments prepared to seize this opportunity?

When many policymakers, industry pundits and local politicians talk about broadband, they often compare it to the need for electricity in rural areas in the 1930s and 1940s. Big electric power companies shunned rural areas because they couldn’t make enough profit, leaving these communities to build their own electric utility businesses.

Rather than just citing history, communities are increasingly re-living it by enticing electric cooperatives to build broadband networks. “Every survey that I've known about shows 60 percent or more members saying that if their co-op offered it, they would take broadband services,” said Michael Keyser, CEO and general manager of BARC Electric Cooperative.

As the broadband bandwagon gathers speed, some are asking whether it makes sense for co-ops and local government to partner. This one-two broadband deployment delivery has the potential to make a serious dent in the service need to rural areas.

There are more than 400 citywide, countywide and partial-area broadband networks in the U.S. The overwhelming majority of them successfully offer fast, affordable Internet access, despite the best efforts of Internet service provider (ISP) incumbents. But co-ops are no slouches when it comes to affordability and speed.

Co-ops that have built networks list several reasons they can run successful broadband businesses and still make their services affordable. 

  • they are not for-profit organizations;
  • they can spread the upfront buildout costs over 20 or 30 years; 
  • they typically start with needed resources on hand: bucket trucks, expertise, rights of way, polls, customer relationships;
  • there is often cash on hand because co-ops are conservatively managed;
  • some already have broadband infrastructure in place, which can support substations, metering systems, supervisory control and data acquisition (SCADA) systems, other operations; and
  • it’s less expensive to expand broadband than to start from scratch.

Hey, let’s get hitched

There is a strong case for local government partnering with co-ops, especially if the cities or counties own public utilities. It’s possible that the co-ops and the jurisdictions can share both resources and revenues.

Anza Electric Cooperative has a 550-square-mile service area that takes in a large part of Southern California's Riverside County, which is undertaking a massive broadband buildout that includes a couple dozen cities.  

“Anza has partnered with the county by providing dark fiber services countywide,” said Co-op General Manager Kevin Short. “In addition, Anza will provide broadband services to county government properties, its transportation systems, emergency communications systems and other county operations." 

In 2012, the city of Niles, Mich., built its own backend infrastructure with the purpose of connecting all of city buildings to the network, said Jeff Dunlap, the city utilities manager.

“After doing a needs assessment, we determined it was too costly for us to build fiber to the doorstep of the businesses in our industrial park, so we looked to Midwest Energy Cooperative," he added. “We gave Midwest some property in one of our substations and they agreed to light up the industrial park. We don't charge them pole attachment fees and they in turn provide the connections to the businesses in the industrial park that we couldn't afford to do.”

The city’s population density works out for Midwest. There are 11,000 people in the city and 20 industrial park customers. The city never sought to be an ISP; it preferred running fiber to city premises and then leasing the lines to the co-op, while letting Midwest provide the Internet connection. 

In addition to the fiber loop, Niles has its own electric distribution system. The combined infrastructure was more reliable than the ISP incumbents’ original T1 communications infrastructure. Later, the city decided to rid of its plain old telephone (POT) lines and use Midwest voice over Internet protocol (VoIP) services.

Because Midwest supported the local industrial park with high-speed Internet access, the city was able to keep the businesses in town.

“The fact that you own a existing public electric business doesn't matter very much if you're continually losing the number of people who work and live in the area,” Dunlap said.

Keeping the bandwagon rolling

Dunlap said that because the city already had fiber in place, it was easier for Midwest to provide Internet services. “They have an obligation to serve members first, so we are mindful of Midwest’s requirements and specifications when we build our part of the network," he added. "Since we own an electric utility, we speak the same language and have the same experiences.” 

If co-ops look at the pros and cons of a potential relationship, cities and smaller towns adjacent to a co-op's service areas can represent revenue and density that can financially complement some of the more sparsely populated areas. A city like Niles can have 40 houses per block and co-ops can have two or three subscribers per mile.

And in Tennessee, partnerships may form as a result of a recent bill in the state legislature that would allow co-ops to sell broadband services for the first time. Municipalities could offer broadband at a wholesale to co-ops. Then the co-ops could provide retail broadband service to individual customers who may be outside a municipality.

“You can make just about any combination work if you get the right players together and they are willing to work together," said Mark Mrla, business unit manager at Finley Engineering Co. "You have to be creative at times. Partnering with a jurisdiction might get you into situations that restrict your freedom. There are reporting requirements, or new leaders get elected in the middle of the project and they have see things differently.” 

But keep in mind that partnering with local government can also open the door to grant money.

“The state of Minnesota has been giving grants away for the last two or three years," Mrla added, "and they can be won by any entity, including a co-op, an incumbent, or regional ISP as long as it serves unserved or underserved areas.” 

Craig Settles Contributing Writer

Craig Settles is a broadband industry analyst, consultant to local governments, and author of Building the Gigabit City. His latest analysis report is Telehealth and Broadband: In Sickness and In Health, an assessment of why telehealth providers and community broadband builders should work together to drive broadband and telemedicine adoption.