Minnesota's Rural Broadband Development a Game Changer

The project will get 10 cities and 17 townships above a goal for Internet speed of downloads at 10 megabits per second and uploads at 5 megabits per second across the state.

by Nancy Madsen, The Free Press, Mankato, Minn. / July 20, 2015

(TNS) -- Denny Schultz lives in Sibley County, Minn. Like many in rural America, he has Internet service, but it’s not fast or reliable.

“Last night, my wife was trying to upload photos on Facebook from our future daughter-in-law’s shower,” he said at the recent groundbreaking for RS Fiber Cooperative’s fiber optic network. “She couldn’t get them to upload. She asked me to watch them and went to bed. I finally gave up.”

But it’s not just Facebook photos. Poor Internet access means children can’t use their school-issued iPads for homework at home, health care companies can’t use electronic medical records, and businesses and farms can’t use the latest applications for managing resources or buying or selling goods and services.

For many in rural Minnesota, the information superhighway is a gravel road.

A crew guides the fiber optic cable for RS Fiber Cooperative about 4 1/2 feet into the ground along County Road 8.

Upgrading Internet service is expensive — more so where the customers are sparse. And so Internet service providers have focused on upgrading systems in population centers, where the prospect is a lucrative one and they must constantly improve service in the face of competitors.

But in rural areas, competition is lacking and those who demand speed pay a premium.

About six years ago, after a majority of residents had said they supported finding a way to faster service, local governments in Sibley and Renville counties banded together to overcome that problem.

“All of the towns but two are served by Mediacom,” said Mark Erickson, the economic development agency director in Winthrop who was previously city administrator there. “Some can get 15 or 25 megabits, but it’s a shared platform off old copper wire from different phone companies.”

Wireless providers have some service, but again, the service is expensive and comes with data caps. In the rural areas, some have dial-up or satellite service, but it’s “not a broadband experience,” he said.

The cost of upgrading and expanding the service was more than private providers were willing to spend. The governments, though, sought ways to overcome it.

“In the cities, it costs about $2,500 per connection,” Erickson said. “In our rural area, it’s about $10,000 per pass. We decided early on that we’re all equal in this — there will be no difference in pricing.”

The RS project will be a game changer for businesses and the tools they can use, the co-op members said.

“We can use it for mapping fields,” said Kevin Lauwagie, a board member and farmer south of Winthrop. “When we’re out planting, our planting and resources can be optimized. There are applications to use all the way through harvest.”

These applications include tools to monitor moisture in the soil and apply fertilizer only where it’s necessary, saving money and limiting runoff, which help water quality.

Hog farmers such as Dave Rieke, a member of the Cairo Township Board, can watch live video of animals in their barn and use other tools to monitor the animals and farm business.

“Once we get the fiber cable, the pictures will be crystal clear,” he said, while now they break up or are blocky. “Agriculture has really been as far advanced as any other sector of the economy.”

Broadband access even gives the region hope of major economic development, including an osteopathic medical school in Gaylord.

“That’s one more reason for a fiber improvement to make it as fast in our rural area as it is in the city,” said Cindy Gerholz, vice chairwoman of the co-op board.

Who’s not connected

This project will get those 10 cities and 17 townships above a state goal for Internet speed. In 2010, the Legislature put a goal into law of speeds with downloads at 10 megabits per second and uploads at 5 megabits per second across the state. That speed allows a reasonable level of Internet functions, such as making a video call, checking email or uploading pictures.

This speed does not allow multiple applications that demand high bandwidth, such as participating in an online class while downloading files and watching a video or streaming two high-definition videos, the Federal Communications Commission said.

The state will not make its 2015 deadline to reach these goals, but wired connections at those speeds have increased from 56 percent to 78 percent of Minnesota households over that time.

The state has started counting wireless, or over-the-air, connections, too, which raise the connection level to 88.9 percent.

But wireless connections generally mean cellphone use, which bring hefty charges after meeting a plan’s data cap. The difficulty with getting a hardline connection to everyone in the state is cost. Internet service providers and telecommunications companies are not willing to lay expensive cables without a much higher return on investment than rural areas can provide.

Those who remain unconnected or underserved are almost always in rural areas.

What’s the cost

Both the state and federal government have programs to encourage wiring rural areas. Recently, the FCC announced it would give Frontier Communications $28 million to connect nearly 47,000 rural Minnesota homes and businesses through its Connect America Fund. That money will be paid as an annual subsidy for the company to extend the service to high-cost areas and avoid extra charges to those customers.

The state has also put money into broadband development. The Governor’s Task Force on Broadband has asked for $200 million in an infrastructure grant program, saying it’s a fraction of the total capital investment required to meet the goal. In 2014, the state budget put $20 million to broadband development. This year, the budget for broadband grants was $10.6 million.

Margaret Anderson Kelliher, chairwoman of the state’s task force and a Blue Earth County native, said the state dollars are supposed to be linked with private investment money on at least a 1-to-1 ratio, if not with more private investment.

The task force has estimated that extending a cable-like connection through the the state would cost $900 million, while fiber optic cable to the unwired homes in the state would cost a whopping $3 billion. Any project the state funds is required to have the ability of going to faster speeds of 100 megabits per second.

“We don't think the public dollars should go everywhere,” Kelliher said. “They should go where they make the biggest amount of difference in getting houses and farms connected.”

The cost is high, but Kelliher said the possibilities for rural Minnesotans are huge.

“We know that when families are connected to high-speed Internet, their income increases about $2,000,” she said.

This could simply be a product of being able to file taxes online, she said, allowing families to claim the earned income tax credit or child tax credit. It could also mean selling a good or service online or accessing education.

“These are the sorts of things that the connection can provide,” Kelliher said. “It can help people better themselves.”

How it can work

That’s exactly what residents in rural Sibley and Renville counties are looking forward to.

Crews have begun to lay a fiber optic cable with 1 gigabit per second capacity for a unique public-private partnership. Through RS Fiber Cooperative, more than 6,200 homes and businesses in most of Sibley County and portions of Renville, Nicollet, and McLeod counties will be wired for broadband service.

The co-op is a unique entity — 10 cities and 17 townships working together to bring fast Internet service to their region. The cities have taken out $8.7 million in general obligation bonds which, along with bank loans and other funding sources, will support the first phase of the project.

The first phase, installing the backbone and connecting the cities, will cost $15 million. This phase also includes putting wireless transmitters on cell towers and grain elevators, which will cover 90 percent of the territory involved. By the end of 2016, most of the area will have improved service.

The second phase includes wiring each rural farm, business and home, which will begin in 2018. This is a much more costly endeavor, but by then, the customer subscriptions will start paying down the old bonds and the townships will add their bonds to the pot. The project total is $45 million and will take through 2021.

And throughout the project area, residents and businesses will enjoy the faster speeds at the same or less cost.

The Blandin Foundation gave the co-op money for a feasibility study. The project got a $1 million from Minnesota’s Border-to-Border Broadband Development Grant Program.

The co-op board has persevered through many project iterations. Sibley County refused to be part of the project and some cities and townships dropped out of the process. An earlier cost estimate put the the project cost at $70 million, out of reach for realistic financing. But the phased approach was suggested by Hiawatha Broadband Communications of Winona, which is overseeing construction and will manage the network for the co-op.

“Once you take out loans, even federal loans, you’ll immediately be charged interest,” Hiawatha CEO Dan Pecarina. “It came down to finding out a way to serve as many customers as possible while continuing to build out that network.”

The co-op board and the joint powers board, made up of government representatives from the cities and townships involved in the project, agreed to the approach because it got service to the most possible people in the shortest amount of time.

Hiawatha has used a similar staged process in building networks in southeastern Minnesota.

By partnering with Hiawatha, the project is also an affiliate of U.S. Ignite, a nonprofit that is working on applications to improve the use of cloud computing, video transmission and other tools in business, education, health care and agricultural production, to name a few.

The White House Office of Technology and National Science Foundation started the group with 26 technology companies, including Hiawatha. Being a part of Hiawatha’s network means the region will be able to support start-up technology development.

“The starts and stops made this project stronger,” said Schultz, a co-op board member. “This could be a model for the rest of the country.”

©2015 The Free Press (Mankato, Minn.). Distributed by Tribune Content Agency, LLC.

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