Electric Co-ops Build Rural Broadband Networks

FTTH DEPLOYMENTSElectric Co-ops BuildRural Broadband NetworksElectric co-ops in underserved areas have many natural advantages as broadbandproviders. Some are now building out fiber to the home.By Craig Settles / Gigabit NationBroadband is often compared to othervital utilities, such as electricity, waterand gas. When discussing broadbandin rural communities, industry and media drawparallels to the 1930s-era efforts by electriccooperatives to bring electricity to communitiesthat investor-owned utilities refused to serve.Today, electric cooperatives are reinventingthemselves as broadband providers. There areroughly 900 electric co-ops nationwide, whichserve mostly rural areas and small towns.Estimates indicate that 10 to 15 percent of themmay ultimately launch some type of broadbanddeployment to remedy a lack of services fromincumbent providers to their members.Of all the entities capable of drivingbroadband deployment, few are as wellequipped as electric co-ops to build andoperate high-speed networks that meet ruralcommunities’ specific needs. Most have 70plus years’ experience providing a vital service,their existing business and service operationsare similar in many ways to ISP operations,customer loyalty runs deep and communitymembers literally own the co-ops. Co-ops areskilled at building, maintaining and operatingoutside-plant infrastructure. This includeselectrical plant, but many have also built outfiber to substations to meet their internalnetwork needs.Understanding and responding to ruralcommunities’ needs is the modus operandi of10 BROADBAND COMMUNITIES www.broadbandcommunities.com co-ops. Those tasked with developing effectivestrategies for getting better – or any – broadbandinto rural and urban communities shouldanalyze how co-ops are tackling the broadbandchallenge. Metropolitan areas obviously do nothave the issues of sparse population and difficultterrain that rural communities face. However,some aspects of electric co-ops’ operations, suchas being owned by community members andhaving nonprofit status, can be replicated inunderserved urban areas.KNOW WHAT RURALCOMMUNITIES NEEDA challenge for rural communities is developingstrategies that reflect their needs. “A lot ofthe organizations doing economic analysisand creating or influencing broadband policycome from big cities and bring only big-cityperspectives to solutions they recommend,”states Don Sidlowski, civic/government strategistfor the Northwoods Broadband EconomicDevelopment Coalition in northern Wisconsin.“For example, they measure success in terms of anew company’s bringing hundreds of jobs to anarea because of broadband. For us, a company’sbringing 10 jobs has a major impact or havinga dozen senior executives moving here becauseof the good connectivity and then spendingthousands of dollars with local businesses.”Co-Mo Electric in Tipton, Mo., is quicklybecoming the poster child for electric co-ops.JULY 2014

ELECTRIC COOPERATIVES BUILDING ORPREPARING TO BUILD FIBER TO THE HOME(from the Broadband Communities fiber deployment database at www.fiberville.com)PROVIDERSTATE(S)DATEFTTHPROJECT ELECTRONICSSTARTEDVENDORSSERVICESGPONData, VoiceBROADBAND POTENTIAL ad Electric CooperativeMN2010BARC Electric CooperativeVA2014GA, NC2006Allied TelesisActive EthernetDataBolt Fiber Optic Services (NortheastOklahoma Electric Cooperative)OK2014Alcatel-LucentGPONData, Video, VoiceCo-Mo Electric CooperativeMO2011CalixGPONData, Smart Grid,Video, VoiceConsolidated Electric CooperativeOH2012ADTRANActive EthernetData, Video, VoiceDouglas Fast NetOR2002ADTRAN, CienaActive EthernetBusiness Services,DataBusinesses onlyFrench Broad Electric MembershipCorporationNCDataBusinesses onlyGCEC Telecom (Grayson-Collin ElectricCooperative)TXGenuine Telecom (Richland ElectricCooperative)WIGVEC.net (Guadalupe Valley ElectricCo-op)TX2013ADTRANActiveEthernet, GPONData, Video, VoiceHEMC Broadband (Habersham ElectricMembership Cooperative)GA2010Allied TelesisActive EthernetBusiness Services,DataCO, NM2010GPONData, Smart Grid,VoiceLake Region Electric CooperativeOK2012CommScopeLumbee River Electric MembershipCorp.NC2010Allied TelesisMidwest Connections (MidwestEnergy Cooperative)MI2013CalixGPONDataNineStar Connect (company is bothelectric co-op and telephone co-op)IN2002Calix, ZhoneTechnologiesGPONData, Smart Grid,Video, VoiceNorth Alabama Electric CooperativeAL2010ADTRANGPON, ActiveEthernetData, VoicePlumas-Sierra Telecommunications(Plumas-Sierra Rural ElectricCooperative)CA2010CalixRalls County Electric CooperativeMO2010San Luis Valley Rural Electric CoopCOSECOM (Southeast Colorado PowerAssociation)COUnited Electric CooperativeMOBlue Ridge Mountain ElectricMembership CooperativeKit Carson Electric Cooperative2013CalixTECHNOLOGY3DataADTRANActive EthernetCalixVideo, VoiceData, Video, VoiceEPON3333Data, Smart GridGPONBusiness Services,Data2009CalixGPON, ActiveEthernetData2010CalixGPONData, Smart Grid,Video, Voice Richland-GrantTelephoneCo-op, LaValleTelephone Co-opData, VoiceData, Smart Grid,Video, VoiceCalixJULY 2014ERC Broadbandwww.broadbandcommunities.com33 BROADBAND COMMUNITIES 11

FTTH DEPLOYMENTSCo-Mo is notable for being the firstelectric co-op to launch FTTH to all itsmembers using its own funding, withno government support. Big-city tacticsand benchmarks would clearly be wrongfor Co-Mo’s service area, which today ismostly unserved or underserved.Co-Mo conducted extensiveconsumer surveys of its membersto help it determine the extent ofbroadband coverage and to testdifferent service tiers.Another pioneering co-op, MidwestEnergy Cooperative in southernMichigan, believes rural communitiesare best served through a mix oftechnologies. Midwest developed aproposal for round 1 of the broadbandstimulus program that was a hybridfiber and wireless network, thenrecalibrated and submitted an all-fibernetwork proposal in round 2. Thoughneither was accepted, Midwest learnedthat communities’ diverse needs benefitfrom flexible approaches to technology.“Few people dispute that, in manyways, fiber is a superior technology forbroadband compared to wireless,” statesTerry Rubenthaler, vice president ofoperations and engineering at Midwest.“However, the reality is that terrainissues, geographic isolation, lowincome status and other factors make itdifficult in some places to deliver fiberubiquitously. We must be realistic withthe technology we invest in becauseour members expect us to spend theirmoney wisely. Most of them do notcare whether they get broadband overfiber or wirelessly as long as the serviceis available, reliable, affordable and fastenough to do what they need.”Electric co-ops’ customers are alsomembers who own the organizations,elect representatives to co-ops’ boardsof directors, participate actively inmeetings and vote on major issues.This community ownership andparticipation in the governing processensures that the executives runningthe broadband business get plenty ofcurrent and accurate market feedbackthat produces high take rates. Businessmodels that can replicate co-ops’approach have high likelihood ofmarketing and financial success.12 BROADBAND COMMUNITIES IN THE CO-OP TRENCHES“Many co-op members can’t getbroadband, but they know they need itand they want it,” states Alyssa ClemsenRoberts, industry affairs manager forthe Utilities Telecom Council (UTC), atrade association for utilities and co-ops.“A year ago, just a handful of co-opswere offering broadband services. Nowit appears 10 to 15 percent of them areactively planning or building networks,and other co-ops are discussing it whilewatching how initial networks arepanning out.”When co-ops first formed, ruralpeople could barely comprehend thevalue of electric lights in every room, letalone the marvels of TV and Internet.Some people today may not understandwhat a gigabit is, but there is fairlywidespread understanding that life forrural businesses, schools and consumerswill improve with faster Net access.This dynamic drives take rates to thepoint where some co-ops’ goals oftenare met right from the start.“Further driving take rates is thefact that 340,000 people and a sizeablenumber of businesses have movedfrom rural areas in the past threeyears,” states Clemsen-Roberts. Localgovernments and business ownerswho fear their communities willbecome ghost towns are leading theconstituents pressuring co-ops to takeaction and also are potentially some ofthe biggest broadband customers.CO-MO ELECTRIC CO-OPCo-Mo Electric Cooperative, whichcelebrates its 75th anniversary this year,is bringing gigabit service to 34,000subscribers in rural central Missouribetween Kansas City and St. Louis,some in areas with only seven homesper square mile. Co-Mo actually hasdeployed fiber for several years tosupport its internal electric serviceinfrastructure. In 2009, the companydiscovered that 80 percent of itsmembers were relying on dial-up andsatellite Internet services.Moving the broadband needleforward required a level of marketingdiscipline and creativity that allorganizations delivering communitywww.broadbandcommunities.com JULY 2014broadband should study. Co-Mo beganexecuting a pilot that was more than atest to ensure the technology workedproperly. It built a 1,000-mile networkcovering an area representative of itsdiverse demographics and geography.For more than a year, the pilot testedconstruction time and cost estimates,sales tactics, take rate assumptions andother factors that influence businessoperations.“We collected 100 commitmentsfrom members to validate their interestin the service, which mirrors howCo-Mo started when its first memberswent door to door asking for 5prepayments for electric service,” saysRandy Klindt, the general managerof Co-Mo’s communications division.“We determined that buildout costscould be notably less than projected,and we achieved a take rate of about 46percent, which was considerably morethan expected.”Take rates exceeded expectationsas the network expanded. At a recentmeeting of the UTC’s independentoperating unit, the Rural BroadbandCouncil (RBC), Co-Mo and itsvendor/partner Calix reviewed thekey elements of an FTTH businessplan – cost per home passed, cost perhome served, average revenue per userand penetration rate – and showed thatCo-Mo beat business plan projectionsfor every variable.“Co-Mo is a very disciplined butinnovative operator. It is doing somany things right that it serves as anexcellent guidepost to other electricco-ops. Being the first entity to offer asymmetrical gig in a very low-density,rural area is part of that leadership,”says David Russell, senior solutionsmarketing director at Calix, who workswith electric co-ops and municipalities.Co-Mo is continuing to use goodmarketing practices as it swings intofull deployment after completing itsyear-long pilot. In 2013, it completedphase 1 of the project. In the springof 2014, it started phase 2 whiledramatically increasing speeds. StartingMay 1, 2014, Co-Mo raised all its speedtiers permanently, at no extra charge– the lowest tier from 20 Mbps to 35