State policymakers are increasingly looking for new solutions to improve broadband availability, especially in rural and unserved communities that often lack the profitability to attract traditional commercial Internet service providers (ISPs). Strategies currently being deployed to ensure widespread access to high-speed Internet include allowing electricity cooperatives to provide services, forming regional utility districts to provide broadband, and using investor-owned utilities to improve the availability of critical infrastructure.
Nationally, heads of state are now planning to shell out billions of dollars from the U.S. Federal Bailout Act (ARPA) and the Infrastructure Investment and Employment Act. The provisions of both laws underscore an important point: there is no single solution that will connect all communities to affordable high-speed Internet. For example, the ARPA program rules for the State and Local Coronavirus Fiscal Stimulus Fund and the Funds for capital projects encourage state governments to prioritize projects from co-operatives, non-profits and local government-affiliated networks when deciding how to allocate broadband funding.
The Infrastructure Act provides $42 billion to states for broadband subsidies and specifically prohibits the exclusion of cooperatives, local governments, and utility districts from eligibility. The law also includes $1 billion for infrastructure that builds the middle mile, the part of a broadband network that connects the backbone to the last mile. The last mile is the segment that connects a local Internet service provider to a customer, for example via a cable line to the home.
Electric cooperatives, regional utility districts and investor-owned utilities could each be used, depending on the specific circumstances, to help address the market failure that has contributed to some $42 million Americans do not have access to broadband. The benefits and potential challenges of these models will be explored in a series of three articles, the first examining the potential role of electric cooperatives.
Millions of Americans, many of whom live in rural areas, do not have access to broadband service. To meet this challenge, some electricity cooperatives offer their customers high-speed Internet access in addition to their electricity services. Electrical cooperatives are private, not-for-profit organizations that supply electricity to customers in their service areas. They are customer-owned and operate on a cost-of-service basis, returning additional profits in the form of dividends to members or to invest in infrastructure.
The expansion of electric cooperatives into today’s broadband market mirrors their initial entry into the utility market in the 1930s. At that time, only about 10% of rural America was electrified because deploying the necessary infrastructure in rural areas was expensive and population densities were low. For utility companies, usually private or municipal at the time, rural areas were less profitable to serve than urban areas.
Electric cooperatives were formed to meet this challenge and bring electricity to rural America. In 1935, President Franklin Roosevelt created the Rural Electrification Administration (REA), and in 1936 the Rural Electrification Act, which granted loans for rural electrification projects, was enacted. The following year, the REA drafted the Electricity Cooperative Society Actwhich many states later used as a model to empower legislation to form electric cooperatives. In 1953, less than 20 years after Congress approved the Rural Electrification Act, more than 90% of farms had access to electricity. Today, electricity cooperatives serve 56% of the country’s landmass, but only about 13% of its population.
As with electricity in the 1930s, broadband access in rural America continues the availability of trails in cities and suburbs. Traditional Internet service providers have not found it profitable to build expensive infrastructure in areas where few people are scattered over large tracts of land. Electricity cooperatives therefore offer a potential avenue for extending rural broadband access. Currently more than 200 electrical cooperatives throughout the territory are working on plans to bring broadband services to their members.
Many electricity cooperatives are well placed to bring broadband to rural areas because they already provide electricity service to many of these communities. They also have many of the resources, equipment and personnel needed for their electrical operations. Co-ops have built infrastructure such as utility poles that can be upgraded to incorporate fiber as part of smart grid modernization projects. And they can leverage existing resources, such as trucks, administrative staff, customer support and billing systems, to serve broadband customers.
In recent years, more and more states have expanded the authority of electric cooperatives to provide broadband, both explicitly through legislation and government practice. Many of the policies allowing co-ops to provide broadband services require them to form a separate subsidiary and prohibit cross-subsidization of operations.
from Tennessee law, for example, explicitly prohibits cooperatives from financing service operations using the profits generated by another service. Likewise, in its enabling legislation, Georgia allows electric cooperatives to provide broadband services as long as there are no cross-subsidies between their different lines of business. Yet studies show that deploying existing infrastructure to deliver broadband service could reduce the total estimated cost of bringing fiber to every unserved home in the United States by 8 to 15 billion dollars.
States also allow electric cooperatives to reallocate resources in other ways, including using existing electrical easements deploy the fiber because the process of obtaining such easements can sometimes be cumbersome. For example, unless state policy specifies that existing easements may be used for broadband easements, cooperatives must first obtain an agreement of every property owner whose property will be traversed by their broadband infrastructure, a process that can be time consuming and costly. Yet electricity cooperatives have been providing broadband services to rural customers for more than a decade, and the number of those providing high-speed Internet is growing.
In 2016, Delta-Montrose Electric Association, a Colorado power cooperative, launched a broadband division to provide members with gigabit service through the installation of 4,000 miles of fibre. More recently, the Oregon Coos-Curry Electric Cooperative started to provide fiber optic broadband service to members. Executives plan to build more than 1,400 miles of fiber on the southern Oregon coast, where internet technology has been limited to cable and DSL.
Partnerships between telecommunications cooperatives and electricity cooperatives, which often share customer bases, have also emerged to provide broadband services. These entities combine resources to deploy fiber infrastructure, but they can take different funding approaches such projects: some share the construction costs, while others have a single partner who pays all the initial costs. One of the first examples of such a cooperative approach is collaboration 2016 between Arkansas-based Ouachita Electric Cooperative and South Arkansas Telephone Co. to build an 1,800-mile fiber optic network to rural Arkansas. Several cooperative broadband telecom-electric collaborations have been announced in 2021, including Smithville, a local telecommunications provider, and Utilities District of Western Indiana working together in indiana and Palmetto Electric Cooperative and Palmetto Rural Telephone Cooperative in rural south carolina.
A major challenge for electric cooperatives looking to provide broadband services is securing funding or funding for deployment. Because they don’t have as much capital as traditional Internet service providers, co-ops often look to state and federal programs for additional funding for these projects.
The United States Department of Agriculture ReConnect Loan and Grant Program is a $1.5 billion federal broadband fund for rural Internet service providers. Electric cooperatives have experience borrowing from the USDA, including through Log back in. Cooperatives are among the entities that have obtained 15 additional points in the ReConnect’s application scoring processwhich may give priority to those of cooperatives over others.
Electric cooperatives, on the other hand, have received broadband funding from state broadband subsidy programs and continue to earn substantial amounts of state broadband funding. In 2021, five electric cooperatives in Tennessee received a total of $5.3 million in funding state grants to expand broadband to rural parts of the state. Virginia awarded four co-ops $162 million in funding its grant program and ARPA funding at the end of 2021. And Iowa recently announced winners of its broadband grant program, Empower Rural Iowa; electric cooperatives were among the recipients of more than $210 million awarded.
Experience in recent years shows that electric cooperatives can be used to expand broadband infrastructure in rural areas, so that more Americans are connected to this essential service.
Anna Read is a senior executive and Lily Gong is associated with The Pew Charitable Trusts Broadband Access Initiative.