Shirley Bloomfield: NTCA just recently did a survey of our members trying to explore what happens if Universal Service goes away. The conclusion per our survey is that rates would increase by $72 a consumer. Rural consumers can't afford to pay $72 a month more to get the service. Can providers actually afford to build it?
Jeff Johnston: That was Shirley Bloomfield, CEO of NTCA-The Rural Broadband Association about one of the many challenges facing rural American broadband operators who provide essential service in high-cost areas of the country.
Hi, I’m Jeff Johnston and welcome to the All Day Digital podcast where we talk to industry executives and thought leaders to get their perspective on a wide range of factors shaping the communications industry. This podcast is brought to you by CoBank’s Knowledge Exchange group.
Ensuing rural Americans have access to reliable and affordable broadband is a major challenge. For example, broadband operators in rural markets often face tough terrain and hard to reach locations, and the population density makes offering service without some kind of cost recovery mechanism impossible, and getting access to labor is proving to be an ongoing battle.
As the CEO of NTCA, Shirley has a birds-eye view of what is happening on the ground and what needs to be done to ensure all Americans have access to broadband, which is more important now than ever.
So, without any further ado, pitter patter, let’s see what Shirley has to say.
Shirley Bloomfield, welcome to the podcast today. It's an absolute pleasure to have you with us.
Bloomfield: Jeff, it is such a treat to join you. I just want to share how much NTCA-The Rural Broadband Association really treasures the partnership with CoBank. Thank you for the continued dialogue.
Johnston: That's great to hear because we feel the same way. thrilled to have you here today to talk about the digital divide. This has certainly been discussed and written about extensively. I think COVID really exposed how vulnerable those in rural America are who didn't or who do not have access to reliable broadband. If there's one thing folks in Congress can agree on nowadays, it seems like access to broadband is one.
Shirley, if you can just get us started here how would you characterize the current state of the digital divide? Or the current state of broadband in rural America?
Bloomfield: I appreciate greatly because we do hear that term “digital divide” thrown out around a lot. I was really struck by the fact that term wasn't even used until I think it was like 1994, it was put in the Oxford English Dictionary, where they actually started trying to coin a term which basically said who were the haves and the have-nots in terms of technology access, and obviously, specifically, broadband.
You know, I have long really considered it more of a rural-rural divide. I think people tend to like jump right in and think, well, digital divide means rural, these are folks with tin cans and no technology. Then urban America has all the bells and whistles. One of the things that we have found in our space, in that rural-rural divide, you've got the rural America that's really served by those community-based providers who, frankly, their customers are their neighbors, their kids go to the schools, they utilize the local healthcare entities. They have always been so far out ahead of the curve.
Whereas there is another part of rural America on the technology front and the connectivity front that I think has really been second class in some ways. It's larger entities, nationwide providers who honestly have a business case to make, right? I totally understand. They have shareholders they are responsive to.
They look at a rural market, and instead of seeing their neighbors or the immediate economic impact of building a fiber network, they see a cost with very few subscribers to support that cost. So we've always seen a little bit of that delta between how some of those communities get served. I think we really, to your earlier point, saw that difference highlighted during COVID when people were sharing the heart-wrenching stories of kids doing their homework in the Taco Bell parking lot.
We were surveying our members and seeing that 82% of their customers had fiber to the home connectivity. Yet at the same time, I think it's been really, really an important opportunity to educate policymakers as to why it's important to get everybody connected, how we as a country do better the more people that are connected. That is all to say, even though I think NTC members have done a yeoman's job and have really led the way, I think they also have a really interesting role potentially to play into some of these unserved markets where large carriers just really are never going to be able to justify a business model.
But maybe a community-based provider can make that case because maybe it's adjacent to where they already provide service. Maybe it makes sense in terms of some of the state partners they have in the state fiber network.
Johnston: Well said, well said. I want to key in on something you said. I think you made a really good point around the business case and the challenges associated with it for some of the larger operators to be able to provide service in rural America and how that really sets up the local providers to be able to step in and provide that service. Look, these local providers clearly are not operating on the scale of the national operators, so they don't get to enjoy those economics associated with equipment and labor and all those kinds of things.
If it's a tough business case for the national operators to make work, it's even a harder one for the smaller rural operators to make work. I'm just curious, given that as a backdrop, how do you feel about or how do you think about the various programs that are out there today? There are a number of them, government programs to help operators make the business case make sense. Do you think they're addressing all the needs, generally speaking?
Do you think they really take into account what needs to be done from an opex perspective in addition to a capital perspective?
Bloomfield: Jeff, I have so many thoughts on that. You're going to be stunned. You're right. To your point, there's a lot of federal programs. There's existing programs that we've had out there. Again, I think USDA's program, particularly the ReConnect, has been one that people don't pay a lot of attention to because it's just there. It's solid. It's been in existence as loan, and loan and grant programs for a while. That is a program when I look at the recipients, now that we're on round five, a vast majority are my member companies.
USDA understands rural. They understand the economics. They understand the credit worthiness of my folks. But they also understand, to your point, the challenge. You don't have the scope and scale. A lot of areas of the country, you've got a really short build time. You've had inflation. The ability to work with the USDA staff on the ground, I think, has been really a difference maker in that program.
I look at BEAD, and while I continue to be a glass half full kind of person, and we worked really hard on the Infrastructure Act, and I was really thrilled to be in the Rose Garden when the president signed that bill. It's very near and dear to my heart. I think there's some challenges. I think challenges by dint of the fact that you are taking $42 billion of federal funding, pushing it to 56 states, telling 56 states they can come up with their own plan, which is great because they know their states best, but these broadband offices have been stood up very quickly. Not everybody understands the complexity of building a broadband network.
I think you're seeing a variation in terms of what those rules might look like. For example, the size of a bidding area. There are some states that are saying, "You've got to bid for the whole county." My companies might be interested in filling a niche, filling a hole. They do really, really well at that. Where is that gap that they can fill in that for them makes economic sense to do so? Having a huge area is going to be probably not very attractive to a lot of entities.
The other thing as I think about the success of these programs, to your point, is it's expensive. It's expensive to build these networks. It's expensive to maintain these networks. And it's expensive for people to be able to afford these services. One of the things the BEAD program does is it mandates an affordable rate. Some states have been really thoughtful about what does that look like? How do you do some differentials between urban rates?
Some states, the state of New York, has set $15 as a benchmark. How do you go into the most rural, the most difficult to serve area and say, "We want you to bid on this, but by the way, you're going to offer a $15 low-cost rate." I don't even know if a large national carrier can do it. And my last point on your question, Jeff, I think the unsung hero in all of this real broadband deployment success to date has really been because of the Universal Service Fund program.
I think having a program that has been out there for decades that has basically said, regardless of where you live, all Americans deserve access to comparable and affordable services. This program being a cost recovery mechanism, an affordability mechanism that has allowed carriers to make that leap into building networks into these difficult high-cost areas, but knowing they have the ability to do cost recovery on their capital investment and their ability to offer an affordable rate.
NTCA just recently did a survey of our members trying to explore what happens if Universal Service goes away. The conclusion per our survey is that rates would increase by $72 a consumer. Forget the affordability program. Rural consumers can't afford to pay $72 a month more to get the service. Can providers actually afford to build it?
I also find there's a really interesting disconnect between grant money that goes out to build a network and something like the Universal Service program, which is currently under some judicial review. All of those programs have to work together and in harmony, I think, for us to really be successful if we're going to be serious about bridging this digital divide.
Johnston: Yes, those are great points. I think about it from an operator perspective. If you're in multiple states, you've got multiple broadband offices, of course, to deal with. It feels like you're almost trying to herd cats. I'm sure that that's a challenge. Just to go a little bit deeper on the cost side, am I right to understand that the BEAD program helps pay to build a network but doesn't necessarily provide ongoing support to manage the network, which is a pretty significant line item. Is that a true statement?
Bloomfield: That is absolutely a true statement. It's a really important piece because, again, when you think about the BEAD program, one of the things I do love about what NTIA had done with that is they really prioritize those unserved areas. Well, you're an economist. You know that those unserved areas are unserved for a reason, and that is that they have been the most historically expensive to serve.
So then asking somebody to make a commitment, get a grant to build, but not have that ability to have ongoing support, that is a big leap of faith. That is one of the reasons why, again, we've been really in some very serious conversations with the Commerce Department sharing that the success of BEAD in a lot of ways is going to rely on the continued viability of the Universal Service program.
Johnston: No doubt, no doubt. Shirley, what do you think beyond the financing aspect of it? Do you see other challenges that your members are facing, to help make sure that everyone is connected? Is labor an issue? Inflation? Any other thoughts in your mind at all beyond the obvious ones, which I think we've done a good job here discussing around the federal programs?
Bloomfield: Yes. I think there's a number of things that I hear from my members when I talk to them about this. First of all, there's some basic ones, permitting.
Permitting makes everybody pull their hair out. But a lot of it is happening at the state and local level. So how can the federal government actually influence that?
Part of that is staffing, right? I think about things like Western areas, Bureau of Land Management. Trying to get permitting through some of those things is a nightmare. BEAD can have all this money for deployment, but could BEAD do a better job of potentially supporting state efforts? Could some of those funds be used for states to staff up their permitting offices? Are there ways to get through that?
You also raised inflation. One of the things that really has struck me as I've been talking to member companies is those that have gotten funding, particularly, I would say, ReConnect, just because that's a pretty clear-cut program. As they go through the hoops, maybe they went in two years ago to get the funding. Now they're getting the funding, they're getting ready to go. The cost of what they thought they were going to build has gone up, and you know as well as I do, Jeff, 20% to 30%. Most of them are like, “yes, 30% is standard.”
How do you then adjust accordingly? You've got to either go back to the government and say, "You know what? We're going to do 30% less because my cost is 30% higher." That is a hurdle that has been exponential.
Supply chain, you know what? It has been quiet on that front for the last couple of years. Thank goodness, knock on wood. It's one of the reasons why we take our partnership with Corning Fiber so seriously. They were terrific at the end of COVID when we kept seeing our companies get put to the back of the supply chain line in creating a rural set aside. Has that been important this year or last year? No. Will it be important next year when money starts to flow? Absolutely, because I envision that when everybody and their brother is out there looking to start building, my companies have the potential to be at the end of that line again. The willingness of Corning to continue to set aside 45 million feet of fiber and connectivity equipment is really important because I think we're going to see a squeeze. That money is going to come out five-year build time. We're talking about a really compressed space in the supply chain market once again.
Those are things I think about a lot. Then in rural markets, honestly, it's finding those bodies. They're growing, my companies are growing. It's hard to get the workforce. I don't think we're unusual. I think you could probably talk to fast food and construction and manufacturing, but that is definitely a challenge. It's hard to compete when you're competing with those companies that have scope and scale or they may have an enticing lifestyle for young people, working out of Chicago, instead of potentially rural Western Illinois. A lot of variables that I think we're going to see coming.
Johnston: Yes. Wow. For sure. Running a broadband network is not for the faint of heart. It's complicated stuff. Even for the big guys, who don't struggle from a lot of the challenges you've talked about are having a hard time meeting their plan. When you're a smaller operator and dealing with all the rural specific dynamics and challenges associated with running a network, it's hard.
We've even seen some companies, they get their greenfield deployments, and they get money from a institutional investor who wants to “get exposure to digital infrastructure.” Here's X amount of money and go launch a business. They get into it. Then it's like, two years later, it's like, wow, this is actually a lot harder than we thought. It's no joke.
Bloomfield: It is harder. I think the return on investment is longer than some people assume. The thing that I like to think about, though, in our markets is the rewards, it's the stories. We think a lot about building smart rural communities and what that means. It really means bringing your whole community along with you as you're deploying these networks.
We think a lot, too, about the fact that, as a career, the ability to start off maybe as a tech and a community-based provider, you can become the CEO. It is an amazing career path. Having worked for large nationwide providers, I know, you become a cog. You may think you're as impactful as you can be, but you're still a cog. I do think there is some pull. We just need to probably get that word out a little bit more and help our members be able to tap into that with their young people, their high schools, their tech schools, things like that.
Johnston: Yes, Being a part of that company where you're really truly making an impact on the community, a crucial, a profound impact on the community, is, I got to go think, pretty powerful, because I think most of your members rank pretty high on customer satisfaction. I think they do a really good job with their communities.
Bloomfield: It's a great differentiator. Every time they show me their NPS scores, I'm always blown away, which is really that sign of, would you recommend this company to your friend? Indeed, and it is that customer service. It's that customer touch. It's that willingness to go out and reset somebody's router because they don't know how to reset it. It's taking away the fear factor from some of the technology. Again, that helps propel rural America and these communities forward.
Johnston: Shirley, I wanted to go back and touch on something that you mentioned, which is the Smart Rural Community Initiative that the NTCA and you and your team are championing, which by the way, I think is a fantastic program because it really highlights the impact that broadband networks and broadband access can have and have had on communities, economic impact, social impact, et cetera. I think it's really important.
Maybe you could just spend just a moment, Shirley, just talking about Smart Rural Community and if there's any stories or things you think are important around the impact that these networks have had in your member communities.
Bloomfield: Oh, I so appreciate your asking, Jeff. It is near and dear to our heart because we really started thinking about a decade ago about how do you really tell this story, how do you really get your community excited about what you're doing It's taking a little bit of the focus away from the provider to saying, the provider, by definition, and to be a Smart Rural Community provider, we have about 280 of them across the country, you do have to have a certain standard of service, a certain amount of fiber in your network. It is the ability to showcase what that network means for the people you serve, what it means for the schools, what it means for your healthcare, and really elevating and lifting up for everybody the economic impact of what broadband actually brings to a small community. This program has really helped our members tell that story in some ways, but also to get their communities excited about what they're doing.
I have gone out to so many ribbon cuttings in these communities and having Smart Rural Community cakes and having the mayor of the town there, but showcasing then going into literally the two-room local health clinic that is connected to Vanderbilt University that NCTC has done in Tennessee, where they are able to now do remote health directly with Vanderbilt, and showcasing that to the people who live there.
I think about companies like PRTC in Eastern Kentucky, who was able to recruit about 1,500 to 2,000 people in the region to train for remote work. One of the things I love about the program is these providers sharing with each other things they're doing. Maybe they're setting up a remote health clinic for vets in the area through VA Health that is in the local library. All of those things are part of being a Smart Rural Community. How does that technology make your community smarter?
Johnston: I love it. I just love it. That's wonderful. It's just great to see how these networks are having such a profound impact on people's lives. It's just wonderful. Thanks for sharing that. As we wrap it up here, Shirley, we've covered a lot of great stuff. I did want to give you an opportunity to share anything or talk about anything that we didn't cover that you think is important?
Bloomfield: That would be great, Jeff. Thanks for the platform. Two things that I would say. One is that we think a ton about all of the money going into building the networks. The other thing that I think community-based providers do really well and should not lose sight of is that digital inclusion piece. You may build the network, but what are you doing to get people connected to the network, to get them engaged on the network, to fully utilize the network?
Are we reaching those senior citizens? Are we reaching those young people? Are we reaching those communities that might be a little bit off the beaten path? I think there's going to be a ton of funding in that arena as well.
The second thing that I would say is, again, with all of the excitement about the federal funding and all of these programs, certainly here at NTCA, we are not losing sight of the importance of the ability to maintain, sustain, and keep these networks affordable.
We're going to be working really hard over the course of the next year to ensure that if the Supreme Court hears the 5th Circuit ruling on whether or not USF contribution mechanisms are constitutional or not, that we are also working with Congress to impress upon them the importance of that program in terms of being able to maintain all of these amazing networks that have been built in rural America. We can't go backwards. We can't afford as a country to go backwards.
Johnston: Absolutely. Look, Shirley, you're the best. Thank you so much for being on. I got to tell you, rural America is really lucky to have you on their side, I think you do just a wonderful job supporting all that needs to be done in rural America. Thank you for being on the podcast today, this was a lot of fun. I really appreciate it.
Bloomfield: Jeff, thank you. Thank you for all you do. Thank you for continuing to share your insights with my membership, and my thanks to CoBank for always supporting rural America.
Johnston: A special thanks goes out to Shirley for being on the podcast today. Wow, like I said, rural America is lucky to have such an outstanding advocate in Shirley Bloomfield.
I think what stood out to me most during our conversation are the challenges with the various government programs and ensuing they all work in harmony to achieve the desired goal of getting people connected. These programs are well intended, but I get a headache thinking about all the factors that need to be considered when applying for the support and managing through the risks.
Hey thanks for joining me today and a special thanks to my fellow CoBank associates Christina Pope and Tyler Herron who play a critical role in making this podcast a reality. Watch out for the next episode of the All Day Digital podcast.
