Teri Viswanath: Rural America, we've got a problem. About three out of 10 of us don't have reliable internet. For low-income homes, that number rises, fast approaching 50%. The research shows 40% of schools and about 60% of healthcare facilities outside metropolitan areas lack broadband. This is the digital divide and our rural co-ops are working on it.
Welcome to Power Plays. I'm Teri Viswanath, your host, and lead economist for power, energy, and water at CoBank. I'm joined with my co-host and CoBank managing director, Tamra Reynolds. Tamra, we've been talking a lot lately about what it means to be a trusted energy advisor, and you reminded me why rural communities formed co-ops in the first place.
Tamra Reynolds: Hey, Teri. That's right. We discussed that in the late 1930s, electric co-ops were formed to improve the quality of life for rural Americans. Living in rural America was really tough, especially if you think about going through the Great Depression, the Dust Bowl era, it was a challenging time. Those co-ops played a key role back then and still today by providing reliable, affordable access to electricity. In fact, it's in almost every co-op's mission statement.
Teri: You see parallels today with provisioning rural communities with reliable and affordable broadband access. What's more, as a CoBank banker, you've been working with co-ops for a little bit more than a decade financing broadband projects in rural communities. Today's program for me, at least, feels a little bit like a day in the life of a CoBank relationship manager, where we're evaluating business plans and financial models with co-ops who want to extend broadband internet to rural communities.
Tamra: Rural broadband solutions require some creativity and cooperation similar to what it took during the '30s era for rural electrification, but there's no doubt that the community economic impact is just as, if not, maybe more impactful today with broadband. In fact, a Purdue University study showed that for every dollar invested in broadband, nearly $4 came back to the local economy.
I have witnessed, firsthand, the importance of strategic partnerships between electric co-ops and those technical consultants in delivering high-speed internet to these rural communities. Today's program is like SportsCenter, where we're going to highlight all-star coaches or consultants and their playbooks for success with electric co-ops.
Teri: Tamra, you and Doran Dennis, he's another managing director at CoBank, did a great job with setting up today's all-star lineup. We'll start our conversation with Carl Meyerhoefer. He's a senior vice president of business development at Conexon. That organization was founded by an electric co-op broadband pioneer, and then we're going to continue the journey with Aaron Bennett. He's a vice president of broadband development for NRTC. Finally, we'll finish off with TWN Communications’ CEO, Colin Wood. He's an important co-op partner providing internet services to our rural communities for more than 20 years. Here's that conversation with Carl.
Tamra: We're here with Carl Meyerhoefer, SVP of business development with Conexon. Hey Carl, thanks for joining us.
Carl Meyerhoefer: Thank you for having me.
Doran: Carl, could you give us a little background about Conexon and where you are today in terms of your market share with the electric cooperative industry?
Carl: Absolutely. Thanks for asking. We are currently working with about, I would say 65 or so electric cooperatives building out networks, and we're probably deploying, right now, about a thousand miles of fiber a week, so very significant amount of network being built throughout rural America today. The company was founded by Randy Klindt, who is a general manager at Co-Mo Electric. Randy worked at Co-Mo, was one of the first organizations, electric cooperative organizations to build out fiber network to 100% of the membership and do that without any government subsidy.
In order to do that, Randy had to innovate and look for the most cost-effective way to build out fiber into these very rural areas, and down to a density level unheard of in the past below 8 meters per mile.
Doran: How are those 65 projects performing? If you had to summarize the co-ops out there that are doing this work financially from a member perspective, how are the projects doing?
Carl: Sure. A great question. I would say that if you talk to the CEOs or general managers of those cooperatives, they've had an extremely positive experience. Whether that's from a financial standpoint in terms of meeting or exceeding the business plan projections that we worked with them on, but really when it comes to the feedback that they're getting from their membership, off the charts positive. They said it is really transformed the relationship that they've had with their membership all in a positive way. They have members chasing trucks down the street asking when service is going to become available.
They get these phenomenal stories about how this broadband service is changing the lives of their members in terms of their ability to be able to work from home, take remote jobs, start new businesses, be able to connect with family members that are distant from them. There's just a tremendous number of positive feel-good stories associated with the deployment that even goes well beyond the success they're having financially.
Tamra: Talking a little bit about Conexon's business strategy, a couple of years ago, the Rural Digital Opportunity Fund came about and you guys were instrumental in changing the game for how electric co-ops bid in that process.
Carl: Absolutely. We were successful in obtaining $1.1 billion. About half of that was on behalf of our clients, but the other half of that funding was for this newly formed ISP that we created called Conexon Connect that you mentioned. Conexon Connect was really born out of Conexon doing probably in excess of 250 feasibility studies with electric cooperatives. While we are currently working on those 65 that I mentioned, there was a number of other projects that we did studies for that looked really positive and looked like a really good business model. But unfortunately the cooperative just may not have been able to make the leap into starting a broadband subsidiary and getting into the broadband business themselves.
While financially, the model looked good, maybe just culturally, some of those cooperatives are just not ready to take on a whole new business. Looking at those models and having those conversations with those cooperatives, what really was needed was someone else to operate the broadband side of the business in partnership with the electric cooperative.
What's really unique about this particular partnership model is with each one of the cooperatives that we work with, we will model them getting into the business themselves the same way we have historically. They will then have the option whether they want to enter the business themselves and follow the model that we've created or the other option is to have Conexon step into the shoes of the operator. We're actually so confident in the model that we create, that we're willing to step into that, the shoes of the operator and work in partnership with the cooperative in the exact same way, exact same model that we've created for them to do it themselves.
Doran: The Infrastructure Investment and Jobs Act legislation passed at the end of November last year, and it supports several electric co-op priorities, including rural broadband. What do you think some of the key provisions are, that were included in that legislation, that would help electric co-ops if they decide to pursue a broadband deployment?
Carl: We're really excited about the funding levels that are available, but we're also excited about some other programs that are, as of the beginning of this year, now are going to be available and there is one in particular, and that is the Affordable Connectivity Program, where there is going to be a $30 subsidy, where there is a $30 subsidy that is being offered to low-income families. What we believe that that will do is not only make it affordable for all, but also from a cooperatives perspective, that'll significantly drive up adoption and take rates, which further enhances the financials of the business model.
Let's understand right, that the cooperatives typically operate in a demographic that, that Affordable Connectivity Program is really going to make a big difference to probably over 50% of most of their members. It's a really exciting program when you can stitch all of these funding opportunities together and really be able to provide a stellar service in rural communities that rivals and beats what you would find in an urban area to that.
Doran: What advice do you have for co-ops today to start preparing for that funding that's coming in the future?
Carl: I would say the very first thing is get a business plan and feasibility study done, this way that you have all of the information, all of the financials, and you can take that information when the time comes that you're able to apply for some of these programs. You've got all the information available to you to be able to request and ask for reasonable funds that have a highest probability of getting approved. Be ready, because what we think is going to happen is these programs are going to get solidified, the funding's going to become available, and then you got to act quickly.
Tamra: Carl, that's great advice. I think being prepared and being ahead of the game is definitely the way to succeed in this industry. Carl, we appreciate your time today. Very insightful information about Conexon and what you guys are doing, as well as how well your projects are succeeding and we're happy to see that. Thanks again for your time.
Carl: Thank you very much for inviting me on the show here and also really enjoy working with CoBank as a partner as well.
Tamra: We'll be right back.
CoBank promo: Electric co-ops are leading the charge to bring broadband to rural communities across the U.S. CoBank offers competitive terms, pricing, and the expertise you need from a financial partner to make your project successful. Call your CoBank relationship manager today for more information about financing rural broadband.
Tamra: Welcome back. Teri, I never lose sight of our mission and the importance of doing our due diligence on projects so we can help cooperatives achieve financial success in rural communities. Carl speaks to the fact that there are so many feel-good stories about closing the digital divide. For example, addressing the disparity for education access on what researchers call the homework gap. The difference between school-aged children who have access to high-speed internet at home, and those who don't.
Teri: That's right. Do you remember the conversation we had with Luis Reyes from Kit Carson last year? He talked about how the past two years and the need to work from home for his members really surfaced the importance of broadband for his community. A similar story from Ozarks Electric in Arkansas merged during the pandemic when they partnered with a local school district to create a fiber to bus, and they built out Wi-Fi hotspots in their rural community for expanded student broadband access.
Tamra: Clearly, we see the importance of accelerating the pace of access, but these community commitments are truly generational investments. It's important to make sure that they are financially feasible for the long haul. How can we build the local expertise for sustainability in our communities?
Tamra: We sat down with NRTC’s, Aaron Bennett, to figure that out, and here's what he had to say.
Teri: We are joined today by Aaron Bennett. You are the Vice President of Broadband Development for NRTC so welcome.
Aaron Bennett: Thank you.
Doran: Why don't you start by telling us a little bit about NRTC and what you guys do.
Aaron: NRTC is a national cooperative. We are basically owned by the electric cooperatives and telephone cooperatives throughout the country so much like our cooperative members, we exist to serve them, the way we do that best is technology advice.
Doran: Maybe talk a little bit about one of the projects that NRTC is working on, what kind of projects is NRTC having success with?
Aaron: All types. We do have hybrid fiber, fixed wireless projects that have been very successful in Kansas and Minnesota. We've got fiber projects in Texas. I'm going to forget people, but so in Texas, we've got a project that's well exceeding their take rate goals. Down in Mississippi, in Alabama, all throughout Indiana, lots of successful projects. We don't have any projects that have actually not achieved their financial goals when they're more than two years into it so it's nice to see it.
Doran: How did NRTC get started in the broadband space? How has that evolved over time?
Aaron: What we're seeing a lot more today is partnerships between electric companies and telephone companies.
Doran: Talk a little bit about what co-ops, who are thinking about a broadband deployment, should consider in terms of a partnership.
Aaron: I think the biggest key is to have clear roles and responsibilities lined out from the very beginning. The electric co-op, again, relying on their strength is very good at maintaining cables on poles and maintaining that plant over decades, providing 24/7 customer service. Taking broadband to customers, that's what the telephone companies do. They do that in their sleep, they do that when the electric co-ops are sleeping so I think just rely on each other's strengths. The electric co-ops also have the innate ability to manage longer-term assets better as well. If the fiber itself is a 30-year asset and you're putting all of that on the electric co-op's books, it makes it much easier for the telephone companies to make the money they need to make to provide a high-quality service.
Teri: I think that leads us to most of our member experience is actually really great with their electric co-ops. There's a benefit that you already have a reputational benefit with their co-ops coming in and providing these services and I think maybe the challenge being to keep the same level of reliability with this new service, right?
Aaron: Yes. Exactly right. It goes beyond just customer service. The electric co-ops have been known for decades to leave no member behind. There isn't a debate of whether or not I'm going to be able to get service from my electric co-op, they're going to get it to me, even if there's some aid to construction or something, they're going to make it happen. Having faith in your local electric co-op to be able to make good infrastructure decisions as we go, that's where the comfort comes from the members in these rural areas.
Doran: That lends itself to a conversation about the evolution of providing service. Co-ops have traditionally been known for providing ubiquitous service to their members so every member gets the same service. Very early on, a lot of cooperatives were deploying hybrid solutions for their broadband projects where there was certainly a fixed wireless portion of the project and then a pure fiber portion of the project. How has the government funding programs that are out there now really shifted that? And is there more emphasis now on fiber than there was before as a result of the programs?
Aaron: There is but it's a double-edged sword so you're exactly right. A lot of our feasibility studies, even five years ago, were hybrid fiber, fixed wireless feasibility studies where we can take fiber all the way down to five homes per linear mile of density, even four homes in some cases, and really dig deep and take fiber as low as you can. Then you're going to have to fill in with some fixed wireless where it just doesn't make any financial sense to bring in fiber.
Now, in the past year or so, a lot of those studies are being flipped on their head saying, "Okay, so now, how much grant money do I need in order to make that lower density area make sense instead of using multiple technologies?" That can work but then you end up with more demand and as you can see with all our supply chain management issues the price of materials and things are coming up on fiber. We're pushing on things and pulling and we'll see, but I think fixed wireless is still going to have a role in the future.
Teri: As you approach the priorities over the next, say, three years for your organization, on addressing this, what might they look like, what are they?
Aaron: Well, I have to say that those priorities haven't changed for us and it's not about building networks. Anyone can fly in a bunch of people and build a network. Ours is more about building capabilities within the cooperative communities we serve and having people locally that know how to make good decisions and know how to continue to expand and design and continue to build this network because if we just build a network and leave and they don't know how to operate and maintain it, it doesn't help anybody, right?
Teri: Yes. That reputational risk that may occur if you just do a fly-by, right?
Aaron: Yes. What you're pointing out is, yes, it's going to take a lot of time, effort, and thoughtful money to train those people to be able to exist on their own once the network's built.
Teri: If we think about how the pandemic has changed the sense of urgency around serving these communities that we now have funding, are we going to continue to have the same momentum over the next three years as we work through the funding in connectivity?
Aaron: I think so, I mean it's not just the funding being available but we have a ton of co-ops that have forged the way 10, 15 years ago. This current wave of co-ops that are finding success in the same area, it's just more proof that pretty much all these guys can do this. You need to find yourself in the right space though. Your electric work plan is obviously your priority and if there isn't space in your work plan to take on another project, these broadband projects, by the way, they're generational decisions.
In most cases, you're going to double the asset base of the electric co-op by rolling out a fiber plant and that's a big decision. The fact that people are taking their time and being thoughtful about this, that's not a surprise at all.
Teri: Well, that's great. Thank you so much, Aaron. I appreciate that your time, it's great to have you on our Power Plays podcast program and really enjoyed the visit.
Aaron: Thank you.
Teri: Tamra, Aaron makes this critical point that their focus is more about building capabilities within the cooperative. Having people locally know how to make good decisions and how to continue to expand and design local networks because if NRTC just applies their technical expertise in building out the network, only half of the job gets done.
Tamra: That expression, "Give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime," really rings true here. The conversations with Carl and Aaron both talked about the forthcoming federal funding and our last interview with TWN's Colin Wood, he provided a playbook on orchestrating the necessary policy piece of the puzzle.
Teri: You know building momentum toward a community-based broadband solution feels like building a political campaign. Colin stresses the importance of defining, up front, what the carrier co-op political partnership should look like and the need that, that relationship be well articulated to get these projects to the finish line. I like the way that Colin presents his coordination. Have a listen.
Tamra: Colin, welcome to the CoBank booth.
Colin Wood: Well, thank you. Thank you for inviting me.
Tamra: Why don't you give us a little background for those that don't know about TWN, give us a little background about your company?
Colin: Our company started off in the communications world primarily in long-distance voice services back in the 1980s. In the 1990s, not only did we move forward with a lot of different products and services beyond traditional long-distance voice, we began to work with electric cooperatives and partnership programs in which we, together, were the communication provider and the co-op was basically the market arm if you will.
Over time, it's become more and more of a true partnership where we, today, do a lot of work with electrical cooperatives to get broadband services to members utilizing every tool possible. That includes assisting co-ops with financing so we pay for part of the capital of the project build. We also have a lot of platforms that have been developed over time which includes all the network monitoring management, et cetera, as well as design services.
Essentially, the deeper that you get into some of these projects, it requires greater contractual recognition of who does exactly what, to make sure that everyone's role is pretty clear, and to also make sure that goals are aligned and that's proven to be very successful.
Doran: We've seen over time, that co-ops, very early, started doing these projects somewhat on their own but more recently, we've seen a trend where co-ops are pursuing a partnership model. Can you talk a little bit about the way you approach that partnership model, and how that benefits electric co-ops and maybe some of the challenges that come along with the partnership model?
Colin: What we're trying to do is ensure that both organizations have a common set of goals. When you've got common goals, then regardless of the technology or how complicated these things are to actually deploy and properly operate, if you have common goals, it's going to be a winner because everybody has risk and responsibility and the desire for a positive outcome.
Doran: Switching gears a little bit, let's talk about funding. We know that the Infrastructure, Investment, and Jobs Act legislation was recently passed. How has that changed your approach to deploying broadband? How has that supported your business model in working with electric cooperatives? And overall, just how does that change the landscape for broadband in rural America?
Colin: From our perspective, we've really ramped up our technical support team to be able to do grant writing, to be able to reach out, and work with the political entities that are really a very, very important part of this process. Make sure that your political partners are fully embraced and engaged, and helpful in so far as defining what the carrier co-op political partnership may look like, and is well articulated.
One of the other things is to ensure, at the state level, that you have time right now, to start to tackle things like ensuring you've got enabling legislation for things such as right of ways, to ensure that issues don't arise in so far as what was an energy right of way, but can now be used for communications. If you have oversight in so far as regulatory authorities, to be able to enter into projects like this, which also may have funding requirements that go beyond grants may require borrowing and that type of thing, to ensure that your state regulators are supportive of them.
You're clearing as many of these things as possible ahead of time. We're also assisting in entities such as co-ops doing studies right now. Doing the initial feasibility level design work, getting bills of material prepared for them, preparing studies that show appropriate grant levels to have the dynamic, if you will, of the kinds of speeds that are going to be necessary, these networks to deliver, and have that ready to go at a point in time when the notice of funding opportunities begin to be made available.
Everyone needs to think in terms of having a network's that going to be able to capably deliver the speeds that are going to make you eligible for the funding opportunity. As I said, I think electric co-ops are well-positioned to be very successful in being able to attain some of these grant opportunities, and really move the needle in terms of bringing true broadband to some of the rural areas because of a number of reasons. We know issues with broadband maps and those types of things, this has a chance to be a true game-changer. That's a fascinating thing to be a part of.
Tamra: I'm really proud of this program and the engagement we had at Tech Advantage in Nashville. In my mind, the spirit of the rural electrification movement of the '30s and '40s, along with appropriately managed federal support is really a template for closing the digital divide in rural America.
Teri: What I found fascinating about the way you and Doran orchestrated today's program is that there is not simply one path towards a successful broadband partnership, but rather, a relatively important diversified field of players, each bringing a different, but deep bench of technical expertise to our co-ops.
Tamra: That was exactly our intent. I hope that our listeners have enjoyed today's program. Tune in next month when we refocus our attention on member technology adoption and the changes that these home appliances will bring about for our electric co-ops. Bye for now.
