Colby Wells: My words of encouragement to anybody. There's a path forward. If we could build electricity out and in the late '30s and early '40s to less than 4.5 passings per mile back then, you can figure out a way to do broadband. Probably my largest regret that I've had in my career to date is the fact that we didn't have all of our electric membership built out when the pandemic hit.
Teri Viswanath: That was Colby Wells, the CEO of South Central Electric and South Central Connect. Colby’s podcast interview, that took place in the CoBank booth at last month’s NRECA TechAdvantage event, punctuates the need to accelerate the nation’s broadband roll-out.
Hi, I’m Teri Viswanath, the energy economist at CoBank and your co-host of Power Plays.
Rural electric cooperatives across the country are making similar investments to those made by South Central Electric, stepping in to provide broadband to the same communities they electrified in the 1930s.
But just how quickly can these co-ops connect their communities. And, how much of the task are they willing to take on? Well, that is exactly the questions we’d like to answer on this podcast. As always, I’m joined by my colleague and co-host, Tamra Reynolds, a managing director at CoBank. Hello Tamra.
Tamra Reynolds: Hi, Teri. The global pandemic surfaced the importance and availability of online connectivity as Americans complied with social distancing and transitioned to remote work, school, and regular communications with family and friends. Yet, despite billions already invested, the FCC still notes that millions of people lack access to broadband service at minimum speeds of 25/3. And the government has promised billions of dollars of grants to help bridge this divide, which have yet to materialize. So, what’s missing from the equation and how can we collectively achieve deployment in rural co-op communities? I think the answer is getting creative about partnerships.
Teri Viswanath: Well, maybe, let’s do what we do best. That is, lean into cooperation amount cooperatives, and look for the best of strategic partnerships to accelerate broadband connection for our communities.
What you will hear next is a terrific conversation that happened at last month’s NRECA TechAdvantage breakout session, “To Partner or Not to Partner on Broadband.” The moderator of that session was Doran Dennis, a CoBank managing director, you are going to hear him ask the tough questions that get us to the heart of the matter. The responses are going to come from George Weaver, the president and CEO of Central Georgia EMC, and Ray Grinberg, the CEO of Tri-County EMC.
Tamra Reynolds: Central Georgia EMC provides services to over 62,000 accounts in 15 counties just south of Atlanta. Central Georgia has committed to build a fiber-to-the-home network encompassing 5,300 miles of fiber, ultimately reaching 100% of their membership. Conexon Connect will operate the fiber network and deliver broadband service for Central Georgia.
Central Georgia’s neighbor, Tri-County EMC, delivers electricity to over 22,000 meters. Their approach to broadband is little bit different. They decided to be their own internet service provider through their subsidiary Tri-Co-Go, building out 1,600 miles of fiber to deliver services to their membership.
For this discussion, you will first hear Doran asking questions. Ray Grinberg from Tri-Co responds first, followed by George Weaver from Central Georgia.
Doran Dennis: So give us a quick overview of your individual broadband projects and the question about to partner or not partner.
Ray Grinberg: Our broadband project is a 100% fiber-to-the-home project. We started it May of 21, first connected customer, September of 2021. We are now at just shy of 4,000 connected customers. We chose to do the ISP model ourselves. I think that's the big difference in the partnership, not partnership, is I look at it as, are you going to let someone else run the ISP side of the business or are you going to take that all in-house yourself?
Doran Dennis: That's one of the things we discovered as we dug into this a little more. It's a little bit of a misnomer. It's not about partnership. It doesn't matter how you approach this, you're going to need partners. It's just whether you decide to be your own ISP or whether you ultimately decide to partner with somebody to provide that service, which is exactly what you guys did. Can you talk a little bit about that, George?
George Weaver: We decided that we did not want to be the ISP. The Georgia legislature probably the year before had clarified the legislation that electric co-ops can provide broadband. Well, then they basically called us back the next year and said, we gave you the legislation, we gave you the ability to provide broadband. What are you doing?
In February 2021, we announced that we would be providing broadband. We'd be providing a method to get broadband to every location where we provide electricity. We connected our first account in September of that year. As of the end of the year. We passed about 20,000 locations as of last Friday, I think we have slightly over 7,800 active accounts.
Ironically, at the same time that we were looking at broadband, we had just announced Fuel Georgia as a new venture for us. We knew our resources were limited. In Georgia, we are not under in all requirements power contract. We spent a lot of time on wholesale power. Between the wholesale power, the natural gas, growth, and everything else we had, we felt like we could not complete the system at the speed we needed unless we had some relief.
We have experience buying energy wholesale and selling retail. We have experience providing controlling and managing a distribution system. But we don't have any experience in a competitive venture like broadband. So we felt like we needed to find a partner that would work with us and we decided, that it was not for us.
Doran Dennis: You're saying you didn't want to bite off any more than you could chew, because for an electric co-op to start a natural gas business, start a broadband business, and procure all of your own power and do all those things in a single year felt like you were stretching beyond the means and capacity of the folks that you had working for you.
George Weaver: We probably would've had some retirements along the way. I've seen some of the people back there, some of our employees smiling at me. We wanted to keep all of our employees. We didn't want to start losing employees.
Doran Dennis: I think that's fair. I would guess your employees are appreciative of that.
George Weaver: I hope so.
Ray Grinberg: We talked to a million different entities about, local telephone co-ops and other ways of trying to deliver and no one really wanted to bring the project to your entire system. They just wanted to get to the good spots in your system. We had kind of gone down the road and we'd made our decision, I think, on who our partner was going to be at the time as far as helping us design, build a system.
We had visited coops in Mississippi and South Carolina and talked to some around the country. They were all their own ISP. For those in the room, those of us in the co-op world, it's that member relationship. My board was really struggling with the concept of giving up that relationship with the member to someone else.
Doran Dennis: You guys after evaluating a lot of different partners per se, you ended up both selecting to work with the same company, but you also chose to go very different models.
You can talk a little bit, George, about how much of the member relationship do you give up, because now you have a contractual relationship with someone else to be your ISP. But how does that change, or does it even change your member relation?
George Weaver: It's different and that's one thing really important that's to be addressed up front. We have contracts of course with Connect, with the retail provider, on our service levels. That was one of the things we as a co-op and having someone between us and a member, we had to know that call center, billing, everything was handled correctly.
We had to be sure that everything was upfront and that we knew that we have a contact person and if it's a customer issue, there's someone to go out there and take care of that. It's just a little bit different, but you have to be sure your standards are set firmly by contract to go in this if you're going to go with the model that we used.
Doran Dennis: I think the interesting thing is, you're talking about it from that perspective, but Ray, they provide some of the same services for you guys, so you also have contractual relationships with them to provide service, sort of tier two support, you still have that contractual relationship where they’re there providing solutions for you.
Ray Grinberg: They provide us a lot of services. It's just when it came to being the ISP, we looked and said we want to do this. You almost have to go, "Am I going to use my existing customer information system to do the broadband? Do I need to go out and acquire a new one? How do I integrate that into my systems?" Being an ISP has some great parts to it, which is we do continue that customer-member relationship.
Doran Dennis: George, I know you guys met with a lot of different folks and explored a lot of different options for how you were going to pursue this. Talk a little bit about that and how you went about selecting the right partner for your project.
George Weaver: Well, we tried not to do this, but we had members that needed the service. We had directors that were saying, you have to find a solution to get broadband to your territory.
We came back to the one we met with first, Conexon. We knew they worked exclusively with rural electrics. They had success records. We felt very confident with them and we went back with what we called our wish list of what we wanted them to do. From that wish list and from weeks of negotiation, the Connect model was developed and enabled us and Southern Rivers, our neighbor, who shares a county, with us to announce that we would be the first that would use the Connect model, which is now grown and I think currently 17 co-ops in four states have used the same model.
Doran Dennis: Because what you're best at is building poles and wires and connecting things, but maybe that other element is not an area where you've had that expertise.
George Weaver: Right. Just add to that, most who do this, let a third party migrate the work.
Doran Dennis: Ray, how did you guys go about making the decision and selecting your partner?
Ray Grinberg: Well, it was as our members were making those demands and as Georgia was thinking through are we going to amend the act to allow us to the enabling act? We started going around. We probably went to three or four different presentations, talking about, different approaches to designing, building your system. We liked for a lot of the same reasons George talked, mentioned, we felt comfortable with Conexon who had done work with rural electric cooperatives.
Doran Dennis: George, I'm going to switch gears just a little bit and talk about which services and solutions you ultimately decided to provide yourself in-house.
George Weaver: Well, I'll just say anything electric related, we basically handle ourselves. We are operating an electric asset that stops at the outside of a house or business. We would handle anything that would be past the wall of the house. Anything that would be broadband related, we would be working with someone brought to us by Conexon.
Doran Dennis: Ray, under your model, I guess you would have a little more control over selecting who those partners are and I guess same question for you then.
Ray Grinberg: When you're in build mode, we contract everything. We started out with Greg is running the business. I'll just tell you our structure real quick. 4,000 customers and probably even about six or eight, we probably won't look a lot different. He has a marketing person. He's got two customer success reps. We've got a network engineer, if you want to call it that.
Then we see ourselves as we get closer to that, what I would call level plane, where we've built our system out, we'll hire our own installers and techs and we'll bring that in. I actually don't know if we'll ever bring tier 2, tier 3 kind of support in-house. We hope to bring one of our CSRs up to snuff on how to do a lot of the tier 1 kind of support.
If we're super successful and we knock out another 10,000, then it'll change a little bit, but we're going to be pretty lean and we're going to stay pretty lean till we're mostly profitable.
Greg and his people, they're really making sure that they're managing that relationship with the member and the customer. That's why we have our own people go through, even though our project manager does some QC when it comes to that member interface, we do post-install surveys. Our net promoter score is off the charts.
Doran Dennis: That was one of the questions that we talked about earlier on, is how much does it change the speed of your project.
Ray Grinberg: It's really back office. The guys in the field are still stringing strand and cable and fiber. That's no big deal. They don't need back office to work to do that. They know how to do it. We still know how to pay invoices so they're happy. It's the back office on managing the customer that we got to figure out.
Doran Dennis: George, you guys could hit the ground running, right?
George Weaver: For those of you that are not in a fiber project, you don't realize everything that's going on. Typical week, 30 miles of fiber being built, occasionally 50 miles in one week. Pole change out, 50 to 100 pole change out in a week. The effort in just watching what you're doing is just tremendous and you don't need to ever get distracted from that.
Therefore, I can't imagine us taking on everything Ray has accomplished and being where we are right now. We are on schedule and we plan to finish on schedule
Doran Dennis: A couple of years into this, how would you say you look compared to how you thought it was going to be, how your financial projections were indicating it was going to be, how would you say overall it's going?
Ray Grinberg: Our cash flow positive probably is going to come in about where we said. Our take rates are anywhere from 40%-50%. We have a couple zones that we're scratching our heads on why we're not doing better than in the 20s.
I think we're doing really well from all the targets, and the board’s pleased with where we're at. Like I said, the hardest conversation in the boardroom is how do I go off system and when do I go off system because the question you have to ask yourself is, do I go to a non-member before I go to a member?
That's a hard question for your board to get wrapped around.
Doran Dennis: George?
George Weaver: Fortunately, we're on schedule. We should have passed 50,000 locations by the end of this year and by mid-next year should have finished installing the system to all of our members.
Financially, yeah, it's stressing. We had a business plan that showed that we'd get equity would drop for two to three years lower point below which we did not want it to go, but it had to go there. We're also showing that within 10 years, it will be throwing off cash and talking to people who are five years ahead of us, it throws off cash. It is financially stressing when you go through that.
As far as the return of the cash flow, the business plan has been solid.
Tamra Reynolds: These capital projects are enormous so it’s no surprise that getting consensus among board members and co-op staff takes time and patience. But both of these coops are seeing success and proving that there is more than one way to skin a cat from a business model perspective.
I’d like to also point out that we are seeing some creative approaches to broadband partnerships in other states that are worth noting. In Arkansas we saw Diamond State Networks created a couple years ago. They serve as a wholesale broadband provider, or more of a fiber G&T, for electric cooperatives across the state that are engaged in broadband. And just last month we saw the electric co-ops and telephone co-ops of South Carolina join forces in a very unique way to create an association called The Broadband Cooperatives of South Carolina – with the goal to ensure every South Carolinian has access to affordable, high-speed internet.
Teri Viswanath: You know, that’s really helpful. As I think about the conversation that Doran had with co-ops, about how to plan strategically for ‘managing the weight of executing and operating these projects’, and we come back to this fundamental idea of just how important it is to share experiences — the success stories, sure, but also the stories where we’ve stumbled, so that we have a good understanding of our collective experience in this space. For this podcast, that collective experience hopefully highlights the trade-offs of bringing in more pair of hands and whether that trade-off will be acceptable to co-op members.
Tamra Reynolds: I hope all of you have enjoyed revisiting the discussions we had with co-ops in Nashville at TechAdvantage. Tune in next month when we take a look at the challenges with sourcing transformers and other critical materials.
Teri Viswanath: Our May podcast, “The Trouble with Transformers and Other Tales of Supply Chain Woes” comes directly from our TechAdvantage conversations that occurred in Nashville. Please join us then. Bye for now.
