Over the past year I’ve spent a lot of time talking to key new players in deploying broadband to rural America: electric cooperatives. Due to the lack of investment by the local telcos and cable operators, these co-ops have decided to deliver a suite of modern connectivity and communication services to their members and help enrich life and commerce in their communities.
According to the FCC, 39% of rural Americans (23 million people) lack access to 25 Mbps/3 Mbps broadband compared to 4% of their urban counterparts. Rural businesses struggle to meet the needs of the evolving digital transformation, large corporations seeking a skilled workforce outside high-cost urban areas can’t keep telecommuters, and consumers suffer lacking the ability to get the next generation of media and entertainment.
Starting in the 1930s co-ops were formed to bring electric power to rural areas in the United States to improve the efficiency of work and the comforts of home life in rural areas. Today, electric cooperatives are leading the charge in delivering fiber-based broadband services to these underserved markets and address this broadband gap. With speeds up to 100 Gbps, this is like going from candle-lit dark hallways to turning on every possible light inside and outside the house immediately!
Why co-ops and not a traditional telco or cable MSO? As member-owned and driven businesses, co-ops have a stake in the stability and growth of their local communities. Plus, they are deploying fiber for smart grid applications, have rights of way, a loyal member base, and a mission to make communities better. A traditional, for-profit ISP doesn’t have those incentives and only sees the business case.
While co-ops have experimented with broadband over power lines or resold satellite broadband in the past, fiber is the future. It meets today’s broadband needs, has significantly more headroom for bandwidth, and is in place or being deployed anyway for smart grid and advanced metering infrastructure.
A growing number have deployed fiber broadband (at least 50 today) and over 100 more conducting feasibility studies or securing funding. Consultants like Conexon and Pulse Broadband play a key role in enabling these electric providers with business plans, and regulatory/funding navigation. Playing a role in building these networks are the likes of FiberRise, Finley Engineering, Vantage Point, and others. These firms will help with determining the viability of offering broadband with feasibility studies, cash flow analysis, and competitive and member research.
The Business Case is Getting Stronger
A big challenge is the business case for FTTH. Broadband projects can be very expensive, requiring tens of millions of dollars of capital, even with smart grid fiber already in place. Costs per home can run into the thousands of dollars. A 2016 a Broadbandtrends survey on offering Gigabit broadband services found that an unclear ROI is the top challenge.
Three factors are playing a huge role though in strengthening the business case and financial models:
- Programs like the upcoming auction for Connect America Fund Phase II (CAF II) are driving more dollars towards broadband in rural areas.
- The experience learned from the initial groups of co-ops takes the guesswork out of the planning and solutions needed to succeed with take-rate numbers, efficient operational solutions to understand personnel costs, and innovative product offerings and marketing.
- The economic development imperative to bring high-speed connectivity to rural towns is becoming a moral obligation to area leaders.
Bundling Service Packages
Leichtman Research Group found that 68% of broadband subscribers and 59% of all households get a bundle of services. So, offering as many services as possible is key in hard and soft benefits – ARPU, win/retention rates, better cash flow, and faster ROI. Cloud-based services make this extremely easy to manage and launch for products like video, phone, security, etc.
We advise that when considering adding a new service to the portfolio, it needs to meet four key criteria:
- Clear business case
- Cost/margin contribution
- Ease of operational model
- Impact on the customer experience
Broadband Phone Services for Electric Cooperatives
Voice is one of the key ones to add. Huge market and helps SPs with adoption. With voice adoption rates by other broadband providers ranging 20-40%, phone services offer margin-rich additional revenue for these operators. Feedback we also receive is that businesses can’t justify switching Internet providers without a phone service bundled.
RECs will drive modern communications into rural markets. Instead of expensive, outdated TDM, customers will have access to the latest communication features without annoying à la carte pricing.
You can read more about why voice makes sense in our eBook Got Fiber? You Need VoIP!
We are helping electric co-ops deliver advanced VoIP services to their members with our turnkey managed solution that is easy-to-launch and easy-to-manage. Customers include Co-Mo Connect, BARC Connects, Midwest Energy & Communications, and OzarksGo. And industry organizations have saluted us with the UTC Impact Award for Services and FTTH Top 100 company recognition from Broadband Communities Magazine.
Learn More at Key Industry Events
If you’re looking to learn more, we think these events offer insightful content and many opportunities to engage with peers that have realized success (and made members happy) with broadband:
- NRECA TechAdvantage
- Broadband Communities Summit
- Utilities Telecom Council Telecom & Technology
- UTC Utilities Broadband Council workshops
- Fiber Connect
- NISC Member Information Conference
- Calix ConneXions
You can find us at these events every year. So contact us if you’d like to meet us there.