Even if a local government isn’t ready or able to build its own broadband network, there are still ways they can help bring the benefits of better connectivity to their community. Over the past few years, several counties in Minnesota have partnered with local electric and telephone cooperatives to expand high-quality Internet access as an economic development strategy. In many instances, county governments have offered financial support to the local co-ops, in the form of grants and loans, to connect their rural residents with high-quality fiber networks, often supplementing federal subsidies or statewide Minnesota Border-to-Border Broadband Development grants.

Projects Across the State

Minnesota counties have taken a variety of approaches when it comes to helping cooperatives finance broadband deployment projects.

Some, such as Cook County in the far northeastern corner of the state, provided grants to local co-ops. Cook County began its partnership with Arrowhead Electric Cooperative back in 2008 when both entities contributed to a broadband feasibility study. At the time, the county suffered from the worst connectivity in the state, and many people still relied on dial-up. In 2010, Arrowhead was awarded a $16.1 million combined grant and loan from the stimulus-funded Broadband Initiatives Program (BIP) to build a fiber network in Cook County. The county government offered Arrowhead a $4 million grant for the project, funded by the voters’ reauthorization of a 1 percent sales tax that was due to expire. In return, Arrowhead agreed to provide services such as Internet access to county buildings at no cost.

More and more electric cooperatives have been building broadband networks to bring better Internet access to their rural members. According to the cleverly titled podcast “Along Those Lines” from the National Rural Electric Cooperative Association (NRECA), that trend isn’t stopping any time soon.

In the second episode of the podcast, host Scot Hoffman, editor of RE Magazine, speaks with guests Mike Keyser, CEO of BARC Electric Cooperative, and Brian O’Hara, regulatory issues director for NRECA. They discuss the growing interest in broadband among electric cooperatives, some of the hurdles co-ops must overcome when deploying networks, and the impact that better connectivity has on Rural America.

Highlights From Their Conversation

A few years ago, the field of cooperative broadband was populated only by the early adopters. Now, Keyser tells the podcast host, “It seems like we’re reaching this tide where everybody’s now talking about [broadband] at every conference we go to.” One of the reasons for this groundswell of enthusiasm, O’Hara explains, is the increasingly vital role of communications infrastructure in managing the electric grid. Cooperatives’ commitment to local economic development and their “strategic advantages” in deploying networks also plays a role, he says.

BARC Electric Cooperative is one of the dozens of co-ops that have built fiber networks to connect their members. In the podcast, Keyser relates how the co-op ultimately decided to move forward with BARC Connects despite challenges:

“We finally got to the point as a co-op where the board said, look, this is going to revitalize our community, this is our mission, this is what we did 80 years ago . . . We need to just go. This is too important to the community and to the co-op.”

Local residents are clearly excited about the new network. “The single biggest question I get asked everyday is ‘When is it coming to my house?’” shares Keyser. He even believes that revenue from the broadband network will one day outstrip the co-op's income from selling electricity, a testament to the community’s need for better connectivity.

When it comes to high-quality Internet access, the big corporate ISPs have failed rural Mississippi. Other states with similar digital divide issues are starting to see rural electric cooperatives make efforts to connect members. In some places, legislatures have adjusted state laws that complicated co-ops' ability to deploy fiber optic infrastructure. Now, the Public Service Commission (PSC) in Mississippi has formally requested that state lawmakers update an antiquated statute to allow rural electric cooperatives to expand high-quality Internet access.

Waiting for Action

When Magnolia's State Legislators convene in January, they’ll have a unanimous resolution waiting for them from the state’s PSC. The resolution requests that lawmakers take action to adjust Miss. Code 77-5-205 to allow electric cooperatives the authority to offer Internet access. 

James Richardson, Policy Director and Counsel from the Office of Commissioner Brandon Presley, explained that the law currently only allows electric cooperatives the authority to form “…for the purpose of promoting and encouraging the fullest possible use of electric energy…” — electric cooperative are precluded from operating for any other purpose. The law was passed in the 1930s when cooperatives formed across the state to bring electricity to the many farmers in rural Mississippi. The matter has been tested and confirmed at the state Supreme Court. 

The PSC asks that the State Legislature create an exception in statute in order to allow rural electric cooperatives the the ability to also offer Internet access. Earlier this month, the three Commissioners on the PSC approved the resolution requesting the law change.

For many rural Americans, the local electric or telephone cooperative is their best hope for finally obtaining modern-day connectivity. With the support of government funding, rural cooperatives have brought electricity, telephone service, and more recently broadband access to some of the most rugged and sparsely populated places in the country.

However, recent tax code changes might prevent co-ops from connecting more rural communities. Cooperatives could potentially lose their tax exempt status if they accept government grants for broadband expansion and disaster recovery — an unintended yet foreseeable consequence of the Republican “Tax Cuts and Jobs Act” passed late last year. In a press release, Senator Tina Smith called attention to the oversight, noting, “This uncertainty has caused cooperatives significant concern and frozen some of their grant applications.”

Who’s Ready for Some Tax Policy?

As nonprofit membership corporations, rural electric and telephone cooperatives are exempted from paying taxes under section 501(c)(12) of the Internal Revenue Code (IRC). To maintain this tax exempt status, cooperatives must derive at least 85 percent of their income from members (e.g., from selling electricity). This is sometimes referred to as the the member income test or the income source test.

City Officials in Fort Scott, Kansas, located about 95 miles south of Kansas City, say that they haven’t been able to entice national providers to bring high-quality Internet access to their town of about 8,000 people. That may be a good thing — Craw-Kan Telephone Cooperative is building out fiber in Fort Scott as early as 2019.

Working With the City

Planning for the network has involved collaboration between Fort Scott and the cooperative. Before bringing connectivity to residents, the cooperative has been deploying to a local industrial part, the airport, and the golf course. 

The plan has included an Exchange Agreement between the city and Craw-Kan which allows the co-op to use vacant conduit to connect Fort Scott’s Water Treatment Plant to the golf course and the airport. Fort Scott will also provide an easement for a fiber node at the golf course. Craw-Kan will provide six fibers for the city to use along this part of the route, and will also install vacant conduit for the city during construction at another location. The additional conduit will be earmarked exclusively for the city’s use.

City officials and representatives from Craw-Kan have been working on the deal and the project since the fall of 2017. At a recent City Commission meeting, City Manager Dave Martin said that Fort Scott was excited that the cooperative was bringing gigabit Fiber-to-the-Home (FTTH) connectivity to town, noting that they’d tried to attract ISPs that would offer better services. Suddenlink offers services in parts of town and AT&T’s DSL is also available. 

Craw-Kan will provide $70 per month symmetrical gigabit connections  with no data caps in addition to 10/10 and 50/50 for $50 per month and $60 per month respectively. Installation is free and a Wi-Fi router is included in the monthly rate.

Working With Other Communities

South Dakota has more cows than people — and if you live in a rural community in of the state, it’s possible that all those bovines may have better Internet access than you do.

South Dakota Dashboard recently released a report on rural Internet access in the state. It was commissioned by the South Dakota Telecommunications Association (SDTA), whose members include cooperative, municipal, and tribal providers. The report, Connecting South Dakota’s Future: A Report on the Deployment & Impact of Rural Broadband, found that rural connectivity in the state significantly exceeds national averages, proving that high-quality Internet access is possible even in the most rural areas.

Download the report for more details.

Summary of Findings

According to the report, more than three quarters of rural South Dakotans who subscribe to Internet access from SDTA members have access to speeds of 25 Megabits per second (Mbps) download and 3 Mbps upload, which are the federal minimums for broadband. Across the country, approximately 61 percent of rural residents have access to those speeds.

Furthermore, 65 percent of people who subscribe to Internet access from SDTA members receive service through Fiber-to-the-Premises (FTTP). In contrast, only around 40 percent of rural telecommunications company subscribers nationwide are connected via fast and reliable fiber optic lines.

This is all despite the fact that, with fewer than five residents per square mile, deploying fiber costs on average $3,571 per resident in the rural regions served by SDTA members versus about $26 per resident in the more densely populated Sioux Falls.

Fast Internet Speeds Nothing New for South Dakota