At the end of 2019, Congress passed the Revitalizing Underdeveloped Rural Areas and Lands (RURAL) Act, fixing a tax law change that threatened to raise rates and delay the expansion of broadband for rural cooperative members across the country.

Passage of the RURAL Act ensures that cooperatives can accept federal funds for broadband deployment, disaster relief, and other efforts without risking their nonprofit tax exempt status. A change in the 2017 tax law would have labeled these funds as revenue for the first time, potentially causing co-ops to exceed the allowable percentage of non-member income they must maintain to remain tax exempt.

After Senators Tina Smith (D-Minn.) and Rob Portman(R-Ohio) and Representatives Adrian Smith (R-) and Terri Sewell (D-Ala.) introduced the bipartisan bill in April, it attracted 55 additional cosponsors in the Senate and more than 300 in the House. It was eventually incorporated into the consolidated appropriations act and signed into law in December.

“Obstacles From the Federal Government”

We described the possible impact of the 2017 tax law change on rural cooperatives over a year ago, when Senator Smith first brought the issue to our attention.

Failure to remedy it would have forced some co-ops to choose between continuing with desperately needed broadband and disaster recovery projects and increasing their members’ rates. Northwestern Electric Cooperative CEO Tyson Littau described the difficulty of that decision to the National Rural Electric Cooperative Association (NRECA):

Do we rebuild and try to strengthen our distribution system and pay the taxes, or do we delay the mitigation project that would improve 1,200 miles of line throughout our territory? I think we have a responsibility to the membership to improve the system for the future.

Almost six years ago, we told readers about Ottawa, Kansas, where the community of around 13,000 people had invested in publicly owned fiber optic connectivity for local businesses. We recently touched base with IT Director Paul Sommer, who updated us on the progress of their broadband utility and how it has impacted the community.

Steady as it Grows

When we first met Ottawa, they had worked with the local school district and Franklin County to capitalize on existing fiber infrastructure and expand to more locations. Local leaders had learned from Ottawa businesses that the best options available from incumbent AT&T were T1 lines for approximately $600. Higher capacity connections were scarce and financially out of reach for local establishments, and AT&T could not be convinced to upgrade their infrastructure. As Bigham put it, AT&T was "milking the cow."

Once the city, school district, and Franklin County established a partnership, Ottawa began to expand fiber to other municipal facilities and businesses as requested. Sommers, who has taken over as IT Director, says that now all 10 city buildings are on the network. In addition to an industrial park on the original infrastructure on the north end of town, the network now reaches an industrial park to the south.

The electric utility has trained their own staff rather than hiring external fiber deployment personnel. In addition to enriching skills, their employees are able to respond quickly if there are downed cables or other maintenance issues. Sommers recalls an instance when a car, which had caught fire, sent shrapnel flying into the air. By a twist of fate, one piece severed the fiber optic cable hanging some distance away. His team was able to rehang and splice the cable that same day and get the subscriber back online.

By using electric utility staff, Ottawa has reduced the cost of their incremental build over the years. They typically budget around $100,000 each year for expansion of the network, have never gone over, and often don’t spend the entire allotment. Sommers says that, since they own the utility poles in town, have necessary personnel on hand, and equipment at the ready, unnecessary bureaucracy doesn’t slow down maintenance, repairs, or expansion efforts.

Bursting at the Streams

In  November 2017 we reported that Mount Washington, a town of roughly 200 people in southwestern Massachusetts, had deployed its own infrastructure for broadband service. More than two years after the initial setup, a recent article in Government Technology on municipal broadband in Massachusetts takes us back to the tiny town. We learn how fast affordable, reliable publicly owned Internet infrastructure has brought positive transformation to the citizens of Mount Washington, located in the Taconic Mountains.

You Could Barely Use It

The article covers several layers of how high-speed Internet access has provided a jumpstart for the local economy. The small town with its remote landscape and inherent challenges had only two options before broadband: dial-up or a long-distance Wi-Fi service, which provided download speeds of less than 1 Mbps. 

“You could barely use Wi-Fi calling, and it was impossible to stream anything,” said Brian Tobin, Mount Washington select board member. “You could send emails, and you could do Internet searches that just took a long time.”

In spite of the fact that they're the third smallest town in the state, the Mount Washington Broadband Network now offers fiber optic infrastructure and contracts with an Internet access provider to offer speeds which surpasses those in some of the state's much larger communities. Funding for the network is part of a larger state plan to bring broadband to rural towns in need of Internet service. The Government Technology article notes that: 

“Mount Washington benefited from the Last Mile Program, which provided more than $35 million in grants for rural broadband. The program is run by the Massachusetts Broadband Institute (MBI), which is part of the state agency Massachusetts Technology Collaborative (MassTech).”

As the USDA continues to award federal ReConnect funds for rural connectivity, we're glad to see that communities in West Virginia are not being ignored. Most recently, the Harrison Rural Electrification Association (HREA) announced that they will dedicate ReConnect grant funding of approximately $18.75 million to deploy Fiber-to-the-Home (FTTH) in rural sections of their service area.

Combining Funding and Collaboration

The project will bring more than 6,300 households high-quality connectivity along with five educational facilities and another community facility. The deployment will cover approximately 354 square miles within Harrison, Lewis, Upshur, Barbour, and Doddridge counties. Once completed, the project will provide better connectivity to around 16,000 residents.

In total, the project will cost an estimated $25 million and HREA will use a $6.2 million loan from CoBank to cover the difference. They plan to complete the project within 3 1/2 years and cooperative leadership intend to have the project ready for bids by the end of February.

Rather than offering Internet access directly to members, the cooperative will work with Prodigi Fiber, a private sector ISP that works exclusively in West Virginia and only with FTTH connectivity. The co-op will lease the infrastructure to Prodigi and dedicate the proceeds from the lease toward the CoBank loan payments.

Early Excitement

On the HREA Facebook page, locals have expressed their excitement at the prospect of better connectivity. Some note the need for better reliability while others are looking for better speeds or alternatives to current options. 

Lenny W.: Was excited to get the email. This is great for the rural areas of this county. Are there any maps or projections on what areas are going to start and when? I’ll sign up for whatever is $75-$100 per month.

Ken C.: Whoooohoooo

This month, both Frontier Communications and CenturyLink put the FCC on notice that neither company expected to meet deployment milestones related to Connect America Fund Phase II (CAF II). In total, rural households in 23 states will have to wait for connectivity that the two large companies were tasked with developing using federal subsidies.

Not-So-Great Expectations

When Frontier and CenturyLink accepted the funding in 2015, they agreed to provide deployment of Internet access speed of at least 10 Megabits per second (Mbps) download and 1 Mbps upload. By the end of 2018, they agreed to have at least 60 percent of the premises within each state connected and 80 percent of the premises connected by the end of 2019.

In their letter to the FCC, Frontier claims that of the contracted 774,000+ locations in 29 states waiting for connectivity through the CAF II program, they have deployed to around 596,000 in CAF II census blocks. They calculate that these deployments come to at least 70 percent in each state where they've accepted funding. The company also says that in 13 states they "may not have met" the 80 percent milestone.

The failure was a continuation of last year, when they reported that they had met the 60 percent milestone in 27 states, but had failed to make the grade in New Mexico and Nebraska.

Frontier accepted more than $283 million in CAF II funding soon after the FCC redefined broadband to 25 Mbps / 3 Mbps. The CAF II program had also increased minimum connections from 4 Mbps / 1 Mbps to 10 Mbps / 1 Mbps, which seemed outdated almost from the beginning. 

Iowa has multiple rural communities where large national Internet access companies have not invested in high-quality Internet infrastructure. Iowans have adopted a self-reliant approach, however, and one look at the community networks map shows that publicly owned networks pepper the state. Osage, in the north-central part of Iowa, has offered Internet access to the community since 2001. In a recent announcement from the U.S.D.A, we learned that Osage Municipal Utilities (OMU) will receive almost $400,000 to continue their efforts to connect more premises in rural Mitchell County and connect people with fiber Internet access.

According to the announcement:

Osage Municipal Utilities (OMU) in northern Iowa will use a $397,749 ReConnect Program grant to provide broadband service to underserved households, farms and businesses in Mitchell County. This will be accomplished by directly accessing a fiber trunk line that runs through the heart of Mitchell, Iowa, and up to the border of Minnesota, allowing OMU to increase its service area bandwidth. The funded service area includes 151 households spread over 20 square miles.

We wrote about Osage's broadband and solar projects and interviewed OSU General Manager Josh Byrnes back in 2016. Listen to the interview here:

Over the last few months, the U.S. Department of Agriculture (USDA) has released a steady stream of awardee announcements for the first round of its ReConnect broadband program. Among the recently announced recipients is Valley Telecommunications Cooperative Association in Flandreau, South Dakota. The telephone co-op will receive a grant of about $9.5 million to connect nearly two thousand underserved households, businesses, and farms to it’s existing fiber network.

The first round of ReConnect funding made $600 million available in grants and loans to Internet service providers to expand broadband access across the country. Many of the round one awards have gone to locally-run, community-owned providers, like Valley Telecommunications, to build fiber networks. This includes grants to Forked Deer Electric Cooperative; Orangeburg County, South Carolina; and Star Telephone Membership Corporation, as well as awards to two economic development agencies in Tyler and Wetzel Counties, West Virginia.

Valley Reaches a Peak

Members of Valley Telecommunications Co-op can already subscribe to gigabit speed fiber connectivity. From 2008 to 2016, the co-op replaced all of its old copper lines with a modern fiber optic network. “One hundred percent of our members in north central South Dakota can receive gigabit broadband services via that fiber network,” shared CEO and General Manager Jeff Symens at a press conference announcing the ReConnect grant.

Soon after completing the fiber buildout, the co-op decided to expand into nearby communities such as Volga and De Smet, operating under the name Valley FiberCom. However, this still left some homes and businesses outside of the towns unconnected. Symens explained: