Last November, we reported on a change to the tax code that is deterring rural telephone and electric cooperatives from leveraging government funding to expand broadband access. We were alerted to the issue by the office of Senator Tina Smith (D-MN), who sent a letter to Treasury Secretary Steven Mnuchin and IRS Commissioner Charles Rettig requesting that they remedy the issue and announcing her intention to introduce corrective legislation.

Federal elected officials have introduced such a measure, called the Revitalizing Underdeveloped Rural Areas and Lands (RURAL) Act. Senator Smith together with Senator Rob Portman (R-OH) introduced the Senate version of the bill, S. 1032, in early April, followed by Representatives Terri Sewell (D-AL) and Adrian Smith (R-NE), who introduced a companion bill, H.R. 2147, in the House a few days later. The RURAL Act would ensure that co-ops, which are many rural communities’ only hope for better connectivity, could take full advantage of federal and state funding for broadband networks.

Addressing Legal Ambiguity

As we explained last year, a tax policy change included in the 2017 Tax Cuts and Jobs Act carelessly put rural co-ops at risk of losing their tax-exempt status if they accepted government funding for broadband projects or disaster relief, among other things. Traditionally, these government grants were excluded from the requirement that electric and telephone cooperatives obtain at least 85 percent of their income from members (often referred to as the member income test) to maintain their tax exemption. The 2017 law threatened this precedent by changing the tax code so that “any contribution by any governmental entity or civic group” is now included in a corporation’s gross income. This has made some co-ops hesitant to apply for programs like the U.S. Department of Agriculture’s ReConnect Pilot Program for fear of jeopardizing their...

Doug Dawson, President of CCG Consulting and author of the POTS and PANS blog, was willing to sit down with Christopher for episode 353 of the podcast this week. Christopher interviewed Doug in Austin, Texas, at the 2019 Broadband Communities Summit. They discussed all sorts of happenings in the telecommunications and municipal network space.

In addition to 5G and the hype that has surrounded it for the past year, Doug and Christopher make some predictions about where they think the technology will go. They also talk about the involvement of Amazon in the satellite broadband industry and what they think that means for different folks from different walks of life.

Other happenings that Doug and Christopher get into include different public-private partnerships that Doug has been watching and some new models that he’s seen this past year. He’s noticed that communities are more willing to work outside the box and that an increasing number of local communities are moving beyond feasibility studies to investment. Doug and Christopher talk a little about Erie County, New York, where the community is developing a middle mile network, and Cortez, Colorado, where the town has attracted several private sector companies because they worked hard to develop the right infrastructure.

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Innovation today requires a high-speed Internet connection, and in rural areas, that often means a fiber optic network owned by a local government, a cooperative, or a local business. It’s no surprise then that when the Rural Innovation Initiative was looking for rural communities with good connectivity and an interest in innovation-based economic development, it turned to cities served by locally owned broadband networks. Out of the nine communities initially selected to participate in the Rural Innovation Initiative, more than half have a local Internet access provider instead of a national ISP.

Initiative Bridges Rural Opportunity Gap

The Rural Innovation Initiative is a new program created by the Center on Rural Innovation (CORI) and Rural Innovation Strategies, Inc. (RISI), with funding and support from the U.S. Economic Development Administration (EDA). Launched at the end of last year, the initiative works to “bridge the opportunity gap in rural America by helping communities build the capacity to create resilient, innovation-based jobs.”

For the first part of 2019, CORI and RISI selected nine cities and community partners to take part in what they describe as a “fast-paced technical assistance sprint,” which will help participants develop innovation hubs as an economic development strategy. The initiative will also prepare communities to apply for federal funding opportunities, such as EDA’s Regional Innovation Strategies program. More than 100 rural communities from 40 states applied for the program, which is free for participants. Selection criteria included location in a census-designated rural county, access to New Market Tax Credits and Opportunity Zones, partnerships with higher education and local nonprofits, and existing high-speed broadband networks — Fiber-to-the-Home (FTTH) in particular.

CORI and RISI, in partnership with EDA, will offer further technical assistance to communities through the Rural Innovation Initiative after this initial project complete. To learn more, watch a webinar about the program from December 2018.

Connectivity Sets Communities Apart...

Volunteer Energy Cooperative (VEC) and Twin Lakes Telephone Cooperative began collaborating in the fall of 2017 to bring high-quality connectivity to folks in Bradley County, Tennessee. Based on the results of a successful pilot project, the cooperatives have expanded gigabit connectivity to more areas. With a recent grant award, the partners will continue to offer the service to more rural Tennessee residents and businesses.

Catching Up on the News

When we last reported on VEC and Twin Lakes, they had announced that they would be launching the pilot in Bradley County. Residents and businesses in Bradley County have long felt slighted by the state’s restrictive laws that prevent Chattanooga’s EPB Fiber from expanding into their county. Over the years, Bradley County and Chattanooga officials have searched for ways to serve Bradley County, but the state’s insistence on protecting large incumbent monopolies by preventing expansion have left Bradley County folks without fast, affordable, reliable connectivity.

VEC and Twin Lakes commenced the pilot in the Camelot subdivision of the Bigsby Creek Road area of Bradley County. In a February 2018 blog post describing the first customer’s experience, subscriber Mrs. Charles Hollifield said, “We had no problem with the installers. They were on time and friendly. We chose the 25 Mbps because we do not download much but it works well. We haven’t had it quit once since we got it.” 

Since then, the initial pilot area passed 120 homes in the first pilot area. Later in the summer of 2018, VEC passed 545 more residences in two additional communities. Last fall, VEC received $1 million from the Appalachian Regional Commission (ARC) to apply toward expanding fiber to approximately 730 premises in in Meigs and Hamilton Counties.

State Assists With Deployment

As part of the Tennessee Broadband Accessibility Act (TBAA) grants awarded in March, VEC received another $1.3 million which they’ll use to connect 867 premises in McMinn County. VEC expects to begin construction on the expansion of the network in the fall of 2019...