Urban areas in North Carolina don’t have the same challenges obtaining high-quality Internet access as rural communities, but telephone and electric co-ops are taking more steps to change that imbalance. Cooperatives are filling gaps and finding opportunities where national ISPs don't see a high enough profit margin. Wilkes Communications/RiverStreet Networks and TriCounty Telephone recently merged to find those gaps and serve North Carolinians left behind.

Acquiring and Expanding 

In September 2018, TriCounty Telephone Membership Corporation merged with Wilkes Telephone Membership, the parent entity of Wilkes Communications and RiverStreet Networks. The cooperative also acquired Peoples Mutual Telephone Company and Peoples Mutual Long Distance Company, which took Wilkes into southern Virginia. 

When they added several other smaller companies, the cooperative continued to implement their strategy to bring broadband to rural communities without limiting themselves to one region. In addition to counties in central North Carolina, the cooperative now serves people along the north border, in a few south central counties, and in three counties far in eastern North Carolina that brush the eastern shore.

President and CEO Eric Cramer told the Journal Patriot in September that, where national ISPs turn away, Wilkes sees opportunity:

“Larger companies have abandoned these areas, so we think there is an advantage to grow there. A number of rural counties are looking to partner with companies like ours to help bring broadband like we’ve done here in Wilkes. .... These buildouts are much harder and take longer to produce results than acquisitions.”

Merging with TriCounty made sense because TriCounty had reached its potential due to size and scale limitations. TriCounty’s Vice President for business development Greg Coltrain recently told WNCT Channel 9 that the cooperative was considering the quickest way to bringing high-quality Internet access to rural North Carolina and achieve long-term success when they chose to merge with Wilkes:

When Indiana’s Tipmont REMC asked members about broadband in 2017, more than half said that they couldn’t access fast, affordable, reliable connectivity. The rural electric cooperative soon began establishing plans to develop a fiber broadband network. Now, in a move to bring high-quality connectivity to members sooner, Tipmont has acquired local ISP Wintek Corporation, and plans to serve all 23,000 members within the next eight years.

A Comfortable Relationship

Wintek, headquartered in Lafayette, began in 1973 and provides connectivity to Tipmont’s headquarters in Linden, Indiana. The ISP has used the electric co-op's poles for more than 10 years to mount sections of the Wintek fiber for residential and commercial connections. According to Tipmont’s announcement on the acquisition, Wintek has also served as a consultant for IT systems to the cooperative. Tipmont leaders have already established a level of trust with Wintek and vice versa.

According to Oliver Beers, co-owner and COO of Wintek, the acquisition will allow more Wintek customers to access fiber connectivity. “We’ve done as much as we can financially afford to do,” Beers told the Journal Review.

Began as A Solo Project

When the Tipmont board unanimously decided to develop a Fiber-to-the-Home (FTTH) network, they had not intended to work with another entity. They commenced construction this past summer in Montgomery and Tippecanoe Counties, where they’ve already deployed 30 miles of fiber. In November, they connected a dozen households in Linden as test customers to work with the system for two months.

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