6 reasons why electric co-ops might not apply for BEAD

• Co-ops already reach rural locations with electricity, and they know their markets
• But they’re weighing the pros and cons of offering fiber broadband to their customers
• There are some pretty significant reasons why they might chose to not get into the fiber business

Electric co-ops are uniquely positioned to apply for, and win, Broadband Equity, Access and Deployment (BEAD) funds because they already reach most of the homes in the U.S. that are currently unserved with broadband. But the question is: do co-ops even want to apply for BEAD?

The topic will be discussed at Fierce Network’s upcoming Broadband Nation Expo on October 9-11 in Washington, D.C., where Cliff Johnson, head of the Rural Broadband Initiative with the National Rural Electric Cooperative Association (NRECA) will be moderating a panel.

Johnson says electric co-ops are uniquely positioned to serve broadband to remote and rural customers. “We have the infrastructure; we know the terrain and the community; and bringing broadband-to-the-home in our communities is a positive thing,” he said.

He noted that high-speed broadband creates jobs, brings in new businesses, keeps young people in the community and allows older people to age-in-place safely. Since co-ops are owned by their members who live in the community, they are naturally interested in the welfare of those communities.

Johnson said there are about 925 electric co-ops in the U.S., and NRECA estimates that 230-240 already offer fiber broadband or are in the process of offering it. Nevertheless, the ones that aren’t yet offering broadband have to weigh the pros and cons of getting into the business.

Reasons not to offer fiber broadband

1: There’s not enough home density

One reason a co-op might not want to get into the fiber broadband business is because there’s not enough demand in the community. “You need a certain take-rate for it to make sense,” said Johnson. Although Mike Malandro, president and CEO of Choptank Electric Cooperative said, “We’re used to working inside very low density areas. Our business model is accustomed to that as opposed to an investor-owned company.”

2: Co-ops don’t have experience with marketing

Johnson said that on the electric side, “We don’t typically upsell people.” He joked that co-ops don’t try to convince people to install a hot tub so that they’ll need more electricity. But marketing is a critical part of offering fiber broadband. A lot of people in rural areas aren’t that familiar with the advantages of high-speed fiber, and they need some information. “That is a muscle that co-ops have not had to develop,” said Johnson. “It’s a different business function; you’re now in a competitive business and trading on the co-op’s reputation in the community. You need to make sure you don’t damage that.”

3: Pole issues

People think it will be a lot easier for electric co-ops to deploy broadband because they already have electric poles in place, and they don’t have to get any permits because they own the poles. But Johnson said that fiber optic cables are heavy, and poles can only handle so much weight. The co-op will need to certify that all its poles can carry the additional weight, otherwise the poles could fall over. There are also regulations about how much space must be kept between the fiber lines and the electric lines. Johnson said there are deaths every year of fiber techs who come into contact with high-voltage lines.

4: Regulatory hurdles

Another reason that electric co-ops may not want to apply for BEAD grants is because it’s complicated to comply with all the requirements. Johnson said it takes a lot of work just to put in a bid, and you don’t know how much money you’re going to get, if any. A lot of co-ops are small operations with limited staff. Johnson said that Evan Feinman, director of the BEAD program with the National Telecommunications and Information Administration (NTIA) came to NRECA’s broadband leadership summit and assured attendees that NTIA would work with them.

Johnson said, “But there’s 500 pages of regulations we have to weed through. Co-ops are trying to figure out if the juice is worth the squeeze.”

5: Competition with bigger players

Another challenge is that electric co-ops may be competing for BEAD funds against huge companies such as AT&T and Verizon. The co-ops are worried that the big guys will cherry-pick the areas where they can make the most money, leaving co-ops with locations that don’t make as much sense economically.

6: Organizational challenges

Electric businesses have been fully built-out for years, and they’re in the operational and maintenance phase. Whereas building a fiber network is a fast-paced endeavor. Johnson said most co-ops who build fiber have people working from 7 am to 9 pm, and they need to be in contact with supervisors to answer questions and solve problems that arise. “On the electric side, big decisions might be deferred until the next board meeting,” he said.

Malandro said he likes to have a hybrid workforce where existing electric employees are involved from the beginning of the fiber build because when the fiber contractors leave, you’ve still got to be able to manage the networks.

Electric co-ops will still deploy fiber for themselves

Despite all the reasons why co-ops may not want to apply for BEAD funds, there are still reasons for them to deploy fiber for their own uses — for smart grids and grid management.

“Whether they choose to be an ISP and do fiber-to-the-home, that’s a decision they will have to make,” said Johnson.

They might choose to deploy fiber but use different business models. For instance, some co-ops have deployed fiber for their own uses and partnered with an existing ISP who acts as the service provider for end users. The ISP leases the fiber from the co-op.

Fierce Network is gearing up for our big Broadband Nation Expo Oct. 9-11 in Washington, DC, where leaders in broadband will gather for the biggest national event to talk about BEAD. Don’t miss the opportunity to meet with your industry peers! Be sure to register here.