Broadband connections are making it possible for people to do extraordinary things on the internet in areas as diverse as education, healthcare, entertainment and economic development. But access to high-speed internet service is not evenly distributed. Rural areas of the U.S. are largely unserved or underserved, and the Federal Communications Commission (FCC) is taking another step to address the gap.
The Rural Digital Opportunity Fund (RDOF) is a $20.4 billion FCC program to help bridge the digital divide and bring broadband connectivity to rural America. The FCC is proposing four tiers of performance, with 25 megabits per second downstream and 3 megabits per second upstream (25/3 Mbps) as the minimum threshold to be provided.
The program is structured around a two-phase reverse auction to provide funding over a period of 10 years. Phase I provides up to $16 billion to target unserved rural communities; Phase II is set to provide at least $4.4 billion to target areas that are partially served, as well as any blocks that may have gone unawarded in Phase I. The Phase I auction begins Oct. 29, 2020.
Miles of Potential
Funding from RDOF has some intriguing possibilities for electric utilities, especially the electric cooperatives and public utility districts that serve much of rural America. Utilities could explore possibilities at all three stages of the broadband connection:
- Backbone: Providing the high-capacity infrastructure to carry internet connections to these rural areas.
- Middle mile: Providing fiber-optic backhaul connections between the core internet backbone and the customer-facing internet service provider (ISP).
- Last mile: Connecting individual locations to the wider network as an ISP through either fiber-optic or wireless connections.
The middle-mile connection looks especially promising because of how some electric utilities are uniquely positioned to respond. Many have experience installing and operating a fiber network. They also have existing poles, rights-of-way and other infrastructure to leverage, which can help address the rural dilemma: having to extend service farther to reach fewer customers. The ability to install fiber-optic cables along existing transmission or primary distribution lines provides a cost-effective advantage over traditional telecommunications companies.
And with many utilities already installing fiber to support robust grid modernization and operations management, the cost of building in additional capacity is incremental. Running fiber with double the capacity does not necessarily come with double the cost.
Customers could benefit from utility support of broadband connections as well, thanks to utilities’ focus on providing extremely reliable service and expeditious restoration after any service interruption. The large telecommunications firms that often provide broadband service typically work to restore service first in locations with higher concentrations of customers, which can mean lengthier outages for rural customers. Utilities — especially localized ones — are poised to be faster and more responsive to their communities’ needs.
For those pursuing funding to build out middle-mile connections, partnering with local ISPs might be a sensible choice. Many rural areas are already served by smaller ISPs that compete with larger providers by offering better customer service and meeting specific local needs. For an electric utility that isn’t interested in diving into the details of internet customer service, rate setting and billing, it makes sense to partner with local entities that can take the middle-mile service and provide the last-mile connections.
After the Auction
Some bidders in the RDOF auction will have developed advanced plans for how they plan to deliver the broadband connectivity. Others might only have the outlines of a plan, with the intent to develop plans further upon winning a piece of the auction.
For those who win blocks in the auction, front-end planning will rise to the forefront. Economic analysis will play an important role in determining appropriate and cost-effective routes and methods. For those extending through the last mile, rate strategies will come into play.
Making cost-effective decisions that maximize the use of RDOF dollars will be critical to success. Strategic consultants at 1898 & Co. can help with financial analyses and business case exploration, developing a strong plan that supports investment decisions. As plans ramp up toward design and construction, specialists can help with asset inventories, estimates and tools that can adjust those estimates based on varying criteria. Drawing on those resources, electric cooperatives and other utilities can meet FCC objectives to expand broadband access while making smart choices for their stakeholders and the communities they serve.
An enhanced financial toolbox can help businesses take strategic steps that build a solid fiscal base that satisfies internal and external expectations.