US electric co-ops plan to build rural broadband infrastructure

Federal funding has incentivised rural electric co-ops across the USA to work together to provide broadband services

In June the Biden-Harris administration revealed US $25bn (£21.2bn) in American Rescue Plan funding to expand access to high speed, affordable internet across the USA.

The country’s rural electric co-operatives welcomed the plan, which aims to bring down costs for families, help small businesses and boost education. For these co-ops, which were set up to provide electricity to some of the country’s most remote communities, offering broadband services seems like a logical next step. 

Around 200 of the 900 co-ops affiliated to the National Rural Electric Cooperative Association (NRECA) are already providing or building out broadband. Another 200 more are assessing the feasibility of providing service to over six million households in co-op service areas that don’t have access to high-speed Internet service. The Fiber Broadband Association (FBA) estimates that rural electric co-op providers currently deliver fibre broadband to around 675,000 homes.

All internet providers have until 1 September to submit data on the locations they serve and at what speed. Their data will be used to create a national map of every home and business in the country without broadband and will play a key role in determining how Broadband Equity, Access and Deployment (BEAD) grants are allocated to different states.

The federal government’s funding has incentivised rural electric co-operatives across the USA to work together to be able to provide broadband services. In May, 13 Arkansas co-ops announced the formation of Diamond State Networks, a new wholesale broadband provider uniting the fibre-optic networks of member co-operatives throughout the state. As providers of electricity that have been serving local communities since the 1930s, at a time when only about 10% of rural USA was electrified, the co-ops said they perceived providing broadband as “the single-most powerful bridge of socio-economic divides”.

The co-ops plan to invest more than US $1.66bn (£1.41bn) in broadband communication infrastructure, exclusively in fibre-optic networks and serve nearly 600,000 potential customer locations.

“By bringing these networks together, we’re investing to build a middle mile network for long-term, far-reaching affordability and delivering high-performance connectivity to every corner of our state,” says Mitchell Johnson, co-managing member of Diamond State Networks.

“Ultimately it will offer local internet service providers better access and capacity to deliver their services, and better opportunities to directly serve businesses with reliable connectivity wherever they are. We’re making it affordable to reach more areas with best-in-class technology to close the gaps from past limitations.”

Related: Canadian government includes co-ops in fund to drive broadband inclusion

Similarly, the Tallahatchie Valley Electric Power Association in Mississippi has set up a subsidiary named TVIfiber to provide broadband services in its area. Co-operatives have only recently been allowed to provide such services. In 2019 the Mississippi Legislature amended legislation to allow electric co-operatives to provide Internet services. A co-op, Tallahatchie Valley, was approved as a designated Eligible Telecommunications Carrier in April and was awarded the $20.17m through from the Rural Digital Opportunity Fund (RDOF) to make high-speed internet access and telephone service available to almost 8,700 homes and businesses in Panola, Tate, Yalobusha, Tallahatchie, Quitman, Grenada and Lafayette counties. The funding will be used by the co-op to deploy the infrastructure to provide the high-speed Internet access and telephone service to rural homes and businesses that are currently unserved or underserved.

Larger cable and telecom companies are also fighting for the pots of funding allocated by the federal government. In November 2021 Mississippi’s Senate Energy Committee heard from both sides on how they would improve rural high speed Internet access. Similar debates are expected to take place in other states as well.

Additional funding will be provided to electric co-ops through the Inflation Reduction Act of 2022, a US$9.7bn (£8.22bn) grant and loan programme for clean energy systems, which would provide funding for various projects, including renewable energy, carbon capture, battery storage, nuclear power and improvements to generation and transmission efficiency. Co-ops would be eligible to receive an award for up to 25% of their project costs, with a maximum of $970 million going to any one co-op.

Approved by the Senate on 7 August and the House of Representatives on 12 August, the budget bill includes direct-pay tax credits for electric co-operatives to deploy new energy technologies. The bill is seen as a game changer for co-ops, which have until now not been eligible for the existing suite of tax credits available for deployment of clean energy technologies. The sector has not benefited from such incentives on the grounds that co-ops are not-for-profit and do not pay federal income taxes.

“Several provisions in this bill provide electric co-ops with crucial new tools as they navigate the ongoing energy transition and prepare for a future that depends on more electricity to power the American economy,” says NRECA CEO Jim Matheson in a news release.

Yet, despite the opportunities brought by the allocation of funding, securing grants could be difficult given the competition from big telecoms corporations. NRECA points out that according to a study by Common Cause, between 2019 and 2020 alone, 15 telecoms corporations spent more than $234m (£198m) in federal election contributions and lobbying for favourable rules.

Legislation also varies from state to state. For example, Tennessee prohibits co-operatives from funding service operations using profits generated by another service. Likewise, Georgia allows electric co-operatives to provide broadband service as long as there is no cross-subsidisation between their various lines of business.

Acknowledging some of these challenges, NRECA has recently launched a broadband service to support members in their advocacy as the Federal Communications Commission updates its broadband maps to identify unserved rural areas that are eligible for funds.

“With the reputation NRECA has inside the Beltway, it’s something members have asked for,” says NRECA CEO Jim Matheson, adding that NRECA’s government relations team is working to build “a new set of assets” to lobby Congress and the executive branch.

“This new level of service will bring our voice as a national organisation to new places in Washington, where telecommunication issues are discussed and where telecommunication business policies are made,” adds NRECA chief operating officer Jeffrey Connor. “This is about building partnerships NRECA can develop to be a more powerful voice for our members’ interests.”