Two Examples of Bringing Affordable Broadband to Rural Markets
Two broadband companies — one for-profit, one co-operative — are providing reasonably priced broadband to rural communities in Minnesota. Ann Treacy, who edits the Blandin on Broadband blog, asks the Hiawatha Broadband Company and Paul Bunyan Communications how they’ve succeeded.
EDITOR’S NOTE: Over the past several weeks, Ann Treacy, editor of the Blandin on Broadband blog, has been releasing a series of reports on the broadband performance of each of Minnesota’s 87 counties. The reports are based on the most recent state broadband report, issued by the Governor’s Task Force on Broadband. We’ve watched Ann’s reports with interest, because Minnesota has identified rural broadband as a priority and taken public-policy steps to improve service. It’s also a state with a long tradition of balancing urban and rural interests. For both these reasons, we wanted to share some of Ann’s reporting. Today, she looks at two different ISPs that are serving rural areas. Next week, she will examine the state’s progress toward creating faster, more affordable broadband for all citizens.
Myth: It’s too expensive to bring high speed broadband to rural areas.
Reality: Providers are bringing high speed broadband to rural areas!
Below is a map of broadband in Minnesota. You can see that there are communities in rural Minnesota with good broadband (colored in blue). There are a handful of providers who offer that service. Some have been kind enough to agree to talk to me about how they are able to deploy, expand and upgrade broadband networks in rural Minnesota. Today we present interviews with Hiawatha Broadband Communications (HBC) and Paul Bunyan Communications.
HBC is a private company. Rural is their mission. Education, economic development and healthcare is important to their community so it is important to them. As their website states, they put people before profits – but that doesn’t mean they are a nonprofit. They are a business and they need a business case that is solvent.
Paul Bunyan is a cooperative and “meeting the needs and expectations of our members and other customers” is a top priority. They began to upgrade their network in 2004 – 13 years ago! – and are nearly finished now. As a cooperative they are willing to invest in their communities and they have a different threshold for success than commercial providers and they have different parameters than larger national providers.
I spoke with Dan Pecarina at HBC and Brian Bissonette at Paul Bunyan about how they were able to support broadband in rural areas. Below are notes on those conversations.
What is the business case that makes sense for them?
HBC has done the numbers and have found that they are able to go into an area if the cost per passing is $1,500 in a rural area or $1,000 in a town. In a rural area, there is little competition so they have found that the are able to get 90-95 percent take rate, as opposed to 70 percent in town.
The real costs often surpass $1,500/$1,000. Rural areas can be tough for deployment. Some areas are built on stone, some are in valleys. The terrain can be more challenging than the distance. So they need a partner to help offset that cost. The partner could be the community or a grant like the Border to Border grant [a Minnesota broadband funding program] or a combination of both.
Paul Bunyan is not focused on high or fast profit margin. They’re goal is to break even in 10+ years. Their investment is in the community as well as the business – supporting customer retention also supports business (and resident) retention and economic development for the community. Federal support, largely in the form of RUS (Rural Utility Service) low interest loans, have made a difference. The Minnesota Border to Border grants have been essential for the very hard to each places.
Paul Bunyan has received Minnesota grants and without them probably would not have been able to make the business case to go into areas south of Park Rapids or Northern Itasca County. Paul Bunyan (and Minnesota) are getting to the stage where a larger percentage of unserved areas are unserved because they are the highest cost areas – due to distance, population density, difficult terrain, natural barriers and permitting issues (dealing with railroad crossings, forestry issues…). In those cases the state funding is necessary.
How do they decide where to go next?
Paul Bunyan focuses on a contiguous footprint. It’s much easier to extend a network than build in a new area – although they have looked at some new projects recently. And building is only one portion of the cost of expansion. Paul Bunyan wants to make sure they have people in the area to be responsive to customer needs, which means customer support and technicians nearby.
Economics are also important – they need to meet that 10+ year time for return on investment. They look at issues that define the high cost areas: distance, population density, difficult terrain and natural barriers and permitting issues (dealing with railroad crossings, forestry issues … and opportunities for low interest loans or grants as they plan.
Finally, a key driver is engagement with a group or community that has done their homework, measured their needs and interest levels, and can provide Paul Bunyan with both valuable data on interest as well as the sense that they will be our partner in making it happen rather than a barrier. Investment by that partner is likely important as well.
Ultimately, it works for them because they are more willing to take financial risk, borrow, make long term investments, etc., to continue the mission of providing services to those that need it. As they said – That’s why we were formed in the first place and that continues to be our DNA.
For HBC, expansion to neighboring towns makes sense because they can more easily tie their existing infrastructure to the new community’s infrastructure. They have also identified opportunities to work directly with the County, which helps. For example, HBC has worked with Dakota County to support smart-grid system. They can work together to offset setup costs. Finally, a community with a drive to promote better broadband locally is a good area for HBC. They aren’t interested in going into an area simply to provide cheaper broadband; that’s not compelling to them. But if the school, hospital, local government or even an anchor businesses is invested in making it happen that makes the area a good partner.
What is the role of wireless?
Wireless is a stop gap measure to get to areas that are not economically viable for fiber. It is a lifeline for communities where the business case for fiber is too difficult but building wireless means building fiber middle mile to the location. It gets them closer and building a cadre of wireless customers helping build capital and future customers for fiber.
Why does it work for Paul Bunyan?
Geography helps Paul Bunyan stay focused and committed. They served about 5,000 square miles. They are growing but managing the growth of their area so that they are able to keep customers happy. Larger providers are in a more difficult position because they have so much more ground to cover and so many more customers to keep happy, which requires a lot more upgrade/expansion projects. And they have difficult decisions on where to upgrade and serve areas where the business case is much easier than rural Minnesota.
Even for Paul Bunyan it is difficult to make long term plans because so much depends on current upgrades. One rainy month can set a project back. A hike in the cost of fiber, a delay in required permit, surprisingly tough terrain all slow down a project, which delays future projects. There’s only so much they can do at a time and again that’s where their size and ability to manage growth are assets.
Ann Treacy has a master’s degree in library and information science. She has been interested or involved in providing access to information through the internet since 1994, when she worked for Minnesota’s first internet service provider. She edits the blog Blandin on Broadband from which this article was adapted.