Entries in USDA (7)


Griswold IA Cooperative Looks Forward to $12.7m Broadband Loan

Much-Needed Funds will Help “Ramp up Speed and Bandwidth”

On November 14, JSI Capital Advisors reported that Agriculture Secretary Tom Vilsack announced the recipients of over $400m in USDA Rural Utilities Service broadband funding. 22 rural telecom providers in 15 states will receive broadband loans ranging from $3.7m to $32m “to build, expand and improve broadband in their rural service territories” (The Monitor: Vilsack Announces Additional Telco Funding to Expand Rural Broadband).

One company slated to receive funding immediately jumped out to me—Griswold Cooperative Telephone Company (Griswold, Iowa), which will receive $12,747,000 “to complete a system-wide FTTP network, enhancing broadband service to all subscribers.” I grew up about 20 miles away from Griswold, so I was naturally curious to check in with general manager Robert Drogo and learn more about his company’s plans to expand FTTH near my homeland in Southwest Iowa.

Drogo explained that the Griswold board of directors started discussing their options two years ago, and in order to be successful “we knew we had to look at fiber.” In addition to improving Internet speeds and capacity, the fiber will also support other capabilities like IPTV for all customers (which Griswold currently offers just in the towns it serves). Over the past 18 months, Griswold has been deploying middle-mile fiber and preparing for the end-goal of FTTH, “should we be fortunate enough to get the loan.” Griswold’s $12.7m good fortune will be used to take the company from its current 60% fiber deployment to FTTH for its entire customer base—1,700 lines in the communities of Griswold, Lewis, Elliot and Grant.

The company’s current DSL speeds go up to 3/1 Mbps tops, but with IPTV also running on the lines to the in-town customers, the bandwidth is getting crowded. Once the fiber is fully deployed, Drogo estimates that customers will experience 5/1 Mbps at the low end and 10/3 Mbps at the high end. He also commented that “now speed isn’t an option,” and it is absolutely necessary for the company to keep reaching for higher limits—hence the importance of the RUS loan.

Many RLECs surely hope that deploying high-speed FTTH will attract new businesses to their service areas, and a few new medium- or large-sized businesses would obviously be a real catch for a rural community like Griswold (located about mid-way between Des Moines and Omaha). Drogo wasn’t sure if the project would help attract any significant new businesses to the area. However, he explained, “I don’t see a big draw on the top end, but [the FTTH] will definitely be a benefit to home based, small and agricultural businesses.” As I grew up in this area, I can certainly see the appeal of being able to run a business from home—the hour plus drive to Omaha or Des Moines can get quite monotonous (especially every day for a job), and volatile Iowa winters definitely add an element of uncertainty to a long commute. Griswold’s FTTH may facilitate more teleworkers and home-based start-ups, and it will surely benefit the area’s important agricultural economy.

Companies eager to deploy FTTH are often quick to claim that the investment will bring new business to struggling rural economies, but it really might be just as important to focus on bolstering the community’s current small businesses. Hopefully Griswold’s broadband loan will help ensure that the local businesses (current and future) will have the tools to move forward at a pace that matches economic and business development in urban areas.

The fiber expansion should help Griswold become more competitive on the video front as well. IPTV will become available for the rural consumers, who currently can only receive pay TV from satellite providers. Of course, the FTTH will also give the rural consumers an opportunity to “cut the cord” on traditional video if they desire, since the FTTH connections will be able to handle plenty of Netflix. Drogo speculates that Mediacomm may come to the community in several years, but by that time Griswold could have a significant competitive advantage on video services. Drogo does not see wireless broadband as an immediate competitive threat, but he anticipates that 4G will eventually be available in the area—although that could also be years down the road too. Even so, it is likely that wireless broadband will complement, and not substitute, Griswold’s FTTH service offerings.

Griswold will probably not see the $12.7m RUS loan money for at least 18 months, but the company has been approved for interim investments such as ordering the fiber. Drogo believes that the $12.7m will be enough to complete the entire FTTH build out. He added that this amount is “very conservative” and was calculated to account for various regulatory, legislative and resource uncertainties. Drogo is “not concerned” about the bad publicity that has been hanging over USDA and BTOP broadband loans like a dark cloud in the past few months. For the most part, RLECs have been putting their broadband loans to good use and have not been caught up with any of the various failures or mismanagement catastrophes that some other  loan recipients have encountered.

With this $12.7m broadband loan, it sounds like Griswold Cooperative Telephone Company will be in a position to achieve its strategic goals and bring benefits to the community. The FTTH deployment could solidify the company's competitive advantage if it is completed before cable and 4G competitors start knocking on the door.


From Appalachian Stereotypes to Broadband Connectivity

Transforming a Region: Horizon Telcom Partners to Connect Appalachia

In nearly every study conducted on broadband penetration rates, one region of the U.S. is consistently listed as behind the times—Appalachia. Still, despite its debilitating stereotypes and rambling topography, some areas of the region are quietly growing with industry, education, scientific research, and health care. But none of these sectors can thrive without broadband availability, a fact that inspired Ohio Congressman Zach Space to advocate for widespread connectivity in the region. Space collaborated with other smaller broadband advocacy groups in the area and, after several years, Connecting Appalachia finally found public and private sector support to make it a reality. Construction of the middle-mile project began this spring, thanks to combined funding from the NTIA and Chillicothe, Ohio-based Horizon Telcom. Many other organizations, businesses, academic institutions, and healthcare providers joined the effort, and as Brooke Eiselstein, public relations specialist for Horizon, describes it, Connecting Appalachia is “a testimony to partnership.”

The project is also a testimony to perseverance. Originally, Eiselstein said, Horizon Telcom worked with Congressman Space and a group of consultants to obtain an NTIA Broadband Technology Opportunity Program grant that would be a last-mile network. “We wanted every person in Southeast Ohio to receive broadband,” Eiselstein said. “Our grant was denied. They didn't find it practical to fund a broadband network that would carry aerial fiber several miles out to the middle of nowhere when only three houses could get it, and who's to say they [these residences] would even sign with us?”

Eiselstein said they re-grouped and “wrote the grant a second time, although this time we were asking for money to build the network to only the middle mile consortium. This entailed hanging fiber on existing utility poles all down major highways to hit large businesses, K-12s, colleges, hospitals, health care entities, government agencies, MARCS [multi-agency radio communication system] towers, and industrial parks.” The NTIA then agreed to fund 70% of the $100m middle-mile project, and Horizon stepped in to pick up the remaining 30%. The group was formally awarded the grant on August 18, 2010, and they will have exactly three years to have the 10MB synchronous connection network up and running.

But the process of securing funding was just one aspect of Connecting Appalachia's evolution. In many ways, the project is a mosaic of smaller, local efforts, starting with three hospitals that came together and decided they needed a broadband network for health care in southeastern Ohio. “Adena, O’bleness, and Holzer [the hospitals] joined together to form the Southern Ohio Health Care Network, and received a grant for $18 million from the FCC,” Eiselstein said. “Later, Horizon was awarded the contract to construct the network.” News of their efforts spread, and soon, Eiselstein said, local districts came together with Congressman Space to “develop a vision for what would become Connecting Appalachia.”

Eiselstein said that the project enjoyed a lot of press in local, regional, and even national press, and as a result their list of partners is quite extensive: the three lead healthcare providers; educational partners across the state; several state government agencies and the Appalachian Regional Commission; federal groups including the FCC, USDA, NTIA, and BTOP; local development districts; and Connecting Appalachia's consultants, Reid Consulting Group.

Such a wide variety of early partnerships paved the way for a larger broadband backbone, while also ensuring a customer base. Eiselstein said, “While we were writing the grant we had to identify 592 Community Anchor Institutions (CAIs). However, many of those customers needed services 'now' (then) and have already signed with other providers. Some have signed monthly contracts so they can switch providers after the network is built.” 

Before the BTOP grant was awarded, Eiselstein said, “We were awarded the Southern Ohio Healthcare Network grant. This allowed us to connect all rural hospitals in 13 counties. Most of these have already been connected. Now, the BTOP grant allows us to connect another 21 counties, totaling 34.”

When asked about cost and Horizon's concerns for return-on-investment, Eiselstein said “absolutely” the group will bring in new customers, adding, “We have to keep in mind that the grant was awarded because Appalachian Ohio has been left behind in regards to technology. This area has suffered because of the lack of broadband, and this was a great opportunity for Horizon to continue its 116-year tradition of providing good service to its neighbors. Horizon cares about putting Appalachian Ohio on equal footing with other areas of the state.” In order to elevate the area's residents and provide more advanced opportunities, Eiselstein said, “It truly is essential that a fiber optic network be built that would provide world-class, high speed Internet. Customers will finally be able to be on the same playing field as colleagues in more urban areas. New customers will be able to purchase internet connections, point-to-point connections, PRIs, and VOIP lines. We are also offering a business video package in many of the counties.”

As an investment opportunity for Horizon, Eiselstein underscored that the network “has the potential to reach 11m customers with up to 10GB synchronous connection. Of course we will not be reaching this many customers, but that is the potential it has.” She added that it was actually a strength for Horizon to be a small company, making it more “nimble and flexible when it comes to creating a solution-based service specific to our customers’ needs.”

Eiselstein has been an ambassador for Connecting Appalachia, tasked with “going to all the counties, joining the chambers, meeting the business owners, elected officials, mayors, commissioners, chamber executives, and so on. We go to trade shows, luncheons, and banquets. We usually have a table where we can distribute our annual reports, brochures, and giveaways that explain the project and who we are. Our response has been very positive. Everyone agrees there is not nearly enough broadband in the region.”

While the project itself will only affect the Appalachian regions of Ohio, Eiselstein notes that the broadband gap expands to other areas of Appalachia as well. “People in this region have been starving for Internet for years,” Eiselstein said. “When people see our trucks on the side of the roads hanging fiber, they immediately call into the office, or even stop to talk to the technicians about availability. The people of Appalachia are extremely excited and relieved to finally have access to Internet speeds and bandwidths that allow them to run their businesses and their lives more efficiently.”

As for the project's current phase, Eiselstein said the group has begun to construct the network's backbone, and are primarily hanging fiber on existing pole routes. A very small portion will be buried. Connecting Appalachia will be providing some last-mile connectivity to businesses. “These last mile costs are typically built into the quote for the business either in an up-front cost or amortized over the life of the contract,” according to Eiselstein. “We are also providing the last mile connection to the community anchor institutions who sign contracts for services. We are also partnering with WISPs to reach residential customers” since the BTOP grant did not fund the last-mile piece of the project.


Paul Bunyan Communications Bets on Broadband 

As Traditional Services Decline, Cooperative Says Broadband is THE Future

As our Richelle Elberg reported last week, telcos providing broadband serve about half of all broadband connections in the U.S.—numbers that, so far, are holding steady against cable-provided broadband connections. In the same study, Richelle predicted that ILEC broadband connections would overtake the number of access lines as early as 2015, as ILECs increasingly are deploying fiber and upgrading their broadband offerings.

As a case in point, Paul Bunyan Communications in Minnesota has aggressively incorporated broadband into its business strategy and is about to complete its final year of a fiber-to-the-home upgrade for its entire 4,500-square-mile service area. The cooperative's broadband initiative has been well-received, too, with take-rates at 60%, representing some 17k subscribers.

But Paul Bunyan isn't just a small company benefiting from a forward-thinking business plan; it's an ILEC that attests to the collective power of a cooperative to implement broadband buildouts and forge strategic partnerships with local electric co-ops.

In fact, the Minnesota cooperative has made broadband a focus of service for many years, according to Brian Bissonette, marketing supervisor for the company. Paul Bunyan first started offering broadband in its service areas in 1999, and now Bissonette says that 100% of its service area has broadband access. In the majority of its service area, Paul Bunyan is the only provider of high-speed Internet. “In rural areas [of the state], there are no real competitors. Wireless and satellite service is available, but it's much more expensive, with slower speeds, and less reliability,” Bissonette said.

Paul Bunyan's service packs a good punch too, with speeds up to 10Mbps for both upload and download, and up to 25Mbps service and higher available. The co-op's extensive fiber build has allowed it to offer digital and high-definition television services to all its customers as well, complete with DVR and On Demand. According to Bissonette, these television services have about a 50% take-rate so far. The company now uses vendors like Calix, Minerva, ADB, and Clearfield, but Bissonette said television services will be transitioning to offer the Microsoft Mediaroom IPTV platform.

Last month, Minnesota received some press for the release of Connect Minnesota's Consumer Broadband Adoption Survey, which reported that “only” 28% of Minnesota's consumers do not subscribe to a broadband service. Among those who don't subscribe, the majority said they don't need broadband or that there isn't content relevant to them on the internet; the second reason was that it was too cost-prohibitive. But while that 28% figure is lower than the national average of 35% non-subscribers, once again there was a marked gap in broadband availability in rural communities versus more populated areas. In rural parts of the state, 39% of Minnesotans do not have broadband, usually due to lack of availability, not lack of desire.

Because Paul Bunyan's service area is primarily rural, Bissonette said its diverse services and broadband deployment are even more dependent on federal stimulus monies. Just this year, the cooperative was awarded a $19.7m Rural Utility Service (RUS) grant through the USDA, and will use the funding to expand broadband FTH service into two more underserved areas—rural areas of Park Rapids and Trout Lake.

Overall Paul Bunyan has seen a steady increase in broadband subscribers and revenue, something Bissonette credits to the “millions of dollars” the company has invested in “upgrading and expanding our network to offer broadband services. And they have been well received.” He says that back in 1998, the company had just 8k access lines and no broadband Internet customers. “Today we have more than 28k access lines and more than 17k broadband subs,” Bissonette said. But even while noting these gains, he added, “This could be radically affected by access and universal service reforms if they are unfavorable to high-cost-to-serve rural areas.”

According to Bissonette, service availability is overwhelmingly contingent on sustained FCC funding. “The biggest challenge we face is intercarrier compensation and universal service reform,” he said. “The majority of our service area is rural and high-cost to serve. If these mechanisms are eliminated or drastically reduced, the result would be much higher costs for the services to consumers. That would create a significant barrier to receive the services that most [of our customers] consider essential. We'd also be unable to continue to expand our broadband services to those rural areas, and that includes our planned expansion with the recent $19.7m RUS loan.”

As a cooperative, Paul Bunyan has also realized the advantages that come from local and regional partnerships. Bissonette cited one such example in Paul Bunyan's alliance with Beltrami Electric Cooperative. Together, the two formed Cooperative Development, “a construction company that serves both cooperative's network expansion and replacement needs,” Bissonette said. “This greatly reduces the need for both cooperatives to outsource this work and provides dozens of full-time local jobs during the construction season.”

Paul Bunyan has also partnered with seven regional electric co-ops to form Northern Safety and Security—an entity that provides security systems, smoke and carbon monoxide sensors, a latch-key feature, gas leak monitoring, agricultural environment sensors, camera systems, and more, along with a 24/7 response center. Together, Bissonette said the group “shares investment costs and a resource base providing a variety of services to 52k co-op members and 150k households throughout Minnesota and eastern North Dakota."

Going forward, the cooperative is planning on taking advantage of cloud services for its data hosting and online backups, which it already provides for some of its larger customers. Ultimately, Bissonette said it all returns to broadband and its potential—be it for cloud services, high-speed internet, or IPTV. Facing the current reality for telecommunications providers, Bissonette stated, “We anticipate that wrapping more service around our broadband will be important in the future, as our traditional services decline.”


Tech Savvy U.S. Farms: A Promising Telecom Market?

USDA Report Details Internet Use and Availability on America's Farms

With so much attention focused on rural broadband these last few months, it's difficult to imagine why last month's “Farm Computer Usage and Ownership” report by the U.S. Department of Agriculture went virtually unacknowledged among rural telecommunications analysts. And yet, the USDA's detailed findings reveal an as-yet unsaturated sector in wireless and broadband technology: the American farm. In the last decade, the number of farms with an internet connection rose by 20%, and more than half of American farms now have access to the internet. But a closer look at the numbers reveals that, of those connected farms, only 11% connect through cable, 38% use DSL, 15% use satellite, 20% use wireless, and 11% still turn to dial-up. Availability is not equal regionally, either, with the West and Northeast enjoying the best coverage and the South suffering from the least opportunity to connect (a little more than half of farms there have computers with internet access).

For the communications provider industry, these farms represent an important “vertical” market, where clever partnerships, federal funding, and local investment can come together to meet sector-specific needs. In the next few months, I'll be taking a closer look at the ways precision agricultural and farming communications technologies are affecting the telecommunications provider industry. I'll also profile companies who are servicing these farms or expanding to provide service there, as well as farmers and other industry insiders who understand the promise of a technologically-connected agriculture sector. Then there's also the recent battle between the widespread use of GPS technology on farms and the potential interruptions from cellular service—as evidenced by the recent Lightsquared uproar we've been following.

The bottom line is that, in communities where internet connections are possible and have even become essential for agriculture, farmers are prepared to make good use of fast, reliable broadband, and they are often frustrated when DSL or dial-up are their only options. In July, RUS Administrator Jonathan Adelstein acknowledged the need to connect rural areas—farms among them—and even gave his rousing speech from a family farm in rural Iowa. Our Cassandra Heyne remarked that Adelstein's sentiments were part of a growing chorus of governmental leaders who hailed broadband as beneficial and even necessary to what I call the Rural Triumvirate: Education, Health Care, and yes, Agriculture. But too few of us in the telecom industry understand how farming communities represent an important vertical market, what they do with internet connectivity, and how investments (public and private alike) are revolutionizing an industry that's as old as this nation.

According to Mike Smith, a farmer who operates a small 40-acre farm in California, “The internet means survival to a lot of small farmers.” Smith says that he and other farmers in his area sell crops directly to customers online, adding “If you don't have a Web site, nobody's going to know about you.” Similarly, Alec Smith (no relation) says that pest control is one of the most important uses for the internet on his farm. He's able to upload pictures of diseased plants to plant specialists across the country, who email him back with suggestions on how to combat the disease or pests. In recent weeks other farmers in Oregon, Iowa, and South Carolina have attested to seemingly immeasurable uses for wireless and broadband on their farms—everything from measuring rainfall and crop fertilizer needs, to checking crop prices and trading agricultural commodity futures.

In fact, the USDA's report underscores what many in the agricultural community take for granted: that one of the keys to more productive and more profitable farming (along with successful farming communities, more broadly) is better Web access. About 40% of smaller U.S. farms are online, with 72% of the largest farms using the internet for farming technologies and farm-related business. The gap in service is a telling one, as precision agriculture technologies—many of which use internet connectivity to store and access data—are becoming the new norm and even proving essential to maintaining profitability and viability. Just this month Purdue University and Crop Life magazine published a survey of 2,500 agricultural dealerships, concluding that precision agriculture is on the rise on United States farms and stating that, in some cases, precision ag resources are now “so common place that they aren't thought of as unique anymore.” As precision technologies become more advanced, better connectivity is crucial.

When it comes to wireless, farmers are beginning to turn to their smart phones and similar mobile devices to check weather forecasts, research farm equipment before buying, get advice on pest control, and communicate with other agriculture specialists. According to PrecisionAg Editor Eric Sfiligoj, “the increasing use of iPhones and Blackberries among agricultural experts [is] one of the up-and-coming trends.” He writes that, “Based upon the evidence, the popularity of smart phones and tablets has grown substantially during the past 12 months, with multiple apps now available covering everything from commodity prices to weather reports. And more are on the way.”

Technology specialist for Crop IMS Jeremy Wilson states that “One of the most significant trends I have seen in the precision ag industry is the increased use of tablets or mobile tools.” These mobile tools allow farmers to be connected globally, even while in the cab of their tractors, so that information can be communicated in a much more timely manner. According to Wilson, “Once the equipment is connected, the sky is the limit to the new functionality that a precision ag manufacturer can design to improve the user experience for the operators.” In other words, precision ag allows the farmer to take to the field what “was once limited to the office where he had an Internet connection.”

The question that remains is what platform will farmers rely on for internet connectivity and when will these services expand to cover underserved areas? The answer likely depends on the region, the cost, the available funding, and the infrastructure already in place, which is why it will be useful to look at examples from across the country and investigate Adelstein's claim that, in rural areas, “recovery is underway.”


More Rural Broadband Loans Announced as Past Recipients Wait On Funds

Telephone Coops to Receive a Large Portion of the $103m

Agriculture Secretary Tom Vilsack dusted off his rural broadband speech earlier this week, and announced the recipients of $103m in funding for projects targeted to bring broadband to low-income and remote areas. The loans included around $13m of Community Connect grants and $90m of USDA Telecommunications Infrastructure loans slated for 18 cablecos and telcos located in 16 states. While the funding is great news for the rural communities, the experiences of at least one prior recipient serves as a cautionary tale for this round of awardees.  

The Community Connect grants are awarded to rural communities of less than 20k citizens that currently lack broadband transmission service. The grant winners—who must match the funds they receive—can either put the funds towards broadband infrastructure or towards a community center than will provide free broadband for its citizens. Eighteen rural communities will benefit from the grants--which ranged from $480k to $1.1m.

The term ‘rural’ in this case does not do justice to exactly how sparsely populated some of these locations are.  One of the five loans received by Crystal Broadband Networks will be spent to develop broadband for residents of Birdsong Town, Arkansas—all 37 of them. Other grantees include the Karuk Tribe in the impoverished community of Orleans, California and Wichita Online which will bring high speed Internet to the tornado damaged town of Tushka Town, Oklahoma.

The $90m in USDA Infrastructure Loans comes on top of last month’s round of $192m in funding. Coleman County Telephone Coop in Santa Anna, Texas was the only repeat awardee from July, securing another $22.5 for its fiber build out. Elsewhere, Wabash Telephone Exchange was awarded around $22m with which it will install 777 miles of fiber optic cable in Clay County, Illinois. The Hemingford Coop in Nebraska, the Vernon Telephone Coop in Wisconsin, and the Dubios Telephone Exchange in Wyoming round out August’s loan recipients.

The Dubios Exchange will use its $11.4m to remove outdated copper cables and replace them with fiber-optic lines.  The general manager at Dubois, Mike Kenney, commented that rural customers for a long time have wanted faster Internet speeds, which Dubois’ current infrastructure could not deliver.

“They are demanding more and more, greater broadband speeds for home-grown businesses,” Kenney said. “The only way that we can get faster speeds to them is not with existing copper and existing digital technology, but to go to the next generation of broadband.”

Kenney added that the likelihood of the fiber build out without the loan was extremely low—citing that raising capital for the project would take 10-15 years. While the sparse availability of funds plays a role in why rural areas such as Dubois aren’t currently equipped with broadband, the main reason for the lack of access remains that building fiber to rural areas simply isn’t profitable—a fact that is not lost on the USDA’s Jonathan Adelstien.

“There’s a big gap that remains between rural and urban areas because it’s just hard to make a business case (for broadband) in rural areas,” Adelstein said in a call discussing the recent loans on Monday.

The dollar amounts to be invested in broadband per customer for this round of infrastructure projects bears out Adelstein’s point. Wabash, which serves only 320 Internet customers, will spend $68k per customer to complete its fiber build, followed by Coleman County at $42k and the Hemingford Coop. at $36k per customer. The Vernon Coop, serving by comparison a metropolis of 3.7k Internet customers, will still invest $6.5k per customer to connect Westby, WI with broadband. The payback for most of these projects is at least a few generations down the road—if that.

Despite the lack of return, a few rural telcos have been supplementing USDA loans with their own funds, but a slow down in the delivery of the infrastructure loans have left some providers high and dry. 

OmniTel Communications has been a recipient of government loans and grants multiple times, including this past July. Ron Laudner, ceo of OmniTel, stated the company worked 18 months to secure $30m of funding from the government and began building its fiber network in 2010. After OmniTel was announced as a repeat loan winner this past July, the USDA even made a trip to Rudd, Iowa to tout the effectiveness of the rural loan program. The trip to the site of OmniTel's fiber build was complete with a photo-op and a staged event of Adelstein watching a farmer download a file while sitting on his tractor. Mission accomplished!  Right?  Well, not so fast…

The work OmniTel had done up to the point of the USDA’s visit was funded solely from the $10m internal loans it secured.  The telco had yet to receive a check for its first government loan awarded in the summer of 2010, let alone the funds that the USDA announced this July. Even worse, this delay had forced OmniTel to shut down the project until the USDA funds were in hand—which as of the beginning of August had still not occurred. 

I know what you’re thinking, ‘the government is slow and inefficient at times, not much of a shock.’  The point is that when your ‘success stories’ are not really all that successful and loans are slow to be released, these shovel-ready broadband projects that are announced may not get underway for a long time.

Despite the bureaucratic slowdown, the intent of the loans and grants remain unquestioned—providing high speed Internet to underserved areas benefits rural citizens and their communities immensely. We’re learning however that in many areas it will take longer than expected to make rural broadband a reality.