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Arkansas Cooperatives Apply Rural Electrification Model to Internet Access

6 min read

Three electric cooperatives in Arkansas will soon be delivering broadband internet service to their members.

Ouachita Electric in Camden, North Arkansas Electric in Salem (Fulton County) and Ozarks Electric in Fayetteville plan to deliver internet via fiber optic cable in the next few months because fiber optic is the most advanced delivery system and it offers high-speed access. Fiber optic is also expected to stand the test of time by providing customers the technology they need now and what they’ll need years from now as internet technology evolves.

The co-ops hope that offering the service will attract businesses needing fast and reliable internet and help stanch the population decline experienced in many rural areas. The rural population in Arkansas has shrunk by 1 percent since 2010, while its urban population has grown by 3.4 percent, according to the University of Arkansas Division of Agriculture’s 2015 “Rural Profile of Arkansas.”

Another benefit, the co-ops say, is their ability to connect substations to each other, to other facilities and to smart meters, increasing efficiency and improving reliability by enabling better monitoring of outages. That could mean lower electric bills for their customers.

But finding the money to build the infrastructure from scratch is a challenge for the co-ops that puts them at a disadvantage compared to traditional internet providers. Those traditional providers have been building on to networks that were already in place.

For example, AT&T of Dallas has invested $1 billion since 2012 to improve its wireline and wireless networks in Arkansas.

AT&T also receives $427 million a year in federal money from the Connect America Fund that local telephone companies are eligible to participate in. AT&T plans on using the money to bring broadband internet to 1.1 million FCC-identified homes and businesses in 18 states, including Arkansas, over a six-year period that began in August 2015. The company’s plan is to reach 51,000 customers in Arkansas.

Little Rock’s Windstream hasn’t spent that much, but it has pumped $250 million into its nationwide network. And the company has spent $41 million over the last three years to improve its network in Arkansas, according to Scott Morris, senior adviser for corporate affairs.

Comcast, based in Philadelphia, did not answer emailed questions but instead directed Arkansas Business to the Arkansas Cable Telecommunications Association. Executive Director Joe Molinaro said cable companies have spent hundreds of millions of dollars to reach more customers and they will adapt as the cable industry — the No. 1 broadband internet provider in the United States — continues to change.

That falls in line with what Walter Hussman, publisher of the Arkansas Democrat-Gazette and chairman of Wehco Media, recently told Arkansas Business. “We keep investing a lot of money to provide a lot of broadband for customers, because broadband is the future in cable,” he said. Wehco owns several cable television companies that provide internet service.

Although the three electric co-ops declined to disclose to Arkansas Business how much they plan to invest in their new networks, the news website Watchdog.org reported that OzarksGo would be spending $50 million. OzarksGo is the subsidiary of Ozarks Electric created to provide broadband service to the co-op’s members.

Ouachita Electric and North Arkansas Electric also formed subsidiaries. Ouachita Electric, through a partnership with South Arkansas Telephone Co. in nearby Hampton, formed Arkansas Rural Internet Services. North Arkansas Electric’s subsidiary is called Next.

Rural Electrification
North Arkansas Electric CEO Mel Coleman, who is also president of the National Rural Electric Cooperative Association, said cooperatives like his are more motivated to reach rural areas than traditional providers because they don’t have for-profit business models.

He explained that cooperatives exist to improve the lives of their members, while traditional providers must be accountable to shareholders. It makes less sense for them to invest in places where only one or two customers per mile can be reached as opposed to the thousand per mile that could be reached in a metro area, Coleman said.

Cooperatives around the country, he said, are comparing providing broadband to bringing electricity to rural residents in the 1930s, calling it the next necessity for rural America.

For-profit providers disagree with the rural electrification analogy.

Ed Drilling, president of AT&T’s Arkansas Division, said internet is different because there was a guarantee in the 1930s that every resident would buy electricity and pay a usage-based price for it, while only 30 percent might buy broadband access and pay a fixed-rate price for it.

Coleman is more optimistic. He pointed to crowded cooperative-hosted meetings in which members clamored to buy broadband internet from their electricity providers, while Ouachita Electric General Manager Mark Cayce said he expects 40-50 percent of its members to purchase the new service.

Cooperatives, like traditional internet providers, believe providing broadband access is their future too, and they are expecting a higher rate of buy-in from members than Drilling suggested there would be.

North Arkansas Electric, for example, is hoping to take internet to 30,000 customers in the next five years and begin connecting people within 60 days, Coleman said.

The co-op has been hanging fiber cable from power poles since early summer and says the last phase of rolling out broadband service will be running lines to homes.

Its goal is to offer upload and download speeds of at least 25 megabits per second. Some customers could get speeds of 100 Mbps, and the eventual goal is to make internet service even faster at 1 gigabit per second, Coleman said.

OzarksGo expects to have its first customer online by the end of this year, General Manager Randy Klindt said. He said the six-year project would deliver internet with gigabit speeds, television and phone service to approximately 75,000 co-op members in Arkansas and northeast Oklahoma.

Mark Lundy, president of South Arkansas Telephone Co., which partnered with Ouachita Electric to create ARIS, said the subsidiary plans to start connecting homes to internet in November. ARIS’ goal is to service 15,000 homes and businesses in the next two or three years.

SATCO and Ouachita Electric agreed that the partnership making this possible was natural because both serve the same area.

Cayce, the co-op’s general manager, added, “Doing it on your own is a great undertaking.” He said Ouachita Electric has just 37 full-time employees.

But Lundy echoed the sentiment of others. He said that despite the challenges they face, co-ops have an advantage because their mission is to serve members rather than to make a profit.

Coleman, with North Arkansas Electric, put it this way: “Eighty years ago, the for-profit business model did not fit rural Arkansas. And, today, the for-profit business model does not fit rural Arkansas.”

Co-ops were established to improve the quality of life of their members, and internet access improves education, property values and public safety and attracts economic development, he said.

Coleman also said providing broadband internet to members has been discussed at every co-op meeting he’s attended while serving in his national role.

Lundy added that, at least for SATCO and Ouachita Electric, providing internet is in their best interest. That’s because it could stem the 3-5 percent annual population loss the area has been experiencing, he said. “We feel that the internet is really the freeway to keeping these people and bringing more people in. Our goal is to say to the customers in our territory, ‘You can have this experience of gigabit service or multiple-gigabit service so you can do everything you need to do.’”

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