Executive Insight, Policy & Regulation

Why Broadband is a Better Bet than Coal for Rural America

In my years as CEO of two different power-supply electric coops, one in Kentucky and the other in Colorado, I came to deeply appreciate the hardworking coal miners whose tough jobs had always been so indispensable to power generation.

I felt for those miners as the forces of regulation and economics shifted our coal-powered industry toward natural gas. Across coal country, proud and vibrant small towns suffered enormously as mines closed and good-paying jobs faded. They suffer still.

For those mining towns, it would be wonderful if coal could once again be king. The truth is that no amount of political rhetoric can alter a fundamental reality of the U.S. energy system: Coal has no chance of competing with natural gas. Not only is natural gas cheaper and cleaner than coal, but gas-fired generating plants also are easier to permit and faster to build.

Fortunately, a movement is growing that actually could make a real difference for overlooked rural communities. According to a report published this past January by the National Rural Electric Cooperative Association (NRECA), more than 100 electric co-ops now aim to provide broadband to rural communities in which this infrastructure is desperately needed. Citing statistics from the Federal Communications Commission (FCC) and academic researchers, the authors note that:

·         6.3 million households in electric co-op service areas lack broadband Internet access (25 megabits per second download speed, 3 megabits per second upload speed);

·         these households will lose $68 billion in economic value over the next 20 years alone due to this lack of connectivity;

·         30 percent of rural Americans have no access to broadband, compared to just 2 percent in urban areas;

·         40 percent of all U.S. schools lack high-speed Internet access, and more than three-quarters of these are in rural areas or small towns, and

·         60 percent of healthcare facilities outside of metro areas lack broadband.

Discouraging as these numbers may sound, we may not actually know the full extent of the problem, according to Jeffrey Sural, director of the broadband infrastructure office at the North Carolina Department of Information Technology. Writing for the Triangle-focused news site WRAL TechWire, Sural argues that FCC data on rural broadband has led to a “wildly inaccurate” map for both North Carolina and the country as a whole. That’s because ISPs provide the FCC with data on broadband access based on sweeping generalizations about entire census blocks of American households. “If there are 100 homes in a census block and one of those homes can receive Internet service at broadband speeds … the other 99 homes are counted as having access to that same service even if they don’t,” Sural explains.

NRECA’s analysts sum up the state of affairs this way: “Millions of rural Americans are locked out of the modern economy simply because of their ZIP code … These rural families and businesses are fighting an uphill battle in the digital economy.”

Of course, this type of divide is hardly unprecedented. Back in the 1920s, people in rural areas were still using candles and kerosene even though the average American city had already been electrified. Even as late as 1932 power lines ran to just 10 percent of the countryside.

“Franklin D. Roosevelt made this issue part of his 1932 presidential campaign and worked with Congress to establish the Rural Electrification Administration (REA),” wrote historian Harold D. Wallace. “Rather than simply build power systems, the REA made loans to electric cooperatives that were repaid over 30 years. Country folk came together, organized cooperatives, and provided labor to build the systems that they ultimately came to own.”

Given this history and legacy, it would be particularly poignant for America’s rural electric coops to bridge the broadband divide, too. Some are already moving forward with plans to do so. For example, the 24,000-member Tipmont REMC reportedly is rolling out high-speed Internet access to the rural Indiana communities it serves, and a subsidiary of Tombigbee Electric Cooperative will reportedly spend $38 million on high-speed Internet in northwest Alabama.

Lawmakers in states like Georgia and Mississippi are working to give coops explicit legal and regulatory permission to get into the broadband business. My home state of Tennessee (I grew up on a farm in Cookeville) took precisely such a step by passing the Tennessee Broadband Accessibility Act of 2017. Newly elected Tennessee Gov. Bill Lee used his first executive order this past January to call for accelerated rural development in the state. Lee is a staunch supporter of broadband expansion.

The availability of $950 million in new federal incentives for rural broadband is part of the reason for the increased momentum. While these incentives represent an encouraging start, the consensus is that much more investment is needed for this national project to truly take off.

In its report, NRECA calls for grants and loans of at least $40 billion over 10 years. Cognizant of the problems with the FCC’s map of U.S. broadband access, the association also recommends more accurate reporting: “FCC Form 477 data is self-reported by industry and unverified, resulting in over-estimating broadband availability,” the analysts wrote. Lastly, NRECA recommends putting a priority on projects in low-density areas and that steps be taken to make sure federally funded broadband systems keep pace with evolving data needs over time.

Rural coops have an obligation to contribute to the quality of life of their members. They rose to that challenge in the 1930s by pulling off one of our society’s greatest accomplishments—the electrification of rural America. A successful effort to roll out rural broadband could bolster communities that have been hard hit by the loss of family farms, the declining demand for coal, rampant closure of rural hospitals, struggling school systems, the onset of the opioid crisis and many other challenges. In past eras, major employers seeking to open a new facility made no secret of their need for power, water, natural gas and transportation. High-speed Internet access is now on that list as well. Broadband availability can be a critical factor in whether a particular rural community lands a new car factory or solar panel manufacturing plant. It enables schoolchildren to do their online research and tests at home instead of having to find a public place with high-speed Internet access, and it greatly expands healthcare options by connecting doctors and patients at a distance.

Investing in rural broadband will pay dividends for millions of Americans for decades to come. The expense represents a major challenge, to be sure, and there are many other logistical issues to be resolved, such as the need to avoid cross-subsidization of revenues from the power side of the business.

Still, those electric utilities that have not yet explored their options with respect to rural broadband should consider doing so. The effort could include working with counsel to determine the legal, financial and regulatory issues in play; launch broadband subsidiaries; file applications for federal funds (deadlines are rapidly approaching); and explore the logistics of working with expert third parties. They could also consider supporting the lobbying and educational efforts by NRECA and others seeking to promote rural broadband.

By all accounts, rural America feels disconnected from the wired, populous and prosperous coasts. A major investment in rural broadband could literally and metaphorically reconnect these communities with the rest of the country.

About the author: Roy M. Palk is Senior Energy Industry Advisor for national law firm LeClairRyan. A 45-year veteran of the power business, the Glen Allen, Va.-based attorney was President and CEO of the East Kentucky Power Cooperative. His past roles also include serving in several top positions for the National Rural Electric Cooperative Association (NRECA); [email protected]