The cooperative ownership model could be a good one for publicly owned broadband networks according to a new report published by the Institute for Local Self-Reliance and Next Century Cities. The 30-page report focuses on the experiences of RS Fiber, a Minnesota network that was built when 27 rural towns and townships created a cooperative with the goal of building the $45 million fiber-to-the-premises (FTTP) network. When completed, the network will serve more than 6,000 locations in a 700-square mile area that previously lacked high-speed broadband.
ILSR has been a champion of publicly owned broadband networks. Next Century Cities is an organization that aims to help cities and other municipalities obtain high-speed broadband and maximize the opportunities that high-speed broadband creates.
“RS Fiber is a promising model for the vast majority of rural communities stuck with slow and unreliable Internet access,” wrote the authors of the report titled “RS Fiber: Fertile Fields for New Rural Internet Cooperative.”
Publicly Owned Broadband Networks
The RS Fiber cooperative was created when 10 city councils and 17 rural township boards voted to do so. The cooperative structure calls for all customers served by the network to automatically become members. People who are not customers have the option to invest in the cooperative but unlike the customers, do not have voting rights.
Council and board members likely voted in favor of the cooperative plan, in part, because they were desperate to obtain broadband and, in part, because of the funding plan for the network.
As the report authors explain: “[T]he local governments bonded for seed funding to loan the co-op that became subordinate to other private investors, including local banks. As long as the network hits its financial targets, no taxpayer dollars will be used. The co-op will repay its loans to the local governments with revenues from the network, but local taxes will make up the difference if it falls short.”
If that were to occur, however, the additional taxes required would be relatively low, the authors said. If the loan had to be paid back entirely through taxes, the average cost would be $10 to $15 per property. And the actual cost likely would be less because revenues earned from the network will go toward paying back the loan.
The RS Fiber network is being built by Hiawatha Broadband Communications (HBC), a company that already offers broadband in other rural areas of Minnesota. HBC also will be providing telephone, television and Internet access over the network.
A Phased Approach
Another notable aspect of the RS Fiber project is that the co-op voted to bring service to all locations, including farms that were particularly costly to serve. To make the project more economically viable, however, locations that are the least costly to serve will get service first – a move that will maximize upfront revenues that can be reinvested in future construction.
People in more remote areas won’t have to continue to struggle with their current slow Internet, however. Another element of the project calls for the deployment of broadband wireless to serve more remote locations until fiber can be deployed to those locations.
Where FTTP has been installed, broadband is available at speeds up to 1 Gbps bi-directionally for $129.95 a month. A 50 Mbps symmetrical service costs $49.95 monthly.
The entire network is expected to be completed by 2021 – about 12 years after the community first began talking about building it.