State laws can make a big difference in whether it’s feasible for electric cooperatives to build broadband networks and offer broadband services. While some states restrict an electric cooperative’s ability to do that, others encourage it.
Two executives from the National Rural Electric Cooperative Association (NRECA) discussed state laws impacting this development during a recent webinar organized by media outlet Broadband.money. They signaled that most states generally are on a positive trajectory — making it easier than in the past for rural electric cooperatives to offer broadband.
NRECA represents most of the nation’s 900 rural electric cooperatives, which together serve 42 million customers with electricity. Of these co-ops, 210 already offer broadband to approximately 500,000 customers.
Because of the historic amount of funding currently available to deploy broadband to unserved and underserved areas, between 100 and 200 additional co-op members are considering the role they may be able to play, whether it’s deploying broadband themselves or partnering with another entity to get into the business, said Brian O’Hara, webinar co-presenter and senior director for regulatory issues, telecommunications and broadband at NRECA.
Electric Company Broadband Restrictions
“I don’t think that any states have laws on the books that prohibit co-ops from offering broadband,” said Katie Cullerton, webinar co-presenter and legislative affairs director for broadband and telecommunications at NRECA.
She noted that the trend has been away from restrictive laws, and said that changes in Mississippi that reduced restrictions have led to several electric co-ops getting into broadband and providing “some really great service and build-outs.”
At a minimum, 18 to 20 states have changed their laws to specifically give electric co-ops the authority to get into broadband, O’Hara noted. In most other states, the statute was “silent,” meaning that it was written long before broadband was ever envisioned and it asserts that co-ops can provide electric or other similarly situated services, which is being interpreted to allow the electric co-op to get into broadband.
Last fall Telecompetitor.com reported that 21 states had laws in place that prohibited or restricted municipal broadband networks. While no longer entirely prohibited, some states have certain restrictions that electric co-ops need to navigate before getting involved in broadband, O’Hara said.
For example, “Tennessee limits electric co-ops to only serving their electric co-op service territory,” O’Hara said.
He also noted that some states may only allow an eletric co-operative to offer broadband within a certain distance of its electric service territory.
“A few other states would [require the co-ops] to jump through a lot of hoops to go to the state public utility commission to get approval to get into broadband,” he said.
Easements Aren’t as Easy as You Might Think
One of the biggest state restrictions involves easements.
“Everyone likes to think that electric co-ops have poles, they have all the rights-of-way, they have easements — not necessarily,” O’Hara said.
“The vast majority of times our easements would only apply to electric service,” O’Hara explained.
For example, if an electric co-op that is not in broadband wants to deploy fiber on all its poles, it can do that without a problem because it’s all for electric operations. But if retail broadband is going across the fiber, that could be outside of the co-op’s electric easements and it could be sued, O’Hara said. He cited a $70 million judgment against a Missouri co-op for this reason.
Easement issues almost always have to be dealt with through state legislation, O’Hara remarked.
“About 18 to 20 states — almost the same number that have given co-ops the authority to get into broadband — have passed legislation to adopt this easement relief. And it’s up [for consideration] in other states now that are having this problem,” he said.
“They have to look at their state-enabling statutes and the easement issue, because there are a couple of states where the easement issue is becoming a problem and it could slow down the deployment of some of these loans and grants,” he said.
Must They Serve Everyone?
There are other state-by-state legal issues that electric co-ops desiring to get into broadband must address, as well. Some states require their electric co-ops to create a subsidiary if they’re going to get into broadband. Cross-subsidization between the electric and broadband operations also may be prohibited.
There is also the question of whether a rural electric co-op that enters the broadband business — whether federally funded or not — is required to deploy broadband to every REC customer, even to those customers located in areas that already have a competing broadband provider.
The answer depends on the state laws. In Tennesse, for example, “they have to treat every single one of their electric members the same. So if they’re deploying broadband to some of their members, they have to deploy to all of them. Not every state is that in the governing statute for the co-op, but that is the co-op mindset. If a [co-op] is going to get into broadband, they would like to treat all their members the same,” O’Hara said.
So although state laws no longer expressly prohibit rural electric cooperatives from deploying broadband networks or providing broadband service, it’s clear that many states closely prescribe the rules by which co-ops must play. Despite restrictions, it is clear that the recent legislative changes are paving the way for electric cooperatives to have an easier go in the world of broadband.
