Bill to use coops to expand broadband
By Jon Hawley
Thursday, March 21, 2019
Area lawmakers are backing new legislation that would help electric cooperatives offer broadband internet.
Rep. Howard Hunter III, D-Hertford, is a primary sponsor of House Bill 387, which was introduced Tuesday and would remove restrictions on electric membership corporations supporting or providing broadband internet. Other primary sponsors include Republican House Reps. Dean Arp, John Szoka and David Lewis. State Reps. Ed Goodwin, R-Chowan, and Bobby Hanig, R-Currituck, are also among the bill’s 33 co-sponsors.
Hunter said the legislation seeks to bring affordable broadband to underserved, rural communities, which lawmakers widely agree is a burning issue.
“You know we need broadband bad,” Hunter said. “That's the talk of the session.”
State law doesn't forbid electric coops from offering internet, but it does make it harder and more expensive. To reduce those barriers, H387, and its companion legislation, Senate Bill 310, would make three key changes, according to Nelle Hotchkiss, chief operating officer for coops' statewide organization, NC Electric Cooperatives.
First, it would allow coops to seek U.S. Department of Agriculture funding for broadband projects, which the legislation notably defines as providing download speeds of at least 25 Megabits per second and uploads of at least 3 Mbps.
Hotchkiss said that would allow cooperatives to seek $600 million in grants and loans available for internet projects. It's hoped that initial funding will prove successful and Congress will grant more funding, she noted.
Second, it would exempt broadband activities from a requirement that cooperatives' business ventures “fully compensate” the cooperatives for the use of personnel, services, equipment and property. The rationale for the restriction is that cooperatives should not use their electrical revenues and infrastructure to subsidize other ventures, which could grant a competitive advantage, she said.
Hotchkiss said the restriction should not apply to broadband. That's because cooperatives plan to offer broadband through their existing infrastructure. They use a great deal of internet fiber to connect electrical stations, offices and more, and it’s why they're seen as a potential way to expand broadband to rural areas.
Additionally, she said competitive concerns over coops providing broadband is moot. They’re looking to serve areas that large internet companies aren't, she said. Large providers often don't serve rural areas because it would be too expensive to install enough fiber and other infrastructure to serve their scattered populations.
Third, H387 would limit property owners' ability to sue cooperatives who provide internet service through existing easements. Easements that cooperatives already hold may also be used for broadband, the bill provides. The bill also provides that property owners may not pursue class-action lawsuits against cooperatives with claims of trespass or “inverse condemnation” related to expanded use of easements. It does not bar individual suits, however.
Hotchkiss reiterated that cooperatives are looking to offer internet with existing fiber, so broadband service shouldn’t take up more space on a property. Cooperatives sought the restrictions on “inverse condemnation” lawsuits in response to a case in Missouri, she explained, where a court found a cooperative had to pay more for its easement because broadband service had increased its value. The court factored the value of data flowing through fiber, not just the fiber itself, she said.
If H387 passes, Hotchkiss said NC Electric Cooperatives would pilot a business model with River Street Networks, of Wilkesboro. River Street would handle more of the retail side of broadband service, allowing cooperatives to focus more on the infrastructure, she said.
River Street would be NC Electric Cooperatives' recommended partner to member cooperatives, but they would be free to choose other partners, she added.
Given their existing infrastructure, and nonprofit status, Hotchkiss said cooperatives should be able to offer very cost-effective service. They would seek primarily to generate enough revenue to cover maintenance costs, she said.
One large unknown in the legislation is whether large cable and internet companies will oppose it for enabling competition. Hotchkiss said she hopes those companies will support, or at least remain neutral, on the legislation. The goal is to serve areas where the companies have few or no customers, she reiterated.
Hotchkiss also said a lot of lawmakers support the legislation, and cooperatives hope to get legislative leaders' support as well.