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Broadband providers vie for tobacco funds / March 07, 2018
Communication companies of varying stripes — from media giant Comcast to rural electric cooperatives — are competing for an $11.3 million pot of money from the Virginia Tobacco Revitalization Commission to extend broadband internet service to the countryside.

Tobacco commission members are set to meet Thursday, to decide how to divvy up funding for local projects in the Southside and Southwest Virginia service area. Locally, Mecklenburg Electric Cooperative is asking for $2.6 million to fund a fiber-optic network expected to cost $5.2 million that will reach an estimated 3,000 homes.

In Halifax County, officials have requested $206,000 in seed money for a $1.1 million project involving a private, third-party wireless broadband provider. Further west, Pittsylvania County is asking for just under $500,000 for a $980,000 project.

Aside from MEC, two other rural electric cooperatives are in the running for funding. Central Virginia Cooperative, based in Appomattox County, wants $980,000 for a $3.9 million project, and Prince George Electric Cooperative is seeking $1.25 million for its $2.5 million “Sussex County Highspeed Broadband Initiative.”

The largest single request — $4 million — has been submitted by Bedford County on behalf of telecom giant Comcast, which is proposing to extend broadband service to nearly 7,000 homes in the Smith Mountain Lake region. Lunenburg County wants $343,000 for its last mile broadband project, estimated to cost around $650,000, and other projects are proposed across an area east in Sussex County to west in Russell and Buchanan counties.

All told, the Tobacco Commission is being asked to fund $18.4 million in broadband projects, to reach around 18,000 subscribers, according to conservative estimates, although the customer base could rise to as many as 41,000 homes and businesses.

The $18.4 million total is nearly twice the $10 million amount that the tobacco commission initially set aside for the project.

In the face of such large demand, the tobacco commission announced plans at its last meeting to offer low-interest loans instead of grants to participating entities. It is unclear how or if this will impact the number of applicants in the broadband pool.

“We just need a small boost up front to get rolling,” said MEC CEO John Lee of the cooperative’s plans to lay fiber optic cable in a nine-county Virginia area. Lee declined to say if MEC will accept tobacco commission money if it comes in the form of a loan, rather than a grant. Instead, he noted that MEC plans to match tobacco commission seed money with $2.6 million of its own funds to pay for the initial stage of the fiber optic backbone, which will be used to support the cooperative’s communications needs and Smartgrid initiatives.

“We remain hopeful that the community leaders and elected officials who were appointed to serve on the Tobacco Commission and represent those served by MEC will recognize the critical nature of broadband access in Southside Virginia and do the right thing by returning it to a grant program, as it was designated initially and continued to be right up until the very meeting the grants were to be awarded,” Lee said.

“Obviously, the change from grant to loan has a substantive impact on our business plan to aggressively deploy fiber to the home and offer Southside Virginians broadband service at a speed and capacity offered in urban areas.”

Given that the cooperative is a not-for-profit organization, Lee promised to pour every dollar of revenues generated from the project into expansion of MEC’s internet customer base. “Once established [MEC’s involvement in broadband], we will pour every penny back into deployment.”

MEC has argued that a fiber optic network — generally acknowledged as a superior but pricey technology for telecommunications needs — will help to level the playing field for rural areas that otherwise will fall further behind larger communities on economic development, education, small business growth and other areas.

For about $56 per month, MEC subscribers will have internet access with upload and download speeds of 50 megabites per second (mbps). By comparison, for $35 per month subscribers to Halifax and Pittsylvania broadband initiatives will have access to service with upload speeds between 10-15 mbps and download speeds of 2-8 mbps.

These charges and speeds are estimates based on the business plans and feasibility studies that localities have submitted to the tobacco commission to support their requests for grant funds.

The timeline for each of these projects ranges from six to 47 months, depending on the size. Dwayne Long, MEC vice president of technology, said he expects the cooperative to reach nearly 3,000 homes by mid-December 2020.

Pittsylvania and Halifax counties are working with a third party entity, SCS Broadband, on a fixed point wireless network system (whereby radio signals transmitted between fixed points such as a radio tower and home or business) to serve residents in the two counties.

Lee describes MEC’s approach to broadband as the ideal way to reach end users in areas rife with financial, technological, and topological barriers.

Their motivation for entering the broadband business, Lee explains, is born from the same inequity that existed in the 1930s when investor-owned utility companies denied service to rural areas, citing high development costs, and low profit margins. Consequently, even when they could purchase electricity, rural consumers paid higher prices than urban consumers. The same problem exists today with the digital divide.

He calls their involvement with broadband “New Deal 2.0”, a term coined by MEC vice president David Lipscomb. Lee analogizes today’s large-scale internet providers to investor-owned utility companies of the past: “For them, it’s all about the money, which is understandable given that they answer to stockholders. If they were concerned about rural access, why didn’t they build [internet service] two decades ago?

“We have waited patiently for someone to provide Southside Virginia with internet access comparable to what is offered in urban areas, but as was the case in the 1930s with electricity, its now obvious that if its going to get done, the cooperatives will need to once again step up, and fill the void.”

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