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Mixed signals

South Boston News / March 08, 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 today in Richmond to decide how to divvy up funding for local projects in the Southside and Southwest Virginia service area. The decisions come with a conundrum: the commission has far more requests for money than the ability to pay for them.

Already, the tobacco commission has edged away from its initial plan to award grant funding for rural broadband networks, opting to instead to offer loan awards— in hopes of stretching scarce dollars.

Local officials and third-party internet service providers, however, are concerned that loans may be inadequate for the expensive challenge of building broadband systems to serve lightly-populated, far-flung areas.

ED#1 supervisor J.T. Davis, who has spearheaded Halifax County’s rural broadband initiative, said he hopes the Tobacco Commission will go back to its original plan to award grants from the $11.3 million funding pool.

He’s not alone. “We just need a small boost up front to get rolling,” said John Lee, CEO of Mecklenburg Electric Cooperative, which has proposed one of the most ambitious — and expensive — broadband systems under consideration: fiber optic cable that would hopscotch the countryside by connecting to MEC substations and other facilities.

“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,” Lee said.

MEC is asking for $2.6 million to fund a fiber-optic network in Mecklenburg County that will pass by an estimated 3,000 homes and cost $5.2 million. The cooperative eventually hopes to extend hard-wired, fiber optic connectively to homes and businesses across the entirety of its 14-county service area, including Halifax.

Halifax County local government, working with Nelson County-based provider SCS Broadband/AcelaNet, is building a wireless system to reach into Nathalie, Vernon Hill, Cluster Springs and other parts of the county where internet connectivity is weak or practically non-existent. Halifax County is planning a four-phase rollout; for the first two phases, it has requested $206,000 from the Tobacco Commission, which will supplement the county’s contribution of $50,000 and a $407,000 investment by SCS/Acela.

Once completed, Halifax County’s wireless network — which will also serve the Brookneal areas and parts of Pittsylvania County — will cost an estimated $1.1 million.

For network customers, SCS Broadband will charge monthly subscriber fees beginning at $35-$40 for residences, good for download speeds of 10-15 megabytes per second (Mbps). Residential rates will scale up to $115-$120 per month for download speeds of 50 Mbps. Business customers will pay up to $150 to $300 per month for comparable service.

With its fiber optic network, MEC is proposing faster speeds of 50 Mbps for about $56 per month. However, access would likely be limited to homes and businesses in close proximity to where the cooperative runs the fiber optic cables.

While MEC and SCS/Acela would conceivably compete for customers in low-concentration areas across Halifax County, Davis said the two proposals are not in conflict. In fact, he said, county officials and MEC are working together to convince the Tobacco Commission to go back to the idea of awarding grants for the new systems.

“John Lee and I are working together to see that 100 percent of residents of Halifax County get broadband service,” said Davis.

Aside from MEC, two other rural electric cooperatives are seeking Tobacco Commission funding for rural broadband. 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. Comcast says it will put up $5.4 million for a network that would draw about $418,000 annually in subscriber fees.

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 whether this will impact the number of applicants in the broadband pool.

MEC anticipates building its system in time to reach nearly 3,000 homes by mid-December 2020, said Dwayne Long, Vice President of Technology for the Chase City-based cooperative.

Lee declined in a recent interview 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.

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.

Lee describes MEC’s approach to broadband as the ideal way to reach end users in areas rife with financial, technological, and topological barriers. He compared the fiber optic build-out to the 1930s-era electrification of the countryside — “New Deal 2.0”, a term coined by MEC Vice President David Lipscomb.

“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,” he said.

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