Reinvesting in Rural America

C-SpireOver the last few weeks C-Spire has begun rolling out gigabit fiber in Mississippi. Unlike Google which is mostly concentrating on large and fast-growing cities, C-Spire is rolling fiber out to small and rural towns throughout Mississippi. The C-Spire story is an amazing success. C-Spire is part of a holding company that includes a large wireless company, a large CLEC and a significant fiber network throughout the region. The company got started by the Creekmore family. Wade and Jimmy Creekmore are two of the nicest people in the telephone industry and they started out working at the family business which consisted of Delta and Franklin Telephone Companies, two small rural ILECs.

When the FCC distributed some of the first cellular spectrum they did so through a lottery. The company won spectrum through this lottery and started Cellular South. It’s grown to become the sixth largest cellular company in the country and many people are surprised when they visit Mississippi and find that C-Spire is more dominant there than AT&T or Verizon. The company was rebranded a few years ago as C-Spire Wireless. There used to be a number of other sizable independent wireless carriers like Alltel that have been swallowed by the two big wireless companies.

A little over a year ago C-Spire announced that it was going to roll out gigabit fiber optics to towns in the region. They modeled this after Google and towns that signed up enough potential customers qualified to get fiber. There are a number of towns that have now qualified and many others striving to get onto the C-Spire list. In the last few weeks the company began turning up gigabit services in small towns like Starkville and Ridgeland.

The company is offering 1 Gbps data service for $70 a month, a combined Internet and home phone for $90 per month, Internet and HD digital TV for $130 per month and $150 a month for the full triple play. These are bundled prices and customers who do not have C-Spire wireless will pay an additional $10 a month for each package.

It is really refreshing to see somebody investing back into the communities that supported them for many years. It’s pretty easy to contrast this to the big telcos and cable companies which are not reinvesting. C-Spire is building needed infrastructure, creating jobs and bringing a vital service. I view this as a true American success story. This is a win for both the Creekmores and for the people of Mississippi.

This is not the only place in the country where telephone company owners are reinvesting back into their community. There are hundreds of independent telephone companies and cooperatives around the country who are quietly building fiber and bringing very fast internet to some of the most rural places in the country. For example, Vermont Telephone Company grabbed headlines when they announced gigabit fiber for $35 per month. There are wide swaths of places like the Dakotas where fiber has been built to tiny towns and even to farms.

What these companies are doing is great. They are doing what businesses are expected to do, which is to modernize and grow when the opportunity is there. This is especially what regulated utilities should be doing since they have benefitted for decades from guaranteed profits from their businesses. But unfortunately for rural America most of them are served by AT&T, Verizon, CenturyLink and other large telephone companies like Frontier, Windstream and Fairpoint. These companies share at least one thing in common, which is that they are public companies.

It seems like public companies in this country are unable to pull the trigger on investing in infrastructure. The exception is Verizon who has invested many billions in FiOS, but even Verizon has stopped building new fiber and they are not investing in the small towns like Starkville. Rather than investing in rural America, the large companies are doing what they can to hold down costs there. In fact, AT&T has told the FCC that they would like to cut down all of their rural copper lines within a decade and replace them mostly with cellular.

The Creekmores aren’t building fiber just because it’s the right thing to do. They are doing this because they see a solid business plan from investing in fiber. They will make money with this venture, which is the way it is supposed to work. But the public companies like AT&T only seem to invest in fiber when they face a big competitive threat, like AT&T in Austin Texas. I get a sense that CenturyLink would build fiber if they had the financial resources, but most of the big companies are doing the opposite of reinvesting in rural places.

Unfortunately, the big companies are driven by stock prices and dividends. They don’t want to take the negative hit from making large investments because it depresses profits for a few years while you are building. And that is the real shame, because in the long run these large companies would increase profits if they reinvested the billions that they instead pay out as dividends. They would end up with fresh new networks that would make profits for the next century.

It’s going to be interesting to see how gigabit fiber transforms the small pockets of rural America that are lucky enough to get it. The broadband map in the country is a real hodgepodge because right next to some of these areas that have fiber are areas that often have no broadband at all other than cellular or satellite.

It is also going to be interesting over twenty years to see how the two different types of areas fare economically. There is a company in Minnesota, Hiawatha Broadband, that has been building fiber to small towns for a decade and they claim that every town where they have built a network has been growing while every surrounding town has shrunk in population. They have been at this about as long as anybody, and so their evidence is some of the early proof that having fiber matters. Within another decade we are going to have evidence everywhere and we will be able to compare the economic performance of rural areas with and without fiber.

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