Tag Archives: Consolidated Communications

Big Telcos and Federal Grants

Several large telcos have announced big plans to expand fiber coverage, and I assume that also means heavily participating in the upcoming $42.5 billion BEAD grants that are aimed primarily at bringing better broadband to rural areas.

When Frontier came out of bankruptcy, the company announced plans to pass 6 million homes with fiber by 2025. As part of its Build Gigabit America plan, the company raised that goal to 10 million homes. Frontier already has undertaken the first step in that plan. It set a goal of 495,000 new fiber passings for 2021 but recently announced that it expects to hit 600,000 passings for the year.

AT&T also has big plans. The company has been steadily building a fiber customer base and announced at the end of the third quarter that it now has 5.7 million fiber customers, representing a 37% market share of its 15.4 million fiber passings. A year ago, AT&T announced a goal to pass 25 million homes and businesses by 2025 – another 10 million passings. CEO John Stankey announced recently that the federal infrastructure bill will entice AT&T to increase that goal to 30 million passings, adding 5 million rural passings.

Windstream didn’t express expansion plans in terms of passings but announced this past summer that it is embarking on a $2 billion fiber expansion plan. It seems likely that the federal grants will entice the company to tackle even more growth.

Consolidated Communications is passing 300,000 new potential customers with fiber this year and has plans to continue fast growth into the future. I couldn’t find any specific plan related to federal grants, but I speculate that the company is likely going to chase grants close to existing properties.

The big mystery is CenturyLink. The company is passing 400,000 locations with fiber this year. But the company also announced the sale of its copper networks in twenty states.

It’s likely that all of these telcos want to benefit from the huge upcoming federal grants. The easiest ways for telcos to take advantage of the federal grant is to plan to overlash fiber onto existing telco copper where the companies are already the incumbent. But if the grants are lucrative enough, they might seek grants in other areas as well.

It would be interesting to be a fly on the walls of the corporate board rooms of these big telcos to see how they feel having the huge federal funding flowing through the states. The big companies have always done well with subsidies coming directly from the federal government, such as the $11 billion CAF II subsidies.

But will the telcos do as well with funding being decided at the state level? State regulators and state governments across the country have been unhappy with the way that the big telcos abandoned rural telephone networks. Most states have been able to make an easy comparison between smaller telcos and cooperatives that have invested in rural fiber and the big telcos that have done as little as possible to keep rural networks operating.

I’m curious about the degree to which the big telcos might have burned their bridges with past behavior. I know a lot of state regulators and state broadband offices who will not want to see money going to the companies that were largely responsible for creating the rural broadband gap. Are states going to be willing to give another chance to these big telcos?

I am sure that the state politics involving these grants is going to get intense. Most of the broadband offices that will be awarding these grants will be understaffed and under a lot of pressure to spend the grant money on schedule. Legislators are bound to get involved in some states to try to steer the grant process, although the federal money must meet federal grant rules set by the NTIA. Governors will also weigh in on the issue, and in some states, the grant offices are part of the executive branch. State regulators who have tussled with the big telcos will weigh in. And the public is likely to make itself heard as communities are coalescing around grant applications.

It’s going to be nearly impossible to follow grant policies and trends everywhere when all fifty states will be embarking on a giant grant program at the same time. One thing is for sure – the next few years are going to be interesting.

Partners are Where You Find Them

An interesting new partnership has been formed between Windstream and Colquitt Electric Membership Corp. of Georgia to build a rural fiber network. Windstream is a large price-cap telco that recently emerged from an interesting bankruptcy. Colquitt is a rural electric cooperative.

Only high-level terms of the partnership have been released. Windstream will own the fiber network, will provide broadband and other services, and will own the customers. Colquitt will provide access and rights-of-ways on poles and Colquitt technicians will place the new fiber on poles. Colquitt will get access to some fibers on the new network to connect electric substations and other electric network components to fiber. The partnership is described as having a network that is ‘jointly built and jointly-owned’.

The area to be served is rural and is described as having around 7 people per square mile. It’s a little hard to put that statistic into perspective because the most commonly used metric in the industry for understanding density is the number of homes per mile of road – however, the area sounds sparsely populated.

The state of Georgia decided a few years ago to allow electric cooperatives to become ISPs – a restriction that was imposed years ago by legislation prompted by telco incumbents. Many states have recently lifted such restrictions in an attempt to find more solutions to solve the rural broadband gap.

Partnerships with larger price-cap telephone companies to provide fiber broadband is a new phenomenon. An argument can be made that decisions made by price-cap telcos over the years are one of the major reasons why much of rural America is still served by DSL broadband provided over old and poorly-maintained copper networks.

But we’ve seen several similar partnerships with price-cap telcos. CenturyLink has partnered with the City of Springfield, Missouri to provide fiber. Consolidated Communications has partnered with several villages in New Hampshire to build fiber. Cincinnati Bell has partnered with the Butler Rural Electric Cooperative in Ohio.

This announcement is a reminder to rural communities and electric cooperatives that broadband partners might be found in unexpected places. It’s easy for rural folks to assume that the telcos that built and have been operating the dreadful copper networks are not interested in providing better service. In this case, the network is being built in a rural community and it’s extremely unlikely that Windstream could justify investing the full cost to build fiber – the return and payback on investment would never meet corporate earnings metrics and would make no sense as an investment. However, sharing the costs with the electric cooperative must have reduced Windstream’s costs to the point where the project makes financial sense.

That is the power of partnerships. Investing all of the cost to build fiber in this case probably didn’t make financial sense to either the electric cooperative or to Windstream. Both parties have something to gain out of the transaction. Windstream gains customers who will like the broadband service on fiber. The cooperative gets a fiber network connecting substations. Both are contributing to an improved community that will benefit both companies in the long-term. We’ve seen that fiber can reinvigorate a rural community. Many people want to live in rural areas but need good broadband to work from home – having a fiber network should attract new residents and keep residents some local people from leaving the area to find better broadband.

During the last year, my advice to rural communities is to have a serious discussion with the incumbent providers. Historically I’ve always advised to not bother with the incumbents because over decades I had never seen a large incumbent telco respond to plea to improve service. This is still a rare occurrence, but this partnership, and the ones mentioned earlier illustrate that it’s worth having the discussion on the outside chance that you hit the right note and the right opportunity to get the attention of the incumbents.

A New Partnership Model

Last year the New Hampshire legislature passed bill SB170 that allows municipalities to bond for a broadband network as long as the town doesn’t have existing broadband speeds of at least 25/3 Mbps.

Several small towns in the state have taken advantage of the new legislation and have entered into a partnership with Consolidated Communications, the incumbent telephone company serving much of the state. Consolidated became the incumbent after acquiring Fairpoint in February 2017.

The latest announced partnership is for Dublin, NH, a town of a little more than 1,500 residents. In the announced partnership, Dublin will finance a $1.3 million bond to build fiber to every resident and business in the town. The bond passed by a vote of 223 to 5. The town will own the network and has partnered with Consolidated to operate the business.

On paper, Consolidated will make the bond payments, but in fact, the residents of the town will make the payments. Consolidated plans to add a surcharge to each broadband bill of $11.50 per month. I assume the surcharge will go away once the bonds have been retired. Residents are not required to subscribe to broadband and won’t pay the surcharge unless they are a broadband customer.

The partnership in Dublin follows a similar partnership last year in Chesterfield, a town of 3,600. Other New Hampshire towns are weighing similar partnerships – with Consolidated and with other ISPs.

These partnerships are unique in that the towns are trusting their network to the incumbent telecom provider. Granted, Consolidated is new to the state and is probably being viewed as a breath of fresh air. The company is also investing in fiber in larger communities in the state and announced it will build fiber to pass over 86,000 residents in the state. There was a lot of frustration with the previous incumbent Fairpoint, which seemed unwilling to build fiber or even to upgrade DSL to faster speeds. Consolidated is currently embarking on improving DSL speeds for 500,000 customers.

These small communities know that lack of broadband is hurting their communities. People don’t want to buy houses in communities without good broadband, and communities without broadband foresee a bleak future as people settle instead in other communities around them.

Dublin and Chesterfield are joining a long list of towns that are willing to borrow the money needed to bring broadband. Every community in this situation looks around for the best operating model available to them – and in this case they chose the incumbent telco.

Legislators around the county need to take a look at the realities of municipal broadband. For every community that decides to become an ISP there are a lot more cities that instead partner with an existing ISP. The vast majority of cities have no interest in becoming a commercial ISP, but still can be hindered from finding partnerships by existing laws that prohibit municipal participation in broadband.

It’s time for legislators to ignore the lobbyists of the giant telcos and cable companies and do what’s right for their constituents and communities. These two New Hampshire towns will be better places to live when they get fiber – the residents and businesses will be able to fully partake in our modern online society and not be left behind. The New Hampshire legislature did the right thing last year and a whole lot of other states need to take heed.