Another Path to Rural Broadband: Electric Co-ops

Service territories of Virginia electric utilities. The CVEC territory is shown in bright blue in the center of the state. (Click for larger image.)

The Central Virginia Electric Cooperative has been delivering electricity to the inhabitants of 14 Central Virginia localities for 80 years. Now it’s planning to provide high-bandwidth Internet connections. The company has announced a plan to invest $11o million to connect all 36,000 co-op members.

Co-op members will be able to purchase 100 megabits per second (mbps) access for $49.99 a month or 1 gigabit per second (gbps) for $79.99 a month, reports the Fluvanna Review.

Keeping the pricing reasonable was important to CVEC President Gary Wood. “I didn’t want this to become a premium service or a luxury service,” he says. Continues the Rivanna Review:

Wood said the project is anticipated to lose money for the first seven years and reach the break-even point in about 11. He admits that “give me $100 million and in seven years, I’ll start bringing you your profits,” hasn’t been the easiest argument to sell, but he believes it can be done with a combination of  loans, grants, state and federal funding and tax rebates.

CVEC is also asking for financial support from each of the counties in its service area.

For a for-profit business, eleven years would be a slow payback. But for an electric co-op, owned by its customers, that might seem like a reasonable proposition.

One objection, I would expect, would revolve around opportunity cost. By taking on a financial obligation of this size, the co-op might be limiting its ability to pursue other projects such as, say, grid modernization or solar energy. Another objection would be risk. What if rural residents aren’t willing to pay $50 to $80 per month for broadband access? Could disappointing revenues put the co-op in financial jeopardy?

But let’s face it, no one else is likely to want to deliver broadband to the rural residents of Central Virginia. This seems like a project that is custom-made for CVEC, and it could provide a model for other co-ops, who cover roughly a third of the geographic expanse of the state.