Cooperative broadband is rare, but successful in California

by Steve Blum • , , ,

Rural utility cooperatives have gotten a lot of good ink recently, as a possible alternative to investor-owned broadband companies. Although it’s a business model that’s far more common in the U.S. midwest and south, it’s been successful in California too. At least as far it goes – there are only three rural utility co-ops here.

Anza Electric co-op in Riverside County is in the process of building a fiber to the home system using a grant from the California Advanced Services Fund. By FTTH standards, it’s an inexpensive build – about $1,200 per household, total – primarily due to the fact that Anza already owns the necessary poles and conduit.

Plumas-Sierra Electric co-op has subsidiary that’s a wireless Internet service provider serving parts of Plumas and Sierra counties, and a bit of Lassen County. It’s tried for CASF in the past, too, although it ultimately withdrew its application. The third rural California co-op – Surprise Valley in Modoc County – isn’t in the broadband business, but two of three isn’t bad.

Rural utility co-ops are creatures of the federal agriculture department’s Rural Utilities Service (RUS). It’s one of three basic utility business models, the other two being investor owned utilities, like PG&E, and municipal utilities.

The investor owned variety predominates here, but where there are exceptions, California tends toward muni electric utilities – either cities, like Palo Alto or Santa Clara, or special districts, like the Sacramento Municipal Utilities District. Californian muni electric utilities have been largely successful when they’ve dipped a toe in the broadband business, particularly as dark fiber providers, although there is one big exception – Alameda had to sell its cable system at a loss.

Elsewhere in the U.S., there are rural utility co-ops that are in the telephone business. In California, small rural phone companies fill that niche in the eco-system.

The co-op business model has also been used for middle mile projects. Digital 395 is owned by the California Broadband Cooperative and was funded by an ARRA stimulus grant, and there’s another – the Mid-Atlantic Broadband Cooperative – in Virginia, funded by tobacco settlement money. However, those are not the traditional, federal agriculture department sponsored utility co-ops.

The cooperative business model is very effective, when it suits local circumstances. The RUS-backed version, though, isn’t a viable way of creating a competitive service – if there’s an incumbent provider, that option is off the table for all practical purposes.