How the Rural Electric Cooperative Consortium Won $186 Million in CAF II Funding for Gigabit Broadband

When 21 rural electric cooperatives decided to submit a joint bid to receive funding for gigabit broadband in the Connect America Fund (CAF) II auction, their reason was a simple one. Consultants helping with bids were only allowed to work with a single bidder — and submitting a joint bid as the Rural Electric Cooperative Consortium enabled multiple co-ops to work with consulting firm Conexon. Telecompetitor talked with Jonathan Chambers, one of two partners who created Conexon with the goal of seeing fiber brought to rural America. Prior to founding Conexon, Chambers was the chief of the Federal Communications Commission’s office of strategic planning, where he worked on auctions, making him well qualified to offer insight on both topics. The Rural Electric Cooperative Consortium (RECC) won a total of $186 million in the CAF II auction, making it the third largest winner overall and the largest winner that pledged to build out service supporting gigabit speeds.

The RECC pledged to build low-latency gigabit service, giving its bid the most favorable weighting.  How can rural electric cooperatives afford to do this? Chambers noted three reasons “and the most important is not one typically cited,” he said. Reasons most commonly cited: Utility companies have poles, conduit, rights of way and other infrastructure that helps minimize make-ready costs. In addition, they have a lower cost of capital and are non-profit organizations. The most important consideration, however, is time horizon, Chambers said. “If you’re looking for a quick hit ROI [return on investment], this is not the business for you,” he said. The biggest reason rural electric cooperatives can build out gigabit service with a relatively low level of Universal Service/ Connect America Fund support is that their time horizon “is measured not in years but in decades.” Rural electric co-operatives, he said, have “been around for 80 years and will be around for another 80.” Chambers praised the “covenant” approach that rural utilities follow, which drives them to provide service to everyone in their service area, even those that are the costliest to reach. He noted that rural telecom cooperatives are similarly motivated.