CFC Backstops $75 Million of New Rural Broadband Initiatives

It looks like 2019 may be a banner year for rural broadband construction, thanks to the Federal Communications Commission’s (FCC) recently completed Connect America Fund II (CAF II) reverse auction. More than $1.5 billion in funding over 10 years was awarded to 103 entities to subsidize the cost of deploying broadband to unserved or underserved areas.

Thirty-four electric cooperatives were auction winners, and collectively will receive $225 million. For its part, CFC committed more than $75 million in the form of letters of credit to support members who were successful in the CAF II process.

Tri-County REC Tackles FTTH Buildout

One of those systems, Tri-County Rural Electric Cooperative, a 100 percent CFC borrower headquartered in Mansfield, Pennsylvania, was awarded $32.3 million to help defray the cost of a $77 million fiber-to-the-home (FTTH) broadband rollout. When completed in six years or less, all of the co-op’s 16,600 members—residing in seven counties across 5,000 square miles of rugged and remote north-central Pennsylvania—will gain access to reliable, high-speed Internet. 

“The project, including 3,250 miles of fiber, is expected to start in this year,” reports Tri-County REC President and CEO Craig Eccher. “Financing will come from CAF II, $17.1 million in two state grants, operating revenue and debt. We’re also in discussions with regional telecommunications companies about leveraging assets and certain operations to further reduce costs.”

Technology Improvements a ‘Game Changer’ for Co-op

A portion of the new network will be used to enhance electric cooperative-related communications and grid services. “This infrastructure improvement is a game-changer for our technology plans,” Eccher points out. “It will deliver communications between all 25 of our substations, main office and five district offices while greatly improving our wireless scheme and allowing implementation of additional distribution automation equipment.”

Along with a multi-year letter of credit, “CFC ensured that things moved ahead smoothly,” Eccher notes. “We have a long-standing relationship with CFC that’s involved a range of issues, from cooperative plant financing to financial solutions for our various subsidiaries.”

Eight-State Co-op Consortium Wins Big in CAF II Auction

One of the largest winning bidders in the CAF II auction was the Rural Electric Cooperative Consortium—a group of 21 electric cooperatives from eight states that captured $186 million. GoSEMO, a subsidiary of SEMO Electric Cooperative, a 100 percent CFC borrower based in Sikeston, Missouri, garnered $2.2 million of the amount.

“The consortium gave us an opportunity to pool resources with others,” remarks SEMO Electric General Manager and CEO Sean Vanslyke. “Our members are benefiting because we’re working with peer cooperatives that have experience bringing fiber-to-the-home.”

Yes, Missouri, There Is a Santa Claus

The funds will help supplement a five-phase, $40 million FTTH project GoSEMO launched in 2017 to serve nearly 14,000 homes, farms and businesses—all of its members as well as adjacent areas—in southeast Missouri. “We were waiting and waiting for better Internet service to arrive, but Santa Claus never came,” Vanslyke comments. “Fiber makes it a new ballgame. With the CAF II money, we believe we can now finish construction in four years instead of five.”

A significant portion of the fiber will assist the cooperative with smart grid and system monitoring purposes, while GoSEMO lease fiber from its parent to hook up broadband customers.

CFC Supplied Letters of Credit and Financing for Buildout

In addition to providing GoSEMO with a letter of credit, CFC also assisted with financing the first three buildout phases. “CFC has been a great partner,” Vanslyke concludes. “Before our board made its decision, we reviewed the feasibility study with CFC, and approached the effort as we would a $40-million ice storm. Everything was very efficient.”