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Virginia electric utilities wiring rural areas for broadband

March 18, 2019

RICHMOND, Va. (AP) — If you want internet service in the rural hamlet of Honaker, in far Southwest Virginia, Cable Plus is the only game in town. With internet speeds of 3 megabits per second, customers can go online to check their email, surf social media and watch low-quality videos from streaming services, but not much else.

The cheapest Cable Plus internet package available to the 700 households in Honaker: $54 a month.

An hour away in Bristol, Virginia, residents have plenty of options to choose from for broadband. They can get high-speed service — with speeds of at least 25 Mbps — for as low as $45 a month.

The difference in internet services between urban and rural communities in Virginia is stark: Only 53 percent of rural Virginians have access to broadband internet. Urban areas have far better coverage — 96 percent, according to a 2016 study by the Virginia Chamber of Commerce.

That’s because internet providers profit more when their customer base is concentrated and easy to reach. In rural areas, it’s much more expensive per customer to provide high-speed internet.

Virginia lawmakers have taken steps to address geographic disparities in broadband coverage by passing a bill that will give the state’s two largest electric utilities, Dominion Energy and Appalachian Power, the green light to provide broadband internet service to unserved areas.

HB 2691, sponsored by Del. Israel O’Quinn, R-Bristol, will create a pilot program that allows the electric utilities to expand “middle mile” broadband coverage — the infrastructure that connects the networks and core routers on the internet to local internet service providers that serve businesses and consumers directly.

The bill will allow each utility to spend up to $60 million annually on the pilot program. The companies will be able to recover that money from ratepayers.

Dominion and Appalachian Power won’t be providing high-speed internet straight to residents’ homes and businesses, however. The final connection, called the “last mile,” will be left to third-party internet providers. The last mile brings service to the end user’s premises and is typically the most expensive component of broadband infrastructure.

Nate Frost, director of new technology and energy conservation at Dominion Energy, said the program is “unconventional” for electric utilities but could help solve rural Virginia’s broadband woes.

“There’s a unique opportunity to potentially leverage some of the business that we’re going to be doing anyway,” Frost said. “But getting to that point won’t be easy.”

Under the Grid Transformation and Security Act of 2018, Dominion Energy and Appalachian Power must modernize their systems, and part of that involves bringing broadband to electrical substations to support new “smart” infrastructure initiatives.

The pilot program allows the electric utilities to add extra fiber optic cables to rural substations in addition to the fiber they’re already putting in place. That additional broadband capacity will then be leased to third-party internet providers, which will provide last-mile connections to homes and businesses nearby.

O’Quinn’s bill is awaiting Gov. Ralph Northam’s signature to become law.

Evan Feinman, Northam’s chief broadband adviser, said earnings by electric utilities from leasing middle-mile infrastructure will result in lower electric bills over time and will save ratepayers an estimated $150 million over the next three years.

Those savings are based on Dominion’s 2018 Broadband Feasibility Report, in which the company outlined the potential for adding broadband capacity to rural areas.

“It’s one of those very rare win-wins where the electric companies, ratepayers and people in need of broadband service all benefit,” Feinman said.

The bill passed the Senate unanimously but drew opposition from a few Republicans in the House of Delegates. Del. Kathy Byron, R-Bedford, voted against it.

“We’ve made great progress toward achieving this goal over the last several years,” said Byron, who chairs the state Broadband Advisory Council. “I’m concerned that the approach enacted by HB 2691 might unintentionally divert or detract from our well-established and successful efforts.”

Over the last few years, the Virginia Telecommunication Initiative has provided millions of dollars to broadband service providers to extend their service into rural areas. During its recent session, the General Assembly increased funding for the Virginia Telecommunication Initiative for the 2020 fiscal year from $4 million to $19 million.

Del. Dave LaRock, R-Loudoun, also voted against O’Quinn’s bill, citing the increased costs to ratepayers.

“This is a perversion of the system where the State Corporation Commission has the authority to set reasonable rates and to return ratepayer money that exceeds reasonable rates,” LaRock said.

It’s not unprecedented for electric utilities to provide internet services in Virginia. Central Virginia Electric Cooperative, which serves rural areas in 14 counties, announced its own broadband expansion in January 2018. The $110 million project aims to provide internet and phone service directly to consumers through a subsidiary company called Firefly Broadband.

Virginia has the fifth-highest rate of broadband adoption in the nation and ranks among the top 10 states in terms of its average peak internet connectivity speed, according to the Virginia Chamber of Commerce. Up to 70 percent of the world’s internet traffic flows through Northern Virginia.

But state officials have been concerned about the lack of broadband in rural areas, saying such connectivity is critical to economic development. Northam has made broadband expansion a priority, proposing that the state spend $250 million over the next 10 years to address the unequal distribution of internet service.

“Broadband internet is inarguably a necessity for participation in a 21st-century economy, and many Virginians have been left without quality access for far too long,” Northam said. “By ending this disconnect, we can better attract and support business and entrepreneurship, educate all Virginia students and expand access to cost-saving telehealth services.”

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This story was produced by the Virginia Commonwealth University’s Capital News Service.

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