A coalition of Arkansas electric cooperatives are months away from finishing the first phase of a $1.66 billion project to bring high-speed internet to more than 600,000 households in rural Arkansas, leaders of Diamond State Networks said last week.
The new wholesale broadband provider was created when 13 electric cooperatives and their fiber network subsidiaries partnered to unite their fiber optic networks and lay new pathways to reach the most rural parts of the state.
Mitchell Johnson, co-managing member of Diamond State Networks and CEO of Ozark Electric Cooperative Corp., said the partnership will create a "middle-mile network" to offer wholesale broadband to some of the toughest-to-reach households in Arkansas.
The group plans to leverage its existing energy infrastructure, such as above- and below-ground lines.
"We see this as a natural extension of rural electric cooperatives' mission to improve the quality of life in our communities and critical to our state's economic success in the 21st century," Johnson said.
A "middle mile network" is an industry term to describe how service is routed to a household. It begins with global internet, usually picked up in Dallas, Chicago, Atlanta, Washington, D.C., and other major markets, that is then routed to the "middle-mile" suppliers, who then sell the connection to internet service providers, such as AT&T, CenturyLink, Windstream or Suddenlink. The ISPs are "last mile" networks since it is the very last link in the chain that connects a home or business to the network.
"We bring in massive internet connectivity for internet service providers," Doug Maglothin, project leader for Diamond State Networks, said.
Diamond State Networks' project has "a lot of overlap" with the state's comprehensive broadband plan unveiled in April, Maglothin said.
The state's report -- compiled by Broadband Development Group -- concluded that Arkansas has 210,000 households lacking adequate broadband access, meaning those with internet speeds less than 100 megabits per second.
Prior to reaching that number, Broadband Development Group found that 41,000 households were mischaracterized by the Federal Communications Commission and actually do have adequate internet access.
About 100,000 of the 210,000 remaining homes are already working through various state and federal grant programs to create coverage, leaving 110,000 households without internet or a plan to get service, according to the report.
"I think from [Broadband Development Group's] perspective, they thought the good news for Arkansas was that there was not as much connectivity need as they originally anticipated," Maglothin said in an interview Thursday. "But I think if you cut through that messaging a little ways, what you'll find is that it is in large part due to the participation of electric cooperatives in the distribution of fiber. That's the good side of the story. The tough side of the story is that there are still lots of areas left that are not so fortunate yet."
In its report, Broadband Development Group estimated Arkansas will need about $550 million to extend broadband access to the 110,000 households.
Diamond State Networks' said its $1.66 billion price tag is much higher, but it will have brought high-speed broadband access to six times that many households in the state with a network that will cover more than 64% of the state's land mass and provide more than 50,000 miles of fiber lines.
The collective's plan for Diamond State Networks began in 2015 with a discussion at the cooperatives' annual conference -- long before the state's broadband initiative.
Connecting the cooperatives' infrastructure and installing fiber began a few years ago, with the first phase of the three-phase project on schedule to complete by the fall and the whole project to be completed by late 2028 or early 2029.
Maglothin said Diamond State Networks is not disputing Broadband Development Group's estimate of 210,000 homes without adequate internet service in the state.
Many of the 600,000 homes cited by Diamond State Networks are not included in the new statewide plan since they were already being served by the electric cooperatives by the time the state's report came out.
Also, Diamond State Networks arrived at 600,000 households because that's how many the cooperatives currently serve with electrical service. Therefore, there will be 600,000 potential broadband customers, though some of those homes may already have high-speed internet access.
"If the electric cooperatives had not built any broadband yet, the 210,000 'underserved' number would likely be well more by a factor of two-to-three times," Maglothin said. "This 210,000 underserved households are all located in areas where no electric cooperative broadband network is present -- yet -- nor is there any other quality service provider network available that would qualify them as 'adequately served.' In other words, this is the work that we have left to do on top of the work that we have already done here in Arkansas."
Of the 600,000 total, broadband access has been deployed to 250,000 homes already.
The bulk of the $1.66 billion in funding comes from the 13 electric cooperatives themselves, while less than 20% comes from state and federal funding, Maglothin said. The electric cooperatives in the state are nonprofits where the members share ownership. Any profits go back into the cooperatives.
Where the individual cooperatives that make up Diamond State Networks get the cash for the project is less clear. Conventional financing is an option and many have received grants from federal pandemic relief funds. Bond issues and rate increases are unlikely, Maglothin said.
"We are all owned by nonprofits," Maglothin said. "We're not venture capital owned companies that are seeking a quick return, a quick flip. We actually have the patience and the investment horizons to invest for 20-30 years. We feel like we can offer some unique solutions to areas that really don't make sense in the for-profit world."
Still, he added, Diamond State Networks hopes to work with the state to get a slice of the state's current $1 billion surplus to serve remaining rural areas that are outside the cooperative service territories right now.
Because of the size of the collective network, Diamond State Networks is "well positioned" to help the state with serving the underserved numbers with the right levels of funding assistance, Maglothin said.
"It is often more efficient for an adjacent provider to expand than it is for a new provider to build service into an isolated area," he said.
The electric cooperatives are in a prime position to reach the rural areas because they've been providing electricity to those communities since the 1930s and already have existing pathways, said Jeremiah Sloan, CEO of Craighead Electric Cooperative Corp.
Asked how the electric cooperative's plans fit into the state's broadband access plans, Arkansas Department of Commerce spokeswoman Alisha Curtis said state broadband officials had not yet compared the Diamond State Networks plan with the state's recently published maps to gauge the overlap
"However, having a strong middle mile connection will allow the electric co-ops to expand into areas that are in need of broadband service," she said. "The DSN will serve as a viable backhaul for other internet service providers and will have a positive impact on connectivity for Arkansas residents."
The 13 electric cooperatives that form Diamond State Networks hail from all over the state and include:
• OzarksGo in Fayetteville, a telecommunications subsidiary of Ozarks Electric Cooperative.
• Clay County Connect in Corning, a subsidiary of Clay County Electric Cooperative Corp., serving Clay, Randolph and Greene counties;
• Farmers Electric Cooperative in Newport, serving Independence, Jackson, Poinsett and Woodruff counties;
• Petit Jean Fiber in Clinton, a subsidiary of Petit Jean Electric Cooperative, serving members in Central Arkansas;
• Enlightened by Woodruff Electric in Forrest City, serving parts of Woodruff, Prairie, Monroe, Cross, St. Francis, Lee and Phillips counties in eastern Arkansas;
• NEXT Powered by NAEC in Salem, a subsidiary of North Arkansas Electric Cooperative, serving in eight north Arkansas counties;
• Wave Rural Connect in Ozark, a subsidiary of Arkansas Valley Electric Cooperative, serving members in the Arkansas River Valley and into parts of nearby Oklahoma;
• Arkansas Fiber Network, a subsidiary of Arkansas Electric Cooperatives Inc., the statewide association of the 17 distribution electric cooperatives in Arkansas;
• Four States Fiber Internet in Texarkana, a subsidiary of Southwest Arkansas Electric Cooperative, serving Miller, Howard, Sevier, Columbia, Lafayette, Hempstead, Little River and Polk counties in Arkansas; Bowie and Cass Counties in Texas; and McCurtain County in Oklahoma;
• Empower in Jonesboro, a subsidiary of Craighead Electric Cooperative Corp., serving counties throughout northeast Arkansas;
• MCEC Fiber in Blytheville, a subsidiary of Mississippi County Electric Cooperative, serving northern Mississippi County;
• South Central Connect in Arkadelphia, a subsidiary of South Central Arkansas Electric Cooperative, serving Clark, Hot Spring, Pike, Montgomery and Nevada counties;
• Connect2First in Jacksonville, a wholly owned subsidiary of First Electric, serving members throughout central and southeast Arkansas.
The remaining five cooperatives in the state that are not a part of the collective include: Ashley-Chicot Cooperative in Hamburg, C&L Electric Cooperative in Star City, Carroll Electric Cooperative in Berryville, Ouachita Electric Cooperative in Camden and Rich Mountain Electric Cooperative in Mena.
The Arkansas collective is now working with many other states helping them develop similar plans, even as Arkansas has consistently ranked near the bottom for high-speed internet access among U.S. states.
"I think when we put that vision on paper a couple of years ago, it seemed pretty audacious at the time. Now the position we find ourselves in is that we absolutely see the finish line on this project," Maglothin said. "We can see that Arkansas can absolutely be one of the most connected states in the country."