Expanding high speed internet service to the state’s underserved areas would cost almost $300 million, according to a study that looked at whether electric companies could help fill the gap.
The report found providing internet service to unconnected areas could be done more cost effectively if utilities partnered with existing internet service providers.
The study was required as part of a package of broadband legislation passed last year.
Lawmakers wanted to know whether electric companies could use existing infrastructure to help expand internet service to the roughly 80,000 residents with poor internet service, or none at all.
“The utilities have acknowledged that they have assets that could be helpful,” said Rep. Laura Sibilia, I-Dover, the vice chair of the House Energy and Technology Committee, which wrote last year’s broadband legislation.
“We wanted this just to understand what opportunity there might be,” she said.
Electric companies would face high costs, with unknown consequences to ratepayers, if the utilities offered Vermonters both electricity and internet service, according to the report. The infrastructure costs to cover those residents were estimated to be $284 million.
But there is potential for the electric companies to let broadband providers piggyback on the existing utility infrastructure to expand internet services.
The study, by utility consulting firm Magellan Advisors, found that if electric utilities also offered internet, they would need to make a “heavy investment” to expand their business models and services. Unlike selling electricity, they would also have to compete with other broadband providers.
The electric utilities who participated in the study said they did not know how much offering broadband services would cost. They also told the researchers they found little similarity between the two business models and the workforce that would be required to deliver electric and internet services.
“It seems clear that any policy decision to encourage electric companies to participate in some manner in providing broadband services and/or infrastructure should not depend on the sense that the two lines of business are compatible,” the report said.
But the report says that utilities could develop partnerships with internet providers “to bring new services to underserved and unserved communities in Vermont.”
“In most cases, the partnership option provides stronger financial results than in cases where distribution utilities provide services directly,” the report states.
It points to two electric utilities in Tennessee that have worked with broadband providers to build out fiber infrastructure, and then lease the technology to the internet companies.
Christine Hallquist, the former CEO of the Vermont Electric Cooperative, pitched this model of broadband expansion as a central policy in her unsuccessful campaign for governor in 2018.
On the campaign trail, she called for changing utility regulations to require electric companies to hang broadband cables, rather than internet companies.
Because electric companies already have large networks of fiber cables throughout the state, she said they are poised to build out the infrastructure into rural areas.
“Utilities hang fiber on their existing system. It’s just another wire. They have all the tools,” Hallquist, who pushed for the recent study in the Legislature, said Thursday.
“It doesn’t make sense to have a separate telecommunications infrastructure,” Hallquist said.
Kristin Kelly, a spokesperson for Green Mountain Power, the state’s largest electric utility, said the company is still reviewing the report and declined comment.
But she said the company, which serves about 260,000 customers, could be receptive to working with broadband companies to expand service.
“We’re open to all kinds of ideas and different ways to serve our customers as long as it is cost-effective for all of our customers.”
Clay Purvis, the director of telecommunications and connectivity at the Vermont Department of Public Service, which advocates for ratepayers, agreed that electric utilities are well-positioned to work with internet providers to expand service.
“The takeaway is that broadband deployment in rural Vermont is really complicated and distribution utilities aren’t in any better position to provide retail service than anyone else,” Purvis said of the report.
“But they are in a position to provide assistance in the deployment of broadband and there are opportunities where electric distribution utilities can provide real benefit to the state in the broadband market.”
The Department of Public Service will be awarding two $60,000 grants to electric utilities in 2020 that the companies can use to fund plans to help expand broadband in Vermont.
But Purvis noted that even if broadband companies and electric utilities band together to address Vermont’s broadband problem, the endeavor will still be costly.
“The fact that a distribution utility could assist in some way doesn’t really change the fundamental financials,” he said.
“So there has to be someone who’s willing to stand up and assume the risks and fund the projects that ultimately lead to broadband.”
