What You’ll Learn

Texas has seen great strides in expanding broadband infrastructure across the state. However, challenges with changing legislation, geography, supply chain issues and funding are hindering the important work.

In this episode, Mark Seale, executive director of the Texas Telephone Association, and Craig Cook, general manager at HCTC, discuss these challenges that Texas is facing in deploying rural broadband and how they hope to overcome them.

Guest Speaker

Mark Seale and Craig Cook

Show Notes

Intro: Broadband. We need it for work and for school, for our health and our economy. What’s being done to bring broadband internet access within reach of every American? Let’s talk about it now on Rural Broadband Today.

Andy Johns: Hello, my name is Andy Johns. I’m your host for this episode of Rural Broadband Today, filling in for Stephen Smith. And I’ve got a couple of guests. We’re going to be talking about what you need to know about broadband in Texas. So we’ve got two of the folks that know that better than anybody joining me on this episode. I’m joined today by Mark Seale, who is the Executive Director of the Texas Telephone Association. Mark, thanks for joining me.

Mark Seale: Thank you, Andy. Appreciate it.

Andy Johns: And I’m also joined by Craig Cook, who is the Chief Executive Officer at HCTC. Thanks for joining me.

Craig Cook: Yeah. Thanks, Andy. Good to be here.

Andy Johns: We are at the epicenter of rural broadband this week here at the NTCA RTIME event in Dallas, Texas. And so since we’re here in Dallas, I wanted to be sure that we spend a little bit of time with the Rural Broadband Today podcast just learning a little bit about where the fiber buildout, where you know, broadband expansion in the rural areas of Texas is going. And Mark, that’s pretty much what you’re talking about all day, every day.

Mark Seale: That’s true, Andy, and I appreciate you taking the time to have us. Broadband in Texas in rural areas actually is in a fairly good place. We have many companies like Craig’s that have spent a lot of time building out fiber networks, especially in small communities around them. So we have places in Texas, in rural Texas, where you can get gigabit service today, fiber to the home because they’ve taken the time and made the plans to build it out over many years. Now we’re addressing the places that are underserved or not served at all. And so in the last legislative session, we passed House Bill 5, which gives a framework for our broadband office to deliver funding, offer grants and low interest loans to companies that want to serve those underserved areas. That will affect us greatly. We have in our areas, we’re about 60% copper and 40% fiber. So we are, but those numbers change every day as we build up more robust networks. So we’re excited about where we’re going, and we feel like our rural providers are going to be able to connect rural Texas even better going forward.

Andy Johns: Excellent. And Craig, from where you’re sitting, what are some of the challenges and opportunities? You know, I know everybody here at this conference faces some of the same challenges, but I don’t know if there’s anything particular to Texas or to. Obviously, there’s a lot of land to cover with fiber. That’s a lot of miles. But what are some of the challenges and opportunities that you see for fiber deployment here in Texas?

Craig Cook: Andy, I think the biggest issue for most companies in the state of Texas, especially those rural companies, whether it be a co-op or commercial company, is the fact that our geography is very, you know, diverse in the state. As you mentioned, this is a huge state, and we have companies who are in positions where maybe the soil is very forgiving. I can tell you that for Hill Country and a lot of a lot of the companies out in our portion of the state, you know, we are looking at construction costs that can range anywhere from $30,000-35,000 for an aerial mile of fiber deployment. And most recently, we’ve looked at deploying fiber in some of our more northern territories where there is a lot of granite, a lot of rock and there it’s running $90,000 for a mile of fiber. And I think that continues to be the biggest issue that we deal with, is just the cost of deploying that network.

Andy Johns: That takes a lot of $80 a month subscription payments to pay something like that off and see any kind of return.

Craig Cook: Well, that’s absolutely right. And you know, frankly, that’s why our Universal Service support, whether it be on the federal side or the state side, is so critical to us because frankly, in a lot of these areas, there is not a business case to providing broadband. If we had to do it on our own, you know, you’re looking at a payback period in many cases of, you know, 20-25 years before you even break even on your investments, so it’s critical that we continue to receive USF support. And it’s, you know, I think we’re all very pleased with the newfound attention that we’re getting for rural broadband, especially that being shown by the FCC and NTIA and regulators in Washington that are, you know, really focused on rural broadband at this point. And hopefully we’re going to see a lot of benefit from some of these new programs and the infrastructure bill, the BEAD Program that we’ve heard a lot about here in Dallas this week. You know, over $40 billion you know that will be making it to rural markets here in the near future, so we’re excited about that.

Andy Johns: You mentioned the USF, and I want to come back to that with Mark in just a second, but without naming any names or throwing anybody under the bus, how are the supply line, contractor, labor, how is that going for you at Hill Country as you’re looking at it to get it built, even if everything else was cleared? In terms of supply and labor, how are things going?

Craig Cook: Well, that’s a great question. You know, we deal with and are struggling with supply chain issues just like everyone right now. And it seems like every sector and not just telecom or broadband. But yeah, I can tell you that for right now, you know, fiber orders, we’re looking at, you know, well over a year before an order we placed today would be received. So we’re putting in orders now for deliveries that we won’t see until 2023. So that’s definitely a challenge. Again, it’s great to see some additional focus on the issue and additional money, hopefully making it out to these rural areas. But frankly, that’s going to be an issue is getting the materials we need to build the networks.

Andy Johns: Mark, let’s come back to the USF, because whenever I’m in Texas or at conferences in Texas, the State Universal Service Fund is always a little unique, a little different than than what most folks you know across the country are working with. How does that play a role or not play a role in this broadband expansion, having that statewide USF?

Mark Seale: Well, the network that our companies provide to their customers also connects the rest of Texas to the rest of the world. And that network is a hybrid network. It carries — a piece of fiber, doesn’t know if it’s carrying data or voice. And our networks carry all of that traffic, be it from cell phone towers or connecting to other places. If I make a cell phone call on my AT&T phone from Dallas, Texas, to Austin, Texas, that’s routed through East Texas to an Atlanta switch, and then it goes back to Austin. So every single time an AT&T customer touches their phone, it’s going out of the state network into another network and coming back. Our companies provide that pathway. So, and USF supports that. So the 80% reduction that we are now seeing in USF for the last year has dramatically affected our local companies in rural areas. In fact, we have two of our companies that have just moved to deregulate almost 100 exchanges, which will mean that 250,000 customers will no longer be guaranteed phone service if they ask for it in those areas, because the state has refused to live up to its end of the contract that they made with our member companies in 1987 and going forward.

Mark Seale: So we are now in Appeals Court on a lawsuit to challenge the state of Texas on this because the law basically says you shall fund the Universal Service Fund. Because when we created it, we wanted to make sure that customers in rural areas had prices commensurate with customers in urban areas, and that is still the policy of the state. We had 180 legislators out of 181 that supported us in our efforts to fix this problem in the last legislative session. But unfortunately, the Public Utility Commission at the time because they were running out of money in the fund, decided that it was going to be better to cut back our payments than to raise the assessment that they were making on customers statewide. And that is a policy discussion we are still having and now is a legal discussion we are still having. We hope it’ll be rectified soon, but this is going, if it continues much further — and Craig can tell you this — it is going to cause … we cannot come back from the chasm that we will be in if this funding shortfall continues.

Andy Johns: Wow, and that’s so interesting to juxtapose that against all of the funding that’s just flooding in. How do you tell that story when folks are hearing all the time, “rural broadband money is coming in, rural broadband is coming in,” but you’re faced with telling that story of, well, we’re losing this other piece?

Mark Seale: Well, it’s been difficult. And a lot of times when our public policymakers talk about broadband funding, they say, “Look, here’s this pot of money we’re going to give you.” But what they don’t tell the constituents that are hearing that is, it takes a lot of money and a lot of time to build a rural or any phone network, much less in an area like Craig’s, where he’s pulling through cedar trees and granite all the time. So the buildout for this will take a while, but it’s really two different things. Broadband funding for the most part is going to be grant or low interest loans to cover construction. Universal Service guarantees not only construction, but maintenance and operation over a long period of time. And so that’s the money that keeps these networks alive and keeps rates from, we have an exchange in Texas in Orla that costs our phone company $600 a month per customer just to keep live. And so without universal service, those folks won’t have any connection, and there’s nobody that’s going to serve them, even satellites can’t reach them. So it is an ongoing problem and Universal Service has to continue to be a fundamental tenet of telecom policy in this country and in the state of Texas.

Andy Johns: And, Craig, whether it’s with local officials or state officials, lawmakers, are you telling that story as well? Do you feel like a lot of your fellow general managers are y’all beating that drum and how have you found some ways to explain that? Because I know I’ve been in the industry about 10 years, and USF is can still get confusing. So I imagine, you know, it’s a little bit of a task to get people to understand.

Craig Cook: You know, it is, but I think we’ve had a real success story in terms of being able to successfully communicate our story. And as Mark alluded to, we’ve had a vast majority of our legislators in Austin who understand our plight and have, I think, really just over the last couple of years come to understand that the networks that we’re deploying all this money that’s used to put fiber in the ground, it is a ubiquitous network. It’s, you know, and as Mark alluded to before, it’s not just for broadband, but it’s for voice services. And so we do have resonance in rural America and rural Texas that still require voice services. And yes, broadband is getting all the attention and we understand why and we appreciate that. But the fact of the matter is and again, as we talked about before, there really isn’t a business case to deploy these networks in some of these territories. I can tell you for Hill Country for 2021, with this State USF issue, we lost $3.7 million, and that’s a huge hit to us in terms of really restricting our, you know, our plans and our ability to get the network extended further, you know, and to meet our rural residents needs. So it’s a real problem.

Andy Johns: We’ve heard a lot of that at this conference. You know, Shirley Bloomfield mentioned yesterday that the NTCA working to not just get the networks built, but make sure there’s funding to keep them running. One of the other things we’ve heard a little bit about here is partnerships and for telcos to work with, whether it’s municipalities, electric co-ops, you know, whoever some of those other partners might be. You know, that’s something that has been the right path forward for some folks. Mark, tell me if you don’t mind, have you seen any of those those partnerships work in Texas, or what kind of climate is there for, you know, whatever that other partner may be? Have you seen any of that be the right answer for folks in your state?

Mark Seale: Yes, we actually, there are a couple of examples in East Texas. We built what has been termed LoopNet, which ran around all of the anchor institutions in East Texas through four of our rural phone companies that got together and provided a fiber network to hospitals, universities and to public education facilities. And that has been in place for years. We also just recently, a good example, a little East Texas town was not happy with the service that they had, and they reached out to one of our providers, and they were able to have a public private partnership with the Economic Development Council in this small town. Each side put up a million dollars. They ran a fiber truck there. They’ve now connected the university and the hospital and the Home Depot and a couple of other large customers. And they’re going to pay back the Economic Development Council over the next 10 years and net them 10% profit, and all of that area will be wired. You know, we have pockets in in Texas, I know Craig has these pockets, where you can get gigabit service right now. In a little town called Goldthwaite, Texas, which is 2,200 people in, it’s not in the middle of nowhere, but you can see it from there.

Mark Seale: You can get gigabit service today. And when COVID hit, a lot of people left Austin and drove the hundred miles out to Goldthwaite and resettled there because the service was so good. I cannot get gigabit service in Austin, Texas, but yet you have an Goldthwaite, and that’s because providers like Craig have spent the time to build the networks and build them right. And now we are seeing the fruits of that. All of that was helped by USF over the years. In the 40s, we had a phone divide, not a digital divide. And it was the policy of the state that everybody should be able to call into town for help. That model has worked for almost a 100 years now, and it is important that we understand that if you’re going to build these networks that you want people to stay connected, you have to build them and then fund them and help them operate and pay off the debt to build them. And that is why Universal Service, and whatever broadband funding looks like going forward, is so important.

Andy Johns: Craig, let’s end on this. It’s easy to get lost in all the policy and the funding mechanisms and funding mechanisms, but at the end of the day, the broadband networks that you guys are building has a real impact on real people. So I don’t know if you have a moment just to share one or two examples, or just how you’re seeing those pockets where the network that you guys are building is really making a difference.

Craig Cook: Sure. Now thanks, Andy. That’s a great point. You know, at the end of the day for us, and I would say for all rural providers, it really is about serving our customers. That’s what we’re there for. And I think that’s what makes us so much different than the large national providers. You know, we’ve been in these rural areas. We’ve been working hard to deploy these networks to assist, you know, our neighbors, our friends, those who you know, we share communities with. And so for us, it’s not just about, you know, the dollar investment. It’s not just about the physical network, it’s about serving those members. But you know, what really comes to mind to me really are probably two things first and foremost. And one of those is our local schools. In our territory, which spans over 3,000 square miles, you know, we have fiber to every school that we serve. And so, you know, gigabit services are available. We do have a number of schools who are using that level of service. And it’s critical, you know, for their connectivity, for education. And really, you know, our view has been, you know, is the way the schools go in our communities, that’s where the community is going to go.

Craig Cook: So, you know, the more we can support our schools and our students, that’s really, you know, speaking to the successful future of these rural areas. Secondly, small businesses, you know, it really, and I think COVID has shown this to us is that this is a global economy and people don’t necessarily have to be working out of a metro high rise in downtown Dallas to do business anymore. It’s we have a number of people in our area that have, you know, moved out of Houston or San Antonio or had retirement places in our community where they chose to start conducting their business. And so for us to be able to provide them the high level of connectivity that that they need to run their business is really being critical. And so we’re really pleased that we’re able to provide that. And as Marc said before, in many cases provide service that is superior to that, you know, that they could find in larger metro areas.

Andy Johns: I think that’s a good spot to end it. Mark, anything to add there?

Mark Seale: Andy, we appreciate you. We appreciate the work that you do for the industry, and we’re excited to move into the future. And our companies are still going to be here providing broadband service and all the other services we provide to the communities that we connect.

Andy Johns: Excellent. He is Mark Seale, the Executive Director with the Texas Telephone Association. You also heard Craig Cook, who is the CEO of HCTC. I’m your host, Andy Johns with WordSouth and Pioneer. And until we talk again, keep telling your story!

Outro: Rural Broadband Today is a production of WordSouth, a content marketing company.