Episode 163

Telcos And Electric Cooperatives Working Together

March 17, 2020

Episode Summary

At RTIME, Fred Johnson was called on to articulate NTCA’s position on electrics getting into the broadband business. He joined the podcast after his address to share his thoughts.

Show Notes

Transcripts have been lightly edited for clarity and readability.

Andy Johns: What can your telco do to establish good partnership relationships with your electric counterparts? That’s what we’ll be talking about on this episode of StoryConnect: The Podcast. My name is Andy Johns. I’m your host with WordSouth, and I’m joined on this episode for the first time, oddly enough, by Fred Johnson, CEO and General Manager at FTC right there in Rainsville, Alabama. Fred, thanks for joining.

Fred Johnson: That’s my pleasure, Andy.

Andy Johns: Now, FTC has been working with WordSouth for more than 20 years. I think they were our second customer. So it’s kind of crazy we have not had you on before, but I appreciate you taking the time here at RTIME. I should say that we are recording live at the center of the rural broadband universe this week in Phoenix, Arizona, NTCA’s RTIME Conference. And Fred was nice enough after he addressed the crowd this morning to take some time to talk with us. So your topic, Fred, was looking at electrics and telcos working together. And I thought you had a really good way of putting all that together, based on some of what you’ve learned from legislators and just your experience.

Fred Johnson: That’s correct, Andy. I was actually tasked with the responsibility of sharing with our membership the approach the board has taken with formulating our response to the emergence of electric providers into the broadband marketplace, which is something that we, quite frankly, think is an opportunity and not a crisis. And it was important to share with our membership the approach the board is taking in that regard.

Andy Johns: Definitely. We’ll start like you did with your presentation with the numbers, because the numbers overwhelmingly suggest that there needs to be a way for NTCA members to partner.

Fred Johnson: That’s absolutely correct. You have to remember that there are 327 million Americans, according to our most recent population estimates. Approximately 97% of the land mass is rural, and that encompasses about 60 million people, not 60 million households, but 60 million people. The challenge that we face is that out of that 60 million, only about 13 million are actually reached by members of NTCA or what we would traditionally refer to as telephone cooperatives and independent small community based providers. That leaves 47 million Americans living in rural America that do not have access to the services of a truly rural-based provider. And we cannot ignore that as an association. We have to understand that, and let that fact help us understand where the market is headed and the challenges that are before us.

Andy Johns: Because that 47 million those are the folks that are not reached, like you said by NTCA folks, and there may be many of those that would never be the opportunity for NTCA folks to reach them on their own.

Fred Johnson: That’s right. And that does not portend the presence of evil people. Please understand. That’s 47 million Americans that are living in areas of the country that have traditionally been served by the large price cap carriers, such as AT&T. And you have to remember that they have telephone service. All of America ultimately had telephone service because of a carefully formulated public policy that dates all the way back to the early 1930s. That policy has changed. The marketplace has changed. And the rules and principles that applied in a monopolistic era with heavy state and federal regulation just don’t work any longer. That doesn’t mean the companies that are serving those areas are evil people or evil companies. They just don’t have a business case to do that. But that does put 47 million Americans at risk of not having a world-class broadband, provided by a provider that is based in their community.

Andy Johns: I thought it was interesting how you outlined the history there between NTCA and NRECA. This is not a new concept that the telecommunications folks and electric folks will be working closely together, because, I believe you said, there’s a lot more in common than in contrast.

Fred Johnson: There absolutely is. You go all the way back to the 1950s. Actually you go all the way back to the 1940s, it was NRECA that advocated for changes in the Telecom Act or the REA Act that gave birth to the telecom industry as we know it today. And NRECA also gave birth to NTCA itself, housed their offices for many years. And we’ve enjoyed a long and productive relationship. At the end of the day, we’re all about the same mission.

Andy Johns: I thought it was interesting, you talked about the moral high ground, and I thought that was a nice way to put that. You know, a lot of the co-ops can claim to take that moral high ground. But as you mentioned, a lot of the electric cooperatives are on some of that same space.

Fred Johnson: Absolutely. By and large, the NTCA membership, almost without exception, is either telephone cooperatives or it is comprised of small community-based, community-minded, independent companies. And whether you’re a cooperative or one of those independently owned companies, if you have a true commitment to the community and to the customers, you do have a certain amount of high ground that you can claim. It’s not just a business case at that point. But absolutely, rural electric cooperatives across the country are taking care of people the same way, you know, cooperatives in the telecoms side of things have as well. And they have a right to claim that ground as well.

Andy Johns: Sure. Now as you talked about it a little bit more, you mentioned some good examples of people who are doing it right. I think you mentioned CTC and Pineland and a few others. But where do you see this going? What is the model that you would like to see? You know, hoping that down the road becomes more and more common.

Fred Johnson: Well, can we take just a moment to talk a little bit about some of the advocacy principles we strongly believe in? First of all, we absolutely promote collaboration and cooperation wherever that is geographically possible. At the same time, we are very cautious and encouraging public policy that does not take scarce resources. Think tax payer or consumer dollars, and give it to folks just to artificially fund competition where it doesn’t make sense or to overbuild duplicative networks. That just does not make sense from a public policy perspective. But, at the same time, we acknowledge the need of all rural Americans, not just the ones that are part of our membership. And we encourage cooperation in reaching those as much as possible. The only other thing that we’re not the least bit apologetic [for], I’ve been making a point about, is that people should still act responsibly and invest wisely. And if you don’t do that, there’s always the possibility absent effective regulation for captive electric rate payers to be on the hook for unwise investments in broadband. But the rural electric industry is headed by smart people who understand good business. And at the end of the day, I see them prevailing and making wise, instead of unwise investments, and I think we’re going to be okay. It’s just we’ve got to have some safeguards in place for those that don’t act responsibly. And that happens on both sides of the issue.

Andy Johns: Sure, sure. I liked what you said in the talk was that you’re not afraid of a fight, but if you can avoid a fight with somebody 10 times your size, it’s probably a wise move.

Fred Johnson: That’s a Fred Johnson personal opinion. I’m not expressing everyone’s feelings here. This is my opinion. There’s absolutely no reason whatsoever for a fight. And if there’s going to be one between rural electrics and rural telcos, it’ll be manufactured by bad actors. I’m sorry to be that blunt about it, and remember I just said that’s my opinion. That’s not official NTCA policy.

Andy Johns: Right.

Fred Johnson: But in my opinion, if there’s a fight, it’s because of bad actors. It’s not because there’s something about the system that demands it.

Andy Johns: Right. Not a lot of winners when there’s a fight like that.

Fred Johnson: Now, as a matter of fact, let me make that real clear. This really applies to any rural telco that actually is truly focused upon its customers and the communities in which they live, but especially with regard to cooperatives. If you see electric and telco cooperators fighting, they should really ask themselves what is it about revised Rochdale principle six that they don’t think applies anymore. That’s the same customer being pulled in two different directions by folks that are supposed to be representing his best interest. So there’s no reason for that.

Andy Johns: So what advice would you have for whether they are coming from the telco perspective or the electric perspective? If there’s somebody looking at an underserved or unserved area and there may be an opportunity for partnership, what advice would you give both sides, as they’re kind of heading down that road?

Fred Johnson: It starts with mutual respect. It absolutely starts with mutual respect. I am well-known preaching to my brethren on the telco side of this industry that our counterparts in the rural electric industry are smart, intelligent and capable. They are good people, and they know how to run their organizations. And they understand competitive pressure and often irrational government policy a lot better than we sometimes give them credit for. The only thing that I ask is mutual respect in return. Telco industry has long been down the road of active and aggressive competition. We understand what it is like to function in an area where you can never assume that 100% of the people are going to take your product. And so there needs to be a mutual understanding of that. And if we’re talking about a single customer being served by both, it’s easy to understand how, if you work together, that customer is the ultimate beneficiary of that. Don’t put up two poles, don’t put up two pole lines, if one will do. It’s really that simple. And so, you know, work together where that’s possible. Find a way to work together. At the end of the day, the customers will benefit from that.

Andy Johns: I would agree with that. And this is an idea that you have heard, not just at telco conferences or not just talking to other telcos, but you’ve heard the same notion, the same idea in the State House in Montgomery or with public policy officials you’ve talked to along the way.

Fred Johnson: Absolutely, Alabama. I’m very proud of our state in this regard. I’m very proud of our legislature, because I have seen firsthand how they have put the interest of Alabamians ahead of any special political interest. They established a very well-reasoned and, I think, well-funded grant program to help get broadband to under or unserved Alabamians. And they did it in a very respectful way of those that are actually delivering on that today. And they were very clear, there was no ambiguity at all, they made it absolutely clear that they were not going to take tax payer dollars and fund artificial competition or overbuilding networks that are doing what the public policy is calling for and successfully. But they also made it equally clear, which I frankly respect them for, that if an existing provider was not going to take care of a rural Alabamian, they were prepared to help anyone who was willing to do it and would. And you know what, at the end of the day, that’s exactly the kind of legislative outlook that I’m looking for.

Andy Johns: Sure. It’s tough to argue against that.

Fred Johnson: It absolutely is.

Andy Johns: So, the last thing here before we wrap up. I don’t know if you brought your crystal ball with you or not, but let’s spin it ahead five years or 10 years down the road. Where do you see this going in terms of telco/electric partnerships? What does winning look like? And where do you see the future of this going?

Fred Johnson: I think there will be much progress. The one thing that you have to acknowledge and accept though is this premise: keep in mind we’re talking about significant chunks of the US landmass, some of the hardest to reach and most costly to serve areas that you could come up with. I go back to a comment I made earlier. The only reason we got telephone service essentially to all Americans was because of a carefully crafted government policy that supported those services in an era where it really was a monopoly. It was one provider to do that, and that was the best way to do it. That just doesn’t exist anymore. There’s no argument to be made for it, but there is still going to have to be significant efforts by the federal government, as well as the state governments, to help fund some of that. And the same reason you would want to do that is still out there, even if the model is not the same. And that is quite simply this, it is in the public interest of the United States of America for all of its citizens to be able to be connected to the world’s network. That is in the public interest of the entire nation and every citizen that lives in it.

Andy Johns: Absolutely.

Fred Johnson: And that’s going to require some public policy assistance. And then you’re going to have smart men and women on both sides of the telco/electric spectrum that will find a way to work together, minimize the expenditure of unnecessary resources, cooperate and make it happen in the most efficient way possible. And this is my opinion, and I make no apology for it. It is better they do it, than the government try to do it for them.

Andy Johns: Got it. That insight and those thoughts are brought to you by Fred Johnson. He is the CEO at FTC in Rainsville, Alabama. Fred, thanks for joining me,

Fred Johnson: Andy. It is always a pleasure. We love WordSouth and our relationship with it. Glad to be with you.

Andy Johns: Wonderful. Thanks so much. I’m your host, Andy Johns with WordSouth. And until we talk again, keep telling your story.

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