If you Don’t address Your Community’s Broadband Divide, Who Will?2019 NREDA ANNUAL CONFERENCETECHNOLOGY, INNOVATION AND ENTREPRENEURSHIP…TIES THAT CONNECT RURAL AMERICA

November 8, 2019

Ken JohnsonSVP, Broadband Programs

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If you Don’t address Your Community’s Broadband Divide, Who Will?

The Co-Mo Story…. Grass Roots Initiated – Listen to your Members/Customers Validate Member feedback - Member Survey, Crowdfiber Business Structure – Wholly owned Subsidiary, Division of Coop, L.L.C., C-Corp Service Offerings – Broadband only or Double/Triple-play? Technology decisions – GPON, Distributed Tap, Equipment Pilot – Validate Business Model and Assumptions (Pre-Sales – Success Based, Competition) Board Approved Phased Approach – W/Exit Strategies Financing, RUS, CFC, CoBank, FCC, State Broadband Programs Use Local Contractors when possibleDon’t underestimate the Advantage of Member/Customer Loyalty

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If you Don’t address Your Community’s Broadband Divide, Who Will?

Positive Outcomes of Co-Mo Project 480+ “Smart Devices” Connected on Electrical Distribution System Co-Mo Connect has added 32 new skilled technical jobs 40 jobs saved as a result of improved connectivity and lower communication pricing Multiple Cell providers added additional towers due to fiber backhaul capabilities 5 New Startups from Entrepreneurship classes sponsored by Co-Mo, Local College, DED Local businesses can compete globally, no throttling down to save capacity Local Business added 25 – 30 new high skilled technical jobs doing work globally Improved network capabilities with branch offices has helped multiple local businesses 2nd homeowners at the lake spending longer week-ends due to high-speed connections Reduced local commuting out of area for work – more doing work from home Educational Opportunities, Agriculture, Health Care Improved Public Safety/Law enforcement/Fire protection

If Not You – Who?

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Rural America is being left behind

Vast preponderance of electric service territory is either: NOT served by a cooperative or small/independent telco, or, Served WELL by a cooperative or independent

AT&T's Plan For the Future:No Landlines,

Less Regulation

Verizon’s ongoing focus to … increase its market share in

the wireless industry is driving it to consider selling some of its fixed line assets.

The vast majority of communities in CenturyLink

territory still have no hope for upgrades beyond basic DSL

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Rural America is being left behind

Electric co-op areas without broadband access

Electric co-op service areas

Sources: NRECA, FCC Data

Technologies

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Many technologies are converging to drive disruption

DISTRIBUTED ENERGY

SMARTGRIDSMART AG

FIBER

ANALYTICS

ROOFTOP SOLAR

ENERGY EFFICIENCY

LI-ON

BATT

ERIES MICROGRIDS

BIG DATAENERGY STORAGE

SMART THERMOSTATSELECTRIC VEHICLES

INTELLIGENT AMI IOTNETWORKS

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Smart Grid Solutions and Broadband Solutions are both Network Solutions!

Broadband NetworksSmart Grid Networks

Network Management

Satellite Broadband

Video Solutions

BroadbandBackbone

Fiber Design & Deployment

Mobile & Fixed Wireless

Smart Services

ISP Services

Advanced Energy

Demand Response

AMI Analytics

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A broadband backbone enables real value from a smarter grid

Application and Valuation10,000 Member Coop 2018 2027

Revenue (fiber lease) $28,000 $36,534

Cost Avoidance

Distribution Automation $280,000 $365,975

Substation Automation $1,000 $1,205

AMI $167,400 $218,801

Demand Management $1,150,680 $1,504,002

Outage Management $8,500 $11,110

Asset Management $648,148 $847,165

DER $31,107 $347,748

Previous Telecom Costs $54,000 $323,320

Cost Avoidance - Total $2,340,835 $3,619,327

Total Economic Value $2,368,835 $3,655,861

High Estimate $2,961,044 $4,569,826

Low Estimate $1,776,626 $2,741,895

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New technologies are helping extend broadband more cost effectively to rural communities…Fiber

› The Gold Standard – most capable, most future proof technology. A must have for backbone, but also critical to enable current and future consumer & utility services.

Fixed Wireless› Broadband - New radios, antennas and spectrum can deliver up to 100Mbps (in right areas) › IoT - Low power, long reach with ability to support many utility use cases5G

› Lots of promises…but won’t be in rural America anytime soon.Satellite

› Current GEO systems help reach most rural of customers but limited capacity and high cost.› LEO systems – still in future and unproven. Targeting backhaul, airline and cruise markets.

All emerging broadband technologies rely on lots of Fiber!

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Voice• Basic voice• Analog

• Designed for voice• Digital: Improved coverage/capacity

• Circuit-switched voice

• VOIP (all IP)• Operators often still use 2G/3G for voice

• VOIP Only (all IP)

Data

• GPRS data (kbps)• SMS Texting

• HSPA Data• First mobile broadband capability

• LTE Data• IP-based• True mobile BB

• Enhanced mobile BB• New, higher band spectrum (much smaller, very high capacity cells)

• Ultra reliable, low latency

IoT• IoT (LTE-M/NB-IoT) • “Massive IoT”

- More dense deployment- Longer battery life

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LTE and 5G are progressions of wireless standards

1G 2G 3G 4G/LTE 5G

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5G is being deployed first in cities on mmWave spectrum

Mobile bands

Midbands

Lower bands: Travel fartherMore channel bandwidth = Faster speeds

Very high band “millimeter wave”

Coverage Capacity

Macro cells

Smaller cells

Ultra dense

20 MHz channels

20-100 MHz channels

400 MHz to 2 GHz channels

5G Gigabit speeds are only achieved when using 400MHz+ of spectrum in millimeter wave (mmWave) bands› However, mmWave travels very short distances,

typically 200 meters

5G will be deployed in other mobile bands› Will be an improvement over 4G, but not gigabit

speeds› Only 25-50% faster in these other mobile bands

1M LTE/5G small cells forecasted in 5 years › This compares to <200K towers today› Opportunity for utilities to monetize vertical assets

5G will be deployed (over time) in rural in low and mid bands & will improve data rates;Gigabit mmWave solutions, however, will be limited (possibly wireless drops)

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5G millimeter wave experience

218 Mbps inside Starbucks

5G Site

600 Mbps here 405 Mbps

here (outside)

41 Mbps in this lobby

Partnerships

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Why Partner?(the better question is why compete?)

Strong commitment to community

Overlapping members

Both have made fiber investments in their networks and will continue to do so

Efficiencies should always be pursued

Possible additional sources of revenue

The business case is much harder in a competitive market

The customer may not care who provides it as long as someone does

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Key Elements to a Successful Partnership

Trust between partners

Common Values

Clear and agreed purpose and objectives

Mutual benefits for all partners

Commitment and ownership

Sometimes pride needs to be checked at the door

Clear and robust partnership arrangements

Good communications with all partners

Conflict resolution and mediation

Systems to monitor, measure and learn

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Potential Collaboration – Encouraged by RUS

Can you – and do you want to do this yourself? Depending on proposed service area, consider potential collaborators:

› Other Electrics

› Telcos (co-op or commercial)

› Cable Providers

› Wireless Internet Service Providers (WISPs)

› Municipalities

› Backbone & Carrier Ethernet Providers

› Cloud Providers

Pros: lowers costs; spreads risks; brings additional expertise Cons: potentially increases complexity; requires clear delineation of responsibilities

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Examples of Telco-Electric Partnerships

GA

MN

NY

AL

IN

WI

OR

AR

NC

TN

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Case Study: North Alabama Electric & New Hope Tel

North Alabama Electric

Stevenson, AL

New Hope Telephone Coop

New Hope, AL

Partnered to provide broadband to 8,048 households, 1,442 businesses, and 53 anchor institutions

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Case Studies: NineStar Connect

Central IN Power

Greenfield, IN

Hancock Telecom

Markleville, IN

Management identified “overlapping goals:› Electric Co-op – Focus on deploying Smart Grid

Technologies through fiber› Telephone Co-op – Focus on selling additional

services to new customers through fiber Merged to form NineStar in 2011 Had to amend Indiana law to allow electric and

telephone co-ops to merge

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Case Studies: Arrowhead Electric and CTC

AEC recognized its lack of expertise in broadband service early in the rollout of its fiber network and formed a partnership with Consolidated Telecommunications (CTC) the deficiency

Currently, CTC handles technical service calls from broadband subscribers that AEC staff are unable to resolve

CTC also provides the telephone switch and Internet gateway, which AEC resells to its subscribers

Arrowhead ElectricLutsen, MN

CTCBrainerd, MN

We found out quickly that there is a large learning curve especially related to phone and the assets you need for providing phone service. We found Consolidated Telecommunications Company out of Brainerd, Minnesota, which as a cooperative really had our same values and had been doing this for a very long time. We did indeed need that partnership and still rely heavily on it. Plus, we know the people there—in fact, that is where a former Arrowhead Electric co-manager works now. Our relationship is unique and it’s become a national partnership model- AEC Interim CEO / Finance & AdminDirector Jenney Kartes

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Fiber to the Home Broadband in Prince George County, VA

An agreement between PGEC Enterprises, Prince George County IDA,

and the County of Prince GeorgeJune 16, 2017

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Other Local Partnering OpportunitiesCo-Mo Partnered with others to leverage Technology and Investment G&T - Fiber Assets for redundancy Network Equipment for redundancy Contracted service for Video Programing/Headend with other Co-ops Aggregate Bandwidth Purchases Aggregate Customer Service/Technical Assistance Hired local Contractors from Community for Installs Vendors/Suppliers Local Community College and DED – Entrepreneurial Business Start-up Schools, Businesses Local, State and Federal Agencies Lessons Learned

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Cooperative Partners

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Our Mission:NRTC provides solutions that help our telecommunications and electric members bring all of the advantages of today’s evolving technology to rural America

Our Vision:NRTC will be our members’ most trusted technology partner

NRTC is your technology cooperative

NRTC is a member owned cooperative› 1,500+ rural electric cooperatives and independent

and cooperative telephone companies

30 Year History› We were formed in 1986 and have been profitable

for the past 24 years

Technology Driven› We are not dues funded and we do not lobby › Our revenue comes from the Technology services

we provide

Financially Strong› $141M in Revenue in 2018› No debt and ~$150 million of capital to invest in

technology for the benefit of our members

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NRTC Provides Technology Solutions to Rural America

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29Total projects

37,000Miles of fiber/FTTH plant

378,000Homes and businesses

$1.3BFiber and fixed wireless infrastructure investment

140+Employees

150+Feasibility Studies

completed/in process

NRTC Broadband Engineering at a glance

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Technology Choice

Density by area

Physical Plant Competition

Feasibility studies should assess five main components

Network equipment type and quantity

Deployment choices andcost per unit(mile, site)

Take rate and revenue

per user

Operating Model

Ongoing Costs

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Cash Flow

Financing

Detailed Income Statement

Equity

IRR

Payback

The output should be a detailed financial plan that can be used for financing

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Funding partners

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Major Funding Programs

FCC Rural Digital Opportunity Fund (RDOF); based on Connect America Fund (CAF)› $20 billion over 10 Years (proposed)› Rulemaking launched August 1, 2019; auctions expected 2020

FCC Schools & Libraries ($4 billion/yr; caps proposed)› https://www.usac.org/sl/

FCC Rural Health Care ($500 million/yr; caps proposed; revamp launched Aug. 1)› https://www.usac.org/rhc/

USDA RUS ReConnect Program (Grants; Loan-Grant Combos; Loans)› $550 million allocated for 2020; rulemaking expected 2019› https://www.usda.gov/reconnect

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OTHER USDA PROGRAMS(Funding levels vary by availability) Telecommunications Infrastructure Loans & Guarantees

› https://www.rd.usda.gov/programs-services/telecommunications-infrastructure-loans-loan-guarantees

Rural Broadband Access Loans & Guarantees› https://www.rd.usda.gov/programs-services/rural-broadband-access-loan-and-loan-guarantee

Rural Business Development Grants› https://www.rd.usda.gov/programs-services/rural-business-development-grants

Business & Industry Loan Guarantees› https://www.rd.usda.gov/programs-services/business-industry-loan-guarantees

Distance Learning & Telemedicine Grants (closed for 2019)› https://www.rd.usda.gov/programs-services/distance-learning-telemedicine-grants

Community Connect Grants (closed for 2019)› https://www.rd.usda.gov/programs-services/community-connect-grants

RUS Electric Programs (including Smart Grid, fiber, etc.)› https://www.rd.usda.gov/programs-services/all-programs/electric-programs

Renewable Energy for America Program (REAP) – Not broadband; $400 million available› https://www.rd.usda.gov/programs-services/rural-energy-america-program-renewable-energy-systems-energy-efficiency

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National Telecommunications & Information Admin. Resources NTIA Broadband Funding Guide Searchable list of additional federal and regional broadband funding sources

› https://broadbandusa.ntia.doc.gov/new-fund-search

NTIA News & State Broadband Programs Info & Contact List (Map)› https://broadbandusa.ntia.doc.gov/

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If Not You – WHO?Rural Broadband not a unique problem; We’ve done it before and will do it again!

1935: 13% of farms had electric service

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If Not You – WHO? Rural Broadband not a unique problem; We’ve done it before and will do it again!

1937: Electric Cooperative Corporation Act

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If Not You – WHO?Cooperatives solved the density problem and electrified Rural America

1953: More than 90% of farms had electricity

Questions?