Three-party deal sees PG Electric Coop. getting $1 million for broadband expansion

By: Michael Campbell, News Editor
4:13 p.m. | June 16, 2017

PRINCE GEORGE – The proverbial green light has been triggered for Prince George Electric Cooperative and its venture to expand broadband internet service to the county’s underserved areas after the Industrial Development Authority approved a contract that would see $1 million in county funds going to help PGEC with its efforts.

During a lunchtime meeting Friday afternoon, members of the IDA were joined by PGEC’s Casey Logan and President and CEO Mike Malandro as the authority agreed to enter into a three-party agreement between the IDA, the county, and PGEC’s new entity, PGEC Enterprises, LLC., that would have the IDA providing $1 million through a grant issued by the authority to help expand the cooperative’s Fiber-To-The-Home project it began in late 2016.

With the agreement maintaining the same architecture it had when it was presented and recommended for approval by the Prince George Board of Supervisors in May, the three-party contract would see the $1 million that was earmarked for the county’s broadband expansion efforts from Prince George’s spring borrowing transferred to the IDA, who would then create a “Broadband Expansion Grant” that would be rewarded to PGEC Enterprises to “help cover the overhead costs of the project.”

As part of the seven-page performance agreement, by July 1, 2021, PGEC Enterprises will have to have “installed and made available consistent and reliable broadband service” to a minimum of 500 new subscribers, with customers who were brought online by PGEC Enterprises through their pilot project along West Quaker Road and Prince George Drive not counting toward that 500 customer benchmark.

Residents and businesses that are “within 1,000 feet of a roadway” will be able to receive a fiber drop to their home or business as PGEC Enterprises works to expand internet services through the county, with service currently costing $82 per month, which includes a leased router.

Additionally, if PGEC Enterprises is unable to make the 500 connections by July 1, 2021, they will be considered “in default” of their agreement with the IDA and county, resulting in a clawback of $2,000 for every connection not completed by PGEC Enterprises at the end of the contract.

The agreement also stipulates upload and downloads speeds for the service, requiring PGEC Enterprises to provide a minimum of 25 Mbps down and 3 Mbps up.

Finally, the contract calls for PGEC Enterprises to construct and make fiber optic cable connections available to all public structures owned and operated by the county that is within 1,000 feet of a VDOT road, including schools, libraries, fire stations, and wireless communication towers, among others.

PGEC Enterprises will also provide internet service to the Central Wellness Center, Prince Geroge Emergency Crew building, the Burrowsville Fire Department and the town’s community center for the residential rate of $82 per month with a leased router during the term of the agreement. When that period ends, the rate would convert to the commercial rate.

If the company reaches the 500-customer benchmark before July 1, 2021, the agreement between the three entities would end and the cooperative is required to provide annual reports to the county beginning in 2018.

Friday’s meeting of the IDA featured Deputy County Administrator Jeff Stoke walking through the county’s journey to this point, where he explained Prince George had provided a legal agreement to a wireless internet service provider to provide service on a tower near Route 10 in Burrowsville in 2016, but the county hasn’t received a response from that company or any other WISPs.

He noted other localities, such as neighboring Surry, are facing their own challenges to get WISPs to set up inside rural communities due to the relatively small return on investment.

In Surry, after its joint grant application with internet service provider, SCS Broadband was denied by the state earlier this year, the county is now in negotiations with SCS Broadband to cover the costs required to deliver Internet service from one tower located along Colonial Trail West in the county.

Stoke added county leaders were not interested in publicly maintaining a broadband internet system, such as if the board of supervisors was to create an internet authority in the spirit of a water and sewer authority, with Prince George being responsible for the financial losses, operations, and maintenance of the service.

As discussion shifted and the floor opened to members of the public, a representative from another internet service provider in the county offered their insights and concerns about the project.

Comcast Government Affairs Representative Nathan Daugherty told members of the authority and others in the audience about the national cable and internet company’s commitment to Prince George, touting recent construction investments, increases in residential and business internet speeds, and future rollout of the company’s Xfinity Mobile platform as they venture into the cellular markets.

Speaking specifically to the project’s goal of reaching those who are underserved in the county, Daugherty noted that Comcast offered discounted Internet service for those families who may have a child receiving free or reduced lunch at school or part of a Housing and Urban Development program at $9.99 a month for 10 Mbps.

Looking at the potential customer map provided by the county and PGEC Enterprises along with the agreement, Daugherty said he felt the $1 million in public funds should be used to target those who are underserved in the county, arguing that there isn’t any language within the seven-page agreement that stipulates PGEC Enterprises will focus on underserved areas and he believes there is some “overbuild” on some portions of the map, particularly in the area of Route 156.

When asked about Daughtery’s comments, PGEC CEO Malandro said the map itself “might be a bit misleading” in terms of where overlap is because PGEC plans to connect their two power substations in the area of Route 156 and Middle Road to their new fiber network, but providing internet service of their own in that area is “one of the last things” the cooperative plans to get to as the area is also being served by Comcast.

“We are going to go where there isn’t any [service] and later on, the line will be there so, at another point in time, we would go in there and offer service,” Malandro said.

He added that the priority area they are focusing on at the start of this project is along Pole Run Road and Route 156, an area he notes as having no service options for internet customers.

“The spirit of all this work is to try and get to unreached areas who don’t have access,” Malandro continued. “That is the whole reason the cooperative did this. We didn’t create this business to make money. That is not how we operate.”

Industrial Development Authority Chairman J. Peter Clements praised Comcast for its work to provide Internet service in the county but also pointed out the lack of countywide service by the company that has over 20 million broadband subscribers as of a few years ago.

“I am sure there will be other opportunities for [Comcast] to work with the county,” Clements remarked. “[Comcast] hasn’t found it to be cost effective to go to these areas that are underserved but you are providing good service to the areas you are in.”

Clements, who is also CEO of the Bank of Southside Virginia, did echo comments made by Daugherty in regards to the use of the $1 million lump sum payment of the grant to PGEC Enterprises.

“As public servants and members of the IDA, we should have a conversation and make sure this is a service that is being provided those being underserved,” he remarked. “The use of public funds is to help the underserved populations of the county.”

“I want this to be good for all of us, for the county and the cooperative,” Clements continued.

Following several members disclosing that they had a conflict of interest prior to the IDA acting on the matter because they were customers of PG Electric Cooperative and, through being customers, are partial owners of the cooperative who receive small dividends, which was done out of an abundance of caution by the authority’s legal representation, the board approved the execution of the agreement between the three parties and the transfer of the $1 million in funds that will go to PGEC Enterprises.

The moment brought smiles to the faces of many in the room as the county moves forward its goal of bringing the internet to more county residents and businesses, which Stoke remarked is the “number one complaint” the county receives from those living and working in the county.

For Malandro, he and his staff are ready to get to work.

“We’re going to start work in the next 60 days and start putting infrastructure out into the field and start turning on new Internet customers,” he said. “This is why we decided to embark upon this project to see if we can pull this off and we found out we could do this and we are looking for other assistance to see if we can bring it into other counties that we serve and make this a great success for the rural area.”

Within the next 60 days, PGEC Enterprises will provide a broadband installation plan for installation of the fiber backbone, with that plan including “the locations where PGECE proposes to install broadband infrastructure, the types of materials proposed to be used, and the capacity and lifespan of the materials.”

Once the funds are provided by the county to the IDA, the IDA will transfer the $1 million to PGEC Enterprises within 30 days of receipt.

Copyright 2017 by Womack Publishing
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