EMBRACING BROADBAND AT TIPMONT EMC
Craig Corbin: You have already been busy today as a panelist on the very first segment this morning in the lineup, and a lot of interest in learning about what has gone on with the way that co-ops and utilities have embraced broadband as a necessity for the communities that they serve. And your component of the panel seemed to be of great interest to a lot of the attendees. Give us an overview of how everything transpired at Tipmont, when the decision was made to embrace broadband.
Ron Holcomb: So actually it was somewhat of a evolutionary process. We're, of course, an electric service provider. And when I was hired by Tipmont in 2013 there were a number of topics that we had to consider. Of course, number one, what's our role and in this day and age, as compared to where we were in the '30s and '40s. And another was, how are we going to prepare for the change in technology that we know is coming, consumer choice on the distributed energy resource side, and the kind of infrastructure we need to support that. So long story short was we said, "Well, what we know we need as a backbone. We have connectivity needs for our substations. We need switching capabilities we don't have, and we know that we're going to build enough capacity into that backbone that will allow us then, if we choose to ever use it for any other purpose, we're done."
So it started with taking some action. We built close to 300 miles of a 144 count and covered 22 substations, and it was quite an investment. We got our feet wet a little bit. And then we also started a planning process consecutive to the building of the backbone. The planning process was the question of, ""Why did we do what we do?" That was basically the question we asked. And I challenge especially directors of other co-ops and even CEOs out there, because everyone's got different answer for that. The question is, if someone were to ask your board or you, "Why do you do what you do?" Would you get the same answer?
My guess would be probably not. Okay. And the reason is, is because nothing wrong with that, because we all have a different view of what we think co-op has become. So for some of us in the cooperative space, we're in the electric business and don't want to talk about anything else. That's what we do. Others have tried other types of efforts, partnering with a satellite company back in the day, or offering propane services or whatever. What we turned into in the cooperative world is what I call... We know we can speak about 'what' all day long. We got the 'what' part figured out, right? And the 'how' part, we're really good once we know the 'what' part, because the 'what' part it's easy to describe. The 'how' part is pretty good because we're an efficiency machine, right? We know that part.
But when it comes down to the 'why' part, this starts getting a little bit tricky. I got different answers. I had different answers. The board had different answers. And that really sent us on a path to think about why are we here? So sorry for a long response there, but the point is that, as an electric cooperative that's considering providing broadband service where you could be basically betting the balance sheet, which you kind of roughly are, actually, when you're looking at the magnitude of the spend. Having a really clear understanding why you do what you do will clear up a lot of problems in the long run. So we spent about two years actually going through a strategic planning process and iterations of that until we finally landed on why we think we're here. And that alone solidified us. And then all arguments beyond that disappeared.
TRANSFORMING EMC CULTURE WITH BROADBAND
Craig Corbin: Right. And one of the things that you touched on, in regards to that decision-making process was that it would wind up bringing somewhat of a culture change with regard to the team, the staff, the family that was Tipmont, and the integration of new personnel into that organization is something that perhaps brought more energy. Now, no pun intended, to the delivery of all services. Talk about that.
Ron Holcomb: This is just my opinion, but if you look at it from a historical perspective, the leaders that began building co-ops into the '30s and '40s, and with FDR’s leadership and others that made the funding available and things of that nature, what we were really dealing with there was a human suffering issue, right? People didn't have adequate drinking water because they couldn't dig a well. They didn't have pumps, so they didn't have the basic energy things that could duplicate labor output. So all these things were really piled on. As the electric co-ops began to prosper and grow, the view was, I'm sure, and I'm just guessing because I wasn't there at the time, but the view probably is that, "We have a light now to read by." We have, like I mentioned, a water pump that we needed for service. And look, "Mom got a new oven."
There were these things that had real impact. So as time passed on, I think the trap that we found ourselves in was what I call 'affordable, reliable', right? And I have many that will disagree with me on this, and I know that, and that's okay. Hey, I'm all about 'affordable, reliable'. Believe me, that's not the issue. The problem is their service attributes, they're not a mission. That's one of the debates that the board and I had.
Like, mission says, "Affordable, reliable." Wait a minute. So the problem is that we then culturally started turning ourselves into an efficiency machine. So at first we're talking back, "Grandma needs an oven and I need a light to read by and that." And then as it became old hats, so to speak, that everybody had electric service, now it was all about affordable, reliable, and efficiency machine. So the problem is that culturally, we have transformed ourselves into an efficiency machine. Co-Ops without a doubt, are the best rural infrastructure providers in America. We know this game better than anybody, right?
Craig Corbin: Period.
Ron Holcomb: Period. No question about it. It's what we do best. I've been telling the people, "We've been losing money for decades and we're very good at it." So the problem is that as you transform your culture, yet once again, from an efficiency machine into an innovation machine, which is what you have to be on the broadband side, now you see where the dilemmas starts to get set up, right? We may have been innovative as a institution, as co-ops at one point in our history. That's probably been supplanted somewhat by 'affordable, reliable' in a way. So I will say, based on the experiences that we've had, the cultural change that's required, and the difficulty in making that happen cannot be underestimated. Because we've had wonderful employees, and across the co-op world, across the country, who have done magnificent job over the decades of providing these services. All of a sudden, and we walk and say, "Okay, we're going to change this whole thing up." And that's as difficult for everyone.
But the problem is that if you reimagine what your role is, you quickly start to realize that it's not an infrastructure play. It's what I call the security, comfort, convenience play. Do my customers have the security, the comfort and the convenience they need to be successful? That's where I think the co-ops' focused probably was in the '30s and '40s. Because people lacked security, comfort, convenience. We're facing that same dilemma again, but now we have to be innovative again. So when you start to introduce employees and thought processes and a style of thinking that has become uncommon in an efficiency game, it does create some backlash for sure.
NO COOKIE CUTTER APPROACH TO BROADBAND
Craig Corbin: One of the greatest pieces of advice that I think you shared this morning was describing how each service area across the country is going to be unique, and that no EMC, in the process of evaluating whether to embrace broadband as a service, should take a cookie cutter plan to their approach. Because their situation is going to be unique to everyone else's. Your situation there at Tipmont, very unique with regard to proximity to a major university, the service area, the number of competitors, legacy competitors in the market as well. Talk about how that was a big part of the process in making it come to reality.
Ron Holcomb: Right. So it's almost as though that you have to, especially in my case when I came to Tipmont in 2013, it's like I need to learn the landscape. So one of the things that I try to share with folks that are considering getting in the broadband space is that, "Don't get in a hurry. The Calvary isn't coming." So in other words, you feel the pressure to go do something, but without proper preparation, that can almost backfire and hurt you in a way. So while everyone's situation is certainly unique, we needed to take the time to understand what do we have? What don't we have? And once we'd done a very thorough assessment and understand that, the real question is, can we add value here in a responsible way?
And if the answer to that is no, then you say, "Okay, that's the right answer because clearly, we're not going to go off on a trajectory that puts the membership and others at risk. That doesn't make any sense." But if the answer is yes, what does that look like? And what happens is, if you say yes, the holes and the gaps and the things you are filling are very unique to your particular condition. So for example, I could run through some ideas. We bought a private company that brought in additional sets of resources. It provided a ballast and the boat. I've got network engineers out of the gate. I've got a network core that's already been serving customers for a couple of years and I've got technical stability. We started building relationships with Purdue University on how do we help them be successful and what services do we offer? I'm working with a telephone cooperative, in fact, where we provide their legacy phone and video products to our customers. We're not building head-ends all over again.
We are now contemplating, how do we actually evaluate the application layer that comes along with providing the broadband service as opposed to saying, "Hey, we're just going to deliver a gigabit service and surely you know what to do with it." That's not the answer, right? We got to get in there and help our customers leverage the asset, which may not be the case in some places. Some places they just need the service where they get it. In our case, we got a lot of customers that never had that opportunity, and now they got to understand how to use it.
So the point is that all those things I just talked about, you won't find anywhere else in America, most likely. Not altogether. so what do you do then in your particular area? And what I'll challenge you about is that I guarantee you, you've got nuggets there. But you really want to go find them. And if you use the more cookie cutter approach, like the traditional, like even a couple years ago, the traditional approach was overbuild triple play. Done. Life will be good, right? No, not really. Potentially. So yeah, think about what you have and what makes you unique.