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Rural Iowa needs broadband access to attract, retain businesses

This news story was published on February 20, 2012.
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George C. Ford, CR Gazette –

When Clickstop was planning its new corporate headquarters and distribution center in Urbana, Chief Executive Officer Tim Guenther did not have to make a pitch for broadband Internet service to USA Communications of Shellsburg.

“We’re really fortunate in that we didn’t have to beg to get what we have out here,” Guenther said.

“USA Communications and Urbana put fiber into this business park. They invested in what we would have if we located in Cedar Rapids, and we don’t pay anything other than our monthly bill for service.”

As Iowa’s rural communities look to attract or retain businesses and residents, broadband Internet access has become as important as railroad access was in the 19th century and interstate highway proximity was in the 20th century.

Broadband Internet access has been historically defined by the Federal Communications Commission as providing 200 kilobits per second (kbps) of data transmission, roughly four times faster than older dial-up connections.

However, the desire for higher standards was recently acknowledged by the FCC, which now defines “basic broadband” as 768 kbps, and also defines faster tiers ranging up to 100 megabytes per second.

For Clickstop, parent company of the US Cargo Control, SpaceSavers, EcoFoil and BellyBling online retail stores, broadband Internet access is critical for more than just receiving orders from customers and placing orders with suppliers.

“In 2009, we began migrating from QuickBooks and QuickBooks Enterprise to another platform called NetSuite, which is a cloud-based business software system,” Guenther said. “We run our entire business on it.

“All of our accounting, customer fulfillment, customer management, inventory control, Ecommerce stores, shopping cart and everything we do goes through NetSuite. It provides us with up-to-the-second information.”

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Mark Harrison, general manager of USA Communications, providing fiber access to Clickstop at 202 Blue Creek Dr. was a business decision predicated on the expectation of future revenue.

“We laid fiber from Clickstop to our central office in Urbana, but we also built the infrastructure large enough that we could attact other businesses,” Harrison said. “If a big warehouse is constructed across the road from Clickstop, they’re going to get fiber-optic service.

“The demand for broadband service continues to grow. We felt it was important to build the infrastructure to support more businesses because we feel there is great potential for continued growth in Urbana.”

Sheila Navis, executive director of the Rural Iowa Independent Telephone Association, said the state’s more than 100 independent rural telecommunications providers are keenly aware of the demand for high-speed Internet access.

“Broadband access is part of a critical infrastructure that must be in place for a business to consider coming to Iowa or remaining in a rural community,” Navis said. “It also translates into applications like education, health care and video conferencing that require bandwidth.

“Every time one of our rural telephone companies adds 10 gigabytes, they have to pay for that increase in capacity. This is an Internet Protocol-based technology and there are associated costs that many people just don’t realize.”

South Slope Cooperative Communications in North Liberty is spending $60 million to overbuild its entire network with fiber-optic cable to businesses and homes in Amana, Ely, Fairfax, Newhall, North Liberty, Norway, Oxford, Solon, Shueyville, Tiffin, Watkins, Walford, Western, South Cedar Rapids, and parts of Coralville.

South Slope CEO Justyn Miller said the upgrade will allow residents and businesses in communities served by South Slope to enjoy the benefits of broadband Internet service at a reasonable cost.

“We are committed to providing our customers with the best possible service now and in the future,” Miller said. “Broadband revenue streams are critical under the new FCC rulings.”

The Obama Administration has a goal of extending broadband Internet access to rural communities at a reasonable cost and eliminating the so-called “digital divide” with urban areas. On Oct. 27, the FCC voted to change distribution of the Universal Service Fund, collected each month from telephone subscribers, from helping to provide telephone service to rural communities to assuring broadband Internet access for rural America.

“The FCC’s plan will reduce support for rural independent telephone companies across Iowa, while at the same time mandating a basic benchmark rate that companies will need to charge their end users,” Nqvis said. “The base rate is $10 per month for service, which will increase over the next five years. The FCC is putting more of the financial burden for telecommunications services on the end user.”

Navis said customers may decide to use their cellular phone, rather than continuing to pay for landline broadband access. She said that strategy ignores the fact that cellular phone calls go to a tower, which is linked to a central office with a landline network of fiber-optic cable.

“Without the central office and the fiber-optic landline cable, there wouldn’t be cellular phone service,” Navis said. “It doesn’t travel from cell tower to cell tower. There are costs associated with maintaining and upgrading landline networks so cell phone service is possible.”

While broadband access is needed to attract and retain business, Navis said farmers are looking for the same level of service to download daily market price information as well as remote monitoring of heart pacemakers and other telemedical applications.

“Rural families want to be connected with the world,” she said. “They want to be able to use services like Netflix because many areas are not served by traditional cable TV providers.

“We’re working with the Iowa Economic Development Authority to make sure that they are able to provide quality of life information for businesses considering locating in rural Iowa communities. Rural families also have an impact on urban businesses by providing a portion of their labor pool.”

Navis said the FCC change in the way revenue from the Universal Service Fund is distributed has created regulatory uncertainty for rural telephone companies, many of which are cooperatives dating back over 100 years.

“With that funding uncertainty, I think we’re really at a critical crossroads as it relates to the future of our telecommunications in rural Iowa,” she said. “We’re also asking the Iowa Legislature for property tax relief.

“The independent rural telephone companies are not taxed at the commercial property tax level. We are centrally assessed and taxed between 40 percent and 60 percent higher than commercial property.

“That tax system was put in place to allow for other other companies to enter the marketplace when our companies were basically monopolies. Now our competitors have a competitive advantage and the role has been reversed.”

Navis said there’s a telephone company in northwest Iowa where $8 of a $20 monthly bill for service is earmarked for property taxes.

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