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Serving Northern St. Louis County, Minnesota

Broadband study shows area projects financially feasible

Pike Bay, Daisy Bay, and Eagles Nest areas might be first focus of any project

Jodi Summit
Posted 1/27/21

REGIONAL- A roadmap to provide broadband level internet service to the Tower area was recently released by the Laurentian, Tower, and East Range (LTE) Broadband Group. The study’s conclusions …

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Broadband study shows area projects financially feasible

Pike Bay, Daisy Bay, and Eagles Nest areas might be first focus of any project

Posted

REGIONAL- A roadmap to provide broadband level internet service to the Tower area was recently released by the Laurentian, Tower, and East Range (LTE) Broadband Group. The study’s conclusions show bringing broadband to the Tower area may be financially feasible for the priority areas of Pike Bay, Daisy Bay, and Eagles Nest, and expansion to a wider rural area encompassing the Tower School district boundaries could be possible, although additional financing and contributions from stakeholders might be required.
The study was funded with contributions by governmental units, local businesses, and a matching grant from the Blandin Foundation. The LTE Broadband Group, which has been working with funding and leadership from the Blandin Foundation and Iron Range Resources, and stakeholders from the East Range, Tower-Soudan, and Eveleth-Gilbert-Virginia areas commissioned the study last year. The group hired NEO Connect to conduct the study, which cost about $120,000.
John Bassing, who along with his wife JoAnn, has been an active participant in the broadband planning group, said that while the results of the study are promising, there is a possible complication. A company called LTD Broadband that has previously specialized in providing fixed wireless internet service, not fiber-optic-based services, received $312 million in funding from the Federal Communications Commission for projects in the state, the largest amount awarded in Minnesota.
“That Rural Digital Opportunity Fund (RDOF) grant throws a wrench in the monkey-works,” said Bassing. “The company bid on providing service to census blocks, including those in our area.” LTD’s experience in Minnesota has been providing fixed wireless service in flat farmland areas, said Bassing. The company’s expertise to provide fiber optic service has been questioned, as well as whether it can provide the gigabyte level service that is the goal in Minnesota.
The Minnesota Rural Broadband Coalition sent a letter to state officials asking them to allow the state’s Border to Border program to make grants to projects in areas including in LTD’s proposed areas, but this may run counter to the federal grant program guidelines.
The Blandin Foundation blog on broadband issues reported in mid-December on concerns from the Minnesota Rural Broadband Coalition:
“The concern is multifaceted. Their primary concern with the federal funding is that it won’t happen. From the Task Force perspective, the greater concern is that legislators will assume that RDOF will serve the proposed areas and that therefore no further state funding is needed. An unintended consequence is that the promised funding might prevent other providers from going into those areas, companies that would have provided folks with speeds that would meet the Minnesota broadband state goals. They are concerned that unlike what happens with Minnesota’s state program, the FCC will not follow through with oversight on provider performance.”
“Our next step is to attract a broadband provider,” said Bassing. “But DEED [Minnesota Department of Employment and Economic Development] is worried about the legal implications of giving out grants in the RDOF area.” DEED oversees the state’s Border to Border grant program, which is instrumental in funding rural broadband projects.
At this point, Bassing said, the project is on hold until some of these questions are resolved.
Bassing said LTD still has some hurdles to cross, with their final application to the federal government due at the end of this month.
“They have to show they can do the job,” said Bassing.
Bassing said the local broadband group is not interested in fixed wireless internet, because the speeds available are much lower than what fiberoptic service provides.
“We want a quality system,” Bassing said.
Whether or not the state’s Border to Border program will be able to make grants to project in our area is uncertain at this time, Bassing said.

NEO study results for the Tower area
Northeast Service Coop has already installed more than 865 miles of fiber optic cable in the area, connecting to many township and governmental buildings and schools. This was a “middle mile” project and did not include connections to private homes. But this fiber backbone can be leased by other providers who would provide home service and would greatly reduce the costs.
The cost estimates for providing service to the priority areas of Pike Bay, Daisy Bay, and most of Eagles Nest Township range from $16.1 to $25.2 million, depending on the amount of rock encountered, for an average cost of $20.6 million. Utilizing NESC fiber would save about $6 million. Assuming half the project could be financed with a grant, that brings total costs to around $7.2 million. The study assumes that 40 percent of area households would subscribe (1,153 after two years), with costs ranging from $60 to $125 per month, depending on connection speed. The study concludes that this project would be feasible for a provider and that it could be financed (with cash flow covering debt expenses).
The cost estimates for providing service to the entire Tower-Soudan School attendance area (including the priority area) is much higher, at $53.9 million, though the study still looks at funding half that amount through grants. The study estimates a higher participation rate in these areas, up to 50-percent of households. The study did not calculate the amount that would be saved by using the existing NESC fiber. It noted that additional stakeholder contributions to cover projected losses in the first year of implementation, use of additional financing tools, and building to served areas as part of this project would make this entire project financially feasible.
The study looked at the feasibility of bringing broadband to the three distinct regions, assessed currently available broadband options, looked at already existing infrastructure, potential number of customers, possible project costs, and surveyed area residents on their interest in broadband and pricing options. The study also looked at how the pandemic has impacted people’s ability to work from home and attend school remotely.
The study identified areas that are already served, partially served, or underserved. It designated potential priority areas, where there is a higher density of homes that do not currently have high-speed internet available. The study also mapped out areas that would be eligible for grant funding, which often provides about half the cost of extending broadband to rural areas.

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