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A look at how and why North Dakota became a leader in deployment of fiber optic Internet

by Carolyn Orr ~ June/July 2016 ~ Stateline Midwest »
A fiber optic connection is considered the “gold standard” for quality, high-speed Internet access, and in the Midwest, it’s in pretty short supply.
Except in North Dakota.
In the region’s most sparsely populated state, 60 percent of the households, including those on farms in far-flung areas, have fiber. (That compares to 24 percent in the Midwest, where most of the existing fiber networks serve urban areas.) In all, North Dakota ranks fifth in the nation in fiber access.
This is amazing enough, considering many of the obstacles typically cited as responsible for the dearth of high-speed technologies in rural parts of the Midwest — for example, the high costs of serving low-density areas.
But the story of North Dakota’s prominence in fiber access is also a testament to entrepreneurship in the nation’s heartland, and perhaps a model for the rest of the Midwest.
In 1993, US West (now named Quest) began selling off its unprofitable rural telephone lines, including 65 phone exchanges in North Dakota, to independent and cooperative telecommunications companies. As a result, 18 small, independent providers serve 96 percent of North Dakota’s population and have invested heavily in the effort to get fiber optic to every resident.
Carrington-based Dakota Central Telecommunications Cooperative provides one example of how North Dakota achieved this success. On many exchanges managed by the cooperative, the copper wire was reaching the end of its functional life at about the same time fiber optic cable was becoming more affordable.
According to state Rep. Craig Headland, a longtime director of DCTC, the cooperative saw a need in the community and made the commitment to borrow funds for fiber optic. As a result, it became one of the first operators in the nation to be 100 percent fiber-based. This kind of investment was repeated across the state by those 18 independent providers.
“As a state legislator, we are invested in our districts,” Headland says. “It’s where we live, so we are committed to their success. These independent and cooperative telecoms also are committed to their communities, so investing revenue back into the community to better it for the residents was the right thing to do.”
The state has also provided help along the way. With the passage in 2009 of SB 2040, property used to deploy telecommunications services was exempted from sales and use taxes. (The idea for this exemption came from a legislative study showing that business development lagged in areas of the state without Internet service.)
It was estimated that the exemption would cause a $3 million biennial drop in tax revenue, but the cost during the most recent budget cycle was only $1.7 million. And in the last two years, the state’s telecommunications providers have invested $115 million in infrastructure.
“DCTC would have moved to fiber optic without the exemption,” Headland says, “but [the law] has been a huge benefit in driving the speed and timing of [that] investment.”
This exemption is only in place through 2017, and it is fairly unique. Only six U.S. states, including Kansas and Minnesota in the Midwest, have some sort of tax exemption for telecommunications infrastructure.
In remote areas, the independent telecoms are the ones driving investment in high-speed Internet, says Dave Cruthers, a vice president at the North Dakota Association of Telecommunications Cooperatives.
“It took foresight or stupidity for these small private or cooperative telecoms to take out $50 million in loans,” he adds, “but they have paid off for the cooperative as well as the community. Every public official should be asking its utilities, ‘What are your plans for helping residents get broadband?’”

 

Articles written by Carolyn Orr, CSG Midwest staff liaison for the Midwestern Legislative Conference Agriculture & Natural Resources Committee.