Wired for Success
Broadband co-op helping southern Virginia
attract new information technology jobs
By Dan Campbell, Editor
s David Hudgins looked at the 22 other faces
gathered around the conference table,
someone said: “Anyone who has a better idea,
put it on the table.” The response was dead
silence.
None of the federal, state and local government
representatives or economic development officers who had
gathered that day seven years ago in Chatham, Va., could
think of anything more important than building a broadband
network to bring new jobs to southern Virginia. New jobs
were desperately needed to help offset a wave of layoffs that
had swept over the largely rural region of Virginia along the
North Carolina border (often referred to as Southside
Virginia).
Any doubt that the region was being battered by the
economic tsunami of globalization had been laid to rest
during the three months before the meeting, says Hudgins,
director of economic development for Old Dominion
Electric Cooperative (ODEC). A rash of textile and furniture
manufacturing plant closures had thrown at least 10,000
southern Virginians out on the street. And the region’s other
mainstay industries — tobacco and coal — were following
textiles and furniture manufacturing down the slippery slope.
“The whole underpinning of the natural resources-based
economy of Southern Virginia was collapsing,” says Hudgins.
“Every one of those industries had been dramatically
impacted by government action, whether it was anti-tobacco
legislation or trade agreements that hastened the loss of our
textile and furniture industries. These were the pillars of our
economy; without them, our whole way of life in southern
Virginia was changing.”
Building a backbone
The conclusion reached that day was that the lost
industries were not coming back. The challenge, then, was to
speed the evolution of the region from a resource-based
economy to a knowledge-based economy.
“The question was: how could we help Southside Virginia
become part of the new economy?” says Tad Deriso, now the
general manager of the Mid-Atlantic Broadband Cooperative
but at the time a consultant to ODEC. “We needed to show
that we were open and ready for new, technologically
advanced business.”
To attract these new industries, it was agreed that the
region must have access to fiber-optic broadband service
(although at the time, the talk was of “high-speed
connectivity,” rather than “broadband,” Hudgins recalls).
The Regional Backbone Initiative for Southside Virginia
was launched as a marketing effort to “re-brand” southern
Virginia to the business community.
But as is often the case in rural America, the big telecoms
weren’t interested in the high overhead cost and relatively
small profits that would be generated from building a
broadband network to serve a low-density rural region. They
were not of a mind to “build it and see if they would come.”
So Old Dominion Electric Cooperative, a generating and
transmission co-op headquartered in Glen Allen, Va., took
the lead role in the effort, first pursuing it as a for-profit
subsidiary of the co-op. “But then the telecom market fell
apart,” says Hudgins. So the effort shifted to Richmond and a
proposal to create a Rural Broadband Authority. But that
drew protest from the telecom industry, and the effort failed
in the state’s General Assembly.
It was then that Hudgins started thinking co-op, and he
soon got the support of ODEC’s CEO Jack Reasor and the senior management team to pursue creation of a broadband
cooperative. “It seemed that a bottom-up, grassroots co-op
would be the only way to cut across the rivalries of working
with all of these local political jurisdictions: 20 counties, four
cities and two towns,” he says.
ODEC gave Hudgins approval to have its attorneys start
working up the legal papers needed to set up an independent
broadband co-op. In November 2003, the Mid-Atlantic
Broadband Cooperative (MBC) was born, with offices in
Danville and Richmond. Hudgins now serves as vice
chairman.
“ODEC got the various partners involved and convinced
them of the feasibility and necessity for it,” says Deriso.
“They said ‘you must put aside your petty political
differences and work together in this co-op if you want to get
it done.’ They got everyone looking at the big picture,
realizing that now was the time to get it built. Otherwise, we
would all still be squabbling for the next 10 years and would
never be able to dig ourselves out of this economic hole.”
Co-op builds 700-mile network
The goal for the new co-op was to build 700 miles of
broadband cable through southern Virginia, providing service
to businesses that need a large amount of bandwidth and
which create a lot of jobs. “With Tad Deriso’s guidance and
commitment, we installed a 144-fiber, world-class fiber-optic
cable,” says Hudgins. “The core is OC-192 capable, with
redundancy and self-healing rings and with all Nortel carriergrade
electronics.”
As a broadband wholesaler, MBC’s membership is
primarily made up of telecom and Internet service providers
and phone co-ops. These members, in turn, serve the retail
broadband business market.
“The users are the type of companies that often hire hundreds of people and are willing to spend $800 to $1,000
per month for service,” Hudgins says. The network was not
designed for residential or very small businesses.
“As a co-op, our telecom members will share in our
success in the form of capital credits,” Deriso says. But the
concept of a co-op drew funny looks at first from some of the
larger businesses approached about becoming members.
“New York attorneys would say, ‘what the heck is a co-op?’
Deriso recalls. “So we talked about becoming a member and
how you paid a one-time, $500 membership fee [for a Class A
membership; there are four other classes of membership
requiring higher fees] and about capital credits. ‘What’s the
catch?’ they asked. We told them there was no catch, and
explained how a co-op has a different mindset than a forprofit
company — how we’re not trying to make millions of
dollars for stockholders, but rather to serve our members,
create jobs and boost the region’s economy.”
Today, MBC has more than 30 private-sector telecom
providers as members and has been adding an average of two
members per month since the network went into operation
last October. These members range from large, international
businesses, such as Hibernia Atlantic (a Dublin, Ireland-based
firm that provides European and U.S. customers with direct,
trans-Atlantic connectivity and support services) to relatively
small, local Internet service providers.
Financing the co-op
Raising the money to launch the network proved
challenging, although ultimately MBC got the spark it
needed via a $6 million grant from the U.S. Department of
Commerce’s Economic Development Administration (EDA).
Hudgins felt he was getting nowhere at first with EDA, but
one of its directors eventually handed him three or four pages
of questions about the project, telling Hudgins to “go do
your homework, then come back and see me.”
Hudgins soon answered every question, describing both
the need and the practicality of the proposed broadband coop.
That was the turning point, and EDA awarded the co-op
the $6 million grant, which was soon matched by the Virginia
Tobacco Commission (VTC). The Commission, which
awards funds received from tobacco litigation for economic
stimulus projects, eventually invested $34 million in the coop.
Hudgins says leadership came from State Senator and
VTC Chairman Charles Hawkins and State Delegate Clark
Hogan, chairman of the VTC technology committee.
The network was built on time and under budget, using a
contractor (the co-op itself operates with only three
employees). Hudgins says the co-op is on track to begin
breaking even in the spring of 2008, and is expanding the
network with new laterals. “It’s a mile here, three miles there
– like a spider web that just keeps growing incrementally,”
says Hudgins.
Long-haul cable routes are also being built, connecting
southern Virginia to Atlanta, D.C. and the Hampton
Roads/Norfolk area. “Those aren’t rural markets. But from an economic development perspective, it allows us to
provision circuits from major research and development hubs
and connect them with Southside Virginia,” says Hudgins.
“Our customers can now open an office in Southside
Virginia — with its lower taxes, affordable housing and a
motivated workforce — and still connect to a broadband
network as good or better as they would get in metro-D.C.
or most other metro areas, and using Infiniria” says Deriso.
New businesses opening
There are signs that the strategy is working. In Russell
County, two new data centers have opened, representing
investment in excess of $23 million and 300 jobs. Northrop
Grumman Corp. is building a backup data center in the
Russell County community of Lebanon, a $30 million project
that will create about 433 jobs. “Overall, that’s a combined
investment of more than $50 million and more than 700 jobs
created,” notes Hudgins.
Larry Carr, executive director with Cumberland Plateau
Co., a nonprofit dedicated to business and economic
development in southwest Virginia, says broadband
availability was essential to attracting Northrop Grumman
and CGI, a software engineering firm with 375 jobs. “There
would have been no way to attract businesses like that
without broadband,” he says.
Lebanon has traditionally been dependent on the coal
industry and manufacturing jobs associated with coal. And
while the coal industry has made something of a comeback
there in recent years, it still creates far fewer jobs than in the
past. Carr says five Fortune 500 companies will now have
facilities in the town, and the new, Southwest Technological
Development Center is also being established in a
refurbished strip mall, where it will be used by several higher
education institutions to help train software engineers.
The furniture industry has even bounced back a bit, with a
new 2-million-square-foot Ikea furniture manufacturing plant
being built in Danville, the first such plant built in the
United States for the giant Swedish furniture maker/retailer.
In South Boston, Va., Lindstrand Industries has opened a
plant that makes helium dirigibles and military surveillance
equipment under contract to the Department of Defense.
Before the development of a broadband backbone in
southern Virginia, “we weren’t even getting a second look
from business,” says Neal Noyes, an EDA director who not
only helped secure the initial grant for MBC, but also helped
direct a previous $1.5 million grant to develop broadband in
southwest Virginia and who has supported many other
investments for industrial parks and utilities in the region.
Promoting distance learning
The new broadband backbone also links to educational
institutions, making distance learning more readily available
to support both higher education endeavors and the needs of
industry. Even doctoral and masters degrees can now be
pursued via distance learning without leaving southern Virginia, Noyes says.
“There is nothing more important than workforce
initiatives that build the skills and knowledge workers need to
compete on a level field with metro areas,” he says. Noyes
credits Virginia Tech for providing research on the
importance of broadband for economic diversification of the
region, and for technical guidance in how to get it done.
“Connectivity is an essential part of the long-term
strategy for the economic revitalization of southern Virginia,”
says Noyes, a member of the Virginia Tobacco Commission.
The new jobs coming to the region “would not have been
possible absent very-high capacity, redundant broadband,” he
says, citing the example of Holston Medical Group, which
performs record management for hospitals and clinics, and is
building a facility in Duffield in Scott County.
While the network was not built to serve the residential
market, some large new residential developments are tapping
into it. Just outside South Boston, the first 18 units of a
planned, 100-unit, “smart-wired” town home development
have been built by general contractor John Cannon. Each
home has state-of-the-art broadband service that will
especially appeal to anyone who wants to work out of a home
office, Cannon says.
With gasoline prices soaring and the roads in many major
cities facing rush-hour gridlock, Cannon believes the “home
sourcing” movement is going to grow rapidly in the years
ahead. For example, he points to a major U.S. airline that
now allows all of its reservation clerks to work out of their
homes.
Cannon worked with MBC and his local Internet service
provider, Gamewood in Danville, to bring high-speed
connectivity to his Edgewood Town Homes development.
The work paid off, and each of his town homes boasts CAT-
5E telephone cable (going in and out), as well as RG-6
coaxial cable to each outlet, all of which are connected to a
smart-wire panel, and from there to the MBC fiber-optic
cable.
The monthly homeowner’s association dues include 1
megabit of service, which Cannon says is more than enough
for most people. But for an extra fee they can increase their
capacity as much as they want.
“MBC is the type of partner rural Virginia needs to
compete in the 21st century.” Cannon says.
Fast train to Clarksville
Hopes were also high as of this writing (in late June) that
Clarksville, Va., will be selected this summer for a $600
million data center to be operated by Electronic Data
Systems (EDS), of Plano, Texas, which provides data services
to the federal government. The facility would create 125 jobs in the next two years.
“The EDS guys from Northern Virginia didn’t even know
where Clarksville was, but when they saw the plant site, they
loved it,” Hudgins says. However, EDS said it had to have a
fiber-optic connection, and made plans for a formal site
inspection two months later.
So the race was on to get it connected. One major telecom
firm was contacted, but it required a two-year service
contract and wanted money up front to extend fiber into the
Clarksville facility, Hudgins recalls. “So the contractor came
to us, and 37 days later we had a mile and half of fiber built
from our closest access point to the plant,” Hudgins says.
“That included getting railroad crossing permits, which alone
can normally take six months. We got them 10 megabits of
Ethernet access in 37 days. We blew their socks off!”
The broadband connection is just one of many reasons
Clarksville is being considered by EDS, Hudgins stresses.
The Commonwealth of Virginia, Virginia Tobacco
Commission, Mecklenburg County and the Town of
Clarksville have gone all out to offer a plethora of incentives,
and Mecklenburg Electric Co-op, with the cooperation of
Dominion Virginia Power, will provide a direct feed from a
power station. This is needed so that in the event of a
catastrophic, total power grid failure, the EDS facility is
guaranteed to have power.
Concept spreading
The broadband concept is spreading to Maryland, where
another broadband co-op is being formed. MBC was recently
contacted by a group in southern Ohio interested in forming
a broadband co-op.
No surprise then that Deriso says he is more convinced
than ever that the co-op business model is ideal for bringing
broadband to rural America. “At the end of the day, the coop
model fit us best because of the co-op principles of local
ownership and having concern for your community. It is all
about bringing a metro pricing structure to rural areas to
level the playing field between metro and rural.”
“I don’t see any other way for rural America to survive in a
global economy,” adds Hudgins.
Looking back over the seven years of work to make the
broadband co-op a reality, Deriso says he is glad he jumped
when offered the chance to manage the co-op. “To take an
idea from the concept stage to a business plan, and then get it
built and to make it work – and to be held accountable if it
doesn’t work – that’s fun,” Deriso says, crediting Hudgins as
the “guy who made it all happen.”
The biggest frustration has been “dealing with the
politics – local, state and federal,” Hudgins says. And there
have been many headaches over who gets to claim credit for
what. “As they say, failure is an orphan, but success has many
mothers.”
His experiences working to make southern Virginia more
economically viable have also brought home to Hudgins the
need for a clearer national broadband policy and strategy, and
a commitment to invest more in it.
“Korea is the most wired country in the world. We rank
18th in the world for broadband penetration, and we are
dropping another spot or two every year,” Hudgins says with
a note of chagrin in his voice.
“To make this project happen took a combined effort at
every level of government, the private sector and educational
institutions. Fiber is the way to get your economy moving
forward. But too many old-style politicians still just don’t get
that globalization is here and it is very real. There is no going
back to the good old days of doing business with the same
tools and strategies and hope it all works out. Failure is
simply not an option.”
