In March, Delta-Montrose Electric Association (DMEA) announced Phase I of its fiber-to-the-premises broadband business. Paonia, Orchard City and South Montrose were identified as the zones to be targeted first. Specific details about the exact locations these areas will include are not yet available.
Although DMEA has been making substantial progress on the new venture, much of it has been behind the scenes. DMEA is currently developing a website where members and potential broadband customers can track progress, see project timelines, and pre-sign up for service. The co-op will unveil the website at its annual meeting Thursday, June 16, at Montrose County Friendship Hall.
The co-op has also received several questions about how the new company will operate. "Recently, there has been some confusion about how DMEA's fiber broadband company will operate in relationship to the electric co-op. Namely, that DMEA members will subsidize the fiber broadband company through increased electric rates. This simply isn't true," stressed DMEA CEO Jasen Bronec.
DMEA's board of directors unanimously voted to establish a fiber broadband company. To minimize risk, the board chose to move forward in a phased-in approach in order to protect ratepayers and the financial integrity of the electric cooperative. Members will have the opportunity to pre-sign up for DMEA's broadband services when the zone they reside in is released. Before any construction work takes place in a zone, a specific number of members must pre-sign up and pay a commitment fee. This set number of members is called a take rate and it ensures that DMEA will not spend money to build a fiber network in areas where members do not want it and where it cannot be financially sustained.
"Basically, you'll only pay for DMEA's broadband services if you choose to sign up for them," said Bronec.
DMEA's fiber broadband company will operate as a for-profit business that is 100 percent owned by DMEA and its members. As DMEA builds out the fiber optic network, the construction costs are not included in the co-op's rate base. The rate base is defined as the value of DMEA's property, including poles, wires, substations, facilities, and even equipment, that the co-op is permitted to earn a rate of return. Since the construction costs to build out the fiber optic network are not included in the rate base, DMEA will not recoup those costs through electric rates.
Initially, the revenue earned by the new company will be used to operate the business and pay for the costs of the physical infrastructure through lease payments to DMEA. When profits eventually occur, as the parent company, DMEA will have a few options to consider. These profits could be used to help offset the costs of providing electric service and stabilize rates or they could be allocated back to the individual members of DMEA and refunded as capital credits.
"Our goal is to provide the fastest and most dependable high-speed Internet service on the market; all because our members asked us to. In our most recent member survey, they spoke loud and clear. Nearly 88 percent said high-speed Internet was absolutely necessary or important to quality of life. Additionally, 71 percent agreed with DMEA offering high-speed Internet services. These statistics, combined with years of public forums, substantial member input and solid research, gave the DMEA board an unmistakable direction: Our members wanted DMEA to provide reliable high-speed Internet. They listened, said Bronec.