SDN Blog

Rules will determine real value of rural-development fund

Posted on Wednesday, December 10, 2014 in Broadband Internet

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Rural Opportunity Investment Conference

A multibillion-dollar national fund will provide a new financing option for expanding broadband services in rural America.

Creation of the Rural Infrastructure Fund is an encouraging development for the regional telecommunications industry and under-served areas of the consumer market.

The industry won’t be able to fully assess the potential of the fund until details such as lending rules become available, however.

“Anytime there is additional access to capital, that’s a good thing,” says Greg Dean, director of industry relations for the South Dakota Telecommunications Association.

“A lot of it just comes down to the fact that anytime you do broadband expansion projects, they are expensive. In order to have the best and most up-to-date services, those companies that provide access to broadband across South Dakota need access to capital,” he says.

But the possible availability of additional capital for telecommunications projects is just part of the business equation. Companies also need regulatory certainty, especially from the federal government, Dean says.

Regulatory certainty helps companies more accurately project revenues and expenses when planning and exploring possible expansion projects.

“Once we get some additional clarity, that’s when the fund will become a real bonus for telecommunications businesses,” Dean says. “I can see them at least investigating this fund and the opportunities it presents in terms of accessing capital.”

Details are nearly always important. And in the case of the new fund, some details still are being worked out.

The creation of the fund was announced in late July at the Rural Opportunity Investment Conference held in Washington, D.C.

Mark Shlanta, CEO of SDN Communications, was among the experts on rural development who spoke at the conference. He served on a panel that discussed opportunities for improving the telecommunications infrastructure in rural America.

Broadband infrastructure is not the only prospective beneficiary of the new fund, which was created by the U.S. Department of Agriculture with the cooperation of businesses.

In addition to broadband services, other targeted beneficiaries of the fund include community facilities such as health care and educational structures, water and wastewater systems, energy projects and regional food systems.

CoBank, a national cooperative that is part of the Farm Credit System, committed the initial $10 billion to get the fund started. Capitol Peak Asset Management is managing the fund. In addition to helping identify prospective projects to finance, Capitol Peak is recruiting additional investors.

“The new fund will allow a wide variety of new participants, including pension funds, endowments, foundations and other institutional investors that have not traditionally had access to these markets to invest in rural development,” according to a fund summary issued by the White House.

Broadband accessibility is no longer a luxury. It has become increasingly important for businesses, institutions and residents across America.

As Dean also points out, timing will be a critical factor in determining the usefulness of the fund for companies that provide broadband services in rural America. The availability of financing help will have to coincide with businesses’ construction plans and their need for rule-friendly loans.

The SDTA represents a major segment of South Dakota’s telecommunications industry. Its membership is comprised of about 20 cooperative, small commercial, municipal and tribal telecommunications companies. They provide broadband, telephone and video services to approximately three-quarters of South Dakota’s land mass.

Most of the association’s 20 members also are co-owners of Sioux Falls-based SDN Communications, which is an associate member of the organization.

SDN, the host of this blog, is a premier regional provider of broadband connectivity and related services for businesses and institutions. SDN and its members companies operate a 30,000-mile fiber optic footprint that connects about 300 communities in South Dakota and other states in region.