Broadband communication has become the lynchpin through which schools, hospitals, government agencies, and community service institutions reap the benefits of the digital age. Schools leverage technology to offer distance learning opportunities while improving their administrative efficiency. Hospital emergency rooms and critical care units save lives through information exchange and collaboration with remote specialists. Law enforcement agencies save taxpayer dollars on criminal proceedings by leveraging video connections between the courts and corrections facilities. And that’s just the tip of the iceberg.
With thinly populated communities separated by miles of territory, rural communities arguably have the most to gain by connecting their citizenry through high-speed digital connections. Unfortunately, the cost of service delivery renders the investment unattractive for traditional communication carriers. It takes an enterprising and committed group of community activists to find a way to get the job done.
In the late 1990s, the Morrow Country School District (MCSD) stepped up to the plate by applying for grant funding from the Universal Service Administrative Company (USAC). USAC administers funds set aside by the FCC to make vital communications services available throughout the country. Universal service includes “accessible, affordable, and pervasive high-speed connectivity.” However, grant funds must be used to pay for services; they cannot be used to build the infrastructure that provides the services. MCSD needed a partner.
MCSD gathered potential service providers at the Morrow County Courthouse to share a vision for digital connectivity between their schools. They also disclosed the funding stream available through USAC and asked the participants to submit bids.
No one responded.
Fortunately, another collective of enterprising and committed activists at the Port of Morrow, Morrow County, and the Morrow Development Corporation (MDC) stood ready to help realize MCSD’s vision.
Founded in 1994, MDC administered a small business lending program through which federal funds provided support for rural development. This program filled the gap between traditional sources of financing and the borrowers’ needs. It enabled new businesses to get their starts, existing businesses to expand, and workers to secure gainful employment. While telecommunications fell outside their area of expertise, MDC’s Board saw that a critical community need would not be met without their intervention. They also knew that they had the means to build a viable economic case and hire third party experts to engineer, install, and maintain a fiber optic network. MDC submitted a bid, and MCSD accepted it.
In the first year of operations, MDC financed the build-out of a small fiber optic network using fees for service financed by USAC funding. MDC’s costs came in within budget, and the school district was thrilled with the service. Both parties agreed to expand the network in year two. With continued success came the opportunity to extend operations to the Hermiston School District, other neighboring school systems, and other public service enterprises.
MDC and its community partners opted to create a non-profit telecommunications carrier to own and operate its ever-expanding digital network. Dubbed the Inland Development Corporation (IDC), the company cultivated a thriving business with school districts, hospitals, libraries, county courthouses, and other government agencies across eight Eastern Oregon counties. They also took on a few for-profit clients (e.g., Columbia Basin) but limited growth in that area to avoid putting their tax-exempt status at risk.
For-profit opportunity knocked on IDC’s door faster than they could accommodate it. In 2004, IDC formed Windwave as a wholly-owned subsidiary to accommodate growth in the commercial side of their business. Like its parent company, Windwave focused on under-served, geographically challenging environments. Moreover, one hundred percent of its after-tax profits were reinvested in the communities it serves.
From the beginning, MDC, IDC, and Windwave made intelligent economic decisions regarding the build-out of their networks. They priced their services to ensure adequate recovery of costs invested in designing, building, and maintaining their fiber optic network. They’ve leased excess capacity to other carriers to recover their costs and purchased outside bandwidth when it made sense to do so. And while they’ve face competition when renewing annual service contracts, their pricing, quality of service, and commitment to the community have always held them in good stead.
While public schools provided the initial toe-hold for fiber optics, Morrow County commerce has benefitted from the area’s broadband revolution. As a case in point, Amazon located one of its data centers in North Morrow County, yielding 1,200 well-paying jobs and boosting revenue opportunities for surrounding industries. Morrow County could not have attracted this business without the digital backbone to support it. Now that’s a “full circle moment” for the Morrow Development Corporation!
Meet the Author
Partner, Communications and Utilities
Ryan Johnson, CPA
Aldrich CPAs + Advisors LLP
Ryan Johnson is an expert on the taxation of communications and power companies. He specializes in both business and individual taxation and has significant experience consulting on the structure of entities and transactions, including mergers and acquisitions. Ryan is passionate about keeping his telecommunications and utility clients informed about taxation matters relevant to their industries…
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