Memorandum. To: Federal Communications Commission (FCC) Staff. From: Fall River Rural Electric Cooperative, Inc. Date: 3/6/2014

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Memorandum To: Federal Communications Commission (FCC) Staff From: Fall River Rural Electric Cooperative, Inc. Date: 3/6/2014 Re: Expression of Interest Rural Trials Docket No.

1 Memorandum To: Federal Communications Commission (FCC) Staff From: Fall River Rural Electric Cooperative, Inc. Date: 3/6/2014 Re: Expression of Interest Rural Trials Docket No Background Fall River Electric Rural Cooperative is a customer-owned electric cooperative serving nearly 16,000 residential, commercial, industrial, and agricultural connections in eastern Idaho, western Wyoming and southwest Montana. The Cooperative was formed in 1938, in an effort to bring electricity to rural portions of Fremont County, Idaho. These areas were not served by Utah Power & Light, an investor owned utility (IOU) who served area cities, but had made the decision to not extend power lines into rural areas because of the cost and the low number of homes, farms, and ranches that would be served. The pioneering farmers and ranchers of the late 1930s and early 40s, who formed Fall River Electric, were visionaries; since then, Fall River Electric has continuously operated for 75 years and now owns 2,372 miles of power line, 28 substations, and four hydroelectric generating facilities. Fall River Electric Cooperative is part of nearly 1,000 electric cooperatives nationwide that provide electric service to an estimated 42 million people, in 47 states. As an industry, electric cooperatives own and maintain 42% of the nation s power distribution lines, and while investorowned electric utilities average 34 customers per mile of power line, Fall River Electric serves an average of 7.21 members (customers) per mile. Rural America, the country that Fall River Electric and other cooperatives serve, is now in desperate need of reliable, high-speed broadband service. Just as the electric pioneers of the last century brought electricity to the countryside, today Fall River Electric desires to pioneer broadband service in the 21 st century. Geographic Territory & Anchor Institutions Our full deployment area includes portions of Fremont, Jefferson, Madison, and Teton counties in Idaho, part of Gallatin County in Montana, and a small portion of Teton County, Wyoming. In these areas, we estimate there are approximately 14,657 homes and 147 commercial businesses. The proposed service area also includes seven rural communities. Cooperative member density is just 8.3 per mile. Based on early calculations, this area also includes 43 critical community facilities and public safety entities comprised of 11 schools, 4 libraries, 6 public safety entities, 13 government facilities and 9 medical/healthcare providers, including one hospital North 3400 East, Ashton, ID fax

2 The Fall River Electric service area s economy is based on agriculture specifically potatoes both consumer quality and seed potatoes, along with barley, wheat and hay. Tourism is another vital component of the area economy. With our area s close proximity to Yellowstone National Park, Grand Teton National Park, and Jackson Hole, Wyoming, our area attracts millions of visitors. The west entrance to YNP at West Yellowstone, MT sees just over 500,000 vehicles per year entering the Park with visitors from around the world who are equipped with smartphones and a desire for fast connections to find lodging, food, and visitor services; supplying these needs encompasses a vast number of our commercial businesses. Additionally, the year-round recreational opportunities our service area offers are attracting many more telecommuting individuals and businesses. An excellent example is City Pass, a business that offers up to 50% off admissions to must-see attractions in major metropolitan cities throughout the United States (see Broadband service is vital to the relocation and growth of these types of businesses. Fall River Electric s broadband intends to provide service to an area encompassing portions of six counties in three states, totaling approximately 4,423 square miles. We intend to work closely with Pulse Broadband to determine the eligibility of the 28 census tracts within our proposed service area. FREMONT COUNTY, IDAHO 1,895 square miles of proposed service area 11 Census Tracts & Block Groups TETON COUNTY, IDAHO & WYOMING 450 square miles of proposed service area 5 Census Tracts & Block Groups MADISON COUNTY, IDAHO 473 square miles of proposed service area 8 Census Tracts & Block Groups JEFFERSON COUNTY, IDAHO a portion of 1,105 square miles of proposed service area 1 Census Tract GALLATIN COUNTY, MONTANA a portion of 2,632 square miles of proposed service area 3 Census Tracts 2

3 Proposed Technology & Scalability Recognizing the tremendous need and growing demand for broadband service in a remote rural area such as ours, Fall River Electric has contacted Pulse Broadband to help us design a fiber-tothe-premises (FTTx) product. We will be evaluating the major passive electronic technologies during the next month with our engineering partner, Pulse Broadband. At the appropriate time, they will assist us in engineering the network. The system will be designed and engineered for true Broadband delivery of services at any location. The system will be 100% scalable and engineered for the potential for a gigabit of service to every home or business in our proposed footprint. Based on our financial model, we intend to offer the following: Residential High-Speed Internet Packages Basic: Up to 10 Mbps downstream and 10 Mbps upstream $39.95/month Advanced: Up to 20 Mbps downstream and 10 Mbps upstream $49.95/month Ultra: Up to 100 Mbps downstream and 50 Mbps upstream $89.95/month Business High-Speed Internet AND Phone Packages Basic: Up to 50 Mbps downstream and 25 Mbps upstream $119.95/month Unlimited Local and Long Distance Telephone within the U.S., Canada, Dominican Republic, Bahamas, U.S. Virgin Islands, Puerto Rico and Guam. International calling plans and other features are also available. Residential: Includes three-way calling, caller ID (number), call ID blocking, call return, call forwarding, call waiting and voice mail. $39.95/month Business: Includes three-way calling, caller ID (name and number), call forwarding, hunting and voice mail. $49.95/month Video services are also planned as part of this financial forecast, with package rates available such as video & data for $111.95/month, video & telephone at $99.95/month, data & telephone for just $77.95/month, and finally the triple play, which offers all three services for $139.95/month. Existing Providers The following list of existing providers offer service in some but not all areas that Fall River Electric serves: Blackfoot Telecommunications Group dba Fremont Communications (DSL) Century Link (DSL) Silver Star Communications (DSL & Wi-Fi) 3

4 Grizzly ISP (Wi-Fi) These providers offer either voice, data or video services but not all combined, and offer speeds ranging from a low of 1 Mbps, up to 12 Mbps. Rural areas of Fall River s service territory are mostly devoid of anything other than satellite and Mobile Wi-Fi (MiFi). Project Timeline Pending support of potential grants, Fall River Electric will secure a Competitive Local Exchange Carrier (CLEC) license and an Eligible Telecommunications Carrier (ETC) license from the Idaho Public Utilities Commission, and other certifications when our permanent CLEC is granted. Already, Fall River Electric has deployed roughly 81 miles of our fiber communications ring through 11 of our 28 substations, serving areas adjacent to both Island Park, ID, and West Yellowstone, MT. Fall River Electric s soft launch project of connecting our substations allows us to better gauge service requirements before full deployment to members. Full deployment may take up to three years or more, depending upon the level of support we receive from potential granting agencies. That said, when our permanent CLEC license is secured, we plan to add new customers at a planned, but much more aggressive pace. We also will investigate partnerships with other local/regional providers who may have interest in leasing dark fiber from Fall River in order to expand their geographic footprint. Total Project Investment Fall River Electric continues to refine its project requirements. Our FTTx capital expenditure requirements are, roughly, $52.6 million. Given the 14,657 homes and 147 businesses passed, we will need approximately $3,553 per passing to fully fund this project. That said, our financial model continues to be refined, and we will have solid, defensible numbers to present in our application. These numbers will be in the form of a one-time capital expenditure. We are not seeking an ongoing subsidy from the FCC. Fall River Electric will, of course, review FCC financial models to ensure our numbers are both reasonable and appropriate. In recent financial modeling, Fall River Electric assumed a 40% take rate for residential, and 25% take rate for commercial. This translates into approximately 6,000 customers. Applying standard price points for triple-play, projected net income goes positive in year five, at a fifty percent equity injection. Fall River Electric believes fifty percent equity funding is needed to protect company asset-to-equity ratios. That said, we will apply only for what is eligible and use what is required to be successful in providing up to a gigabit of service for rural eastern Idaho, western Wyoming, and southwest Montana. Total Estimated Project Cost: Ideal FCC Investment: Amount to be Financed: $52.6 million $26.3 million (one-time capital expenditure) $26.3 million 4

5 Leveraging Opportunities: Total Customers Served: Square Miles: FCC Rural Experiments (one-time capital investment only) 5,929 (estimated minimum) 4,423 square miles For More Information: Mr. Bryan Case Fall River Rural Electric Cooperative CEO/GM (208) (direct) 5

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