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Regional Matters

July 15, 2021

Rural Spotlight: Bringing Broadband to Maryland’s Eastern Shore

Rural Spotlights

This is the first article in our new Rural Spotlight series, where we explore solutions to the economic challenges faced by rural communities in the Fifth District.

Introduction

Delivering the “last mile” of broadband service — from a central fiber-optic cable backbone directly to a home residence or business — is a notoriously costly challenge in rural areas. To deliver high-speed internet service, fiber-optic cable must be laid across long distances, sometimes across difficult terrain, to reach a small number of customers. Costs can vary substantially, but the U.S. Department of Transportation estimates $27,000 per mile. Many broadband internet service providers are simply unwilling to make the significant investment of delivering last mile broadband service in rural communities. Despite the challenge, some providers are gaining traction. Choptank Electric Cooperative on Maryland’s Eastern Shore is an example of how many electric cooperatives are providing broadband service in rural communities.

Electric Cooperatives and the Economic Benefits of Broadband

While providing broadband internet service is costly in rural areas, it can also bring significant economic benefits. A report from the U.S. Department of Agriculture estimates that the application of precision agriculture technologies from ubiquitous broadband infrastructure could yield between $18 and $23 billion in economic benefits annually. More broadly, improving access to broadband internet service and increasing the adoption of online tools and digital services in rural areas could add $140 billion in economic activity to rural businesses over a three-year period, according to a joint study by the U.S. Chamber of Commerce and Amazon. Access to broadband internet service also makes distance learning, telehealth services, and other valuable digital tools available to consumers. A study by Roberto Gallardo of Purdue University and Mark Rembert of Ohio State University estimates that lack of access to high-speed broadband service results in $22.5 billion in lost economic benefits to consumers every year.

How can rural areas realize these economic benefits? It takes public subsidies to entice the build-out of broadband infrastructure and providers willing to tackle the task. Many of America’s rural electric cooperatives are quickly expanding into broadband internet service by applying for federal and state subsidies and leveraging their existing capital, easements, and workers experienced with infrastructure projects. Electric cooperatives trace their heritage to the rural electrification effort in the 1930s, a problem with parallels to today’s broadband challenge. According to a study from the National Rural Electric Cooperative Association, in 2018, roughly 60 percent of Americans without access to broadband internet service resided in or adjacent to the service area of electric cooperatives, making electric cooperatives a natural place to look for solutions to the lack of internet service in many rural communities.

The Choptank Story

In 1938, Choptank Electric Cooperative on Maryland’s Eastern Shore was started by 184 rural residents to secure electric service. Since then, Choptank has grown to serve 54,150 electrical customers in nine counties. In Choptank’s service area, 49.5 percent of the population is working age (ages 25-64), compared with 53.1 percent of the population in Maryland (see Appendix). The share of the working age population that is working or actively looking for work (i.e., the labor force participation rate), is also lower in Choptank’s service area relative to Maryland as a whole — 77.7 percent versus 82.2 percent. Approximately 75.5 percent of Maryland households have a broadband internet subscription at home, such as cable, fiber optic, or DSL, but this figure is only 63.9 percent for households in Choptank’s service area. Looking strictly at the rural (or nonmetropolitan) counties that make up the service area, this figure drops to 57.8 percent (see charts below).

Note: The American Community Survey (ACS) defines ‘Broadband of any type’ as any Internet service provided through cellular data plan, satellite, or broadband such as cable, fiber optic, or DSL. Dial-up Internet is excluded from the definition of broadband but included under general internet access.

Note: According to the U.S. Department of Agriculture’s (USDA) 2013 Rural-Urban Continuum Codes (RUCC), nonmetro counties on the Eastern Shore are Caroline, Dorchester, Kent, and Talbot. Metro counties are Cecil, Queen Anne’s, Somerset, Wicomico, and Worcester. The Rural Maryland Council considers all counties on the Eastern Shore to be rural.

Sensing a need for broadband internet in their electrical service area, leaders at Choptank began examining the feasibility of creating a broadband subsidiary to build-out broadband infrastructure. Like other electrical utilities, Choptank has some advantages:

  • Vendor relationships, which increased the certainty of the costs associated with building out fiber-optic cable — work similar to building out electrical service.
  • Physical capital and labor, including 6,290 miles of power lines and 650 miles of middle-mile fiber-optic cable with 160 full-time employees to leverage.
  • Rights of way and easements already in hand for electric service, reducing a significant cost of broadband projects.
  • Financial resources from the ability to tap long-term borrowing with a 30-year time horizon to see a return on investment.

Choptank also pursued legislation at the 2020 Maryland General Assembly to effectively self-regulate electric rates. With support from Eastern Shore legislators, the bill passed, giving Choptank greater flexibility over the long-term revenue from ratepayers. After the legislation passed, Choptank created a broadband subsidiary, Choptank Fiber. Using the model of connecting one community at a time, Choptank Fiber’s plan is to use revenue from new subscribers to help fund the infrastructure build-out to the next community. A portion of federal coronavirus pandemic relief funds of over $300 million — allocated to Maryland for broadband deployment — helped move the project along, and on April 15, 2021, Choptank Fiber connected its first customer in Denton, Md.

Listen to an interview with Tim McGaha of Choptank Electric Cooperative:

Download MP3 (15 MB, 16:11)

A major challenge Choptank Fiber faces is meeting the high demand for broadband internet service throughout their service area. Additional funding at the local, state, and federal levels can help accelerate the build-out of an estimated 10-year project. But the fact remains that providing high-quality, high-speed broadband internet by laying fiber-optic cable can take a significant amount of time, as with any major infrastructure project. Other technologies, such as fixed wireless service, are more quickly deployed, but broadband internet service provided by fiber-optic cable is considered “future proof,” or able to handle the speeds required by new technologies.

Conclusion

There are many ways to deliver broadband infrastructure, even under difficult circumstances. Rural areas, like in parts of Maryland’s Eastern Shore, have the greatest distance to existing broadband infrastructure and the lowest number of potential customers per mile. Choptank’s efforts to deploy broadband internet infrastructure show the potential that electrical cooperatives have to leverage their assets and complete the job. A combination of will, funding, public policy, and existing assets are helping to move the project forward, providing high-speed “future-proof” broadband service to an area ready for a connected future.


Appendix

The following section includes demographic and economic data for Choptank’s service area, which covers the nine counties on Maryland’s Eastern Shore: Caroline, Cecil, Dorchester, Kent, Queen Anne’s, Somerset, Talbot, Wicomico, and Worcester.

Demographic and Education Statistics

GeographyTotal Population% of Population Age 25-64% Population (25-64) with High School Diploma or Higher% Population (25-64) with Bachelor's Degree or Higher
Service Area457,53749.5%89.8%27.7%
Maryland6,054,95453.1%91.3%41.7%
Fifth District32,774,19852.2%90.2%36.1%

Sources: U.S. Census Bureau Vintage 2020 County Population Totals (2019 estimate), American Community Survey 2019 5-Year Estimates; author’s calculations.

Employment Statistics

GeographyEmployment/Population Ratio (25-64)Labor Force Participation Rate (25-64)Unemployment Rate, December 2019Unemployment Rate, December 2020
Service Area74.0%77.7%4.2%6.8%
Maryland78.3%82.2%3.0%6.7%
Fifth District74.0%78.3%2.9%6.2%

Sources: U.S. Census Bureau, American Community Survey 2019 5-Year Estimates; U.S. Bureau of Labor Statistics Local Area Unemployment Statistics; author’s calculations.
Note: December unemployment rates are not seasonally adjusted.

Note: Due to data suppression, percentages may not add up to 100 percent.

Interested in reading more articles like this one? Check out Our Regional Focus, where you can find additional research and analysis on rural communities, broadband access, and other pressing economic issues that affect our communities.

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