The Free Press, Mankato, MN

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August 18, 2010

HickoryTech gets grant to build cable

By Dan Linehan

MANKATO — HickoryTech was awarded a $16.8 million stimulus grant Wednesday through a subsidiary, Enventis, to build 428 miles of fiber-optic cable in Greater Minnesota.

The infrastructure will be the backbone of two new high-speed Internet lines that will greatly increase the information that can be delivered to government and businesses in the cities and rural areas along the routes.

One line will run between Brainerd to Fargo along Highway 10 and the other goes from St. Paul to Duluth. They are expected to be finished in three years.

The federal government awarded 94 projects (including four in Minnesota) worth a total of $1.8 billion to “create jobs across the country and expand opportunities for millions of Americans and American companies,” according to a White House press release issued Wednesday.

HickoryTech’s grant award will be combined with more than $7.2 million in contributions from the company for a $24 million total cost. The company was only required to commit 20 percent of the project cost, but got a boost in the application process by offering 30 percent instead, said Mark Weber, a senior network engineer.

The grant was technically awarded to HickoryTech’s “Enventis” brand, a company it purchased in December of 2005.

To compare the grant to a typical year in construction for the company, HickoryTech expects to spend between $22 million and $26 million this year building new lines and maintaining the ones it has.

The new cable will complement HickoryTech’s existing 2,400 miles, mostly in Minnesota. That doesn’t include 350 miles currently under construction.

According to a government formula, the project will create an estimated 250 jobs, but Weber said the broadband network is expected to continue providing economic benefits for 10 to 20 years.

HickoryTech won’t necessarily be offering Internet or cable service to homes along the new routes anytime soon.

As in other areas where it owns fiber-optic cable, HickoryTech will sell data services to the government and businesses that need the extra capacity. In addition, it can sell capacity to other companies that offer Internet services directly to their own clients, which may include residential customers.

Some of those institutions in need of high-speed Internet have already partnered with HickoryTech on its application. Their partners are the Mayo Clinic, the University of Minnesota and the state of Minnesota. They will have access to Internet speeds of 100 megabites per second. That’s a lot of data, Weber says, and is in general the thresholds for what businesses need.

HickoryTech does not have contracts with these entities — it didn’t have the grant until Wednesday, after all — but its partners do know how much services will cost and presumably will buy the right to send data down the new pipe.

In some ways, the system is similar to a stimulus grant to build a regular old concrete highway: The government solicits bids and selects a company to begin construction. With a finished road, the contractor hands over maintenance and responsibility to the government and the public.

With this fiber optic line, however, the company continues to own the line. The public still benefits by being offered low-cost, high-capacity broadband services, either through HickoryTech or another company contracting with HickoryTech.

HickoryTech’s stock ended the day trading at $7.87 per share, up 2.34 percent.

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