I was reading this post about US broadband co-ops in Minnesota and it left me bemused. It’s hardly breaking news that the US has telecommunications co-ops – they have been there since the year dot in telecoms terms. It was the language used to describe them that prompted me to repsond.
The article is littered with comparisons between the broadband co-ops and “commercial providers” as though, somehow, co-ops aren’t commercial – they don’t trade and make a profit? Really? So how did they last so long?
The UK has a similar issue – co-ops are often deemed “not for profit”. Equally nonsensical – they are as free to make a profit as the most carnivorous plc; they must as there are no magical powers that mean co-ops don’t need profits to reinvest and be sustainable.
The only thing that separates a meat-eating “commercial provider” and a fluffy “not-for-profit” co-op is what they choose to do with the profits they do and must make.
- A publicly quoted company, after making an allocation for reinvestment, may pay their owners a return in the form of a dividend to shareholders
- A co-operative company, after making an allocation for reinvestment, may pay their owners a return in the form of interest to shareholders and a dividend to their members
There is no reason why a public or private limited company, a partnership or a co-operative shouldn’t make a sustainable business out of the same situation – the choice of legal incorporation is really a matter for the owners and investors, and doesn’t necessitate a particular trading philosophy.
There are, however, very good reasons why locally owned businesses of any form of legal incorporation may be able to reach geographies that traditional large-scale operators would struggle to supply:
- They know their customers personally
- They can closely tailor a solution to their locale’s very specific needs & opportunities
This can offset the benefits of scale enjoyed by major providers, especially at the margins of a market; broadband, in this regard, is no different to local shops v supermarkets or niche manufacturers v mass market companies.
So why co-ops? In my book, it’s a personal choice but I can understand why locally owned and run organisations, often also funded locally, frequently choose to become co-ops – in many ways it’s the natural choice when “we’re all in it together”.
I have worked with co-operative network operators and “commercial” operators over many years, and I’ve not detected any marked difference in their relative success rates.
However, there have been very real differences in organisations’ understanding of their local markets and the local opportunities leading to very critical differences in their success rates; the ones that survive and outlive their initial investment have been commercial, for-profit organisations, whatever form of incorporation they initially plumped for.