Correspondence with GM Foster Hildreth

Hi Philip,

Thank you for taking the time to write and for clearly outlining your concerns. I appreciate the transparency regarding your background, and I agree that questions like this deserve a thoughtful and complete response.

There are a few important pieces of context that I think are missing from your assessment, and they are central to understanding both the Rock Island/T-Mobile relationship and why rates are what they are today.

First, the network you're referencing did not exist prior to OPALCO and Rock Island stepping in. Here is a link to our website that outline the history of Rock Island.

https://www.rockisland.com/post/home-grown-broadband

In 2012, internet and cellular service across San Juan County ranged from unreliable to nonexistent. A major outage in 2013 that took down phone, internet, and even 911 service made it clear that doing nothing was not an option.

At that time, no private provider—including the large telecom companies—was willing to invest here. The geography and density simply did not pencil out. This community made the decision to build essential communications infrastructure ourselves.

That decision required real capital and real risk.

Rock Island was launched as a startup. OPALCO members contributed upfront funding, and additional financing was secured to build what is now a countywide fiber and wireless network. That infrastructure—much of it installed underground through bedrock, across water, and to remote locations—was and continues to be very expensive to build and maintain.

Today's rates are directly tied to that reality.

They are not set based on what a mainland market might bear in a competitive urban environment. They are set to:

• Pay debt service on the infrastructure that was built
• Operate and maintain a system spread across 20 islands
• Continue expanding service to unserved and underserved areas
• Ensure long-term reliability for homes, businesses, and emergency services

Without that revenue, the system simply would not exist—or would not be sustainable.

Second, regarding the T-Mobile relationship: it's important to understand that this was not a case of OPALCO enabling a ready-made competitive market and then restricting it. The partnership was what made widespread fixed wireless and cellular coverage possible in the first place.

OPALCO provided the fiber distribution network and mainland backhaul. T-Mobile provided the cellular equipment and operations. In return, Rock Island secured the ability to deliver fixed wireless broadband locally.

That structure was intentional. It created a viable path to:

• Rapidly expand cellular coverage (now roughly 95% countywide)
• Generate early revenue to support startup operations
• Build a scalable communications system for the islands

Without that arrangement, it is unlikely that either the current level of cellular coverage or the Rock Island network would exist in its current form.

Finally, I want to emphasize something that often gets overlooked in these discussions: Rock Island is not a private company extracting value from the community. It is 100% owned by OPALCO. And OPALCO is owned by its members. That means Rock Island's rates are not going to outside shareholders—they are sustaining infrastructure that members collectively built and continue to rely on. You are absolutely right that OPALCO was formed to serve its members when others would not. Rock Island is a continuation of that same principle. It exists because this community chose to invest in itself.

That ownership comes with tradeoffs. One of them is that we must set rates at a level that keeps the system financially healthy—so it can continue to serve current members and reach those who are still unconnected.

To answer your requests directly:

1. Disclosure of the Rock Island / T-Mobile agreement

Rock Island operates as a competitive communications business within a broader cooperative structure. Like any business partnership, our agreements include confidential and proprietary terms. We also have binding non-disclosure obligations with T-Mobile that we will honor. For those reasons, it would not be appropriate—or legally permissible—to publicly disclose the detailed terms of that agreement.

2. Request to allow T-Mobile Home Internet to be offered independently

This request is based on an assumption that Rock Island is simply preventing access to a lower-cost alternative. That is not an accurate characterization of the situation. Rock Island exists because this community chose to build its own communications infrastructure when the private market would not. That required taking on significant debt to fund startup operations and construct a network across one of the most challenging geographies in the country. Our subscription rates are set to support that system. They are what allow us to:

• Pay back the loans used to build the network
• Maintain and operate infrastructure across 20 islands
• Continue expanding service to additional members
• Ensure long-term reliability for essential communications

Introducing lower-priced alternatives that rely on the same member-built infrastructure, without contributing to its cost recovery, would undermine the financial model that makes the entire system possible. If Rock Island's revenue is materially weakened, the consequence is not simply "more competition"—it is reduced ability to maintain the network, slowed expansion, and risk to the long-term viability of the system members built.

3. Reporting back to the membership

There is no separate action underway to renegotiate the T-Mobile agreement, so there is no specific progress to report in that regard.

That said, OPALCO and Rock Island regularly report to members on financial performance, capital investments, and system expansion. We will continue to do so in a transparent and responsible manner.

I will be forwarding our email exchange to OPALCO Board members as requested.

Thank you again for reaching out and for being part of the cooperative.

Sincerely,
Foster Hildreth
General Manager
OPALCO and Rock Island
[direct phone redacted]

Hi Philip,

Thank you for your thoughtful follow-up. I appreciate the tone of your response and the opportunity to continue the discussion. You've raised important questions around agreement transparency, debt, and long-term pricing. I'll address each directly.

On disclosure and duration of the T-Mobile agreement

While I understand the interest in greater visibility, we are bound by confidentiality and non-disclosure obligations with T-Mobile that limit what we can share publicly.

What I can reiterate is that the agreement was foundational to making both cellular coverage and fixed wireless broadband viable in San Juan County. It was not layered on top of an existing market—it helped create one where none existed. We will continue to evaluate that relationship over time based on what best serves the long-term interests of OPALCO members.

On debt, cost recovery, and future rates

It's important to clarify that Rock Island is not a completed project with a fixed endpoint. The network is still being built out. Today, we serve just over 7,000 subscribers—roughly half of the households in San Juan County. That means a significant portion of the community is still not connected, and expanding the network to reach those members requires continued investment.

Rock Island uses debt not only to finance the original build, but also to continue extending the communications grid and connect additional subscribers. As we grow, we are simultaneously paying down existing obligations while investing in expansion. Because of that, there is not a single "debt paid off" moment where costs drop away. This is an ongoing infrastructure system that requires:

• Continued expansion to serve remaining members
• Upgrades to meet increasing demand and usage
• Maintenance and replacement in a harsh marine environment
• Long-term planning to ensure scalability and reliability

As a cooperative, rates are not set to maximize profit—they are set to sustain the system over time. Financial performance is regularly reviewed, and rates are evaluated accordingly, with a focus on long-term system health and reliability.

On the $30 comparison

The comparison to a $30/month mainland product does not reflect the underlying cost structure here. That pricing exists in dense markets with existing infrastructure and millions of customers. In contrast, the network in San Juan County was built from scratch across a geographically complex archipelago, with far fewer subscribers to share those costs. The service Rock Island provides is supported by infrastructure that members collectively funded and that must be maintained and expanded locally.

On the claim that members have "paid twice"

I want to address this point directly, as it is not an accurate characterization. Rock Island provides a connection incentive of approximately $1,500 per new connection. The member contribution covers only the remaining portion of the individual service drop to their home. That contribution does not pay for—and does not come close to covering—the cost of the broader system, including backbone infrastructure, fiber distribution, wireless sites, or ongoing operations. The cooperative model shares costs between the system as a whole and individual connections, but it is not a case of members fully funding infrastructure and then being charged again for the same asset.

Closing

We welcome your participation in the Annual Meeting and the opportunity for an open discussion with the broader membership. Rock Island was built through significant community investment and careful long-term planning, and we are confident in the strength of that story. We encourage a discussion grounded in the full set of facts, including the actual cost structure and ongoing investment required to sustain the system.

Presenting partial comparisons or simplified assumptions risks mischaracterizing the situation for members who deserve a complete and accurate understanding.

Sincerely,
Foster Hildreth
General Manager
OPALCO / Rock Island Communications

Hi Philip,

Thank you for the continued exchange and for your engagement on these topics. Before we close this thread, I want to clarify one point to avoid any misunderstanding.

Rock Island's rates are not designed to remain fixed indefinitely, nor are they based on a concept of perpetual "cost recovery." As with any utility-scale infrastructure system, rates are reviewed over time and reflect a combination of operating costs, ongoing investment, and system performance. The network is still being actively expanded and upgraded, and those realities are part of that evaluation. It's not a static system with a single endpoint.

Beyond that clarification, I don't think additional back-and-forth over email will be productive. We welcome the opportunity to have this conversation in a broader setting, including the Annual Meeting, where the full context can be shared and discussed with the membership.

Thank you again for your perspective.

Sincerely,
Foster Hildreth
General Manager
OPALCO / Rock Island Communications