PCCA Journal 1st Quarter 2011

The Official Publication of the Power & Communication Contractors Association 1st Quarter 2011 Also Inside • USDA Announces $2.9 Billion in Rural Electric Loans • Marketing in the “New Normal” • Stringing Equipment Maintenance PCCA Members Meet with Labor Department Offi cials

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1st Quarter 2011 President Kevin Mason ElectriCom, Inc. President-Elect Larry Libla W & L Constuction 1st Vice President Tommy Muse Aubrey Silvey Enterprises, Inc. 2nd Vice President Glen Amerine Amerine Utilities Construction, Inc. Treasurer Steve Sellenriek Sellenriek Construction Secretary Timothy D. Killoren North States Officer Directors Official Publication of the Power & Communication Contractors Association Board of Directors David Aubrey Okay Construction Tony Briggs Vermeer Manufacturing Ed Campbell Henkels & McCoy, Inc. James Dillahunty Henkels & McCoy, Inc. John Fluharty Mears Group, Inc. Herb Fluharty Mears Group, Inc. Matthew Gabrielse Gabe’s Construction Co., Inc. Jerrod Henschel Michels Corporation Dan Levac Preformed Line Products Todd Mix ElectriCom, Inc. Todd Myers Kenneth G. Myers Construction Robert Orr Sherman & Reilly, Inc. Larry Pribyl MP Nexlevel, LLC Brad Radichel Condux International Ron Tagliapietra Michels Corporation Matt Trawick Trawick Construction Co., Inc. Bryan Westerman MasTec, Inc. Publication Staff Publisher Timothy Wagner twagner@pccaweb.org Associate Publisher Cheryl Stratos stratosc@pccaweb.org Editor Michael Ancell mancell@pccaweb.org Advertising Sales Manager Victoria Geis vgeis@pccaweb.org PCCA Discusses Davis-Bacon with Labor Department Officials 13 On November 12, a PCCA delegation met with high-ranking officials at the U.S. Department of Labor in Washington, D.C., to explain our members’ problems with Davis-Bacon Act job classifications and wage determinations and to seek the agency’s guidance and assistance in complying with Davis-Bacon on contracts financed by federal stimulus funds. Marketing in the “New Normal” 21 By Cynthia Paul and Ken Roper Marketing, customer loyalty, value propositions, market brand, and efficiency are all part of the new normal for contractors. What do you need to prepare for in 2011 and beyond? This article presents ideas for marketing in the new normal to grow profitable revenue. Stringing Equipment Maintenance 36 With line construction continuing year round, it is more critical now than ever before to have a preventive maintenance and service program in place to avoid or mitigate the consequences of equipment failure. The folks at Sherman & Reilly thought it would be a good idea to remind their fellow PCCA members that now might be time to do some preventive maintenance. RDUP News 7 News Briefs 13 In Memoriam: Don Killoren 14 2011 PCCA Convention Preview 29 IT Watch 34 Safety News 39 PCCA Member News 43 Industry Calendar 46 Advertiser Index 46 103 Oronoco Street, Suite 200 Alexandria, Virginia 22314 (800) 542-PCCA • www.pccaweb.org

PCCA Journal|1st Quarter 2011 7 Arkansas, Missouri Carroll Electric Cooperative Corporation; $45,594,000 Build 208 miles of new distribution lines and 19 miles of new transmission line, make improvements to 274 miles of distribution line and 23 miles of transmission line, and make other system improvements. Arkansas C & L Electric Cooperative Corporation; $13,000,000 Build 50 miles of new distribution line, and make other system improvements. Colorado, New Mexico La Plata Electric Association, Inc.; $53,166,000 Build 386 miles of new distribution line, make improvements to 38 miles of distribution line, and make other system improvements. Colorado, Nebraska Y-W Electric Association, Inc.; $19,930,000 Build 38 miles of new distribution line, make improvements to 103 miles of distribution line and 9 miles of transmission line, and make other system improvements. Colorado Mountain Parks Electric, Inc.; $25,653,000 Build 12 miles of new distribution line, make improvements to 86 miles of distribution line, and make other system improvements. Colorado, Nebraska,New Mexico, Wyoming Tri-State Generation and Transmission Association, Inc.; $173,689,000 Upgrade and modify the generation system and make environmental control improvements. Florida Sumter Electric Cooperative, Inc.; $30,000,000 Build 435 miles of new distribution line and 1 mile of transmission line, make improvements to 103 miles of distribution line, and make other system improvements. Florida Seminole Electric Cooperative, Inc.; $112,758,000 Finance upgrades and replacements to existing generation and transmission facilities. Georgia Three Notch EMC; $14,000,000 Build 283 miles of new distribution line, make improvements to 827 miles of distribution line, and make other system improvements. Georgia Middle Georgia EMC; $3,000,000 Build 89 miles of new distribution line, and make other system improvements. Georgia Oglethorpe Power Corporation; $373,100,000 Two loans to purchase two natural gasfired combustion turbine facilities. Hawaii Kauai Island Utility Cooperative; $109,968,000 Build 52 miles of new distribution line, make improvements to 23 miles of distribution line, and make other system improvements. Project includes a 10MW Naptha/ Biodiesel Fueled Combustion Turbine and hydroelectric plant improvements. Iowa The Calhoun County Electric Cooperative Association; $4,423,000 Build 5 miles of new distribution line, make improvements to 108 miles of distribution line, and make other system improvements. Iowa Hawkeye Tri-County Electric Cooperative; $17,500,000 Build 55 miles of new distribution line, make improvements to 236 miles of distribution line, and make other system improvements. Illinois Southwestern Electric Cooperative, Inc.; $20,000,000 Build 92 miles of new distribution line and 9 miles of transmission line, make improvements to 112 miles of distribution line, and make other system improvements. Indiana Utilities District of Western Indiana REMC; $14,000,000 Build 68 miles of new distribution line, make improvements to 124 miles of distribution line, and make other system improvements. Indiana Daviess-Martin County REMC; $5,000,000 Build 24 miles of new distribution line, RDUP News RDUP News continued on page 8 USDA Announces $2.9 Billion in Rural Electric Loans Agriculture Secretary Tom Vilsack on November 18 announced that 50 rural utilities and cooperatives in 31 states have been selected to receive guaranteed loans that will benefit more than 183,000 rural electric cooperative consumers by financing the construction and repair of more than 15,000 miles of distribution and transmission lines, including over $310 million invested in renewable energy. The $2.9 billion is funded by USDA Rural Development’s Rural Utilities Service. This funding assists with upgrades, expansion, maintenance, and replacement of rural electric transmission, distribution lines, and generating equipment. The Electric Program also helps fund energy conservation and renewable energy projects. For example, Basin Electric Power Cooperative, based in Bismarck, N.Dak., has been selected for $153,396,000 in loan guarantees for two wind projects. Together these projects will provide 120 MW of renewable electricity. Combined with Basin’s previous wind investments, they are expected to represent more than 600 MW of wind generation—enough to power the average annual needs of 175,000 homes. Funding of each recipient is contingent upon their meeting the conditions of the guaranteed loan agreement. Following are the rural utilities that were selected for funding:

PCCA Journal|1st Quarter 2011 8 make improvements to 51 miles of distribution line, and make other system improvements. Indiana Fulton County REMC; $5,000,000 Build 24 miles of new distribution line, make improvements to 36 miles of distribution line, and make other system improvements. Indiana Newton County REMC; $1,700,000 Build 12 miles of new distribution line, make improvements to 27 miles of distribution line, and make other system improvements. Kansas Pioneer Electric Cooperative, Inc.; $21,306,000 Build 220 miles of new distribution line, make improvements to 1,137 miles of distribution line, and make other system improvements. Kentucky Shelby Energy Cooperative, Inc.; $10,000,000 Build 34 miles of new distribution line, make improvements to 143 miles of distribution line, and make other system improvements. Kentucky Kenergy Corp; $23,000,000 Build 143 miles of new distribution line, make improvements to 130 miles of distribution line, and make other system improvements. Kentucky, Tennessee South Kentucky REMC; $51,000,000 Build 346 miles of new distribution line, make improvements to 108 miles of distribution line, and make other system improvements. Michigan Cloverland Electric Co-operative; $88,000,000 Serve 22,960 new consumers, build 860 miles of new distribution line, make improvements to 55 miles of distribution line, and make other system improvements. Minnesota Wright-Hennepin Cooperative Electric Association; $25,000,000 Build 144 miles of new distribution line, make improvements to 54 miles of distribution line, and make other system improvements. Mississippi East Mississippi Electric Power Association; $22,000,000 Build 97 miles of new distribution line and 5 miles of transmission line, make improvements to 221 miles of distribution line, and make other system improvements. Mississippi South Mississippi Electric Power Association; $267,393,000 Add 150 MW from two new combustion turbines and install new heat recovery steam generators to existing steam units. Montana Big Horn County Electric Cooperative, Inc.; $4,656,000 Build 36 miles of new distribution line, make improvements to 17 miles of distribution line, and make other system improvements. North Dakota, Minnesota Minnkota Power Cooperative, Inc.; $24,363,000 Make system and plant improvements, including projects for environmental emission control. North Dakota, Colorado, Iowa, Minnesota, Nebraska, New Mexico, South Dakota, Wyoming Basin Electric Power Cooperative; $405,000,000 Finance the Deer Creek Station Energy Facility Project; a 300 MW natural gas fired combined cycle generating plant. N. Dakota, Colorado, Iowa, Minnesota, Nebraska, New Mexico, S. Dakota, Wyoming Basin Electric Power Cooperative; $153,396,000 Finance the PrairieWinds Project, a 115.5 MW wind farm consisting and the Minot Wind 2 Project, a 4.5 MW wind farm. New Mexico, Texas LCEC Generation, LLC; $38,550,000 Build a 42.2 MW natural gas-fired electricity production facility and related interconnection transmission facilities. Ohio, Indiana Butler Rural Electric Cooperative, Inc.; $12,000,000 Build 24 miles of new distribution line and 6 miles of transmission line, make improvements to 37 miles of distribution line, and make other system improvements. Ohio Buckeye Power, Inc.; $85,500,000 Finance emissions equipment. Oklahoma Caddo Electric Cooperative, Inc.; $31,396,000 Build 132 miles of new distribution line, make improvements to 149 miles of distribution line, and make other system improvements. Oklahoma Central Rural Electric Cooperative; $7,750,000 Build 42 miles of new distribution line, and make other system improvements. Oregon Wasco Electric Cooperative, Inc.; $10,000,000 Build 24 miles of new distribution line, make improvements to 23 miles of distribution line, and make other system improvements. South Carolina Laurens Electric Cooperative, Inc.; $43,724,000 Build 206 miles of new distribution line, make improvements to 73 miles of distribution line, and make other system improvements. South Carolina Pee Dee Electric Cooperative, Inc.; $15,000,000 Build 144 miles of new distribution line, make improvements to 39 miles of distribution line, and make other system improvements. South and North Carolina Broad River Electric Cooperative, Inc.; $12,000,000 Build 78 miles of new distribution line, make improvements to 42 miles of distribution line, and make other system improvements. South Dakota Rosebud Electric Cooperative, Inc.; $5,717,000 Build 26 miles of new distribution line, make improvements to 43 miles of distribution line, and make other system improvements. South Dakota West Central Electric Cooperative, Inc.; $2,017,000 Replace existing automated meter reading system with a two-way automated communications system. Tennessee, Mississippi Pickwick Electric Cooperative; $6,900,000 Build 19 miles of new distribution line, and RDUP News Continued from page 7 Continued on page 10

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PCCA Journal|1st Quarter 2011 10 RDUP News Continued from page 8 make other system improvements. Texas Victoria Electric Cooperative, Inc.; $6,949,000 Build 23 miles of new distribution line, make improvements to 52 miles of distribution line, and make other system improvements. Virginia, West Virginia Shenandoah Valley Electric Cooperative; $180,000,000 Build 2,811 miles of new distribution line, make improvements to 11 miles of distribution line, and make other system improvements. Virginia, Kentucky Central Virginia Electric Cooperative; $84,000,000 Finance ownership interest in two renewable run-of-the-river hydroelectric projects for a total of 14.6 MW. Virginia Rappahannock Electric Cooperative; $198,675,000 Build 3,288 miles of new distribution line, make improvements to 44 miles of distribution line, and make other system improvements. Washington Orcas Power & Light Cooperative; $8,822,000 Make improvements to 21 miles of distribution lines, and make other system improvements. Wisconsin Clark Electric Cooperative; $4,000,000 Build 39 miles of new distribution line, make improvements to 50 miles of distribution line, and make other system improvements. Wisconsin, Illinois Scenic Rivers Energy Cooperative; $20,000,000 Build 46 miles of new distribution line, make improvements to 236 miles of distribution line, and make other system improvements. Wyoming High Plains Power, Inc.; $22,394,000 Build 37 miles of new distribution line and 16 miles of transmission line, make improvements to 92 miles of distribution line, and make other system improvements. USDA Releases Report on the Impact of Stimulus Funds in Rural America USDA Under Secretary for Rural Development Dallas Tonsager issued a report in October on how loan and grant funds through the American Recovery and Reinvestment Act of 2009 (Recovery Act) have helped the nation’s rural residents and, not surprisingly, provided a glowing review of the administration’s efforts. The report estimates that millions of business owners, agricultural producers, and internet users and thousands of homeowners will benefit, and more than 300,000 jobs are being created or saved. The job estimates contained in the report are derived from recipient reported data or programbased economic models. “With Rural Development’s loans, grants, and loan-grant combination financing for new and existing programs, we have leveraged our Recovery Act funds to ensure the greatest bang for the taxpayer’s buck, allowing our agency to make unprecedented and lasting investments in rural America,” Tonsager said. “I am proud of what we have accomplished over the last two years towards building livable, innovative, and sustainable rural communities.” Of the $40.7 billion in Recovery Act funding obligated by the U.S. Department of Agriculture, Rural Development obligated more than half for projects ($21.2 billion in programlevel funding) through seven programs. In all, 95,000 loans and 2,500 grants were provided to recipients in all 50 states, American territories, the District of Columbia, and the Commonwealth of Puerto Rico. This record level of federal investment leveraged additional private investment in communities across the country, demonstrating the positive impact that public-private partnerships can have on rural communities and economies. Broadband was the first example in the USDA press release of how Recovery Act funding is making a difference in rural communities. The release said, “USDA’s Rural Utilities Service (RUS), a Rural Development mission area, received $2.5 billion in funding to deploy high-speed broadband networks to the hardest-to-reach rural areas of the country. Working with partners at the Department of Commerce’s National Telecommunications and Information Administration (NTIA), RUS invested $3.5 billion in funding for 297 broadband infrastructure projects, four satellite awards, and 19 technical assistance grants to extend the benefits of broadband to rural communities, Native American and Alaska Native lands in 45 States and 1 territory. An estimated 7 million people, many of them located in extremely remote areas, will have access to improved broadband services. “In Reedsburg, Wis., (located in Sauk County), the Reedsburg Utilities Commission used $5,239,168 in Recovery Act funds to bring broadband service to an area of southwestern Wisconsin that is deficient in broadband services due to hilly terrain. In addition to the USDA funds, more than $2.3 million in private investment was provided. It is estimated that 310 businesses and more than 2,400 homes will be able to access the utility’s services, and an estimated 42 new jobs will be generated.”

PCCA Journal|1st Quarter 2011 11 Alaska - Cordova Telephone Cooperative, Inc.; $10,750,000 loan Arkansas - Southwest Arkansas Tel. Coop., Inc. $22,418,000 loan Iowa - Interstate 35 Telephone Company $7,090,000 loan Kansas - South Central Telephone Assoc., Inc. $10,215,000 loan Minnesota - Garden Valley Telephone Company $34,177,000 loan Montana - Central Montana Communications, Inc.; $38,793,000 loan Southern Montana Telephone Company; $5,544,000 loan Montana & Wyoming - Range Telephone Cooperative, Inc.; $18,000,000 loan North Dakota - Reservation Telephone Cooperative $32,322,000 loan New Mexico - Tularosa Basin Telephone Co., Inc.; $8,572,000 loan South Dakota - Cheyenne River Sioux Tribe Telephone Authority; $37,870,000 loan Wisconsin - Nelson Telephone Cooperative; $22,132,000 loan The U.S. Agriculture Department announced on November 11 nearly $247.9 million in funding for telecommunications projects that will improve broadband service to rural residents and businesses in 11 states. This funding, which is part of the $690 million investment from USDA’s Telecommunications Infrastructure Loan Program during fiscal year 2010, will finance more than 16,000 miles of fiber to the home (FTTH), bringing high-speed internet service to rural areas. Administered by USDA’s Rural Utilities Service (RUS), this infrastructure financing is in addition to the $3.5 billion in broadband funding RUS awarded for rural broadband projects under the American Recovery and Reinvestment Act of 2009. The telecommunications infrastructure program funds facilities and equipment for upgrades, expansion, maintenance, and replacement of rural networks. RUS funded approximately $537 million in FTTH projects during fiscal year 2010. For example, in Kansas, a $10.2 million loan for South Central Telephone Association, Inc. will be used to deploy 192 new route miles of fiber and copper cable. These upgrades will improve service for rural residents and businesses and help the systems meet current and future telecommunications requirements. In South Dakota, Cheyenne River Sioux Tribe Telephone Authority, a telephone company wholly owned by Native Americans, received a $37.9 million loan. The financing will enable them to complete a total fiber-to-the-premises buildout, which will bring broadband to homes and businesses in their service area. Funding of each recipient is contingent upon their meeting the conditions of the loan agreement. A complete list of the rural utilities that were selected for funding is below: Rural Telecom Projects Get a $247.9 Million Boost USDA Submits Comments to Support Development of the National Broadband Plan The USDA submitted comments to the Federal Communications Commission (FCC) in November to support development of the National Broadband Plan based on what it called “the department’s considerable experience in financing broadband projects in rural areas.” The FCC is implementing the plan to guide broadband deployment nationwide. Rural Utilities Service (RUS) Administrator Jonathan Adelstein submitted a letter in which he offered to make RUS data available to the FCC as the independent regulatory agency evaluates policy options to advance broadband deployment. He noted that RUS loan financing to rural telecommunications providers is “dependent on sufficient, specific, and predictable revenues to ensure that all Americans enjoy the benefits of modern telecommunications technology.” Only four out of the current 480 RUS telecommunications program borrowers do not receive federal universal service support for high-cost areas. Adelstein said that the two agencies can work together to ensure that the “right mix of incentives are available to attract private sector investment into otherwise uneconomic areas.” RUS is a policy, planning, and lending agency within the USDA and currently manages a $56 billion portfolio consisting of loans that support the construction of water and waste treatment systems, electric systems, and broadband networks in rural communities. The RUS telecommunications program currently has more than $4.2 billion in outstanding principal, which will increase substantially with awards this year under the American Recovery and Reinvestment Act. The current rural loan portfolio consists of approximately 2,337 active loans to borrowers committed to building and upgrading broadband capable networks across rural America.

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PCCA Journal|1st Quarter 2011 13 News Briefs News Briefs continued on page 14 On November 12, a PCCA delegation met with high-ranking officials at the U.S. Department of Labor in Washington, D.C., to explain our members’ problems with Davis-Bacon Act job classifications and wage determinations and to seek the agency’s guidance and assistance in complying with Davis-Bacon on contracts financed by federal stimulus funds. The meeting provided a frank exchange of problems and needs faced by both groups and an agreement to continue working to resolve issues. The PCCA delegation met with officials from the Labor Department’s Wage and Hour Division and described problems faced by PCCA members as they bid on broadband projects under the Obama administration’s American Recovery and Reinvestment Act. Under Davis-Bacon, contractors must pay their laborers and mechanics not less than the prevailing wage rates and fringe benefits listed in the wage determinations issued by the Department of Labor for the classes of laborers and mechanics employed on similar projects in the area. Although it is the responsibility of the contracting agency to ensure that the appropriate Davis-Bacon wage determinations are included in bid solicitations and contracts, some of the solicitations have not included complete wage determinations, and our members are left to determine on their own which wage determinations will be applied to the work on which they are bidding. Moreover, the wage determinations issued by the DOL often do not include job classifications that accurately describe the work performed by our members’ employees, resulting in inappropriate classifications and pay rates. Because of these problems, the PCCA members do not have the benefit of knowing the applicable prevailing wage and benefit rates when bidding for this work, resulting in significant commercial risk and uncertainty in the bidding and contract performance stages. The Labor Department officials listened closely to PCCA’s concerns and provided background on Davis-Bacon and the wage determination surveys used to set rates. They said that job classifications and wage determinations, especially on relatively new types of construction like broadband, can be skewed due to lack of data. They can’t publish a rate if they don’t have the data. PCCA will continue to engage DOL on these issues. The November meeting will be discussed in greater detail at the upcoming PCCA Convention in Key Largo, Fla., which also includes a breakout session on Davis-Bacon compliance. The PCCA delegation consisted of Jim Dillahunty, Henkels & McCoy; Walt Donovan, Quanta Services; Jerrod Henschel, Michels Corporation; Kevin Mason, ElectriCom; Todd Myers, Kenneth G. Myers Construction; Steve Nielson, Dycom Industries; Steve Sellenriek, Sellenriek Construction; and Tim Wagner, PCCA. PCCA Discusses Davis-Bacon with Labor Department Officials PCCA members traveled to Washington, D.C., on November 12 to discuss Davis-Bacon compliance issues with officials from the Labor Department’s Wage and Hour Division. From left are Kevin Mason, Todd Myers, Jerrod Henschel, Steve Sellenriek, Steve Nielson, Walt Donovan, Jim Dillahunty, and Tim Wagner.

PCCA Journal|1st Quarter 2011 14 News Briefs Continued from page 13 The Federal Energy Regulatory Commission (FERC) in November proposed reforms to its rules to lay the foundation for integrating the rapid growth of variable energy resources into the nation’s power grid while ensuring reliability and bringing potential savings to customers. The proposed rule would reform the Open Access Transmission Tariffs (OATT) and the Large Generator Interconnection Agreements filed by public utility transmission providers to require them to offer services that will allow for a more efficient integration of variable energy resources such as wind, solar, and hydrokinetics into the grid system. “Most of the new power plants for which developers are seeking access to the grid are variable resources such as wind and solar generators,” FERC Chairman Jon Wellinghoff said. “This proposal will help the commission to cost-effectively integrate these and other variable generators into the grid in a way that helps maintain reliability and operational stability.” The Notice of Proposed Rulemaking (NOPR) proposes to require public utility transmission providers to offer all customers the option to schedule transmission service at 15-minute intervals instead of the current hourly scheduling procedure. The more frequent scheduling intervals will provide for greater accuracy in scheduling, thereby mitigating the amount of ancillary services the customer will need to supply or purchase. The NOPR also proposes that interconnection customers whose generating facilities include variable energy resources provide meteorological and operational data to transmission providers, and it encourages transmission providers with variable energy resources on their systems to implement power producNews Briefs continued on page 16 PCCA is saddened to report that Past President Donald J. (DJ) Killoren passed away peacefully at his home with his family by his side following a short illness. Don was an entrepreneur and inventor who held US patents, and he was President of PCCA in 1968 and 1969. Don was born on February 10, 1925, in Appleton, Wis., the son of Edward and Marie (Weiss) Killoren. He was an active lifelong member of St. Mary’s Parish in Appleton. Don left Appleton High School at the age of 17 to join the Navy, serving on the artillery minesweeper USS Vigilance in the South Pacific during World War II. Returning to Appleton after the war, Don married the love of his life, Carol Marie Collins of Carter, Wis., in 1949. They recently celebrated their 61st wedding anniversary. After several years living in North Dakota, Don returned to Appleton to work for the family business, Killoren Company. An entrepreneur and inventor, he was involved in multiple business ventures with bother-in-law and business partner, John Spalding. He was who held US patents. With John Spalding, Don owned and operated K & S Game Farm in Shiocton, Wis. He was an avid sportsman, enjoying hunting and fishing all over North America. Don was President of Poygan Land Company and a founding member of Winnegamie Wetlands Chapter of Ducks Unlimited as well as serving as a National Board Trustee of Ducks Unlimited and a Board Member of Wisconsin Wetlanders, Inc. Don worked closely with the Appleton Trout Unlimited in sponsoring events for disabled individuals. Don is survived by his wife; six sons: Gene (Ann Marie) Killoren, Tim (Nancy) Killoren, Pat (Kris) Killoren, Mike (Marla) Killoren, Andy (LuAnn) Killoren, and Chris (Jamie) Killoren; a daughter Kate (Steve) Luebke; 12 grandchildren and five great-grandchildren. He is preceded in death by his parents, his brothers Eugene and Kenneth, his sister Patricia Spalding, and his grandsons Emmett and Kenny Killoren. PCCA Mourns the Loss of Past President Don Killoren Laura, Nancy, Tim, Carol, and Don Killoren at the 60th Annual PCCA Convention FERC Proposes Rule to Integrate Variable Energy Resources

PCCA Journal|1st Quarter 2011 16 tion forecasting. A third element of the proposal clarifies that transmission providers have the opportunity, through a newly proposed schedule, to recover costs associated with the integration of variable energy resources and sets forth the commission’s proposed expectations that the transmission provider would need to demonstrate its implementation of intra-hourly scheduling and power production forecasting to ensure variable energy resources are being charged a just and reasonable rate. Voters in Four States Ban Union Card Check Voters in four states passed measures on November 2 to ban the “card check” method of unionizing. The ballot measures were supported by 60 percent of voters in Arizona and Utah, 76 percent in South Dakota, and 86 percent in South Carolina. The card-check method of organizing does away with the secret ballot in union elections and instead forces people to publicly sign a card saying they support unionization. Sen. Tom Harkin (D-Iowa), chairman of the Senate Health, Education, Labor and Pensions Committee, has threatened to bring up card check legislation in the lame duck session of Congress, but opponents say that overwhelming opposition to card check on election day ought to give him pause about trying to ram it through. The U.S. House passed card-check legislation (the Employee Free Choice Act) in 2007 but failed to get enough votes in the Senate to forestall a Republican filibuster. The bill was reintroduced in 2009 but was never brought up for a vote in the Democratic-led Congress. The U.S. Chamber of Commerce has waged an intensive campaign against the legislation, and the state ballot measures are part of that campaign. Groups are planning similar measures on the 2012 ballot in California, Florida, Mississippi, and Ohio. NTIA Announces Final Recovery Act Investments for StateDriven Broadband Activities The Department of Commerce’s National Telecommunications and Information Administration (NTIA) in November announced 56 investments totaling $190 million to support state efforts to compete in the digital economy. These are the final awards in the State Broadband Data and Development (SBDD) grant program, funded by the American Recovery and Reinvestment Act. “As Congress recognized, many communities are being left behind in the 21st Century economy and need improved broadband access and adoption to compete,” said Assistant Secretary for Communications and Information and NTIA Administrator Lawrence E. Strickling. “Each state has unique broadband challenges, and these investments will support solutions developed by the states to harness the power of technology so that local businesses can thrive and residents can enjoy a better quality of life.” NTIA said the 50 states, five territories, and the District of Columbia will use this funding to support the efficient and creative use of broadband technology to improve their economies. These state-created efforts vary depending on local needs but include programs to assist small businesses and community institutions in using technology more effectively, research to investigate barriers to broadband adoption, innovative applications that increase access to government services and information, and state and local task forces to expand broadband access and adoption. Launched in 2009, NTIA’s State Broadband Data and Development grant program implements the joint purposes of the Recovery Act and the Broadband Data Improvement Act (BDIA), which envisioned a comprehensive program, led by state entities or non-profit organizations working at their direction, to facilitate the integration of broadband and information technology into state and local economies. Economic development, energy efficiency, and advances in education and health care rely not only on broadband infrastructure, but also on the knowledge and tools to leverage that infrastructure. FCC Releases Mobile Broadband Spectrum Forecast I n October, the Federal Communications Commission released a detailed technical and economic forecast of mobile broadband market trends that details the looming spectrum crunch in a concrete, datadriven fashion. The National Broadband Plan recognized the exponential growth of mobile data usage and recommended that the FCC make available 500 megahertz (MHz) of new spectrum for wireless broadband within ten years, including 300 MHz for mobile flexible use within five years. In addition, President Obama in June directed that 500 MHz of new spectrum be made available for mobile and fixed broadband use. Spectrum is a national resource used for all forms of wireless communication, including the use of smartphones. Data usage over wireless networks is rapidly increasing as more consumers surf the News Briefs Continued from page 14

PCCA Journal|1st Quarter 2011 17 web, check email, and watch video on mobile devices. The FCC said its forecast demonstrates that the amount of mobile data demanded by American consumers is likely to exceed capacity of the wireless networks in the near-term and that meeting this demand by making additional spectrum available is likely to create significant value for the mobile economy. New mobile broadband spectrum will also support innovation in other important areas, such as online learning, remote health care diagnostics, and the smart grid, the commission said. Key findings in the white paper, “Mobile Broadband: The Benefits of Additional Spectrum,” include: • Within the next five years, the spectrum deficit is likely to approach 300 MHz. • This spectrum crunch will be driven by significant growth of mobile broadband traffic, on the order of 35 times recent levels. • Mobile broadband growth is likely to outpace the ability of technology and network improvements to keep up by an estimated factor of three. • Meeting this need may create $120 billion in spectrum value, with hundreds of billions more in total value to the economy. Commerce Department Report Shows Broadband Adoption Rises While Gap Persists The Department of Commerce’s Economics and Statistics Administration (ESA) and National Telecommunications and Information Administration (NTIA) recently released a report, “Digital Nation II,” that analyzes broadband internet access and adoption across the United States. The study— which the department calls the most comprehensive of its kind—finds that socio-economic factors such as income and education levels, although strongly associated with broadband internet use, are not the sole determinants of use; even after accounting for socioeconomic differences, significant gaps persist along racial, ethnic, and geographic lines. The report analyzes data collected through an Internet Usage Survey of 54,000 households conducted by the U.S. Census Bureau in October 2009. Earlier this year, NTIA released initial 1-888-633-1243 News Briefs continued on page 18

PCCA Journal|1st Quarter 2011 18 findings from the survey, showing that while virtually all demographic groups have experienced rising broadband internet adoption at home and 64 percent of households overall have broadband at home, historic disparities among demographic groups have persisted over time. The principal findings of the report are: • Seven out of ten American households used the internet in 2009. The majority of these households used broadband to access the internet at home. Almost one-fourth of all households, however, did not have an internet user. • Income and education are strongly associated with broadband internet use at home but are not the sole determinants. • Broadband internet adoption was higher among White households than among Black and Hispanic households. Differences in socio-economic attributes do not explain the entire gap associated with race and ethnicity. • A similar pattern holds for urban and rural locations. Urban residents were more likely than their rural counterparts to adopt broadband internet, even after accounting for socio-economic differences. • Lack of need or interest, lack of affordability, lack of an adequate computer, and lack of availability were all stated as the main reasons for not having home broadband internet access. The significance of these factors, however, varied across non-users, with affordability and demand generally dominating. • Internet non-users reported lack of need or interest as their primary reason for not having broadband at home. This group accounted for twothirds of those who don’t have broadband at home. In contrast, households that did not use the internet specifically at home but did use the internet elsewhere ranked affordability as the primary deterrent to home broadband adoption. This group represented almost one-fourth of those who don’t have broadband at home. • Households that use dial-up service cited affordability as the main reason for not adopting broadband at home. For rural residents using dial-up service, lack of broadband availability was reported as a significant factor. • Between 2001 and 2009, broadband internet use among households rose sevenfold, from 9 percent to 64 percent of American households. • Some of the demographic groups that had lower-than-average adoption rates in 2001 have since shown impressive gains, but sizable gaps remain among demographic groups defined by income, education, race, and ethnicity. Similarly, despite gains in adoption rates within geographic areas, significant gaps in adoption still persist among the states, some regions, and between urban and rural locations. Central Indiana Power Paves the Way for FiberBased Smart Grid Central Indiana Power (CIP) is deploying a fiber-based smart grid that sets a precedent for how regional telecommunications and electric cooperatives can work together to provide rural customers with broadband connectivity and advanced energy management capabilities. CIP is partnering with Hancock Telecom, a local communications cooperative, to leverage Hancock’s fiber-to-thehome) network for smart metering as well as prepare for the demand response initiatives proposed by Wabash Valley Power Association, which provides power to CIP and other utilities in the region. Eric Murray, president and CEO of technology-platform provider Tantalus, predicted that mutually beneficial business arrangements between telecom providers and electric cooperatives will become common at utilities like CIP, which serves 12,000 homes, businesses, and farms in a fast-growing community 25 miles east of Indianapolis. “It’s natural for telecoms and utilities to work together,” Murray said. “Many telecoms already supply their local electric co-op with wireless or wired connectivity to substations. By collaborating with Hancock, CIP can extend connectivity to other points in the distribution network via the telecom’s existing infrastructure. It’s a logical next step that will accelerate smart grid rollout, avoids the cost and complexity of building and maintaining two separate communications networks, and consolidates billing, customer service, and many other business functions under one roof.” Although CIP did not receive federal grant money, Murray said the deployment ties together the objectives of both the Department of Energy’s ARRA Smart Grid stimulus program and the Department of Agriculture’s Broadband Initiative Program by bringing high-bandwidth communications and advanced energy management capabilities to a rural community. “Fiber supports data intensive applications including customer signaling and load control, which require rapid and reliable two-way interaction between the operations center and each customer,” Murray said. “Capacity is virtually limitless, so more and more devices such as smart appliances will be able to communicate over the network without the risk of data congestion. It’s a future friendly solution.” News Briefs Continued from page 17

PCCA Journal|1st Quarter 2011 19 Verizon Urges Congress to Update Antiquated Telecom Rules With a highly innovative and competitive internet ecosystem now a critical resource for consumers and increasingly important to America’s economic growth, Verizon says that Congress must act to address telecommunications policies that are broken. “The grinding you hear are the gears churning as policymakers try to fit fast-changing technologies and competitive markets into regulatory boxes built for analog technologies and monopoly markets,” said Tom Tauke, Verizon’s executive vice president of public affairs, policy and communications, in discussing Federal Communications Commission policies. Tauke pointed out that on the issue of net neutrality, the FCC’s focus was limited to how internet service providers might degrade or block internet traffic and not on other sectors of the internet marketplace where similar consumer harm could take place. “A key reason why the FCC doesn’t consider the activities of those who control operating systems or applications is that the FCC looks at the world from the standpoint of its jurisdiction rather than from the perspective of the consumer,” Tauke said. “Given the outdated statute, that’s somewhat understandable. But from a reasonable person’s perspective, that approach makes no sense. That is why we need Congress to update the law.” Tauke laid out four components to a new policy to guide the internet ecosystem: The policy should be a federal framework. Because of the innovative nature of the marketplace, the framework should not involve anticipatory rulemaking, but rather principles that allow for case-by-case adjudication. The test for government intervention in the marketplace should be to prevent either harm to consumers or anti-competitive activity. And a single federal agency should be given clear jurisdiction. As part of any regulatory overhaul, Tauke said, safeguards surrounding cyber security and privacy need to be addressed. He also called for a revamping of the subsidy programs for universal access to communications. News Briefs continued on page 46

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PCCA Journal|1st Quarter 2011 21 Is your company, like that of so many contractors, struggling to find profitable work and sell projects at levels that sustain profitability? As one of our clients says about the current market prices, “You can’t compete with stupid!” Construction put in place, down by more than 24 percent from market peak, accounts for the largest market driver that is pushing owners to focus excessively on price (See Exhibit 1). Our industry has too much competition for the available work. Expect mergers, closures, and failures in abundance over the next two years. Additionally, surety losses traditionally spike for two years following every recession. All combined, these market drivers are contributing to “stupid pricing” in a market already struggling to deal with the new normal. Saying the new normal is going to bring change to our industry is an understatement. Heightened competition, fewer projects, and sophisticated buyers will eventually produce better and more competitive contractors. Fewer competitors are a positive outcome of recessions. Therefore, the key is surviving and thriving until the market changes and pricing stabilizes. There is good news for best-of-class contractors. Banks, bonding companies, and buyers of construction services will be getting a healthy dose of negative consequences of belowcost pricing. Contractor failures, project failures, and lowquality projects will begin to serve as a wake-up call. Think of how many profitable jobs it will take to offset the loss from one poorly priced project. The new normal will require discipline, patience, and persistence. Marketing, customer loyalty, value propositions, market brand, and efficiency are all part of the new normal for contractors. What do you need to prepare for in 2011 and beyond? This article presents ideas for marketing in the new normal to grow profitable revenue. Keep Marketing Best-of-class contractors prosper in down markets. One reason is they value the disciplines of marketing and sales. They are market-driven companies and know they have to get in front of new as well as existing customers in order to succeed. Economic cycles are just a way of life in our industry. The key is being able to identify future market shifts and being ready to make the changes needed to be successful. Throughout the ups and downs of the market, investing in marketing and sales helps level backlog and cement customer relationships and keeps your name at the front of the minds of potential customers. One of the construction industry’s unique features is the pricing model. Most contractors use cost-based pricing versus market-based pricing. Market-based pricing means setting a price based on the value of the product as perceived by the customer. This assumes that the value the customer perceives is more than the cost of providing the service. It is a valuebased pricing system. Many everyday products have marketbased pricing, as do unique purchases. Some products, from cars, artwork, and jewelry to everyday items like Starbucks coffee and Godiva chocolate, have a high perceived value. The products are priced on the value they have to us, not the product’s production cost. Market-based pricing is difficult, but not impossible, in today’s market. The only way to get a premium price (i.e., a market-based price) is to market the value that you bring to the customer. Without marketing, the chance of selling on value rather than price, regardless of market conditions, is similar to an ice cube’s chance of surviving in a hot location. Marketing in the “New Normal” Marketing, customer loyalty, value propositions, market brand, and efficiency are all part of the new normal for contractors. Competitive companies are best-value marketing machines. By Cynthia Paul and Ken Roper Continued on page 22

PCCA Journal|1st Quarter 2011 22 In a cost-based pricing environment, you win market share by being the lowest price. Being the low price, however, does not guarantee a profit. How much marketing is required to compete solely on price? The answer is not much. What happens in the recessionary environment is that some contractors eliminate marketing to eliminate cost, but that act does not eliminate the need for such costs. You have two options to survive and thrive in tough times. You can increase revenue and gross profit or you can reduce cost. Marketing does increase cost, so the marketing effort must be properly aimed and productive in execution. The problem in the construction industry is that you cannot save your way to prosperity. Costs became costs in your business for a reason. Not to say that all costs are good. However, if you eliminate costs, it does not change the reason or purpose that drove it to become a cost in the first place. For example, cutting marketing expenses certainly eliminates expenditures. However, what is the long-term cost of saving those dollars? The dynamic friction between saving money today and strategically investing in your business for tomorrow creates some of the most difficult trade-offs our industry faces. Many companies cut marketing and sales expenses in economic downturns. The benefits of these expenditures (brand recognition, differentiation, customer targeting, market presence, etc.) disappear, but too often, the impact of the cutbacks is not immediately felt. This gap can fool companies into thinking that their marketing and sales efforts were not generating results. Marketing and Sales in the New Normal The new normal offers fewer negotiated work opportunities. The market has scaled back to the levels experienced in 2003 (as shown earlier in Exhibit 1) and is not expected to recover to pre-recessionary levels for three to four years. Construction will be out of the recession in late 2010 to mid-2011, but the market will not return to 2007 levels for several more years. Best-of-class contractors know local and regional market trends. They have researched and explored emerging markets. Their strategic planning efforts have given them the insights needed to get a jump on market changes and find niches that best fit their capabilities while providing profitable work. These companies focus their marketing and selling efforts on emerging markets (such as health care, assisted living, alternative energy, LEED construction, etc.) and market niches that provide the best potential. They realize that simply bidding more work in existing markets is not the best answer. In some cases, that type of bidding strategy can be the worst possible answer. Marketing and sales, working together, have four basic objectives: • Retain existing clients • Engage new prospects • Create opportunities for higher profit potential • Increase the success rates on projects Marketing means identifying the right opportunities within the market you serve. It is about understanding your core strengths and the real value of your products or services. It is learning the needs of target customers, what drives their decision making, finding sufficient potential projects, and winning work. Proactively, a company evaluates its market position and determines its best strategic moves. You have to communicate effectively with your customers if they are going to understand the true value you bring to their organization and projects. Postcards about successful projects, customer testimonials, press releases, and signage are just some of the available communication vehicles. Exhibit 2 is a list of marketing tools for communicating market messages. Match the marketing tool to your marketing objectives. The goal is to gather the knowledge needed to target customers, markets, and segments in which you want to operate. Being clear and intentional on that is the simplest way to ensure that your marketing investments generate the highest possible returns. Marketing Continued from page 21 Continued on page 24

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