Fiber Fight: Broadening Gig City Touted as Model in Broadband Debate

If cable and phone companies don't provide faster web service, more municipalities say they want to do it themselves as municipal electric utilities have done in Chattanooga, Tullahoma, Tenn., and Dalton, Ga.

by Dave Flessner, Chattanooga Times (TNS) / December 1, 2014

In a growing number of cities, high-speed Internet is seen as another essential utility, like water, sewers, roads or electricity.

If cable and phone companies don't provide faster web service, more municipalities say they want to do it themselves as municipal electric utilities have done in Chattanooga, Tullahoma, Tenn., and Dalton, Ga.

"Broadband service is rapidly becoming a vital asset for a community and, just like turnpikes or airports, it may be that a broadband initiative is the kind of public-private partnership that we may need," Aldona Valicenti, chief information officer for the city of Lexington, Ky., said during a recent visit to Chattanooga. "We're very much looking at that."

As a model, many cities from around the globe are looking at Chattanooga and the first citywide gigabit-per-second broadband service developed in the western hemisphere, built by the city-owned EPB. Delegations from more than two dozen cities across North America, Europe and Asia have come to the self-proclaimed "Gig City" over the past couple of years to see the power of high-speed broadband.

The Chattanooga Area Chamber of Commerce estimates EPB's fiber-optic, high-speed broadband has played some role in the start or relocation of at least 91 businesses in the Scenic City. Sybil Topel, vice president of communications for the Chamber, said the high-speed Internet "created an enlivened entrepreneurial culture" in the Scenic City that has attracted new business and spurred the growth of existing businesses linked, in some way, to the addition of more than 1,000 jobs.

HomeServe USA, a telemarketing business, regularly uses high-speed broadband to support its 340-employee operation in Chattanooga. Topel said the fiber optic system also "was an important decision-point" for Claris Networks, a cloud computing company that has expanded into Chattanooga because the fiber system allows them to serve customers less expensively by locating their technical infrastructure here.

Chattanooga is also forming partnerships that should yield future economic dividends. The Annenberg Innovation Lab at the University of Southern California has formed a partnership with EPB "and we just beginning to think about what are the possibilities and uses of this technology," lab director Jonathan Taplin told a recent conference in Chattanooga on "Envisioning a Gigabit Future."

"What we're going to try to do is bring some of the brilliant people from Warner Bros., Fox, Disney and IBM down here to Chattanooga to help them get their heads wrapped around this notion that you've got to stop worrying about scarcity," Taplan said.

Last year, T-Bone Burnett, a Grammy Award winner, performed "The Wild Side of Life" from a Los Angeles studio with Chuck Mead, a founder of the band BR549 who was on stage in Chattanooga.

"They sang a song together over 2,000 miles apart," Taplin said. "That's the power of gigabit Internet. I think we're just beginning to think of the possibilities of what this thing can do."

EPB Chief Executive Harold DePriest, who led the $220 million effort to build a fiber optic network in Chattanooga, said the high-speed broadband connections were an unintended benefit of the utility's effort to build a more robust and smarter electric grid.

"Our wants quickly become our needs in America, and in the process whole new opportunities develop," DePriest said. "We originally set out to find a solution for building a better electric grid, but in the process we were able to create much more."

Tullahoma Utilities Board, Dalton Utilities, Jackson Energy Authority and Bristol Tennessee Essential Services are among municipal power unities in the region that are following EPB's lead.

Legal protections and barriers

But such municipalities are still restricted where and how they can offer telecom services in competition with private businesses in 20 states, including Tennessee.

Private telecom companies insist such laws are needed to protect against unfair government competition that could distort the marketplace and put taxpayers at financial risk.

Telephone and cable TV providers object to having to compete with government utilities, which often enjoy tax and borrowing advantages over the private sector. Although EPB's fiber optic system is separately funded from its electricity network, EPB received more than $111 million in federal stimulus funds five years ago to upgrade its power grid through its fiber optic links across the city.

That technology helps improve the efficiency and reliability of the power grid but also can be used for high-speed transmission of data, information and entertainment.

Critics of municipal broadband note that not all cities have been as successful as EPB in their broadband ventures. In its filing with the FCC, AT&T notes that many municipal broadband networks never got off the drawing board, putting taxpayers are risk, while others have pre-empted private investment.

"Although many government owned networks (GONs) have failed, or at least failed to live up to expectations, GONs can nonetheless discourage private sector investment because of understandable concerns by private sector entities of a non-level playing field," AT&T attorney Christopher Meimann said. "Any policy that risks diminishing private sector investment would be short-sighted and unwise."

AT&T wants incumbent, private telecom providers to have a "right of first refusal" to deploy high-speed broadband before a government utility starts such a competitive service. Meimann also contends that any government utility should have to pay the same taxes as investor-owned utilities and should not be given any advantage because of other utility services such as electricity or water to rights of way needed for broadband connections.

Information highway speed

The National Telecommunications and Information Administration estimates at least 98 percent of Americans have broadband service of at least 6 megabits per second downstream and 1.5 megabits per second upstream. Internet service also continues to improve in most areas of the United States with per capita investment in broadband service in America ($562 per household) more than twice as much as that in Europe ($244 per household).

"The remarkable growth and quality of broadband availability in the United States is directly attributable to private sector investment and innovation," AT&T said in a recent petition to the FCC.

Where service is not available, phone companies and cable providers suggest broadband can be subsidized through the FCC's Connect America Fund, which is targeted at the 18 million Americans living in rural areas with no access to robust broadband infrastructure.

But the United States still trails countries like Finland, Sweden and Korea.

Proponents of municipal broadband argue that municipal broadband is simply filling a needed void in the information-based economy of the 21st century. Those pushing for more broadband competition contend that telephone companies and cable TV providers have been too slow to upgrade their broadband services ahead of existing consumer demand and have sought to protect their existing tolls and control of the information highway.

"As far as I'm concerned, that law in Tennessee is nothing but a monopoly protection act and it is the worst kind of crony capitalism that exists," said Taplan, who studies digital media entertainment and communications. "If we don't get this choice (from allowing more municipal broadband), then I think we're going to have a bunch of monopolies that will just sit on it and not do any major innovation like they haven't for the past 25 years and we won't get to the future that is already here in Chattanooga."

Municipal broadband backers highlight EPB as an example of how new players in the industry will improve services and open up new markets.

"This model (opened with with high-speed municipal broadband) is more resilient, more flexible and more dynamic and it brings competition to this important last mile," said Brad Burnham, a managing partner for Union Square Ventures in New York City who previously worked with AT&T and Bell Laboratories. "This brings connectivity to places where there is no competition and no one providing any kind of high-speed broadband. So I think we all need to be supporting this notion of opening up these markets, increasing competition and innovation."

Political battle over broadband

State Sen. Janice Bowling, R-Tullahoma, plans to introduce legislation in the next Tennessee General Assembly to remove a 15-year-old restriction limiting municipalities to serve only the territory allowed by their power service agreements with TVA.

That prevents EPB from extending its gigabit-per-second broadband lines into some neighboring communities that now have only dial-up Internet links.

Bowling said she plans to propose an even bigger change than the proposal she unsuccessfully pushed in the last Legislature.

"I realized in looking at this more closely that we just need to remove the footprint restrictions (for municipal broadband service) altogether so the legislation I plan to introduce next year will be so much simpler and reduce the regulation, not create some new maze for people to try to work their way through," she said. "In rural areas and small towns if we don't remove the existing barriers we have erected in Tennessee to that information highway, many areas of our state are going to be left behind in the digital economy."

Bowling is pitching her proposal as one of local choice to allow municipalities to decide if they want their utilities or City Halls to offer broadband service.

Tennessee House Majority Leader Gerald McCormick, R-Chattanooga, also is supportive of measures to allow EPB and other municipal power utilities to extend broadband service outside of their traditional territories when local governments request such service.

"But I recognize, this is going to be a tough fight in the Legislature," he said. "I do think this should be a state and local decision, not a federal decision."

But at the federal level, Federal Communications Commission Chairman Tom Wheeler is pushing for the federal agency to supersede state limits on municipal broadband services and allow government-owned utilities to enter the telecom market.

EPB and the city of Wilson, N.C., petitioned the FCC earlier this year to step in and remove state restrictions on their ability to offer broadband service.

In June, Wheeler said private phone companies and cable TV providers, especially in rural areas, are unable or unwilling to make the investments needed for fiber optic, high-speed telecom links.

"I believe that it is in the best interests of consumers and competition that the FCC exercises its power to preempt state laws that ban or restrict competition from community broadband," he said. "Our country will not achieve our massive potential if millions of our fellow citizens and businesses in rural America are being bypassed by the Internet revolution."

The FCC is reviewing comments on its potential action on municipal broadband before issuing any decision.

But some members of Congress have already vowed to fight any federal action that would pre-empt state regulations. U.S. Rep. Marsha Blackburn, R-Tenn., says she will push budget language to restrict the FCC from limiting state restrictions on municipal broadband.

"We don't need unelected bureaucrats in Washington telling our states what they can and can't do with respect to protecting their limited taxpayer dollars and private enterprises," Blackburn said.

©2014 the Chattanooga Times/Free Press (Chattanooga, Tenn.)