Tennessee Advisory Commission Considers Role of Utilities Offering Broadband

Some large Internet providers are calling out government-owned electric utilities for cheating in the open market.

by Andy Sher, Chattanooga Times/Free Press, Tenn. / October 22, 2015

(TNS) -- A Tennessee cable industry lobbyist asserted Wednesday that government-owned electric utilities like Chattanooga's EPB are failing with their offerings of lightning-fast broadband service to customers.

But John Farris' claim later prompted Sen. Janice Bowling, R-Tullahoma, to charge he was peddling "lies" on behalf of investor-owned companies like Comcast and AT&T who fear competition in the rural market.

The firms are battling renewed efforts by municipally owned utilities to extend their broadband Internet offerings and other telecommunication services outside their service areas.

Farris, chief lobbyist and attorney for the Tennessee Cable and Telecommunications Association, made his assertion during a four-hour-long hearing by members of the Tennessee Advisory Commission on Intergovernmental Relations.

EPB President Harold DePriest disputed Farris' assertion. Just last week, DePriest announced Chattanooga, which first won international recognition as the country's first "Gig City" for its 1-gigabit broadband service, announced EPB will now offer a 10-gigabit service.

"Last year, we made $130 million from communications," DePriest said. "Communications paid the electric system $30 million," DePriest said.

He said EPB gave Chattanooga and Hamilton County governments a combined $20 million, some $8 million of which went for in-lieu-of-tax payments. EPB's fiber operation, a stand-alone service which started about five years ago, once had about $90 million in bonded indebtedness. It's down to about $36 million, DePriest said.

"We're making plenty of money," DePriest said.

Chattanooga's 1-gig broadband is 40 times faster than the Federal Communications Commission's proposed new 25-megabit standard for what constitutes broadband. EPB's new 10-gigabit service is nearly 250 times as fast and exceeds speeds now being offered by both Comcast and Google.

The advisory commission, comprised of state and local officials, is seeking to sort fact from fiction on behalf of state lawmakers as municipal power services and investor-owned companies prepare for yet another installment of their years-long war in the Legislature.

EPB and other municipal services also offer telephone and cable services in addition to broadband.

AT&T, Comcast and other investor-owned companies argue it's all unfair because this leaves private enterprise competing with government. They also question whether most families need the fastest Internet service.

But in rural areas, many local government officials, as well as a number of businesses and families, say private companies are failing to provide services they desperately need.

DePriest was initially asked to testify. But the offer was withdrawn by officials for fear he would become a "lightning rod" in the advisory commission's exploration of the issues.

That's because EPB successfully petitioned the FCC to override the state law blocking EPB's ability to expand out of its largely Hamilton County service area. Tennessee Attorney General Herbert Slatery is appealing the FCC's decision in federal court. A number of Republican lawmakers are irate, saying the decision violates states' rights.

During Wednesday's hearing, Farris charged of the municipal power services that "these communities that have gone into this business have done very poorly."

He cited the failed Memphis Networx, which lost $28 million, as well as a troubled operation in nearby Covington. Power services like Chattanooga's EPB and another in Jackson, Tenn., are millions of dollars in "debt," Farris argued.

Cleveland Utilities President Ken Webb, who wants EPB to help his customers get fast Internet service, pointed out that Jackson's debt is from bonds which are being paid off annually.

"I'm a CPA," Webb said. "The existence of debt itself is not the determining factor. The determining factor is the ability to pay that debt back. I know of no problem Jackson has had."

He noted that "AT&T operates with debt."

Farris was challenged by Cleveland Mayor Tom Rowland, the advisory commission's vice chairman, who said many other municipal power utilities, including EPB, have been successful.

Replied Farris: "I don't know of a single one."

Following the hearing, Farris' remarks drew a stinging rebuke from Bowling, the sponsor of the municipal electric services broadband bill. Tullahoma's public power service offers high-speed Internet service to customers.

"It's lies," Bowling told the Times Free Press of Farris' comments. "Because the numbers you present to the [state] Comptroller require a good business plan. You have to firewall that portion of the munis' business, the telecommunications portion. In Tullahoma, in every one of the [seven offering high-speed services] is operating in the black."

©2015 the Chattanooga Times/Free Press (Chattanooga, Tenn.) Distributed by Tribune Content Agency, LLC.

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