Tennessee Broadband Battle: FCC, Legislature Square Off Over Municipal Utility Bid

Municipal utilities in Chattanooga want to widen their broadband footprint by extending their fiber-optic service outside of their current service territories, where local governments request the service.

by Dave Flessner and Mitra Malek, Chattanooga Times / February 26, 2015

(Tribune News Service) -- Tennessee is leading the nation in the share of people with access to high-speed gigabit Internet service, which is now offered by five municipal electric utilities and soon will be offered by Google Fiber in Nashville.

But outside of those areas, only about half of rural Tennesseans have access to what the Federal Communications Commission calls broadband service needed for online education, telecommuting or most telemedicine services.

Municipal utilities like EPB in Chattanooga want to widen their broadband footprint by extending their fiber-optic service outside of their current service territories, where local governments request the service. But to do so, EPB and other municipal providers will need help from either the Tennessee Legislature in Nashville or the FCC in Washington, D.C., to lift a 15-year-old restriction on where they can expand their fiber-optic networks.

Private telephone, cable TV and other telecommunication companies object to having to compete with local governments in providing upgraded Internet service at speeds many claim are still not needed or likely to be used by most people. In 1999, Tennessee limited municipal utilities to serving only their existing power service territory with telecom services, and those limits have remained despite repeated attempts by municipal electric utilities to lift them.

State Sen. Janice Bowling, R-Tullahoma, and state Rep. Kevin Brooks, R-Cleveland, are pushing a legislative proposal again this year to give Tennessee municipalities the freedom to expand high-speed Internet services outside of their electric service area, if local governments request the service.

"We cannot afford to wait with the need as critical as it is today for high-speed broadband service," Bowling said. "We're already behind the curve in many rural areas. Let us come out of the 20th century as small towns and join our sisters that are already in the 21st century with modern-day broadband service."

With the explosion of the Internet and its impact on schools, universities and businesses, she said the need for lightning-quick service "has reached critical mass," especially for rural areas in her district and across Tennessee. She said she simply wants to offer the option for municipalities to offer broadband where private telecoms have not and where local governments say they want the service.

But lifting the limits on municipal broadband has been rejected before in Nashville by lawmakers worried that government utilities might shift costs to taxpayers or ratepayers or crowd out private investment.

"I don't understand why the government needs to do this," said state Sen. Mark Green, R-Clarksville, vice chairman of the Senate Commerce and Labor Committee.

But even if the state effort fails again this year in the General Assembly, EPB and other municipal broadband supporters may get some help today from the FCC which is expected to act on an EPB petition for the federal government to effectively overrule the limits on municipal broadband systems in Tennessee. The FCC will likely vote to give EPB the authority to expand its broadband service despite state restrictions on where it may operate.

The FCC decision today could become effective almost immediately.

"The goal is to release as soon as possible," FCC Spokesman Mark Wigfield said. "While there are no hard-and-fast restrictions, the goal is to implement the policies as adopted, and the only way to do that is by releasing the order."

But the FCC decision is likely to be challenged in court and in Congress.

U.S. Rep. Marsha Blackburn, R-Tenn., has vowed to fight to prevent the FCC "from trampling on the rights of states when it comes to 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.

Private telecoms also are likely to fight any FCC decision to overrule state limits on municipal utilities expanding into Internet and cable TV services.

"If you allow municipalities to expand their networks beyond their footprints, it is very similar to Obamacare where you allow government to step in and invest untold amounts of money into something that already exists while stifling further private investment and threatening further private sector job creation opportunities," said John Farris, executive director for the Tennessee Cable Communications Association.

While supporters of municipal broadband cite the success of nine municipal power utilities that now offer broadband service to their Tennessee customers, critics of expanded municipal broadband point to Memphis Light Gas and Water, which lost more than $28 million of ratepayer funds in a failed telecom venture called Memphis Networx.

"The ratepayers of MLGW ultimately had to pay for that mistake," said Chuck Welch, a Nashville attorney who represents competitive local exchange carriers in Tennessee.

Critics also contend that local government investment in telecom ventures discourages private companies from making such investments, especially given that the cost of their capital is usually more expensive than what government utilities or agencies can borrow for in the municipal bond market.

David Snyder, CEO of VolState Inc. and Revtel LLC in Dayton, Tenn., said he started deploying high-speed broadband in Rhea County but stopped when he learned that EPB might extend its government-backed network into that area.

"When I looked at my payroll and my investment risk -- and if my own government comes behind me and turns that investment into dust -- I'm not taking that risk," Snyder said. "We've backed off the deployment of our private sector investment, and we've done it specifically because of the threat of competition from government. It is very real, and I deal with it every day."

EPB President Harold DePriest said the utility will expand its broadband service only where it is asked to do so and only if it makes financial sense to do so.

"It's designed to be a real business, but we are owned by the people of Chattanooga and our mission is to serve those people," he said.

DePriest said EPB is more likely to expand its services to rural areas than are private telecoms because EPB doesn't have to make a profit and isn't trying to protect an incumbent business in such areas.

EPB filed its petition last July asking the FCC to allow it to expand its gigabit fiber-optic Internet, TV and phone access beyond Chattanooga. EPB cited the Telecommunications Act of 1996, which requires that the FCC remove barriers to entry for broadband access. The city-owned utility in 2008 won approval to offer service in Chattanooga.

Joyce Coltrin is one of many looking for service so she can get the Internet at her business in southern Bradley County, J&J Nursery. A group of about 160 people have organized to that end, complaining that the only broadband service available in their area comes from either wireless or satellite connections.

"We went for years being promised Internet by AT&T and Charter" Communications, Coltrin said. She is hopeful that even if the federal order isn't adopted, the "state Legislature will say it's time" and make changes to Tennessee law.

Joelle Phillips, president of AT&T Tennessee, said private telecommunication companies are expanding high-speed Internet to businesses and areas where there is demand. Rural areas are more expensive to serve, she said, and typically have to be subsidized to upgrade connections.

She dismissed claims that everyone has to have fiber-optic connections for high-speed Internet service.

"There is no one size fits all in delivering high-speed broadband speeds," Phillips said.

But to extend Internet to rural areas, even conservative Republican lawmakers are backing the right of municipal utilities to expand service.

"I hope that the FCC decides to allow local municipalities to provide additional consumer choice, particularly for those who live in rural areas with limited broadband options," said U.S. Rep. Chuck Fleischmann, R-Tenn.

In Nashville, state Sen. Todd Gardenhire, R-Chattanooga, and state Rep. Brooks, R-Cleveland, both said changing the state law would open up more choice and needed options for consumers outside of EPB's footprint.

"There are many people in Bradley County who don't have poor broadband service; they don't have it at all -- and we're only a stone's throw away from Gig service by EPB," Brooks said.

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

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