Cable Group Files Suit To Try To Block EPB Fiber Optic Plan

TCTA Says "Using Ratepayer Money Clearly Violates State Law"

Friday, September 21, 2007

The Tennessee Cable Telecommunications Association on Friday filed suit in Chancery Court of Davidson County against the Electric Power Board of Chattanooga on the basis that EPB’s approval Friday morning of a business plan for cable television and Internet services "is in clear violation of Tennessee state law."

Stacey Briggs, TCTA executive director, said, “The EPB business plan calls for the use of electric ratepayer money to build the cable and Internet infrastructure. Using electric ratepayer money to subsidize the cable venture is strictly and very clearly forbidden by state law. Such blatant violation of law cannot be tolerated.”

She said Tennessee Code Annotated Section 7-52-603-9 (a) (1) (A) states: “A municipal electric system may not subsidize the operation of the division (cable television and Internet) with revenues from its power or other utility operations.”

Ms. Briggs said, “This law exists to protect taxpayers and consumers. It is very simple to understand, and it is amazing the EPB board could interpret it any other way than what it states in black and white.”

Harold DePriest, EPB president, said of the charges, "There is nothing illegal about it."

He said, "There is a very well-defined legal path for doing this and we have followed that path meticulously."

Mr. DePriest stated, “This lawsuit is clearly an effort by the Cable Association to limit the choices available to people in the Chattanooga area. More choices available to citizens in this area mean less money for the cable companies. It is not surprising that the Cable Association is opposed to the prospect of losing customers.”

He said EPB "has conducted open meetings and made our Fiber to the Home business plan available for public review."

The next step in the approval process involves a vote by the City Council next Tuesday.

EPB officials said they "encourage all citizens to let their City Council representative know how they feel about the plan."

Mr. DePriest said the utility "plans to fight the lawsuit and move forward to bring a 'Fiber to the Home' infrastructure to the Chattanooga area as planned."

Ms. Briggs said TCTA "strongly believes EPB has not conducted thorough analysis of its business plan, but that if it were to do so would determine the venture highly risky for the utility and its ratepayers."

She said TCTA "over the past two months sought review of the EPB business plan by four independent business finance experts. EPB’s aggressive revenues projections are an astonishing $80 million off area industry standards.

“We have raised the issues of clear illegality and the extremely unrealistic and risky financial basis of this plan with EPB – publicly at the EPB’s Sept. 5 board meeting and again in writing this week to the board. The board has disregarded highly credible financial analysis indicating extreme public risk and the very clear legal violations of this plan.”

The TCTA suit says, in part, that:

- During its 1999 session, the Tennessee General Assembly adopted enabling legislation, codified at Tenn. Code Ann. §§7-52-601 et seq., permitting municipally owned electric plants to provide cable television/video, Internet and related services within its existing service areas, subject to certain conditions designed to regulate the orderly development of a competitive market.

- The plan, as submitted by the EPB, "grossly underestimates anticipated operating costs while severely overestimating gross revenue by basing such projections on unrealistic expectations of market penetration."

- The EPB’s Network operation is allowed to borrow funds from Electric System "with no realistic expectation that the Network operations will provide sufficient revenues to repay the loans, thus exposing the citizen rate payers and ultimately, the taxpayers to fund the deficit."

- The Network operations’ inability to repay the loans from the Electric System "will necessarily mean the electric system will subsidize the Network operations; a practice strictly prohibited by the language of Tenn. Code Ann. § 7-52-603."

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