NASHVILLE — While broadband Internet providers struggle to determine how to provide consistent service in rural areas, Tennessee education, economic development, public safety and agriculture struggle to keep up with other states and other nations.
Cleveland Mayor and TACIR Vice Chairman Tom Rowland said some of the industry panelists alluded that taxpayer money should not be “gambled” on new investments in broadband service.
Hypothetically, the mayor asked, what if Duke Power Co.
said in 1931 that it would provide electricity to all of the unserved and underserved in the Tennessee Valley in 15 or 20 years. “President Roosevelt thought differently and TVA was established. Where would those areas be without TVA?”
He said municipal utility partnerships are ideal “when there is a need to come to the rescue and help a fellow utility. Partnership does make sense.
“What do I tell the woman who runs a business out of her home, but has to go to the library to file her quarterly taxes? What do I tell a fifth-grader who just got a new laptop to take home to do homework and momma says to take it back to the teacher because we can’t use it?
“There are so many inconsistencies with providers and I think everyone’s goal should be to provide the best quality service to every resident in Tennessee,” Mr. Rowland said. “What do I tell the industrial prospect?
“Again, I think a partnership between EPB and Cleveland Utilities is the best way to go. Partnership to me just makes more sense,” he said.
John Farris, chief lobbyist and legal counsel for the Tennessee Cable Telecommunications Association said communities that have entered into the Internet business “have done very poorly.”
EPB Vice President for Marketing J. Ed. Marston said after the hearing that the telecommunications division pays into the electrical system.
He said the project to deliver very high-speed broadband was initially driven by Electric Power Board’s plan to ensure greater reliability of its electrical grid to prevent the types of cascading blackouts spoken of by Mike Knotts, director of government affairs, Tennessee Electric Cooperative Association.
Mr. Marston said EPB originally planned to roll out its broadband service in a small area and slowly expand, but a $111 million infusion of American Recovery and Reinvestment Act funds accelerated the project, which became a large source of community pride.
The American Recovery and Reinvestment Act of 2009 included direct spending in infrastructure, education, health, and energy, federal tax incentives, and expansion of unemployment benefits and other social welfare provisions.
Because of EPB’s vision, Chattanooga is known as “Gig City” for being the first in the United States to build a communitywide fiber optic network capable of delivering 1 gigabit (1,000 Mbps) Internet speeds. The utility announced Oct. 15 that EPB Fiber Optics offered the world’s first 10 gigabit (10 Gig) Internet service available across a large communitywide territory. Unlike point-to-point commercial installations, which have been possible for some time, EPB’s 10 Gig service is available for access by every home and business in a 600 sq.-mile area.
Mr. Farris said Comcast bought Covington Electric after it failed.
“I gave you material on Memphis Networks in Memphis — $30 million it cost in taxpayer money — and they are all across the country. What I gave you is just a thumbnail of poor financial performance. I think as public officials and stewards of public money, you just need to be careful with that.”
Vice Chairman Rowland asked, “But some have been successful?”
“No, not at all,” Mr. Farris said. “I don’t know of any. I don’t know of a single one. I can give you the information. As of 2010, Jackson (Energy Authority), the man here, has $68 million in debt.”
Jackson Energy Authority Telecommunications Division Senior Vice President Ben Lovins said later in answer to a question from state Rep. Tim Wirgau, R-Buchanan that if the telecom division failed, then other utility divisions would absorb it.
“It would fall back to the city residents in the absolute worse case,” he said.
Continuing, he said JEA has paid off millions of dollars since 2010.
“For an industry that makes $6 billion, and that’s just one company, you’d think they could get a new report,” he said.
Mayor Rowland asked Mr. Farris if he had information on the partnerships like the one proposed by EPB and Cleveland Utilities.EPB laid out its plans in March to provide Bradley County with high-speed Internet and TV service at a cost of up to $60 Million. The announcement was hailed as a big win for rural Bradley Countians.
EPB CEO Harold DePrist told a capacity crowd at the Bradley County Courthouse that the expansion would serve roughly 1,000 people, about 800 of whom have no current option other than dial-up.
“I would suggest that you ask the people in Hamilton County if they want to pay for something over in Cleveland; if that’s how they want their taxpayer dollars spent,” Mr. Farris replied.
“But wouldn’t it be less risk?” the mayor asked.
“It would be greater risk mayor because you’re going farther to fewer customers. There’s more cable laid. There’s much more expense,” Mr. Farris said.
“What are we going to do to reach all of these people?” Mayor Rowland asked.
“I’m not saying there’s not any solution (or)that the status quo should be maintained, but at the outset, we’ve got laws on the books for 16 years. The safeguards are not in place to protect the public on how — in our opinion — the government spends its money on going in a competing with private business. It’s how you do it that’s important,” Mr. Farris said. “And in regard to your friend at the courthouse … they (utility company) won’t process the permit because I won’t agree to pay ‘x’ number of dollars per pole. It doesn’t have to be a rural area. It can be right in the middle of town.”
Senator Jeff Yarbro, D-Nashville, asked why a partnership between EPB and CU not be decided by the local taxpayers.
Mr. Farris said that before allowing additional expansion, based on past performance of utilities, “you’ve got to look at the safeguards.”
He said, “Where can you go and borrow $68 million and just not pay principal a year? Those are subsidies and they’re illegal under the law right now but nothing’s happening. We think there needs to be a look at all of that before additional authority is granted and the government should remove the barriers that the private sector has.”
Ken Webb, Cleveland Utilities president/CEO, identified himself as a Certified Public Account since 1979. He said, “The existence of debt in itself is not the determining factor. The determining factor is your ability to pay that debt back and I know of know issues Jackson has had in the repayment of that debt. They have been successful in their system.
“AT&T operates with debt,” Mr. Webb said. “I have an AT&T bond in my brokerage account.”
Louisville Mayor Tom Bickers said he generally believes government should stay out of business, encourage private investment, and not compete with public dollars, “but broadband Internet seems to be a little bit different animal.”
He said the government has deferred billions of dollars in sales tax, for example, to create the demand for broadband services.
“I don’t think you would be where you are without the government stepping in, so I struggle a little bit with why — having had the benefit of those deferred taxes or the benefit of direct payments — why we should suddenly say hands off from competition.”
He asked why spend money on a wired system that could be made obsolete by wireless.
AT&T Tennessee Public Affairs Director Daniel Hayes said between 2007 and 2014 that wireless traffic increased 1,000 percent. “You’re absolutely right. The market is showing every indication that that activity and traffic is going to continue to grow with connected homes and connected cars. John Deere tractors out in the field are connected and they are reporting maintenance (requirements).”
Wireless connectivity is used to relay information to computers in farmhouses to determine the appropriate nutrients in certain areas of a field. Drones fly above cows and checks their temperatures using infrared technology.
“That’s wireless connectivity, there’s not a fiber optic line that’s plugged into that tractor as it’s going across the field,” he said.
AT&T has invested $1.2 billion since 2012 to upgrade its wireless systems in Tennessee. Wireless though, is not a comparable product to wired broadband because it cannot provide the full bandwidth.
Mr. Knotts said, “None of us know what the future holds or else we wouldn’t be setting here. But based on where technology is, our focus is on wired networks.”
State Senator Jim Tracy, R-Shelbyville, asked if it was not profitable for a business to expand to rural areas, “then why can’t a government entity make it happen?”
Mr. Hayes said the expense led to creating the Connect America Fund, which the FCC collects through charges on phone bills.
“The strict purpose of that fund is to incent and subsidize deployment to these high cost areas,” he said.
State Rep. Tim Wirgau, R-Buchanan, asked: What happens if private business fails? What happens if the government entity fails?
He said, “I want to see it happen, but we have to make sure we do it right. … There are many moving parts Mr. Chairman.”
EDITOR’S NOTE: This is the fourth in a four-part series covering The Tennessee Advisory Commission on Intergovernmental Relations held Wednesday, Oct. 21, 2015, on the status and deployment of broadband Internet service in Tennessee.