Cable Industry Misleading Legislators and State Officials

Tennessee’s municipal electric broadband providers are success stories as they implement a successful business model that is providing tremendous benefits to the communities they serve, contrary to misleading and inaccurate testimony from the cable industry during a hearing to a state panel last week.

When asked by a TACIR panel member if any of the state’s municipal electric broadband providers have been successful, the Tennessee Cable Telecommunications Association doesn’t "know of a single one." To set the record straight, all current municipal electric broadband providers that are offering full broadband service are cash flow positive with a net positive monthly income.

The cable industry is attacking Tennessee’s municipal electric systems over its support of legislation (SB1134/HB1303), which seeks to remove the territory restriction on broadband services offered by Tennessee’s municipal electric systems. The bill would allow municipal electric broadband to expand to more areas where it is needed if those communities want it.

"Municipal electric broadband providers are operating in the black and paying down debt with ratepayer revenues, not taxpayer funds," said Mike Vinson, Executive Director of the Tennessee Municipal Electric Power Association (TMEPA). "There is a difference between debt and deficit, between taxpayer funds and ratepayer funds. The cable industry should learn the difference and retract its comments."

Fiber broadband outlays are a significant capital investment requiring long-term investments through bonds and loans. Municipal electric broadband bonds and debts are being paid off with revenue from broadband subscribers and according to their business plans, just like private incumbent providers. No taxpayer funds are being used to pay off municipal electric broadband bonds or debt.

"The existence of debt itself is not the determining factor. The determining factor is the ability to pay that debt back," testified Cleveland Utilities President/CEO Ken Webb to the TACIR panel, who is also a CPA.

"Legislators and state officials deserve the whole story and to not be misinformed," said Jeremy Elrod, Director of Government Relations for TMEPA. "Municipal electric broadband providers that are operating today are doing well and paying down debt through subscriber revenue with no state funding and no taxpayer dollars from the cities and communities they serve. To imply otherwise is misrepresenting the facts and simply wrong."

A snapshot of just a few municipal electric broadband providers across the state:

EPB Fiber Optics System in Chattanooga reduced its debt by over $14 million from FY 13-14 to FY 14-15, and its Telecommunications System component became completely debt free. EPB now has more than 76,800 fiber optic customers, and it recently announced it will begin offering 10 gigabit service, the largest municipal deployment of such speeds in the nation. A University of Tennessee at Chattanooga study suggests that EPB's fiber optics has helped generate at least 2,800 new jobs and added $865.3 million to the local economy by cutting power outages, improving Internet links and attracting businesses to the "Gig City."
Jackson Energy Authority (JEA) has lowered its debt from FY 09-10 levels by 33%. Over just the past four fiscal years, JEA has paid off over $19 million in debt while averaging over $4.7 million in annual net income each of those years. This summer JEA finished upgrades to their broadband service to offer gigabit speeds and ended FY 14-15 with a cash position of $7.69 million.
Morristown Utility Systems (MUS) Fiber Optics Systems made $1.3 million in net income for FY 14-15 and saw overall revenue increase 8% due to customer growth. All debt payments are on schedule, and the Fiber Optics Systems paid $959,448 to the Electric System for its portion of shared expenses. MUS looks to realize a net savings of $30,000 to $40,000 per month after $1 million in upgrades that gives MUS its own phone switch. All MUS divisions utilize the fiber network to optimize operations and improve reliability and outage response.
CDE Lightband in Clarksville finished FY 14-15 with net positive income while making all necessary payments to the electric division, loans from the electric division, franchise payments to the city, as well as tax payments. The broadband division has provided more than $5.5 million annually to the electric division in shared costs and lease payments. CDE Lightband’s broadband Internet division currently has more than 18,000 customers with 27 percent growth in the commercial customer sector from the previous year. CDE’s fiber system saves another $3.5 million annually due to faster electric restoration and safer and more reliable power delivery, with larger outages typically reduced by as much as 50 percent.
Erwin Utilities started offering broadband services in March and is gradually rolling out its gigabit broadband service without having to borrow money.

Estimates show at least 422,000 households across Tennessee don’t have access to landline internet speeds that meet the FCC definition of high speed broadband, 25 mbps download/3 mbps upload, with another 1.6 million Tennessee households served by only one provider.

"During the hearing elected officials, community leaders and interest groups from across the state confirmed the need for more and better high speed broadband service, and municipal electric providers stand ready to help with the fastest internet speeds in the country and the resulting economic development opportunities," said Elrod. "If the legislature removes the restriction on where municipal broadband providers can offer service, Tennessee will see more consumers and communities receive access to high speed broadband, including the fastest internet speeds in the county."

All municipal electric broadband providers offer speeds that exceed the FCC broadband standard, with seven providers offering 1 gigabit per second download/upload speeds, the fastest internet speeds in the country. The seven municipal electric broadband providers with community-wide fiber networks are accessible to 732,451 Tennesseans and generate over $181 million in fiber revenue. 44% of the households with access to municipal electric fiber broadband networks are signed up as subscribers.

"Every municipal electric system is making long-term investments in their communities, and offering broadband service is just another local investment to aid economic development, improve education, increase telemedicine opportunities, and overall make where they call home better," said Vinson. "Municipal electric broadband helped to make Tennessee the leader in the nation with access to gigabit speeds, and changing state law would bring those speeds to even more Tennesseans that are wanting it."

TMEPA is made up of 59 municipal electric systems across the state, which serve 2.1 million homes and businesses or 70% of Tennessee’s electric customers. Eleven municipal electric systems are now offering some level of broadband service. For more on setting the record straight, see the attached document that debunks myths about municipal electric broadband.

Additional Information:

Current Municipal Electric Broadband Providers
(g) – gigabit speeds available     * - testing, limited, or beginning service soon

    Athens *
    Bristol (g)
    Chattanooga (g)
    Clarksville (g)
    Columbia
    Erwin (g) *
    Jackson (g)
    Johnson City *
    Morristown (g)
    Pulaski
    Tullahoma (g)