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VOL. 132 | NO. 24 | Thursday, February 2, 2017

Stockard

Sam Stockard

View From the Hill: Haslam Plan Tilts Broadband Playing Field

BY SAM STOCKARD

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State Reps. Pat Marsh and Art Swann emerged from a meeting underwhelmed by Gov. Bill Haslam’s legislation to spread broadband internet access across Tennessee.

“I thought there would be a lot more to it,” says Marsh, a Shelbyville Republican, calling the proposal “a drop in the bucket” financially but at least a starting point.

Swann, a Maryville Republican who proposed rural broadband legislation in 2016 but saw it stall, is a little more critical.

“We’ve been guarding the haystack all this time and nobody’s been taking care of the customers,” Swann said, coming out of a meeting of the Tennessee Advisory Commission on Intergovernmental Relations, which provided much of the basis for Haslam’s plan.

Senate Majority Leader Mark Norris, who chairs the commission, says he believes the governor’s proposal will lead to “better access not bigger government,” and he says it appears to be spurring competition in some areas already.

While most top state leaders don’t want to let municipal broadband providers such as Electric Power Board of Chattanooga expand their footprint to unserved customers, calling it a risk to taxpayers, Swann says it doesn’t bother him to let a nonprofit company with the infrastructure in place expand. 

When legislation enabling public utilities to provide internet outside their service area failed the last two years, Swann backed an amendment in 2016 to let people in unserved areas petition electrical utilities and cooperatives for broadband.

Swann wanted the bill to give people in hills, hollers and mountains across Tennessee a chance to hook up to high-speed internet. It didn’t go anywhere either.

Governor’s plan

About 13 percent of the state lacks access to broadband, defined as a 25 megabits per second upload and 3 megabits per second download, but while only 2 percent of urbanites lack access, 34 percent of rural residents are underserved, roughly 750,000 people.

Introduced by Haslam and Norris at Cane Ridge High School in Antioch, the Tennessee Broadband Accessibility Act is designed to provide high-speed internet service, not cable TV, to fill those gaps, mainly by providing millions of dollars in grants and tax incentives to private providers and changing state law to allow electric cooperatives to engage in retail broadband. They also want to increase use of public libraries to educate people about broadband opportunities.

No timetable is set.

Focusing on the private sector, Haslam’s legislation establishes the Broadband Accessibility Grant Program providing $30 million over three years, $10 million annually, to broadband providers to encourage deployment to unserved homes and businesses.

It also provides tax credits for private providers totaling $15 million over three years based on the purchase of broadband equipment for access in the state’s most economically challenged counties.

The plan calls for deregulation on nonprofit electric cooperatives to let them provide “universal” service in their territories. It also “strengthens protections that prevent electric cooperatives from using electric system assets to subsidize broadband services and ensures that cooperative participation in the broadband market will not limit consumers’ choices.”

Haslam points out electric cooperatives serve nearly 2.5 million Tennesseans and are “uniquely situated” to offer broadband universally in their territories. 

The governor says he can’t guarantee his proposal will take care of every person in Tennessee without high-speed internet. But he contends this is an affordable way to get close, and he says the electric cooperatives “are the right people” to help meet the goal.

“We won’t know until we’re two or more years in, and we see exactly how much it covers,” he says.

Getting it together

Tennessee’s electric cooperatives, which are private entities owned by their customers, are glad to see the governor’s plan would lift restrictions on them. 

Cooperatives cover 71 percent of the state, and officials say changing the law will let them offer broadband directly to their customers or form partnerships with existing providers to reach more people, especially in rural areas where private companies say it’s not worth the cost to string fiber optics one mile to reach one or two customers.

“When broadband is unavailable, too slow or too expensive, the impacts can be profound with jobs and capital investment locating elsewhere, students falling behind their urban peers and existing businesses missing out on opportunities to sell their goods and services,” according to the Tennessee Electric Cooperative Association.

Norris contends the cooperatives’ relationship with TVA, which has exerted its control over about 80 percent of power poles, makes them a natural fit for extending fiber-optic cable for broadband.

“We look forward to working with the governor and the General Assembly to expand connectivity in the state’s rural and suburban areas,’’ says Trent Scott with the Electric Cooperative Association.

But while cooperatives such as Middle Tennessee Electric Membership are studying the world of broadband expansion, others could take longer to get there.

Between all the options out there, it’s amazing Tennessee ranks 29th in the nation in broadband service.

Local telecoms, which already make high-speed broadband and fiber available to 136,000 rural Tennesseans, welcome Haslam’s plan, too. Tennessee Telecommunications Association executive director Levoy Knowles, who represents 21 independent and cooperatively owned companies, says the group is analyzing details to see how it can work with the state.

“The local telecoms of Tennessee have invested more than $90 million the last year in upgrading rural high-speed broadband access. We have the experience, and we have the expertise. We hope that Gov. Haslam’s proposal will offer a level playing field for providers,” Knowles adds.

One of those is Ritter Communications serving about 23,000 customers through Millington Cable TV and Millington Telephone Co., which provides broadband by DSL. The company is still reviewing Haslam’s proposal.

“This is not about overbuilding existing providers, but it appears to be focused on getting service to people who don’t have it available today. And in that regard, we think it’s a good step in the right direction,” says John Strode, a vice president with Ritter. “We also think that the portion dedicated to digital literacy through libraries is a good thing.”

Randy Boyd, commissioner of Tennessee Economic and Community Development, says the department will prioritize grants and credits to areas with little or no service and will be kind to “broadband ready” areas.

“We want the communities to have some skin in the game as well,” he adds.

Odd man out

Possibly a political casualty, EPB doesn’t appear to be part of this deal.

The utility, which offers Chattanooga the moniker “Gig City” through its ultra-fast, 10-gigabits-per-second fiber internet service to all residents and businesses, has been hoping for legislation enabling it to serve people just outside its footprint, including those in southwest Bradley County who have weak or no service.

EPB built its system using a $111 million federal stimulus grant in 2009 and $219 million loan. Consumers who sign up for EPB’s fastest services can download movies in no time and send information at the speed of light via internet. Gamers are said to be big-time users of this system, as well.

But Haslam is no fan of letting EPB move outside its territory. The state stepped in to stop Chattanooga from taking advantage of an FCC ruling for expansion two years ago, and his latest proposal appears to ignore EPB’s capability.

The governor says he wants to hold to “those principles we believe in,” working toward “better access and not bigger government.”

“We believe the expansion of government-owned networks that compete with the private sector, before we do that, we need to allow private entities to address the problem with the support of new initiatives included in our plan,” he explains.

The federal government already provides private companies with grant money to expand to unserved areas, and Norris says the state’s grants would “complement” those. The Collierville Republican downplays the notion this rural broadband plan is contradictory in that it excludes EPB while providing private companies with public dollars.

Norris also says the financial incentives for private growth will be much lower than the typical amount the ECD offers for other job incentives.

Nevertheless, EPB is taking a high road.

David Wade, president and CEO of EPB, says the utility is studying the legislation and hopes municipal utilities will have a role in filling the broadband gap, along with electric cooperatives.

“Since Chattanooga and Tennessee’s other fiber optic communities have the longest and most successful track record of providing 21st century broadband access to Tennesseans, we are in the best position to assist our neighbors who are currently at an economic and educational disadvantage,” Wade says. 

“In the meantime, we stand ready to work with Gov. Haslam, state legislators and grassroots citizens in support of the effort to break down barriers to broadband access.”

Municipal utilities might even be able to play a role indirectly. According to Amanda Martin, an official with the Department of Economic and Community Development, electric co-ops would be able to buy internet for retail purposes from telephone co-ops, other private providers or a municipal utility, or they could build their own data centers.

In that scenario, Volunteer Energy could string some fiber and purchase broadband from EPB for the pocket of people in southwest Bradley County.

But while legislators such as Marsh and Swann say the governor’s plan appears to cater to the big providers, AT&T is not taking a position yet, saying it is happy to see discussion move to a “comprehensive approach,” according to reports.

It must be noted, too, that AT&T has deep pockets and skillful lobbyists who can bend the ears of our state leaders.

Another issue is content, such as the offerings of cable TV, and whether consumers can afford to tap in to high-speed internet. A large number of people have access but don’t buy it.

For now, though, legislators will have to wrap their heads around the idea of giving big companies such as AT&T and Comcast grants and tax breaks for expansion while telling municipal utilities they can’t expand.

Swann, for one, says his biggest concern for years has been “too little competition instead of too much.”

“I think we’re subsidizing the private companies and giving them an advantage against the public,” Swann says.

Good luck explaining that concept.

Sam Stockard covers the Legislature for the Nashville Ledger. He can be reached at sstockard44@gmail.com.

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