PDF: Comptroller's report on EPB telecom venture
By Jason M. Reynolds and Dave Flessner
EPB will seek public input on its $219 million fiber-to-home plan next week after the Tennessee comptroller's office signed off on the proposal.
The utility's board of directors Tuesday set a public hearing on the telecommunications plan for 5:30 p.m. Wednesday, Sept. 5, at EPB headquarters.
"We have been gratified with the amount of public support for this initiative," said Harold DePriest, EPB's president and CEO. "An awful lot of people would like to see us get into this business."
The Tennessee comptroller reviewed and returned the fiber-to-home business plan on Aug. 21 to EPB, just four days after the distributor submitted the proposal to the state, EPB Chairman Joe Ferguson said.
EPB would become the largest municipal utility in the nation to offer broadband Internet, cable television and telephone service to residences, which has drawn fire from the private industry.
Stacey Burks Briggs, president of the Tennessee Cable Telecommunications Association, said the organization opposes EPB's plan and intends to present its side during the public hearing. Government entry into an industry harms companies and deters private investment in a community, she said.
"Who has not come to your community because of the power board deciding to compete with private industry?" she asked. "What investments have you driven away already? It needs to stop. We need to work with private industry to make Chattanooga the best it can be."
EPB officials say their fiber-to-home plan would benefit the economy and draw new businesses interested in using the broadband Internet, which would be 10 times faster than current Internet service in the area. EPB estimates the fiber-optics network will create 2,638 jobs over 10 years.
However, Ms. Briggs said other utility entries into the telecom industry have failed, including Memphis Light, Gas and Water Division, which is selling its Networx system for a loss of more than $28 million. Nashville city leaders last year decided against entering the telecom business, she said.
Despite problems with the other utility telecom efforts, EPB officials expect the proposed venture to turn a profit within four years -- far more quickly than any other municipal electric system has done so far.
In a business plan reviewed by EPB directors Tuesday, the city-owned utility projects that after four years, the new residential cable TV, phone and Internet service should earn a modest $931,565.
EPB projects it will become profitable when at least 35 percent of its residential electric customers subscribe to the new telecom options, officials said.
"We have been very deliberate in our planning and used very conservative assumptions," said James Ingraham, vice president of strategic planning.
EPB has spent more than two years preparing to expand its Internet and phone business into the residential market with cable television.
But unlike most other electric utilities that expanded into cable TV service, EPB isn't emphasizing the video entertainment or telephone links its fiber optic network will provide.
Instead, Mr. DePriest emphasizes the economic development advantages for local residents and the reliability attributes for the electric system by stringing 3,000 miles of fiber-optic lines throughout EPB's service territory.
In its business plan, EPB allocates 82 percent of the borrowing liability for the bonds to finance the fiber-to-home network to the utility's electric system.
EPB claims an all-fiber network will save more than $2 million a year in meter-reading expenses, cut electricity theft by $6.3 million a year, improve maintenance and outage detection and allow more flexible billing options.
Collectively, EPB estimates the electric system will derive more than $13 million a year in benefits from a fully built-out fiber network. Such a system will allow EPB to communicate directly with each home and business and, by using so-called "smart meters," remotely read and control power deliveries throughout Chattanooga.
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