published Friday, August 29th, 2014

Chattanooga's high-speed broadband brings high-stakes battle over EPB expansion

EPB
EPB

Telecommunications Act of 1996, Section 706(a)

"The Commission and each State commission with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans ... by utilizing, in a manner consistent with the public interest, convenience, and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market or other regulating methods that remove barriers to infrastructure investment."

Footnote to D.C. Court opinion regarding municipal broadband:

"An example of a paradigmatic barrier to infrastructure investment would be state laws that prohibit municipalities from creating their own broadband infrastructure to compete against private companies."

Source: Federal Communications Commission

When Joyce Coltrin looks outside the front door of her wholesale plant business, her gaze stops at a spot less than a half mile away.

All she can do is stare in disbelief at the spot in rural Bradley County where access to EPB's fiber-optic service abruptly halts, as mandated under a Tennessee law that has frozen the expansion of the fastest Internet in the Western Hemisphere.

Given Coltrin's rural location and the arcane web of regulations governing broadband access, the small business owner has no access to wired Internet of any type, despite years of pleas to the private companies that provide broadband in her community.

"The way I see it, Comcast and Charter and AT&T have had 15 years to figure out how to get Internet to us, and they've decided it's not cost-effective," Coltrin said. "We have not been able to get anything because of these state laws, and through no fault of our own, we are treated as second-class citizens. They've just sort of held us hostage."

Access to high-speed broadband Internet for Coltrin and thousands like her is currently being argued by armies of lobbyists, politicians and voters, who have formed battle lines in the debate over the expansion of Chattanooga's gigabit network, slinging their final arrows as the FCC's comment period on EPB's petition draws to a close today.

Comcast, AT&T and a host of politicians in Nashville and Washington, D.C., have moved to stop what they see as a federal usurpation of a state's right to regulate telecommunications, while Chattanooga residents and broadband proponents across the country say they're simply supporting the rights of cities to determine their own broadband future.

The debate pits mayors against legislators, counties against states and Republicans against Republicans, as Tennessee's ruling party faces a split within its own ranks and among constituents who say access to broadband should transcend petty politics.

Small-government conservatives face a choice to either support a federal agency in its effort to free local citizens from state shackles, or side with state legislatures against what some see as federal overreach into their affairs.

For Coltrin, herself a Republican, the debate is simply a civil rights issue.

"We'd still have slavery if they states could make any laws they wanted to," she said. "We certainly would still have segregation."

Caught in the middle is the FCC, which says it simply wants to enforce the Telecommunications Act of 1996, a law that ordered the agency to eliminate barriers to entry for broadband access. Tom Wheeler, the former cable industry lobbyist who now serves as chairman of the FCC, has praised Chattanooga as the "poster child for the benefits of community broadband networks, and also a prime example of the efforts to restrict them," though he hasn't said how he'll vote.

The outcome is already in doubt. An amendment to an appropriations bill sponsored by U.S. Rep. Marsha Blackburn, the Republican congresswoman for Tennessee's seventh district, would freeze the FCC's funding if it attempts to overturn state prohibitions on the expansion of municipal broadband.

"We don't need unelected bureaucrats in Washington telling our states what they can and can't do with respect to protecting their limited taxpayer dollars and private enterprises," Blackburn said of the measure, which was approved by a vote of 223-200.

But U.S. Rep. Chuck Fleischmann, R-Tenn., himself a strong supporter of states' rights, opposes Blackburn's measure and said he had no plans to back down from his support of EPB's expansion into underserved communities.

"At the most rudimentary level, I would say that this is a matter of local versus state government," he said. "The further you get away from local in terms of decision making, the further it gets away from your constituents."

At issue is section 706(a) of the Telecommunications Act of 1996, which directs the FCC to implement "measures that promote competition in the local telecommunications market or other regulating methods that remove barriers to infrastructure investment."

The National Conference of State Legislators, which represents the state legislatures of all 50 states, argues that petitions filed jointly by EPB and the city of Wilson, N.C. run afoul of the Supreme Court rulings which have held that in the absence of clear Congressional intent to preempt state law, "there is a presumption against preemption," and that the petition "threatens our federalist system of government.

But Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance, said arguments against local autonomy are intellectually dishonest.

"They're in the odd position of arguing for preemption and against preemption in the same breath," said Mitchell, "If the FCC does it, they can cry big crocodile tears but quietly be glad that Chattanooga can expand."

Other opponents of expansion charge that the move pits taxpayer-owned utilities against privately-held businesses, which don't have access to the same financial resources and regulatory advantages as utilities like EPB.

"Public provision of private goods, such as broadband services, often leads to: unprofitable operations that push the recovery of losses to taxpayers and to other public services; and barriers to entry which displace and crowd out private investment. The end result is anti competitive and it raises consumer costs," wrote American Consumer Institute, a nonprofit group that says it seeks to protect the interests of consumers across a broad array of industries.

Comcast, which is fighting regulatory battles on another front to acquire Time Warner Cable, said it is generally supportive of public-private partnerships, but only when tax dollars aren't competing against private capital.

"In general, cities have extensive infrastructure needs like roads, bridges and schools, and we think especially in times of fiscal trade offs that tax payer money should be focused on those needs rather than competing with the private sector," a spokesperson said.

The utility cited a number of failures in which municipal broadband providers have ended up posing a liability rather than spurring prosperity.

For example, Google bought a $39 million system in Provo, Utah for just $1 in 2013, while the municipality will still be required to pay back the debt.

In 2002, 16 cities in Utah joined together to build the UTOPIA network. More than a decade later, the system has yet to turn a profit, Comcast said. Instead, the municipal system has a negative net value of $120 million and owes $500 million in interest payments through 2040.

In Burlington, Vt., the government-owned broadband network is $17 million in debt more than eight years after its launch, Comcast said.

And the city of Groton, Conn., and its residents remain responsible for repaying more than $20 million in loans after selling its fiber network last year to private investors at a loss of more than $30 million.

The list goes on. But there are other lists, like one put forth by the National League of Cities, National Association of Counties, U.S. Conference of Mayors, that praises successful efforts in Danville, Va., Longmont, Co. and Sherman County, Ore.

Chattanooga is perhaps the best example, officials say. EPB has signed up more than 60,000 residential subscribers and is well on its way to paying off debt issued to cover its capital costs. A handful of counties and municipalities including Athens, Tenn., Dayton, Tenn. and Bradley County have already asked the utility to extend its service, which has earned high marks for speed and reliability.

Of approximately 400 local governments in the process of adding municipal broadband, less than 5 percent have experienced financial trouble, said Mitchell. Even so, any FCC ruling will likely be immediately followed by a lawsuit and further efforts to defund the agency in the name of states' rights, he said.

"I think you're going to see Marsha Blackburn and others who routinely get big checks from the cable and telephone companies, those elected officials will make a big deal out of this. They'll try to pass amendment to bills to prevent the FCC from enforcing it." Mitchell said."When it comes down to it, a very powerful lobbyists in state legislatures have convinced lawmakers to pass these laws. It's easy for them to do that because they have a lot of influence in the state capital, and there's almost no public interest in the state capital."

Contact staff writer Ellis Smith at 423-757-6315 or esmith@timesfreepress.com with tips and documents.

about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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