EPB urged to cut gig Internet price in Chattanooga

EPB urged to cut gig Internet price in Chattanooga

August 18th, 2012 by Ellis Smith in Business Around the Region

POLL: Would you pay $100 a month for gigabit Internet?

Tale of two cities

Chattanooga

Standard Internet (EPB) -- $57.99 per month

Cost of a gigabit connection -- $350 per month

Cost of a gigabit connection with TV -- $362 per month

Number of customers who can access gigabit service -- 170,000

Kansas City

Standard Internet -- free, with $300 installation charge

Cost of a gigabit connection -- $70 per month

Cost of a gigabit connection withstomers who can access gigabit service -- Zero

Sources: Google, EPB

For all the talk of Chattanooga's gigabit network, only 34 customers actually subscribe to the $350-per-month service.

For $50 more, they could buy an iPad2 every month.

"It's not a good use of anybody's money for EPB to engineer this stuff that nobody's going to use," said Clay Hales, CEO of InfoSystems.

Without subscribers, there's not an economic reason for developers to create applications. Without applications, there's little reason for subscribers to sign up.

That's the vicious cycle that city leaders are working to untangle as they build on Chattanooga's GigTank event, which offered incentives for developers to create killer apps for the city's blazing Internet speeds.

"To me, at $350, it does begin to say that this is an elitist thing," said Ronna-Renee Jackson, interim director of the Chattanooga Technology Council. "To me, I think $100 seems like a reasonable sweet spot."

At last count, just 25 businesses and 8 residential customers in the Gig City pay for EPB's gigabit broadband.

Many residents say they just don't need it at any price, and especially not at $350.

Kansas City

Kansas City will offer the same speeds for $70 per month under a Google-backed plan that could attract a much larger group of gigabit customers, Kansas City officials say.

"Certainly the access [Google] is providing to the communities in Kansas City would give you the ability to test things in the education market and the health care market," said Maria Meyers, a spokeswoman for KCSourceLink, a business incubator in Kansas City.

At $280 less than Chattanooga, Kansas City's gigabit will be accessible to many more entrepreneurs, said Katie Erwin, communications manager for the Greater Kansas City Chamber of Commerce.

"It's good for any type of at-home business," she said.

Dozens of neighborhoods and thousands of users already have registered for the service, said Google spokeswoman Christine Chen, though the gigabit service is not yet available and it remains unclear when it will become available.

Customers will pay about $120 per month when the service is bundled together with TV, according to Google.

Pricing

EPB is studying its options. But it has no current plans to change its pricing, said Harold DePriest, president and CEO of EPB.

"We never thought of people needing a gig in their home," DePriest said. "If anybody cranked up to a gig and used it, we'd lose tremendous amounts of money."

The actual cost to EPB to move that volume of data through the Internet is as high as $2,500 per gigabit, he said. So in reality, the $350 monthly price tag is low by comparison, and represents a bet that consumers won't figure out how to draw on that much bandwidth for several more years.

Low as it may be compared to the actual cost, the steep price tag is a barrier to entry, potential customers said.

Few want to shell out $350 for gigabit Internet when the basic 30-megabit plan works just fine and costs less than $60.

Take Sheldon Grizzle, air traffic controller for The Company Lab, who led the city's GigTank project and coached entrepreneurs seeking to develop applications for the gigabit.

Despite working every day to uncover the best ideas for how to use a gigabit, he doesn't subscribe at home.

"I personally cannot afford $350 per month, but if it gets down to $50 or $60, I'd love to have it," Grizzle said.

Grizzle is not alone.

"At $350, with only nine people, that seems like a deterrent," said Jack Studer, a partner in the Lamp Post Group. "I personally think its very much a price issue."

Studer gets by at home with brisk 100 megabit-per-second Internet service. For most uses, the difference between 100 megabits and one gigabit isn't really noticeable, he said.

"From a residential point of view, you're not going to need the gig unless you have six kids," Studer said.

Hoyt Jolley, a hopeful gigabit developer who wants to create a massive online multiplayer game, remains a Comcast subscriber.

"I'm a struggling entrepreneur myself, and every spare dime goes into my business," Jolley said. "I have basic Internet and basic cable."

Much like electricity when it first was introduced, it's simply too early to know what do to with ultra-broadband speeds, or when to hop on the bandwagen, he said.

"Honestly, unless they're watching 37 different HD channels at one time, its going to be very difficult for people to use unless we create a very powerful application that's transmitting lots of information at once," Jolley said. "In order for people to take advantage of the gigabit, people have to be using it. In order to use it, they have to need it. And at the price its being offered, it's a bit cost-prohibitive."

GIG bargains

Though Google has announced its plans for Kansas City's neighborhoods, it hasn't revealed when the city's businesses will be able to access the faster speeds.

Google's focus on neighborhoods rather than traditional businesses highlights a key difference with Chattanooga.

"We're still waiting to see what [Kansas City's gigabit Internet] means in terms of business," Erwin said. "Google has promised the gigabit for business in the next stage of rollouts."

Chattanooga, on the other hand, has marketed the gigabit's business potential to great effect, and this year began offering entrepreneurs gigabit labs across the city where they can test products, said J.Ed. Marston, vice president for marketing and communications at the Chattanooga Area Chamber of Commerce.

"We were a technology nonplayer and now we're a force to be reckoned with in a relatively short time," Marston said.

Forging ahead

Given enough time, the number of uses for the gigabit will grow, and the number of startup businesses will multiply, gigabit boosters say.

"If it happens lightning fast, it takes three to five years to start making money, but you could be talking 10 years to see these ideas mature," Marston said. "No, we don't have our first Google yet, but we're taking the steps to get there."

More events like the GigTank are coming, and gigabit labs in the city library, business incubators and elsewhere will give residents a taste of what they're missing at home.

In any case, it's premature to talk about Kansas City catching up to Chattanooga, officials say.

At this moment, no one in Kansas City can access gigabit Internet speeds, while any of EPB's 170,000 customers can upgrade to a gigabit today, if they desire.

"This is the only place you can do it right now," Grizzle said. "If you want to wait a year or two for another city to come online, good, wait around a year or two. But I think there are going to be people here that are not waiting."

Follow the latest Chattanooga news on Facebook.