CLEVELAND, Tenn. -- A $72 million proposal from Cleveland Utilities and the municipal government of Cleveland, Tennessee, to provide a standard 1-gigabit broadband network and phone service -- with the capability to provide up to 10-gigabit speed to businesses -- is drawing fire from three conservative groups in Bradley County.
According to a proposal submitted in the fall for review by the Tennessee Comptroller's Office, the goal in the proposal is to build a state-of-the-art fiber network for all of Cleveland Utilities' service area. The proposed system would also allow the utility to design and install a smart grid infrastructure that provides automatic fault location for power restoration during outages, better power restoration response times and phone service.
The utility's all-fiber network would be superior to its competitors, according to the plan, and offer more value at competitive pricing and consistently higher speeds. The plan says that the public utility has a reputation for responsive customer service and that all revenue generated by the project would remain in Cleveland to provide direct financial benefit.
But the proposal, opponents say, pits the government against private businesses, could compromise customer privacy and could cost ratepayers more in the end.
Dan Rawls, a former Bradley County commissioner, joined conservative advocates Glenda Pappu and Ted Gleason to send a letter Nov. 21 to the Cleveland City Council and Mayor Kevin Brooks opposing the proposal they call a Trojan horse and see as a government overreach at taxpayers' expense.
Rawls said the move is an example of leadership that doesn't take an honest look at implications. The endeavor is reckless and could leave taxpayers holding the bag if it fails, and the private sector already provides service and has for years, he said in a phone interview.
"Whether it's the initial tab or the long-term tab, it doesn't matter," he said.
Brooks and the City Council haven't seen the proposal yet, but the mayor said he is behind the idea.
"I have been a supporter of broadband expansion since I was in the legislature," Brooks said in a phone interview. "Equal access to broadband is no longer a luxury, but it is now a necessity in the world we live in. Kids are still struggling to do homework, businesses are still struggling to do business even in the city limits of Cleveland, and I support bigger and better broadband any time we can get it."
Electric to broadband
Cleveland Utilities, established in 1939, serves more than 32,400 customers across its service territory, deriving more than 81% of its electric revenues from inside the city limits, with the remainder coming from outside the city in Bradley County.
The utility has a limited fiber backbone network that connects its 17 electric substations to monitor equipment and operations and utilizes its fiber backbone to backhaul electric and water meter readings for billing purposes, the plan states.
The utility's electric division, which would own and operate the fiber network, would lease capacity on its network to a newly-created, internal broadband division that would use the network to deliver high-speed service to the utility's customers, according to the plan.
Bradley activists oppose Cleveland’s proposed $72 million government-operated broadband network
To finance the project, the broadband division would obtain an $8 million loan from the electric system for start-up expenses. Cleveland Utilities Executive Vice President Walt Vineyard said the plan was created with input from a customer survey and a feasibility study through the Tennessee Valley Authority and the state.
Cleveland Utilities President and CEO Tim Henderson said in the plan that adding high-speed internet and related services will provide customers with a better product and generate additional money for the utility in growing the utility's fiber expansion project.
The utility hired a professional market research firm to conduct a broadband interest survey that indicated overall satisfaction of internet providers was rated at 5.6 on a 10-point scale and 6.4 for telephone providers.
The survey, which collected information from 2,143 customers, found 97% of respondents expressed interest in the utility providing internet service, with 46.4% indicating they "definitely would" and 50.6% saying they "probably would" switch to the utility's service. Also, 79.1% of the survey respondents expressed interest in switching to telephone service provided through the utility.
The proposal includes plans to team up with Chattanooga's EPB, the first in the nation to offer gig service leading to the city's being dubbed the Gig City.
Longtime local cable and internet provider Charter serves all of the city and portions of the county.
"Charter believes every family in Tennessee should have high-quality, high-speed internet service available," company spokeswoman Patti Braskie Michel said by email. "That's why we've deployed gigabit-speed service -- delivered over a fiber-backed network -- to virtually the entire city of Cleveland."
Additionally, Charter in December announced 100-gigabit broadband services businesses can purchase, Michel said, adding that Cleveland Utilities should focus its attention elsewhere.
"In communities like Cleveland that are already served by multiple wireline and wireless providers, limited government funding should be focused on the real connectivity needs, like adoption and digital literacy," Michel said. "By leveraging existing networks and partnering with the numerous broadband providers that have already invested in Cleveland, we can ensure every resident has access to the educational, social and economic benefits that broadband provides. We welcome competition and are proud of our record of building, maintaining and upgrading our networks, including investing more than $123 million in Tennessee."
Chris Richardson, president of the Tennessee Cable and Broadband Association, which represents the state's cable broadband operators, said there are problematic elements in government-owned systems.
"Municipally-owned smart meter and broadband projects, like Cleveland Utilities' proposal, are coming under intense scrutiny," Richardson said by email. "For example, the state comptroller and TVA Office of Inspector General recently released the results of their joint investigation into Newport Utilities, which launched a smart meter/broadband project in 2017. Their findings included nearly $5 million in misspent ratepayer funds."
Richardson said municipal utility broadband projects are struggling, particularly those launched in the past five years, representing a trend occurring in Tennessee and across the country.
"Municipal utilities that have set up broadband projects have drastically underestimated expenses while significantly overestimating the amount of revenue they are able to bring in," Richardson said, citing Johnson City in Tennessee and Traverse City in Michigan as examples. "These projects are putting significant stress on local finances."
Richardson said studies have shown similar projects end up increasing electric rates for customers in a competitive climate such as Cleveland's. Competition among service providers has never been stronger, and the Cleveland market is no exception, he said.
"Cleveland Utilities already has the third-highest electric rates in the state," he said. "This project will assuredly increase them even more."
Richardson pointed to data from independent broadband watchdog BroadbandNow, which lists at least nine internet services available in the Cleveland market.
"Now, T-Mobile has entered the home internet business, providing service to more than 60% of the city," he said. "These types of competitive pressures are a big part of the reason municipal utilities' broadband projects are struggling."
He said Cleveland officials should be wary of services threatening ratepayers' privacy and pocketbooks.
"The bottom line is that Cleveland Utilities' smart meter and internet plan is a bad deal for local ratepayers and families that are concerned about their personal privacy," Richardson said. "Local policymakers in Cleveland should consider all of these issues as they deliberate the best path forward."
Rawls and his fellow government-owned-broadband opponents voiced their concerns about the extent smart meter technology could intrude into people's lives in a letter to the city.
"We oppose this project based on a clear, undisputed set of facts," the letter states. "Cleveland Utilities will pursue the implementation of smart meter technology in our county through this (government-owned network), which is responsible for intrusive government thermostat tampering and rolling blackouts in California. 99% of Cleveland residents already have access to broadband internet service through nine different private sector providers."
The opponents said the project would see the city government spending tax dollars and ratepayer funds to go into competition with the private sector, according to the opponents' letter, which contends government-owned broadband networks have an extensive history of failure nationwide and in Tennessee.
Cleveland's City Council and utility board have not seen a formal presentation on the proposal, so the idea is in its infancy, Vineyard, the utility company's executive vice president, said. Those panels have the letter from the Comptroller's Office, so they know it exists and has been deemed feasible.
"The next steps are to present to our utility board, and if they so choose, they will vote to hold a public hearing, advertise it and hold it," Vineyard said. "And then two weeks after that, it would come back to our board for approval to submit to City Council for their consideration."
Approval requires a two-thirds majority council vote under state law, Vineyard said.
For now, there's no timeline or dates set for a presentation of the broadband proposal, he said.
If it's put in place, Cleveland Utilities will launch an extensive marketing effort promoting its services and features and describe the utility's relationship with EPB in Chattanooga as a strategic partner in developing services and supporting the utility's start-up effort and ongoing operations, the proposal states. EPB's national reputation for its high-speed fiber services will be leveraged in marketing campaigns to generate demand for the service.
The proposed network does not include plans to adopt the capability for controlling smart appliances, thermostats and other home smart systems, Vineyard said. In 2012, the municipal utility began installing smart meters -- then called an advance metering infrastructure -- that allows the utility to talk with its meters.
"We can communicate with the meters we have right now. All of them," he said. "That's done by radio on our existing fiber network. They do not have the capability -- the protocol -- in them to work on a home smart network."
If the proposal is ultimately implemented, the utility's plan budgets almost $2.1 million for sales and marketing in the first four years, when officials believe the majority of customers will be acquired.