Tennessee Municipal Electric Broadband Myths -- DEBUNKED

Myth 1.    The government should not offer the same services that private companies do.

Fact:    Local governments through their public utilities offer essential services for their communities. Public investments in vital infrastructure and essential services attract private investment and help spur economic development. High speed broadband is now an essential service for all citizens, businesses and industries. When a community decides that its needs are not being met for essential services such as broadband, public utilities like municipal electric broadband should be an option, particularly where they are offering the fastest internet speeds available.

Myth 2.    Municipal electric broadband is subsidized by taxpayers and electric rate payers.

Fact:    Like municipal electric systems, municipal electric broadband receives no state funding and no taxpayer dollars from the cities and communities they serve. Municipal electric broadband investments are paid off by revenue from broadband rate payers and not with taxpayers’ dollars. State law requires municipal electric broadband to operate as a separate division from the electric service as an enterprise fund. A municipal electric system is prohibited from subsidizing the broadband division by state law and by TVA, its federal regulator. Many municipal electric systems are already multi-utilities with water, wastewater, or gas. Therefore, it is common for a municipal electric system to operate several utilities jointly but keep them separate financially. 

 

Myth 3.    Municipal electric broadband providers don’t pay taxes.

Fact:    All municipal electric systems make payments in lieu of taxes (PILOT) according to a process spelled out in state law on all facilities, whether they are for electric or broadband services. For a municipal electric system’s broadband facilities, a municipal electric system must also include excise and franchise taxes, sales tax, and local privilege tax so that they pay "to the same extent as if it were a private [broadband] provider." Municipal electric broadband providers pay above and beyond what they calculate on their electric system.  

Myth 4.    Municipal electric broadband providers don’t pay pole attachment fees.

Fact:    State law requires a municipal electric system to "charge or allocate as costs to the [broadband] division the same pole rate attachment fee as it charges any other franchise holder providing the same service." 

Myth 5.    Tennessee’s municipal electric broadband providers are in bad financial shape.

Fact:    All municipal electric broadband providers that are offering full broadband service are cash flow positive with a net positive monthly income. Each provider is proceeding according to the business plan they filed with the Comptroller before they began offering broadband services. Fiber broadband outlays are a significant capital investment requiring long-term investments through bonds and loans. Municipal electric broadband bonds and debts are being paid off with revenue from broadband subscribers and according to their business plans, just like private incumbent providers. No taxpayer funds are being used to pay off municipal electric broadband bonds or debt. Typically, the longer a municipal electric broadband provider has operated the less debt and more customers it has. Some providers are doing better than their original business plans expected, and some are now making reinvestments and improvements out of regular cash flow instead of using bonds or loans.  

Myth 6.    Municipal electric broadband hurts investments by other providers.

Fact:    When municipal electric broadband is offered in an area, investments by the incumbent provider(s) increases. In areas with only one provider, the incumbent provider has little motivation to invest in its facilities, offer competitive prices, or be responsive to the local community. Where municipal electric broadband is offered, the incumbent providers are offering faster speeds and better pricing than before.

Myth 7.    Every part of the state is already served.

Fact:    Using the new, updated and modern definition of high speed broadband set by the FCC (25 mbps download/3 mbps upload), 422,000 households are unserved in Tennessee and 1.6 million households are served by only one provider. While wireless and satellite providers cover much of the state, many customers do not prefer them for home, business, commercial or industrial use because of monthly data caps and signal/connectivity issues. All municipal electric broadband providers offer speeds that exceed the FCC broadband standard, with eight providers offering 1 gigabit per second download/upload speeds, the fastest internet speeds in the country.   

Myth 8.    With the recent FCC ruling regarding EPB of Chattanooga, there is no need for state legislation. 

Fact:    EPB has reaffirmed the need for state legislation that removes the territorial restrictions on municipal electric broadband. Implementation of the FCC ruling may be delayed for years if legal action is taken by incumbent providers or the Tennessee Attorney General. All municipal electric systems, including EPB, are still seeking passage of SB1134 and HB1303 to give an immediate and definitive conclusion to this issue.  

Myth 9.    Municipal electric broadband providers will "cherry-pick" customers if allowed to expand.

Fact:    Tennessee’s municipal electric systems are a part of the public power tradition of offering services to people and places that private providers don’t serve. Many municipal electric broadband providers offer broadband services to all of their electric customers within their electric service territory. If allowed to expand service, municipal electric broadband providers will offer services where it is makes fiscal sense to do so. They are more likely to find a way to make it financially feasible to serve customers in a less dense or rural area than the private incumbent providers, who need a much higher rate of return to make a profit.