Research & Commentary: Chattanooga Municipal Broadband Expansion

Published September 24, 2014

The electric utility company running Chattanooga, Tennessee’s municipal broadband recently filed a petition to override a state law that prevents it from offering broadband data and video services to residents and businesses outside its electricity service area. The Electric Power Board (EPB) of Chattanooga currently provides a “triple play” bundle of 1 gbps data, TV, and phone service to local businesses and homeowners, competing directly with private providers Comcast and AT&T. The EPB broadband system was developed and deployed using taxpayer dollars and still receives taxpayer subsidies from electric ratepayers to maintain the system. 

Although EPB offers the highest speed of any muni system in the country, the system required expensive upgrades to the city’s electric grid, known as Smart Grid. Upgrading the electrical system cost more than $300 million, with $111 million of that coming from taxpayers via federal stimulus money. In addition, customers using only EPB’s electrical services became responsible for financing $160 million of the Smart Grid costs. All told, the project carried a price tag of more than $550 million for taxpayers and ratepayers

Justin Owen of the Beacon Center of Tennessee argues the EPB is underutilized and interferes with natural competition through unnecessary subsidies. Owen says an expansion of the EPB network would be a waste of tax dollars. “These subsidies have created an unfair advantage for the Electric Power Board (EPB), the public operator of the network, making it difficult and unappealing for independent networks to compete. Yet, despite these unfair advantages, EPB has struggled to capture a considerable share of the local market. Just some 4,000 of Chattanooga’s 173,000 residents are surfing the Internet at high speeds through EPB,” Owen wrote. Even fewer businesses signed up for the service. 

Advocates of municipal broadband programs say they create economic renewal and growth in the tech sector. These programs, however, have a poor record of success, with many suffering cost overruns, service disruptions, debt, and very limited use. Taxpayers are saddled with expensive, underused broadband systems that cost millions to maintain. 

Municipal broadband efforts have failed in nearly every place they have been implemented, costing taxpayers millions to tackle a nonexistent problem. In response, several states have implemented new regulations limiting the ability of cities and counties to create their own broadband systems. This year, the U.S. House of Representatives approved a bill to block the Federal Communications Commission (FCC) from removing these state-level restrictions on municipal broadband networks. 

Keeping government-funded broadband providers out of the market while promoting competitive tax rates and business regulations helps create a vibrant market that encourages telecom companies to expand their services. The FCC should leave control over the creation of municipal broadband programs to the states.

The following articles examine municipal wi-fi and broadband services from multiple perspectives.

FCC Petitioned by EPB in Tennessee to Overturn Municipal Broadband Ban
The Electric Power Board (EPB) of Chattanooga, Tenn., a municipal broadband network provider, has filed a petition with the FCC to overturn a state law that prevents it from offering broadband data and video services to residents and businesses that reside outside its electric service area, this article reports. 

Chattanooga Residents Get Internet, Courtesy of Taxpayers
Christopher Butler of Tennessee Watchdog discusses EPB’s gigabit broadband system, how it developed, the efforts to expand the system, and the various groups voicing their support or opposition to the program. 

The Hidden Problems with Government-Owned Networks
The Coalition for the New Economy examines the budget-crushing dangers for towns all across the country that attempt to use funds better utilized for essential services such as fire protection, law enforcement, and education. The paper offers a cost-benefit analysis of government-owned and -operated broadband networks throughout the United States, finding many are high-risk, low-profit endeavors. 

EPB Eyes Gigabit Expansion Beyond Chattanooga
Ellis Smith of the Chattanooga Times Free Press reports on EPB’s plan to ask the Federal Communications Commission to allow it to expand gigabit fiber optic Internet, TV, and phone access to communities around Chattanooga, Tenn. 

Ten Principles of Telecom Policy
Hance Haney and George Gilder examine the results of telecom reforms in Indiana, the advances made by other innovation leaders in the telecom market, and how other states can follow their lead to reap the rewards of new investment in telecommunications services. 

Municipal Broadband: Wired to Waste
In this National Taxpayers Union policy paper, Andrew Moylan and Brent Mead analyze the costs imposed on taxpayers for municipal high-speed networks. The researchers found several high-profile attempts ended in utter failure due to mismanagement, and taxpayers have been left to foot the bill for government adventurism gone wrong. 

Research & Commentary: FCC Plan to Block State Limits on Muni Broadband
Municipal broadband efforts have failed in nearly every place they have been implemented, costing taxpayers millions while tackling a nonexistent problem. Recognizing muni broadband systems tend to be expensive and underutilized, several states have adopted measures restricting cities and counties from creating broadband systems. This Research & Commentary examines these restrictions and the Federal Communications Commission challenge to them. 

Research & Commentary: State & Local Broadband Initiative Failures
Since the start of this century, municipalities across the nation have proposed and implemented plans to provide their citizens with high-speed Internet access. As of 2007, 52 municipal broadband systems had cost taxpayers a combined $840 million. Cities such as Philadelphia and Provo, Utah — expecting low costs and a reliable revenue stream — experienced ever-increasing costs and limited demand. 

Municipal Broadband Ventures More Harm than Help
Kaitlyn Ewing of Digital Liberty discusses several municipal broadband programs implemented across the country and identifies the difficulties many are facing. 

Municipal Broadband: Optimistic Plan, Disappointing Reality
In this Heartland Policy Study, Steven Titch compares the financial performance of a municipal fiber-to-the-home system in Bristol, Virginia with projections made by the same consultant for a proposed fiber-to-the-home system in Lafayette, Louisiana. Titch notes the Bristol system is losing money because its operating budget is growing too quickly and unexpectedly. He also notes the proposed Lafayette system fails to reflect these higher real-world expenses, and thus budgets too little.  

Municipally Owned Broadband Networks: A Critical Evaluation (Revised Edition)
This study finds the case for municipal ownership of broadband networks is weak. Broadband services are plentiful and reasonably priced. New data from communities that attempted to build and operate municipal broadband systems suggest taxpayers would be very much at risk, even under financing schemes involving certificates of participation. A broadband initiative in Illinois’ Tri-Cities area (Batavia, St. Charles, Geneva) remains a useful case study and cautionary tale for communities with similar plans.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit The Heartlander’s Tech News Web site at, The Heartland Institute’s Web site at, and PolicyBot, Heartland’s free online research database, at  

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