Tennessee U.S. Senate race offers sharp policy debate over public vs. private ownership of telecom infrastructure

Bredesen wants TVA mission expanded to provide rural broadband service | Times Free Press

A Tennessee U.S. Senate contest provides a sharp policy contrast between public versus private ownership of advanced telecommunications infrastructure. Former Tennessee Gov. Phil Bredesen favors public ownership via the Tennessee Valley Authority (TVA), formed in the 1930s to provide electric service in areas avoided by investor owned providers. U.S. Rep. Marsha Blackburn on the other hand opposes public ownership of telecommunications infrastructure, contending that unleasing market forces and reduced regulation will encourage investor owned providers to build the necessary infrastructure.

The history that led to the creation of the TVA however suggests market forces aren't up to the challenge. Then as now, if the return on investment isn't sufficient, the market fails on the sell side. Providers cannot earn enough profit in a reasonable timeframe to justify the capital expenditure on infrastructure. In that regard, Bredesen is on the right side of history.

That's not to say however that investor owned players and market forces cannot play a role. Privately owned providers can make money building and operating advanced telecom infrastructure and providing services over it -- and with far less risk than they would face as both owner and operator. Competition can take place in these realms. For example, Ammon Idaho is building publicly owned fiber to the premise telecom infrastructure that allows end users to select among competing ISPs.

Incumbent bellyaching over "unfair competition" from public sector fails straight face test

Rural areas in Marion County could still get broadband access | Times Free Press: JASPER, Tenn. — Like many local governments across Tennessee, Marion County leaders have been pushing for a couple of years to change state laws that restrict municipal utilities like EPB's gigabit internet, TV, and phone services from expanding beyond current borders. EPB has petitioned the state and the Federal Communications Commission, too, and Mike Partin, president and CEO of the Sequatchee Valley Electric Cooperative, said broadband access has been "widely debated across the state."

"So far in the [state] Legislature, that has been defeated," he said. "AT&T has a pretty extensive lockdown, it seems like, in the Legislature. That's one of the holdups." Telecommunications companies such as AT&T and Comcast argue that it's unfair to allow government to compete the market with private industry. (Emphasis added)

That argument would hold water but for a single fatal flaw: telecommunications infrastructure is not by nature a competitive market but rather a natural monopoly/duopoly. Shouting "unfair competition" in a noncompetitive market doesn't pass the straight face test.

State rep flustered by AT&T FTTP deployment to unspecified areas of Bradley County, Tennessee

Report: State broadband access lacking | The Cleveland Daily Banner: The debate is now continuing over whether Tennessee should change its laws allowing municipalities, such as Chattanooga’s EPB, to extend its broadband service footprint into adjacent areas. Communication conglomerates such as AT&T and Verizon have been vigorous in their fight against such measures saying any competition between government and private companies would not be fair. There are those who argue that point, particularly noting AT&T has received hundred of millions of dollars in federal subsidies that are supposed to aid in providing broadband access to rural areas.

AT&T announced Aug. 25 it would be introducing its fiber network to “areas of Bradley County.” State Reps. Kevin Brooks and Dan Howell, who have spearheaded efforts in Nashville to change the laws, questioned why the announcement said “areas” of the county. “What areas exactly? Why not all areas of Bradley County?” Brooks asked in a statement to the Cleveland Daily Banner in response to the announcement.

The answer, Rep. Brooks:

1. Whatever areas we cherry pick because the FCC isn't enforcing its Open Internet rules classifying Internet service as a common carrier telecommunications utility requiring universal service and barring redlining.

2. Even if it did, we couldn't afford to comply and would have to go bankrupt.

Tennessee's telecom infrastructure gaps not just a Tennessee problem. It's a national problem.

EPB Says Those Without Broadband Should Make Their Voices Heard - Chattanoogan.com: “Ultimately, Tennessee’s broadband gap is a problem for Tennesseans, and we need a Tennessee solution,” said David Wade, president of EPB. "We will continue to work with the growing number of state legislators and grassroots citizens interested in removing the barriers that prevent EPB and other municipal providers from serving our neighbors in surrounding areas who have little or no access to broadband.

I respectfully dissent. America's telecommunications infrastructure deficiencies manifest in every state, not just Tennessee. It's a national problem that demands a national solution. I elaborate further in this post from earlier this year.

Local government Internet infrastructure efforts spurred by FCC's non-enforcement of Title II, encourgement of "competition"

EPB Lays Out Plans To Provide All Of Bradley County With High-Speed Internet, TV Service; Cost Is Up To $60 Million - Chattanoogan.com: State Rep. Dan Howell, the former executive assistant to the county mayor of Bradley County, was in attendance and called broadband a “necessity” as he offered his full support to helping EPB, as did Tennessee State Senator Todd Gardenhire. “We can finally get something done,” Senator Gardenhire said. “The major carriers, Charter, Comcast and AT&T, have an exclusive right to the area and they haven’t done anything about it.”

The "exclusive right" mentioned here isn't generally a government-granted or regulated license or franchise to offer Internet service. It's actually a de facto duopoly market of legacy telephone and cable companies. Title II of the federal Communications Act recognizes that telecommunications infrastructure due to its high cost of construction and operation tends to function as a natural monopoly. In accordance with this, the Federal Communications Commission classified Internet as a telecommunications utility under Title II by adopting its Open Internet rules in 2015. But the FCC is currently not enforcing the universal service and anti-redlining provisions of Title II.

It's therefore unsurprising that barring such enforcement, local governments will attempt to fill in the gaps in unserved or poorly served areas in response to their citizens' complaints. When those living and operating businesses in landline unserved areas attempt to order Internet service, without FCC enforcement of Title II the incumbent telephone and cable companies can summarily turn them down without consequence. That leaves them little recourse other than to demand their local elected officials do something to help. The FCC's non-enforcement of these Title II provisions correlates with its current policy position advocating local government "competition" with incumbent telcos and cablecos -- in conflict with its Open Internet rules predicated on a monopolistic and non-competitive market.

Redlined in Bradley County, Tennessee

Broadband providers battle over service in Bradley County | Times Free Press: Dr. Terry Forshee, president of Cherokee Pharmacy stores in Cleveland and Dalton, is eager for that growth. He said he can't get broadband at his South Bradley County home near Red Clay State Park.

"Charter Communications has had 27 years to bring cable down to me, but I'm still three miles away from service," he said. "I'm waiting, and I call every month to both Charter and AT&T, but I can't get anyone to come to my residence."

Forshee said he is trying to build his obesity education business, Take Charge, into a national company. But that's hard to do when he can't get high-speed Internet service at home.

Sandy Wallis lives in northern Bradley County, less than a quarter-mile from where Charter Communications and AT&T lines end.

"I've lived in my house for 30 years waiting on Charter and AT&T, and I've had to send my kids into town to do their homework (where broadband is available)," she told the Chamber gathering. "We need better service."

The U.S. Federal Communications Commission's Open Internet rules adopted earlier this year require Internet Service Providers fulfill requests for service under universal service and non-discrimination provisions of the Communications Act. Internet service is treated as a common carrier telecommunications utility under the rules. So far, however, there are no indications the FCC is enforcing these requirements in response to reports of ISP redlining such as these.

Tennessee cooperative official compares 1930s electrification to today's telecom infrastructure challenge

Officials Urged To Let Local Utilities Cooperate On Providing Broadband - Chattanoogan.com: Mike Knotts, director of government affairs, Tennessee Electric Cooperative Association, brought a somewhat different perspective to the conversation when he said, “Advanced telecommunications will be as important to the next 100 years of electric system operation as steam power was to the first 100 years.”

He said the number one barrier to providing adequate Internet access is “purely customer density” and suggested looking at the model of rural electrification in the 1930s. “What cured the problem of rural electrification was the ability to create nonprofit entities that were able to amortize those expenses over much, much longer periods (than private companies). That was the very simple magic that took, in 10 years, less than 10 percent of American farms being electrified to 100 percent — not much more in the secret sauce other than that.”

Actually, Mr. Knotts, there is a another ingredient that's missing today: capital. Unlike today, in the 1930s the federal government stepped up with significant funding and not just talk, window dressing and "funding leads."

Tennesseans want fiber Internet service

More and more areas of the United States are recognizing they need to build fiber telecommunications infrastructure just as they built their own roads and highways. The excerpts below from this story explain why and the growing political sentiment that is reaching a tipping point.

Farm Bureau backs EPB expansions | Local News | Times Free Press: Sen. Todd Gardenhire, R-Chattanooga, said he backs Bowling's bill because his top priority is getting high-speed Internet to rural areas of south Bradley County that are in his district. Some 800 families would benefit, he said.

He said Charter, Comcast and AT&T told him "it's not profitable" to do it. In Gardenhire's view, "private enterprise has given up on taking care of the people."

Some south Bradley Countians are less than a mile from EPB's service area but can't get its broadband, leaving them with dial-up service and a slow connection speed. Joyce Coltrin, whose wholesale nursery is in southern Bradley County, relies on her cellphone to access the Internet.

"It's very hard to use an iPhone for business," said Coltrin, who heads a group of 160 households who call themselves "citizens striving to be part of the 21st century." They, too, have been pushing state legislators to change the law.

*  *  *

Wireless in particular "is capable of a tiny fraction of what fiber can deliver, with respect to speed, reliability, and capacity," she said. "Because of data caps and usage-based pricing, it's also very, very expensive for anyone who uses a lot of bandwidth, such as families who home-school and therefore require lots of online video." Saying that a community "doesn't need fiber because it has DSL or wireless is like saying that the nation doesn't need the Interstatehighway system because we have the Santa Fe trail," Hovis argued.

A Digital Desert: The Internet Debate Pits Local Communities Against Broadband Giants

A Digital Desert: The Internet Debate Pits Local Communities Against Broadband Giants: Bradley County and other rural communities outside Chattanooga have requested that EPB expand its world-class fiber connection to their area, because companies like Charter have failed to do so. EPB wants to expand its service to rural customers where economically feasible, but a state law passed in 1999 - before most American homes had internet access - is keeping the utility from doing so.

The economics for EPB (Chattanooga's local nonprofit electric utility) to construct fiber to the premise (FTTP) telecommunications infrastructure for Bradley County, Tennessee could well pencil out more easily than for the incumbent legacy phone and cable providers -- where it thus far hasn't.

It's time for state policymakers to repeal laws (or the federal government to preempt them) that restrict expansion by nonprofit telecommunications providers like EPB. It makes no sense from a public policy perspective to preserve a for-profit duopoly as an exclusive franchise without a broad socio-economic justification when lower cost community providers may be economically more able to bring FTTP connections to most all American homes and small businesses.

How big telecom smothers city-run broadband | Center for Public Integrity

How big telecom smothers city-run broadband | Center for Public Integrity: “We don’t quarrel with the fact that AT&T has shareholders that it has to answer to,” Bowling said with a drawl while sitting in the spacious wood-paneled den of her log-cabin-style home. “That’s fine, and I believe in capitalism and the free market. But when they won’t come in, then Tennesseans have an obligation to do it themselves.” 

Republican Tennessee State Senator Janice Bowling puts this debate over the role of the public sector in financing or building telecommunications infrastructure into the proper perspective. It's not a contest over capitalism or any other economic philosophy. It's about the hard reality that markets aren't perfect and can and do fail. When that market is for a service like telecommunications that plays such a central role in the health of the economy as a whole, public sector involvement is entirely appropriate and the interests of a single sector of the economy must take a subordinate position.

At a meeting three weeks after Bowling introduced Senate Bill 2562, the state’s three largest telecommunications companies — AT&T, Charter, and Comcast Corp. — tried to convince Republican leaders to relegate the measure to so-called “summer study,” a black hole that effectively kills a bill. Bowling, described as “feisty” by her constituents, initially beat back the effort and thought she’d get a vote.

That’s when Joelle Phillips, president of AT&T’s Tennessee operations, leaned toward her across the table in a conference room next to the House caucus leader’s office and said tersely, “Well, I’d hate for this to end up in litigation,” Bowling recalls.

Actually, no. Legacy incumbent telephone and cable companies love litigation because it fits perfectly with their strategy of buying time and years of delay since they are unable to invest sufficient funds to upgrade their monopolistic and dupolistic telecommunications markets due the limitations of their business models.

Broadband Spring emerges in Tennessee

Tennessee Legies Go Into Pro-Public Broadband Frenzy | Building the Gigabit City

Craig Settles reports on what appears to be the start of what I'm calling "Broadband Spring," powered by a decade of frustration and pent up demand to modernize telecommunications infrastructure to fiber to the premise architecture -- along with the realization that legacy incumbent telephone and cable companies are part of the problem and not part of the solution to getting that infrastructure in place.

This development could represent a tipping point where the public interest of modernizing the U.S. telecommunications infrastructure to fiber to the premise is outweighing the private interest of the legacy providers. It would be a welcome thaw after a 10-year-long winter of recession and failed public policy that has stood in the way of moving forward with this critical infrastructure.

WSJ: About 60 municipal fiber projects deployed in last decade

According to The Wall Street Journal, about 60 U.S. towns and small cities including Bristol, Va.; Barnsville, Minn.; and Sallisaw, Okla., have built state-of-the-art fiber networks and an additional two dozen municipalities, including Chattanooga and Clarksville, Tenn., have launched or are considering similar initiatives.

The newspaper notes the projects have revived policy debates similar to those of more than seven decades ago when local governments opted to build out their own electrical distribution infrastructures to serve areas large private sector providers neglected.

The Nashville Tennessean, which carried and supplemented the WSJ story, reports Clarksville's Department of Electricity is building some 860 miles of fiber cable to offer TV service, broadband Internet and phone, and will start to sign up customers this year. Meanwhile, Columbia Power & Water Systems offers from 1Mbs to 7Mbs of broadband Internet speeds for residential customers at prices ranging from $29.95 to $52.95 per month.

The public providers complain the private providers are moving too slowly. They're willing to take on more risk than the private sector, and that risk is real for poorly planned and executed government run fiber systems as recent events with Utah's UTOPIA and IProvo systems illustrate. IProvo's financial problems have prompted the Provo City Council to consider selling off that city's system; a vote on the transaction is set for this week.

AT&T, cablecos poised to close Tennessee franchise deal that will leave gaping broadband black holes

AT&T and the cable companies are about to screw over much of Tennessee that has been waiting to come into the modern telecommunications age and obtain broadband Internet access.

They are set to announce a deal today in which the cable industry will drop its opposition to legislation that would preempt local government regulatory authority over Internet-protocol based TV (IPTV) service AT&T wants to offer in selected areas of the state. The same thing happened in California in 2006, leaving about 2,000 communities still without broadband access according to a report by Gov. Arnold Schwarzenegger's Broadband Task Force issued in late January.

Tennessee's cable companies, which earlier this year criticized AT&T's initiative because it provided for only limited infrastructure build out requirements that would leave large areas mired in broadband black holes, have reportedly dropped their opposition.
The Tennessean reports today that under draft legislation that was still being negotiated over the weekend, AT&T would have to cover just 30 percent of its territory within 3½ years after it begins offering IPTV, citing sources involved in negotiations.

According to the report, the draft legislation would apply credit toward AT&T's minimal build out requirement if it offers DSL service of at least 1.5mbs to homes that don't now have access to broadband. It's a meaningless provision. Even if enacted, AT&T is likely to ignore it since it has effectively halted new DSL deployments and is concentrating exclusively on its IPTV-based U-Verse offering. Those without broadband will simply be left twisting in the wind. Why would AT&T need the credit anyway with with legislation's already minimal buildout benchmark?

Bottom line is neither AT&T nor the cable companies have lost any skin in the deal and have sacrificed Tennesseans instead by relegating them to dial up and satellite Internet access. That leaves it to Tennessee Gov. Phil Bredesen to look out for the interests of his constituents as he indicated he would do in early February. Rather than endorse this lousy deal for consumers like Schwarzenegger did in California two years ago, he should reject it.

Tennessee broadband build out debate highlights conflict between public and private interests

The Tennessee broadband build out bloodbath is heating up, according to the The Tennessean. The cable industry is running TV ads suggesting AT&T will redline rural areas if the state enacts AT&T-backed legislation putting the state rather than the local governments in charge of issuing Internet Protocol TV franchises.

The redlined areas will likely remain unconnected for decades from AT&T's new U-Verse fiber and copper based service offering IPTV, voice and high speed Internet. AT&T denies it redlines in the dozen states where it has rolled out U-Verse. Wrong, according to a couple of industry analysts quoted in the story. AT&T lacks patient capital to invest in providing a wider base of U-Verse service and therefore installs U-Verse infrastructure in selected areas only where it believes it will get the quickest return on investment.

This story aptly illustrates the clash between public and private interests that has produced the incomplete and balkanized crazy quilt telecommunications infrastructure that has effectively divided the U.S. into two nations: one with access to advanced telecommunications services based on broadband Internet and one without. Public policymakers are rightly concerned about this situation given the increasingly important role of broadband access to the economy.

Governor: "We ought to consider what Tennesseans want"

Tennessee Gov. Phil Bredesen made it clear earlier this year his policy priority as AT&T seeks legislation allowing it to offer advanced broadband services under a state charter is ensuring the company build out a complete infrastructure rather than the partial one that presently leaves many state residents on the wrong side of the digital divide.

Bredesen underscored that point in remarks reported by the Associated Press Feb. 4 that suggest he's putting the interests of his constituents first:

"Last year and so far this year, it's shaping up into what AT&T wants versus what the cable TV companies want," Bredesen said. "Maybe at some point, we ought to consider what Tennesseans want. It's something I am taking a look at how I might have an influence on."

Tennessee governor says broadband build out his priority as lawmakers mull statewide IPTV franchise bill

Tennessee Gov. Phil Bredesen wisely understands that broadband build out is the single most important issue in AT&T's push in the current legislative session for legislation allowing it to bypass local governments in its quest to sell Internet Protocol-based TV over broadband connections.

According to this Associated Press report, Bredesen hopes to influence the legislative debate this year after similar legislation bogged down in the 2007 legislative session.

"The issue for me is not coming down on the side of cable or AT&T - it's just an issue of that I don't think we have adequate broadband coverage in Tennessee," the AP quoted Bredeson as saying.

AT&T distorts build out as socioeconomic issue

As it did in California and other states where it has sought statewide broadband franchising statutes, AT&T is once again distorting the issue of build out requirements as one of socioeconomic status.

This time it's Tennessee and AT&T Tennessee President Gregg Morton is insisting that AT&T supports language in proposed state franchise legislation that prohibits red-lining of low income neighborhoods.

That's an irrelevant red herring. Building out advanced telecommunications infrastructure has nothing to do with neighborhood income levels. AT&T wants states to issue franchises rather than local governments because they know the locals will rightly insist they serve their entire communities and not just parts of them with an incomplete system.

The reality in Tennessee and other states where it has petitioned for state franchise laws is that AT&T wants to build advanced telecommunications infrastructure on the cheap, leaving some residents and businesses with access to advanced broadband-based services and others without.

Tennessee should reject this effort and tell AT&T and other backers of the bill it won't tolerate dividing the state into digital haves and digital have nots.

Reverse regulation and the race to the bottom

This excerpt from the Jackson, Tennessee Sun once again reveals the real competition between the telcos and cable companies isn't about who can get the most customers with upgraded infrastructure that's able to provide advanced telecommunications and video services. Instead, it's just the opposite in the perverse state of today's wire line telecommunications industry. It's a battle in which the telcos and cable companies compete to serve the narrowest geographical base of potential customers while devising rules to force the other guy to serve the broadest possible base. Call it reverse regulation. In most industries, businesses want regulation that allows them to reach more -- not fewer -- customers. Not in wire line telecommunications, in which the players are engaged in a race not to the top, but to the bottom. (Incidentially, Sen. Ketron is dreaming if he truly believes AT&T plans to roll out its fiber/copper hybrid project U-Verse infrastructure in rural areas. U-Verse is targeted exclusively to select urban/suburban areas.)

By using its existing infrastructure, AT&T could reach smaller rural communities that do not have, and may never have, cable service because of their size, said state Sen. Bill Ketron, R-Murfreesboro. Ketron is the main sponsor of the cable legislation. The bill does not ask for any state funding for AT&T.

"The faster we get broadband into our rural communities, the faster those communities can be connected to the world," Ketron said. "Not only from our children in education in being connected but in providing the economic link to industrial development to those communities."

(Tennessee Cable and Telecommunications Association Executive Director )Briggs argues otherwise.

"They have said they intend to serve 70 communities, and there are over 500 to 600 franchises," Briggs said, "so right there it tells you they do not intend to serve everyone."

Tennessee broadband build out bloodbath predicted for 2008 legislative session

Tennessee state Senator Tim Burchett of Knoxville is predicting there will be a “bloodbath” in the 2008 legislative session as lawmakers once again entertain AT&T's request to preempt local governments and put the state in charge of broadband franchises that include delivery of high bandwidth IPTV video service.

Local governments won out this year when they convinced lawmakers Ma Bell was trying to avoid local government demands that AT&T build out its infrastructure to serve all of their residents and businesses. AT&T doesn't want to make that investment and hopes legislation making the state government the sole regulator will allow it to avoid negotiating with local governments.

“We believe that [the AT&T legislation] weakens consumer protections because there are no build-out requirements,” Carole Graves, communications director for the Tennessee Municipal League, told the Knoxville News Sentinel in this article via Free Press.

Clearwire is missing market opportunity to fill in broadband black holes

A couple of weeks back, I blogged that the big WiMAX players like Clearwire aren't likely to fill in America's many broadband black holes where neither cable nor telco broadband is available.

Here's more evidence: The Tennessean.com reports today Clearwire is sticking to more populated areas of Nashville. There are more customers to be had there of course but there's also lots of broadband competition from the wireline telco and cable broadband providers. While there are fewer prospective subscribers outside the city limits, Clearwire shouldn't neglect these areas since they face little competition other than satellite Internet, which it can easily outperform from a price/performance standpoint.

Read this lamentation from one prospective Clearwire subscriber who like your blogger is situated on the dark side of the digital divide by only about a mile:

One group of people who may be disappointed with Clearwire is rural residents who don't have access to broadband through AT&T or Comcast. Clearwire is sticking mostly to major population centers in the Nashville area with its service.

George Reynolds hopes Clearwire gets to his house in west Nashville on the Cumberland River.

"Broadband is available on Charlotte (Avenue) and that's one mile from my house,'' he said, adding that he has been trying to get AT&T to give him broadband service for about three years.