Where there is a high rate of return on investment with old technology without any threat of competition, monopolistic incumbents have little reason to improve their networks and/or product offerings.
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On Tuesday, September 15, EPB, the public power utility serving Chattanooga and nearby communities in Tennessee, rolled out fully fiber-powered triple-play services to 17,000, a number expected to grow by July 2010, when services will be available to some 100,000 people and businesses. It will take three years before all 160,000 potential subscribers are passed.
Chattanooga has had a relatively rough time creating the network due to the litigious nature of its incumbents, who have filed 4 lawsuits to stop the project only to have each of them dismissed by the courts. (This is a predictable outcome, many of these companies file frivolous lawsuits to intimidate communities with lost time and legal fees - leading to a no-lose situation for companies that invest more in lawyers than in the networks communities need in the modern economy.)
Prices and Options
All broadband speeds are symmetrical; prices by month
|15 Mbps and basic phone||$68.83|
|15 Mbps / basic phone / basic cable||$92.97|
|15 Mbps/ phone & 120 min long distance / 77 Channels||$117.24|
Caveats: an extra $5.99 a month for HD Capability on the TV, but even the basic phone package comes with caller ID and 3-way calling
The Tennessee Cable and Telecommunications Association kicked off the lawsuits in 2007 and Comcast chimed in a year later. As has been done in other communities, the private companies alleged the power utility was cross-subsidizing its triple-play telecom offering with revenues from the electric side. Aside from this just being a poor business practice, the companies say such cross-subsidization would be unfair to them even as major carriers routinely cross-subsidize from community to community - overcharging in non-competitive markets to make up for keeping prices low in competitive markets.
Nonetheless, public power companies and other public agencies have learned to keep meticulous books to show they are not cross-subsidizing, something courts recognize each time their time is wasted by lawsuit-happy incumbent providers.
EPB has long offered some telecom services. Starting nearly 10 years ago, the power utility stepped up to ensure businesses had access to the telephone and broadband networks they needed. Those services clearly scratched an itch as they had more than 2,300 customers before beginning to expand the network to everyone.
EPB's footprint includes over 168,000 electrical customers scattered over 600 sq. miles that reach into northern Georgia. As the fiber network expands to cover the full territory, it will quickly become the largest publicly owned fiber network in the country - making Chattanooga the envy of larger cities. A recent article in Business TN made just this point:
Josiah Roe of Medium, formerly Coptix, a Web graphic design company, cites the ability to upload and transfer large files with the "comprehensibly better product" as an advantage for his company. "When I go to Chicago or larger cities and they hear we have [FTTH], they're just amazed to see a city of our size doing something like that," Roe says. He adds that, "Chattanooga is very progressive and forward-thinking" in its fiber initiative.
One of the reasons publicly owned fiber networks are commonly built by public power companies is because power companies already need fiber to reliably transmit data in real-time to monitor many areas of the grid. This fiber network will be used extensively for electrical uses, which is why the electricity side of EPB is paying for $160 million of the $220 million expected expense. EPB has applied for $111 million from a Department of Energy smart-grid stimulus grant.
Though many utilities are turning to wireless for smart-grid data transmittal, EPB fears its topology will interfere with long-range wireless solutions. Fiber is considerably more reliable, but the upfront costs are indeed higher. EPB is not actually running fiber to every home for smart-grid applications, just those who are taking telecommunications services. Those who do not take telecom services will have an electric meter wirelessly connect to a mesh network that uses a nearby fiber-connected home to send and receive usage data.
Some have claimed the electrical side of EPB should pay less for the fiber network but the Electric Power Research Institute (EPRI) has validated the EPB numbers. Additionally, people in the smart-grid pilot project are already seeing benefits. From that article:
EPB hopes to recoup its investment primarily from not having to continue to manually read its 160,000 meters, cutting the theft of power from altered older-design meters and generating extra revenues from new video and telecommunications services made possible by the fiber-optic network.
Over the next 3 years, EPB expects to sign up at least 35% of its footprint for its telephone, Internet, or television services. Comcast has made now Chattanooga a priority for investment, offering its "up to" 50Mbps down cable network (often paired with a paltry 5Mbps upstream connection). As usual Comcast will advertise its "introductory" rates that increase dramatically after a set period of time; I have yet to find a publicly owned network that uses such annoying gimmicks.
Katie Espeseth, vice President of EPB Fiber Optics, explained why:
“We’re entering the market with a consistent and clear price — it is not a temporary, promotional price,” Ms. Espeseth said. “Because of our fiber-optic infrastructure, our picture quality is clearer and more consistent and our ‘Fi-speed’ Internet service is consistent and more reliable.”
They offer the handiest package picker I have ever seen from a service provider (though I confess I am not an expert in that). It shows you all the different options and lets you customize your bundle, constantly updating the price. Like other publicly owned networks, EPB wants to offer as much local content as possible. Compare this to major cable companies, that often refuse to live up to their franchise requirements and must occasionally be sued to meet their obligations. EPB is actively looking for local content to put on the television, including things like youth sports that they will put on video-on-demand.
From what I can tell from afar, it looks like EPB is pursuing a strategy of "upping the ante." Rather than try to beat Comcast just on prices, they are offering faster services at existing prices (not necessarily the "intro" pricing used by many carriers to hide the actual cost of services). Note that the slowest broadband connection is 15Mbps/15Mbps - speeds that are faster than the best speeds in most communities around the country. EPB is offering services that will ensure any subscriber can use multiple modern applications simultaneously - an increasingly common need as households continue getting more bandwidth-hungry devices.
Chattanooga's network is exciting and looks to be a great investment for the community. Community Networks generally have no problem of signing up 20% in the first year or two, so getting to 35% in three years should not be difficult. In the meantime, the network is already creating jobs. EPB has hired 70 full-time installers and more temporary workers in order to add 100 subscribers a day to the network.
Espeseth has estimated 2,600 new jobs will be created in the greater Chattanooga area from the fiber network and resulting economic development. Another article puts a number on the projected economic development, expecting "almost $850 million in value from both communications and smart grid services, including things like jobs and energy savings."