Lexington, Tennessee Will Soon See Fiber Competition Thanks To Local Utility

Tuesday October 18, 2022

Lexington, Tennessee is the latest U.S. city that will soon see the expansion of more affordable fiber thanks to the city-owned utility, Lexington Electric System (LES). LES’ recent $27.49 million state grant award will be the backbone of a new initiative that will both improve the utility’s electrical services, and deliver a long overdue dose of broadband competition to the area.

Cooperatives and utilities were huge winners in the latest round of awards from the Tennessee Emergency Broadband Fund, itself made possible by the American Rescue Plan. Of the $446.8 million in awards doled out by the state, utilities and cooperatives walked away with $204.4 million — or nearly half of all funds.

LES Lands Major Grant Funding

The second biggest grant recipient was LES, whose $27.49 million award will be used to deliver future-proof fiber to the 22,000 residents across Henderson, Decatur, Benton, Carroll and Hardin counties that already receive electricity service from the utility.

The utility’s original business plan estimated that it will take five years and roughly $42 million to deploy 2,101 miles of new fiber to about 88 percent (18,183) of its current electric customer base. It then proposed taking another five years — and an additional $1.2 million — to reach the remainder of the utility’s harder to reach service users.

More recent estimates proposed by the utility peg the full cost of the fiber deployment at somewhere between $50 million and $55 million.

“The $43 million dollars was an estimate on the front end of the project before we had a formal design done, updated material, labor, and all construction cost,” Lexington Electric System General Manager Jeff Graves told ILSR. “Part of this was based on the cost per customer of systems with a footprint similar to ours.”

Graves told ILSR that while the $27.49 million recently awarded by the state will go a long way toward building the new fiber network, the utility is still hiring consultants to manage the project and determine the best additional funding options moving forward.

“Right now, we are evaluating consultants to manage the project for us and will be making a decision hopefully within a few weeks,” he said. “Additional funding will come once we know the amount we will need to proceed which will be provided by our consultant we select.”

The LES fiber project was given its final green light after Lexington leaders voted to accept the $27.49 million grant for broadband service at a city council meeting on September 15.

As with most utility broadband projects, the fiber network will drive benefits well beyond shoring up broadband access to local Lexington residents and businesses.

“A state-of-the-art fiber optic communication network will provide the Lexington Electric System with the capability to improve and enhance its Supervisory Control and Data Acquisition (SCADA) functionality, strengthen its electric system operational controls, and expand its Automated Metering Infrastructure (AMI) for more efficient operations,” the utility’s project plan said.

Once completed, LES’s goal is to provide symmetrical 10 Gbps service to all customers in range of current electricity service, though it’s too early to determine either the full speed lineup or residential or business broadband pricing.

Chattanooga Inspires State Utilities To Challenge Telecom Monopoly Power

Before applying for state grants, LES conducted a survey of broadband access in the counties they currently serve and found that most local private sector ISPs were incapable of offering broadband at speeds that even meet the FCC’s base definition of broadband, currently still stuck at a dated 25 Megabit per second (Mbps) downstream, 3 Mbps upstream.

“In the more rural areas outside of Lexington and Parsons, Internet speeds often fall below the FCC’s minimum speed level or Internet access is simply not available at all,” the utility found. “Access to the Internet for all of LES’ rural customers and the availability of faster, more reliable, and more affordable Internet for all its customers is a key concern for LES.”

As such, the fiber network should prove hugely beneficial to Lexington locals long-neglected by regional telecom monopolies like Charter Communications (Spectrum), which has long enjoyed market dominance in the city. AT&T and TDS Telecom provide a smattering of additional competition in the city, though limited options have resulted in high prices and low speeds.

“LES would also be able to use the enormous capacity of the fiber network to deliver reliable, robust Internet access and Internet-related services to fill a critical need for its electric customers that are unserved or under-served by the incumbent providers in the market, and in doing so use the new revenues generated by the broadband services to fund the cost of this network,” the utility’s original proposal said.

It’s a story familiar to ILSR readers. Heavy monopolization and a lack of competition routinely results not only in high prices, spotty availability, and slower speeds, but terrible customer service that’s directly responsible for incumbent telecom monopolies having some of the worst measurable customer satisfaction ratings of any industry in the United States.

Some of the most potent disruptors to this long-broken dynamic are local utilities, local cooperatives, or direct network construction by regional municipalities. AT&T-backed nonprofits have routinely tried to claim that Tennessee’s utility-backed broadband efforts are an inherent taxpayer boondoggle, despite no evidence to support the claim.

Tennessee is also one of seventeen states where regional monopolies have also ghost written and lobbied for state laws restricting — or outright prohibiting — the creation or expansion of community-driven alternatives to monopoly power.

Despite being specifically restricted by Tennessee state law from expanding its broadband service outside of its existing electricity footprint, state utilities like EPB in Chattanooga have seen unprecedented success, accolades, and popularity; an inspiration for utilities and municipalities both across the state of Tennessee, and the country as a whole.

One 2020 study estimated that EPB’s broadband expansion in Chattanooga helped deliver delivered Chattanoogans a $2.69 billion return on investment in its first decade of operation alone. Pew Charitable Trusts released a report this month highlighting how states can leverage existing utility fiber networks to shore up longstanding broadband access gaps.

LES, like a growing number of utilities, views the historic influx of infrastructure and Covid-related broadband funding as the green light to consider broadband expansion plans previously deemed just out of reach.

“The potential availability of once-in-a-lifetime rural broadband expansion support funds from the State of Tennessee and the Federal government are an opportunity as significant as the rural electrification was in the 1930s,” LES said.