Transcript: Community Broadband Bits Episode 203

This is episode 203 of the Community Broadband Bits podcast. Jody Wigington and Greg Williams join the show to explain how the municipal utility and the Appalachian Electric Cooperative hope to partner to increase Internet access near Morristown, Tennessee.

Greg Williams: A consumer that is served by Morristown on one side of the street has FiberNet and the person on the other side of the street that is served by AEC cannot get FiberNet.

Lisa Gonzalez: Welcome to Episode 203 of the Community Broadband Bits podcast. From the Institute for Local Self-Reliance, this is Lisa Gonzalez. In this episode, Chris interviews Jody Wigington, General Manager and CEO from Morristown Utilities System in Morristown, Tennessee. He also talks with Greg Williams, General Manager of the Appalachian Electric Cooperative. We're bringing the two together today because they are exploring a partnership to expand the reach of fiber-based services in the areas around Morristown. As many of our listeners know, Morristown's Municipal Network, FiberNet, offers gigabit fiber to the home services to the utilities system's customers. In Tennessee, electric cooperatives in rural areas have been hesitant to use their infrastructure to offer high-quality internet access, as we're seeing in other states. State law prevents them from obtaining the legal ability to offer telephone or video services, which are important to generating revenue, especially in smaller communities. This new partnership has the potential to establish a new model in rural Tennessee. Now, here are Chris and Jody Wigington, General Manager and CEO of Morristown Utilities System, and Greg Williams, General Manager of the Appalachian Electric Cooperative.

Chris Mitchell: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell and today I'm speaking with Jody Wigington, the General Manager and CEO of Morristown Utilities System in Tennessee. Welcome to the show.

Jody Wigington: Thank you.

Chris Mitchell: Also in Tennessee, Greg Williams, the General Manager of the Appalachian Electric Cooperative. Welcome to the show.

Greg Williams: Thank you.

Chris Mitchell: Jody, you've been on before. Let me start with you just to remind people. Tell us a little bit about Morristown and then we'll ask Greg to tell us a little bit about the AEC territory.

Jody Wigington: Morristown is a city of 29,000 and it sits inside Hamblen County, which has 63,000. In US, we serve the corporate city limits and Greg, through AEC, would serve the remainders in the county and some surrounding counties. We're obviously in the northeast part of Tennessee, east of Knoxville. That's kind of who we are.

Chris Mitchell: Great. Tell us a little bit about the AEC territory.

Greg Williams: Sure. Appalachian Electric Cooperative, a little bit different. We are a cooperative, where Jody is working with a municipal. We serve parts of four

different counties: Jefferson, Hamblen, Sevier, and Grainger counties. We do serve a portion of Hamblen County that is around the city of Morristown. Ultimately, right around 45,000 connected meters that we serve.

Chris Mitchell: Jody, I think you have an anniversary you're celebrating right around now. Tell us a little bit about it.

Jody Wigington: We do. This May marks our 10th anniversary of being in retail fiber-to-the-home business. We're smaller than Greg. We have 14,500 customers, but from an electric meter standpoint, we have reached 6,200 customers in our telecom, which is right at a 48% take rate of businesses passed, homes and businesses passed, so we're excited. Going to have a few awards for people or a few prizes and it's been very successful and a short 10 years, really.

Chris Mitchell: I believe that. Let me ask if you have a favorite memory over those 10 years. Maybe a great impact that the network had.

Jody Wigington: Well, probably the greatest impact has been on the educational system. We have about 18, 19 of the schools connected on different platforms. One is 3gig, a couple of 2gigs, and the minimums are 100 megabytes. Just seeing that difference is nice. Probably the biggest aha moment was when I came in one day. We had a Fortune 100 company, Colgate-Palmolive move in here. All of a sudden, they said, "Colgate-Palmolive wants our telephone and internet business." You go, "Wow, really? That's great." Then you go, "Oh no, they really do want it." You finally feel like you've arrived when substantial-sized companies look at you to be their telecom provider as a local provider.

Chris Mitchell: Right, sometimes I like to think in terms of the problems that I'd like to have rather than the problems I don't like to have.

Jody Wigington: Yeah.

Chris Mitchell: The challenges. Greg, I'm curious about AEC, your territory and the internet access you have. I think we'll talk a little bit more in a second, but first, how would a partnership work where you would work with the city? I know you're evaluating working with Morristown to expand internet access. Can you outline that for us?

Greg Williams: It was really not AEC that initiated or even thought about looking at broadband in our service area. It was actually our cities that we serve; initially, White Pine and Dandridge. Their city councils looked at what they could do to improve services to the citizens within their cities. Of course, we serve their electric needs. Knowing that we, as a co-op, cannot provide retail broadband services, we're restricted from doing that in the state of Tennessee, they reached out to Jody and FiberNet to see if they could get a solution from him. There was some dialogue going on there. Really appreciated Jody reaching out to us and bringing us into the conversation. Between the three of us, Jody, and ourselves, and the cities, we found out that Jody's restricted to within his electric boundary. He cannot go outside of his electric boundary. I cannot do retail to our members. We were presented with a pretty substantial dilemma.

Chris Mitchell: This actually seems like a college student logic problem of sorts, where you have a lot of pieces and you have to figure out how to fit them together.

Greg Williams: It really was, given the state of legislation in the state of Tennessee, it became even more complicated. We arrived at what we felt like would work where Jody could wholesale his services. We could be the transport. There's nothing preventing us from transporting this type of data across a fiber network on our electric system. Then we would have to find someone, a third part, to actually retail the services to meet state requirements. That model, we've looked at it, we've had people look at and make sure that it doesn't violate any federal or state laws, and it appears right now as it stands that it looks okay. That's what we're looking at trying to do.

Chris Mitchell: Jody, I'm curious how those conversations started with the towns. It looks like those are cities that have pretty small populations. Do they have any service or are they poorly served or are they totally abandoned?

Jody Wigington: I would say they're totally abandoned, but I think word-of-mouth, that they know and talk to people who live in our system and know the differences in speed. They just began to come. Said, "What does it take for us to get what you have? How do we do that?" We began to have these discussions that, I think Greg would tell you, too, when you look at some of the results of the survey, they were very much under-served in a lot of areas. Some having nothing but wireless, which is very expensive, and some having some pretty slow DSL type of connections or even dial-up. I think from a business standpoint, they felt like it was hurting them on being able to attract and keep businesses in their area.

Chris Mitchell: Why does the city of Morristown want to try and help people outside of Morristown in this case?

Jody Wigington: Whether you're a cooperative or a municipal like I am, we are both not-for-profit and we exist for our customers and the residents we serve. In my case, Morristown has a lot of industry and creates a lot of jobs for several counties and a lot of them in Greg's service area, so his people who will come in and work at maybe some of our factories, didn't have broadband access like they needed to make their businesses more productive. The way we look at it, it's a win-win the further we can drive broadband into a rural community. There's no competition where we'd say, "Hey, we got a heads-up because we have it and you don't, so we're not going to share it." That's not what public service is about. I think that we both share that vision of just making the whole economic prosperity and quality of life for the region that we live in.

Chris Mitchell: Greg, I'm also curious because I noticed that you're a professional engineer. I'm curious. We've seen rural electric co-ops around the nation have different responses to this. You are prohibited by state law, certainly discouraged from going into this, and yet you're doing everything you can to figure out how. I'm curious how you reacted when you heard about this; how your board thinks about it. Why is it a priority for AEC to be the one that solves the problem?

Greg Williams: Well, it's interesting that the priority is not necessarily providing broadband. The priority is to use fiber, first and foremost, for the efficient and reliable operation of the electric system. We are already building out fiber to do just that. Then obviously you want to leverage that investment as much as you can. It's a natural evolution to look at other ways to use that investment, that asset. That's why the conversation with Jody and the cities, all of a sudden it just kind of dove-tailed into what our plans were to upgrade our electric system. Could we utilize that technology to obviously bring broadband into more of a rural market that we serve? It naturally fit together.

Chris Mitchell: Jody, I'm curious if you can explain to use a little bit the benefits of using your system to expand it, just some of the benefits that people in Morristown will see by spreading those fixed costs across a wider base.

Jody Wigington: We have a network operations center that is positioned to serve hundreds of thousands of people. We have all the redundant and diverse internet paths. We have our own telephone switch. We are CLEC. We offer all the hosted and VoIP top services. Obviously we have the video as part of the entertainment package. There's a lot of costs in a head-in of serving 6,100, 6,200 customers that could easily serve multitudes of that more. It would give us, I guess, some larger quantities of scale. We could do a whole lot of serving these others without significant investments at our head-in. Naturally, that would be good for us as a utility. Again, it goes back to the mission of doing what's the best for the people. This would solidify our business even more. It would allow us to pass on administrative costs of that nature across a wider customer base.

Chris Mitchell: Do you have a sense, either Jody or Greg, for feel to tackle this, but do you have a sense of what the need is? Certainly, you heard from some of the cities that they feel like there's a greater need, but the sense I got in Nashville this year was that pretty much the existing carriers are doing fine and that nobody really needs a gig. No one needs a fiber network. How do you respond to that?

Greg Williams: This is Greg. Let me respond by saying, of course, the first thing that we did jointly is we combined efforts to do a feasibility study, which is obviously the first thing you do need to do is to find out what is that need. What's out there currently and is it meeting the needs of the folks that we serve? Interestingly, the results came back quite startling. We sent out 7,000 surveys and got back close to 1,800, which was an excellent return for a survey such as this. Just some interesting information that came out. The federal definition of broadband is 25meg down and 3 up. Out of the three cities that are served by incumbents, for instance, Jefferson City, only has 34.7% of those who responded met that speed test. They're not getting even the federal definition of broadband. In Dandridge, it was only 22.6%, and in White Pine, it was 0. You immediately start seeing the, I guess, the lack of technology that's out there. Some other startling statistics that came out of

the results: 97% of the households expressed a want or a need for internet access. Then you had about 56% of our households that we serve report that our current internet services do not meet their needs. Again, that type of message was continuing to surface out of this feasibility study. We were getting numbers like 28% of our households used the internet to support telework or home-based businesses. I didn't even know that. A growing need for having faster internet speed. It's kind of interesting. We are rural to some degree, but since we serve right up against Morristown, a consumer that is served by Morristown on one side of the street has FiberNet and the person on the other side of the street that is served by AEC cannot get FiberNet. The person with FiberNet, their children have the availability from an educational standpoint, and even the worker, has great possibilities and opportunities than the person on the other side of the street. That's disappointing that the industry as a whole is not stepping up to meet those needs. I think that's the message we continually saw in the study.

Chris Mitchell: Jody, I'm curious. With 10 years of experience in this business, what in the feasibility study really made you surprised?

Jody Wigington: I'm kind of like Greg. I didn't realize that many people were attempting to carry on business through the home. I did not realize the speeds were that poor. Even in town, if you have Charter AT&T, it was even far superior to what some places in Jefferson County and Hamblen County had. If I went back to a point you made, incumbents like to say that you don't need to have a fiber-based gigabit-enabled network. I think they deny that because they simply don't want to make the investment to provide it. I understand their business model. It's to hold on to the legacy copper-based systems to maximize stockholder profit. It's unfortunate for rural Tennessee that they've been successful to put a stranglehold in Nashville on broadband. Right now, communities just don't have the choices that some other states have. I think we've found a model we hope can make that difference. Again, I think the synchronous part of the business, the internet speeds that go the same both ways, been able to put multiple locations up on your systems and yes, if the school systems didn't need a 3gig and 2gig, why would they be taking it? There's obviously a point of interest in higher-speed services.

Greg Williams: Chris, let me point out, also, that another interesting fact is that within our service area, there was no location, through the survey anyway, that identified where an address was served by more than one incumbent. There is not competition. Just stepping out of the Morristown city area, there's only one incumbent typically available.

Chris Mitchell: Right, that's something we often see with federal statistics is that they will suggest that there are multiple providers within a census block, but they don't tell you that those providers, they don't overlap their territories at all.

Greg Williams: That's right.

Chris Mitchell: There's illusion of competition in official statistics, often. You've done the feasibility study. You're reviewing it. Are people excited to figure out what next steps could be? What kind of reaction are you getting from folks?

Greg Williams: I don't know in Morristown for Jody, but I know in our service area, we did meet with the city officials. They are very excited. They're very hopeful. Obviously we have met with our respective boards. I think they were very receptive and I think very surprised at the results, also. We're talking about, obviously, a huge investment and we're looking at different financial models, both public- and private-funded. There's many different options going forward, but I think there is an underlying excitement, you might say, or anticipation within the community because I get it when I go into the grocery store. I go into church, people are asking, "Where are we at on the internet and the broadband?" There is some anticipation out there.

Jody Wigington: Chris, I would add for Morristown, you ask somebody in Hamblen County where they live, and they say, "Well, I live in Morristown, but I can't get FiberNet." Greg's right. We can be across the street and the neighborhood next door and you consider yourself to live in Morristown, but you don't have the opportunity to have FiberNet. There's an excitement here. This is something that's been asked for many years for us to get out further into the community. Like Greg says, it's been a smaller system. We look to maximize our benefits for our electric system and it's made night-and-day difference into the way we run our electric system. It's a huge plus. Yes, it's very exciting for many people. I'm kind of like Greg. I try to temper my excitement until we can get something rolling.

Chris Mitchell: What are the next steps? What do you anticipate in terms of when you'll make a final decision or be able to, in some cases, these things can certainly take time to lock down the financial model once you're moving forward, but what are the milestones you're looking at right now?

Greg Williams: I think from our standpoint, obviously any type of project of this magnitude would have to be done in phases. If we were to get approved to move forward, it would be a very small first step, because you want to prove the concept, you want to prove your initial assumptions and numbers and making sure that they are working. That can happen as quickly as this calendar year. Again, we're very, very hopeful, but we do not want to bite off, obviously, more than we can chew initially. I think all of the pieces are coming together nicely in terms of knowing that we can move forward with this model. There doesn't seem to be anything out there, a big gorilla so to speak, that's going to squash our thoughts or ideas at this stage.

Chris Mitchell: Excellent. Are there any last thoughts about this project before we end the interview?

Jody Wigington: If this is successful and this model works, this is something that I think you would see being repeated in other places. Aside from just Jefferson and Hamblen County, there are other counties looking to participate in a similar type of project. It may be something that could actually bring broadband to a much larger footprint of Tennessee.

Chris Mitchell: We've been writing about a number of different co-ops around the country. One of the ones we were just covering, I believe it was in Missouri where the electric co-op is building out some fiber and it will be operated by the telephone co-op. In that case, it's a co-op to co-op partnership, but we've certainly seen other areas where the co-ops and munis have been looking at working together and I think it's a great match because you have the facilities already. The electric co-op has the customers and the lines and everything else. You have everything working together in those cases. Greg, please let me know if there's any final thoughts that you have.

Greg Williams: What we're seeing on the co-op side is very similar to what you're mentioning, Chris. Even within Tennessee, a number of co-ops have already initiated feasibility studies in response to what we've done here locally in east Tennessee. They're interested in finding out what they can do because, if I'm not mistaken, Jody, I think there's seven cities within Tennessee that are gig cities. Those are hubs and there's a lot of co-ops sitting around those hubs like that and they're obviously, their membership and the little towns that they serve are very interested in bringing that technology out into the rural areas. That's really the way we were formed 75, 80 years ago was to bring electricity into the rural areas and this is kind of like the next infrastructure of the future. It's interesting that even in the feasibility study, it was indicated that broadband is considered that next utility. It's a utility that they feel like is a necessity of the future. We feel like that that's a part of our mission for our membership.

Chris Mitchell: Great. Well, thank you, both. We look forward to getting updates because I definitely agree with Jody that this is a model that I see a lot of opportunities to move forward with elsewhere. Thank you for coming on the show.

Greg Williams: Thank you.

Jody Wigington: Thank you.

Lisa Gonzalez: That was Chris talking with Jody Wigington, General Manager and CEO of Morristown Utilities System, and Greg Williams, General Manager of the Appalachian Electric Cooperative. Learn more about Morristown's network at musfiber.net and check out the co-op's website at aecoop.org. Remember, you can access the transcript for this and other Community Broadband Bits podcasts at muninetworks.org/broadbandbits. Feel free to send us your ideas for the show. Email us at podcast@muninetworks.org. Follow Chris on Twitter. His handle is @CommunityNets. Follow muninetworks.org stories on Twitter, where the handle is @muninetworks. Thank you to the group Forget the Whale, for their song "I Know Where You've Been" licensed through Creative Comments. Thank you for listening to Episode 203 of the Community Broadband Bits podcast.

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