An Alabama state senator plans to reintroduce legislation at would allow city utilities to provide ratepayer-backed broadband services beyond their current service areas.
Sen. Tom Whatley, R-Auburn, pushed SB 438 in 2015 to allow municipal utilities to provide Internet or cable service without any service area restrictions. Alabama is one of more than 20 states with laws on the books to prevent expanded government broadband networks that could compete with private businesses.
“If the cable companies and phone companies don’t want to provide it, then these municipalities that are left out because of their lack of speed should be able to do the same thing that they were allowed to do with water and sewer co-operatives 30 years ago,” Whatley told the newspaper. “Soon, anyone that doesn’t have the really high-speed access to information through the Internet is going to be at a real disadvantage.”
In an opinion piece on AL.com last year, Whatley wrote that:
As a Republican, I believe the private sector is usually the best and most efficient method for providing a service. But when private companies, for whatever reason, make a decision not to serve an area, we should not handcuff the people of that region if they decide to use a public entity to receive that service (in this case, broadband Internet) in order to compete today for the jobs of tomorrow.
But Opelika Power Services in Whatley’s district directly competes with two private Internet providers and now wants to expand its service into nearby rural areas.
Opelika, with close to 30,000 residents, established itself as Alabama’s first “gig city” by establishing its own municipal broadband network in 2014. Voters approved the plan via referendum in 2010, and $43 million was invested in the installation of more than 400 miles of fiber-optic cables within the city limits. Residents and businesses there can get download and upload speeds of 1 GB per second, but at a cost of $500 per month for residential customers and $2,700 a month for businesses.
More reasonable prices of $35 a month for 10 mbps puts the city’s network in direct competition with AT&T and Charter Communications.
June Owens, marketing manager for OPS, told Watchdog.org the utility has about 3,000 customers that subscribe to some combination of its Internet, cable and phone services, but “we don’t have that many, of course” for the $500/$2,700 a month 1 gbps data service.
On its website, Charter offers download speeds up to 60 mbps in Opelika for $40 a month as an introductory offer, while AT&T told Watchdog.org it charges $52 per month for six mbps and $57 per month for 12 mbps.
Owens said OPS’s most popular service is a 60 mbps upload/download speed that costs about $155 per month bundled with phone and TV service.
Owens said OPS hasn’t mapped out exactly how it would tackle nearby rural areas if the law is changed to allow it to expand. She said she is unsure if some of that potential expansion would put the utility in further competition with private cable and Internet providers.
“We touch so many areas that are a rock’s throw away that don’t have any options,” Owens said. “It’s not about us going in there and saying we’re going to knock down Charter.”
“It’s not that we’re trying to cherry pick and target certain areas,” she added. “Were just trying to keep Opelika on the map.”
Whatley and others in Opelika hold up Chattanooga’s gigabit-capable broadband system as one to emulate, but critics note the project has been plagued by high costs and an uncertain future.
In a letter to the Federal Communications Commission in 2014, Taxpayers Protection Alliance President David Williams said the total cost of the Chattanooga project was $552 million, including $158 in federal funding and $391 million in bond charges to customers of the EPB. He noted that comes out to $2,276 per customer.
Williams also noted in his letter that few business customers are signing up for the 1 gbps speed and that the EPB has tried to stifle open records requests and bad press, including pulling advertising from local media outlets that reported negatively on its broadband system.
The Taxpayers Protection Alliance letter was in response to the FCC considering a proposal to allow the EPB to expand its coverage areas beyond the city’s borders, despite Tennessee law forbidding it. The FCC approved the measure 3-2, but the decision now faces a court challenge and Tennessee lawmakers will study a bill during this legislative session that would change the law.
A University of Tennessee-Chattanooga finance professor released a study last year touting the benefits of the city’s municipal Internet system, but critics called it “highly speculative” that the broadband system was the impetus for new businesses moving to Chattanooga.
Some taxpayer-supported broadband networks have spectacularly crashed and burned. Probably the most prominent example is the Utah Telecommunications Open Infrastructure Agency, which proved not to be the utopia its acronym promised. Utopia spanned 11 municipalities and launched in 2004, but after failing to sign up enough customers it was $350 million in debt and had $146 million in negative assets a decade later.