The Chattanooga, Tenn., City Council has approved construction of a municipal triple-play communications system, despite a lawsuit challenging the project.
Council members voted unanimously Sept. 25 to allow the municipal Electric Power Board to deploy 3,000 miles of fiber-optic lines throughout the Southeastern Tennessee city. The utility plans to offer phone, Internet and video service to customers, possibly as early as the fall of 2008. The project will put the municipal provider into direct competition with Comcast, the community's incumbent provider.
In a statement earlier this year, power board CEO Harold DePriest said cities lacking in fiber deployment could be like communities of the past that suffered economic decline when they were bypassed by the interstate highway system.
Project supporters assert the added fiber will reduce outages to electric ratepayers and conserve energy. These benefits, plus the value of increased communications services, will create $1 billion in economic value for Chattanooga during the next 10 years, according to the EPB.
The City Council vote came in spite of pleas from the Tennessee Cable Telecommunications Association and Comcast officials that the council take more time to examine the viability studies and economic risks of such a proposal.
The TCTA went to court on Sept. 24, after the Sept. 21 EPB vote approving the project but before the council vote, to challenge the build. The trade association, in a suit filed in Chancery Court in Nashville, asserts the build will be subsidized by electric ratepayers.
That's a violation of the 1998 state law setting terms under which communities can enter the telecommunications business, the cable association asserted.
Stacey Briggs, executive director of the TCTA, cited an analysis of the EPB's plan by Ron Rizzuto, finance professor of the Daniels College of Business at the University of Denver, a municipal overbuild critic. He questioned the power board's business plan, which attributes 83% of the cost of the overbuild to the electric utility. Only the cost of the headend, consumer set-tops and vehicles are attributed to the video/Internet portion of the proposed business.
Cable-industry opponents also allege that the financial projections for the project are $80 million below industry revenue-generating standards for the area.
Next month, the city council will have to approve an estimated $220 in bonds in order to launch the telecommunications project.
