Last month, the Pulse ran a story on the state of broadband in Knoxville. ["Gigabit Envy," cover story by Paige Huntoon, June 6, 2013] In short, despite numerous reasons behind certain access issues—aging infrastructure, lack of updated wiring in privately-owned buildings, lack of market demand, and others—the article argues in favor of a government-owned Internet network.
Touting Chattanooga's government-owned gigabit network as a "superstar," the article bemoans the fact that Knoxville's Utility Board doesn't provide Internet like Chattanooga, Morristown, or Bristol.
I, along with the many business owners who belong to the Tennessee Veterans Business Association, want to offer our thanks to the Knoxville Utility Board for their refusal to fall into the trap of a government-owned network.
Because our utility board has focused on doing what they do best—providing reliable and affordable electricity—rate-payers and tax payers in Knoxville are not on the hook for the same hundreds of millions of dollars of accumulating debt that burden the residents of Chattanooga, Morristown, and Bristol.
When praising the network in Chattanooga, the article states that the network cost $220 million in combined bonds and federal grants. This number is well short of the actual cost. The utility issued bonds for the network in the amount of $220 million. Interest that will be paid by Chattanooga residents on these bonds amounts to nearly $172 million. Combined with this $392 million, the city received $111 million in tax-payer dollars through stimulus funds. Taxpayers will also have the pleasure of paying nearly $47 million in interest on these funds.
In other words, while $220 million is already unbelievably excessive, Chattanooga's residents actually face an overwhelming $550-plus million of debt to build out the "superstar" gigabit network. Of course, as of the last report, this "superstar" network has fewer than 40 customers—averaging out at approximately $12.5 million in tax-payer and rate-payer monies per customer.
The example from Chattanooga is consistent with every other example of a government-owned network—ongoing accumulation of massive debt leading to eventual failure.
Just recently, Tullahoma's utility board—again touting the supposed success of the network in Chattanooga—received approval to build out a gigabit network for the city. Tullahoma is a town of 18,000 residents.
The price tag for the build-out in Tullahoma is projected to be just about $18 million. So, despite the fact that there is no demand for such a network, Tullahoma's city leaders are spending approximately $1,000 per resident—not per subscriber. So everyone in Tullahoma—every man, woman, and child—is on the hook for a network whether they want it or not.
So what happens when these networks inevitably fail? Memphis had Tennessee's first government-owned network. Like Tennessee's other networks, the network in Memphis was unable to attract sufficient customers, unable to keep up with industry trends, and unable to keep operating. After a number of years of accumulating debt, the network was sold to a private company at a loss of nearly $28 million. The residents of Memphis were left to pay that bill.
All of these networks make it clear that a government should never be in a role where it is using public funds to create an entity that competes with private businesses.
Along with many business owners and tax payers across the city, I want to thank our utility board for not making a bad decision and sinking hundreds of millions of our dollars into an endeavor that—based on previous examples from across the country and right here in Tennessee—is guaranteed to fail.
Jonathan Williams, Chairman
Tennessee Veterans Business Association