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Chattanooga’s Shaky, Government-Run Broadband System Covered by Salon

July 22, 2014

Salon last week ran a positive report on Chattanooga, Tenn.’s municipal broadband service, which is operated by the city’s utility, the Electric Power Board (EPB).

On this blog, we recently featured Michael Santorelli and Charles Davidson’s study on Chattanooga’s network. The report noted the system used millions of federal taxpayer dollars at the outset (millions of dollars more than most municipal networks have access to), had a questionable effect on the local economy and led to a downgrade in the city’s bond rating.

The Salon story argued EPB’s network, “provides the nation’s fastest broadband speeds at prices often cheaper than the private competition.” While Santorelli and Davidson didn’t address this question directly for Chattanooga, a report earlier this year issued by the Phoenix Center for Advanced Legal and Economic Public Policy Studies did. It found a standard triple play package from EPB’s network was roughly the same cost as a private sector offering. (We’ll also note, once again, that EPB reportedly charged businesses $50,000 per month if they used the network’s gigabit service to full capacity.) The price advantage is a wash even before considering the tens of millions of dollars taxpayers spent on the city’s broadband service.

Salon also said EPB’s network helped improve EPB’s bond rating. But that is only half the story. Yes, Standard & Poor upgraded EPB’s rating in 2012, but that same year Fitch Ratings downgraded its assessment of EPB. (The official announcement is available here.) Two years later, EPB still has the same rating from Fitch.

The Chattanooga network is probably the service cited most often by government-owned broadband network (GON) supporters. And certainly it’s cash flow problems are not suffering as much as other networks, particularly UTOPIA in Utah (you don’t hear GON supporters talk about this network much), but as the Phoenix Center report, the Santorelli/Davidson study and the contrasting bond ratings show, the jury is still out when it comes to the Chattanooga system.