Transcript: Community Broadband Bits Episode 59

Thanks to Jeff Hoel for providing the transcript for the episode 59 of the Community Broadband Bits podcast with Danna Bailey on Chattanooga's EPB Fiber. Listen to this episode here.

00:15:

Lisa Gonzalez:  Hi, again, and welcome to the Community Broadband Bits Podcast, from the Institute for Local Self-Reliance.  I'm Lisa Gonzalez.

Today, Chris visits with Danna Bailey, Vice President of Corporate Communications at Chattanooga's EPB.  We've covered Chattanooga extensively on muninetworks.org .  Danna spells out the many benefits of the EPB fiber optic network: reduced power outages, lower electric rates, and an incredible telecommunication utility offer many benefits to the Chattanooga area.  Here are Danna and Chris.

00:45:

Chris Mitchell:  Welcome to another episode of the Community Broadband Bits Podcast.  Today, we've got a really exciting show.  We're talking with the biggest municipal fiber network in the country.  And we're talking with Danna Bailey, the Vice President for Corporate Communications of Chattanooga's Electric Power Board.  Welcome to the show.

01:02:

Danna Bailey:  Hi, Chris.

01:04:

Chris:  Thank you for coming on.

01:06:

Danna:  Yeah.  Thanks for having me.

01:07:

Chris:  So, I wanted to --  This is an interesting show, I think.  Because everyone's heard of Chattanooga.  Everyone knows about you fiber network that listens to my show.  It's an incredible town.  I've been there twice now.  I know that it's filled with great people.  And even if I wasn't in the fiber business, Outside Magazine is constantly telling everyone that they should move there, because it's such an incredible place, with all the outdoors activities and fun things to do.  Ah ...

01:35:

Danna:  Well, I don't know why we haven't gotten you here yet, Chris, to stay.

01:38:

Chris:  [laughs]  I love my winters.  And ...

01:41:

Danna:  OK.

01:41:

Chris:  ... so, you know, as soon as you spend a lot of time below zero, then I will move there.  Ah ...

01:48:

Danna:  OK.  We'll have to live without you then.  I don't think that's going to happen.

01:52:

Chris:  I'm afraid that a lot of people would be unhappy with my style of winter.

01:56:

Danna:  Yeah.

01:56:

Chris:  So, you were the first city in America to make a gigabit available to every single address.  And your slowest Internet offering is the fastest -- or, is faster than just about every community's fastest option, you know, for most of us that aren't in your area.  People are familiar enough with Chattanooga that we don't have to spend a lot of time explaining how you got here and all the things about your network.  But I do want to cover some of the basics.  So, can you just tell us a little bit about how big Chattanooga is, and where the network extends to?

02:27:

Chris:  Sure.  So, Chattanooga -- we serve Chattanooga and Hamilton County, which is the county seat for Chattanooga, and parts of eight other counties in Tennessee and northwest Georgia.  Our service territory covers about 600 square miles.  So we have fiber optics deployed throughout the entire service territory.  At this point, we have about 8,000 miles of fiber deployed.  So, one of the things that's unique about Chattanooga is that we do have -- we're a small city, but we are a city, and we have a downtown hub, and a dense area in the downtown area.  And then we extend out to very rural parts of the service territory.  So it could be -- you could have someone living in a downtown condominium, having access to this network.  Or someone literally living on a farm 20 miles outside of town with access to this network.  So it's about -- EPB passes roughly 170,000 homes and businesses, in that 600 square mile service territory.

03:34:

Chris:  And that's the part of the story that I think has been mostly ignored by the larger press -- is that you took people in some of these areas who were on dial-up as their only option, or maybe satellite, and you brought them one of the world's best networks, at this point.  And I just think that's something you haven't gotten enough credit for.

03:54:

Danna:  Well, we think it's pretty cool, also, that people of all different kinds of socioeconomic backgrounds, as well as different locations in the area, can have access to the same infrastructure.

04:07:

Chris:  OK.  So why don't you tell us what all of the different things that this fiber network does for the community.

04:13:

Danna:  OK.  Well, the first thing it does -- and this is really a big piece of -- this is a real driver in our decision to build this network -- the first thing it does is, it helps us improve the service we're able to provide on the electric power side.  So we are, first and foremost, an electric power distributor.  And our engineers and technicians and planners, years back, wanted to figure out a way to develop the next-generation electric system.  What does the next-generation electric system look like, and what do we need to do to get there?  And, really, the first thing that was needed was a robust communications system.  So, the fiber optic network, firstly, acts as the backbone -- the communications backbone -- for all of the thousands of smart sensors and devices that have been added to the electric power system.  So those smart sensors and devices use the fiber network to communicate, not only with us, but with each other, and with our customers, in near real-time.  And we're seeing already some pretty incredible results.

The first incredible results we're seeing are related to reduction in outage duration for our customers.  There have been many studies conducted to determine -- or to estimate -- the dollar cost of power outages on society.  And most of these studies are pretty consistent in their findings.  One of them, from UC Berkeley, from a few years ago, estimates that this country loses 80 billion (with a "b") dollars a year to power interruptions.  And, now, that's not a loss to companies like EPB.  That's a loss to manufacturers and retailers and restaurateurs and businesses that can't conduct business when there is no power.  So, if you take that 80 billion dollar study, done by UC Berkeley Labs, and you apply it to a service territory the size of Chattanooga, you can estimate that our community loses roughly $100 million a year due to power interruptions.  And so, one of our big drivers in the beginning was to see what we could do to reduce that impact.  What could be do to improve the service that we provide those businesses, so they can be the most productive they can be?

So, the fiber network was really put down, first and foremost, for the electric system. And we're seeing, on average, a reduction of 60 percent in outage duration, as a result of having this network in place now.

06:55:

Chris:  And know that that's not just because of an anomaly of you having really good weather over the past few years, because you've been tried with some of the harshest weather that you've seen in the region's history, right?

07:06:

Danna:  Absolutely.  This past year, in fact -- I guess it was July of last year -- we had a nasty windstorm.  It wasn't a tornado, but it was close.  It was a nasty windstorm that took down lines and poles all over the system.  In years past, that would have resulted in 77,000 homes and businesses being without power for a significant duration.  But, instead, 42,000 of those either saw no interruption in their power at all or saw a momentary interruption in power.  And there have been -- there are hundreds of stories like that, some of them larger in scale, some of them much smaller in scale.  But you're absolutely right, this has been -- the last couple of years have been pretty trying, from a weather perspective, in Chattanooga.  And the smart grid is performing beautifully.  It's actually outperforming what we had hoped.  We had hoped for a 40 percent reduction in outage duration, and we're consistently seeing 60.

08:07:

Chris:  So, what else does the fiber do besides the smart grid?

08:12:

Danna:  So, the smart grid, there are several other components to it.  The big one right now really is this reduction in outage duration.  But then, once you have the fiber optics in place, you can use the network to provide super-fast Internet service, like what we were talking about earlier.  So, we offer Internet service to our customers, phone service, and TV services.  And, you know, the TV and phone services are great; the Internet service is really a differentiator.  It's just blazing fast.  And people love it.  Another positive about that is that the revenue from offering those services allows us to pay for the smart grid faster, and actually helps keep electric rates steady.  The way we've set it up is, we do business under two different brand names, the EPB Electric Power brand, and then the EPB Fiber Optics brand.  The EPB Electric Power brand actually owns all of this infrastructure.  So, every time we sell a customer an Internet package, under the EPB Fiber Optics brand, EPB Fiber Optics pays EPB Electric Power for access fees and allocations.  So the Fiber Optics brand is actually paying back the Electric Power brand for every time it sells a service.  Since we've been in business -- since we've had a communications service in business -- the EPB Fiber Optics brand has paid the Electric Power brand over $57 million in access fees and allocations.  That's the amount -- that amounts to about a 4 percent electric power rate increase that never had to happen.

09:52:

Chris:  So, what you're saying is that the rates would be higher in the absence of the fiber network.  That, in fact, offering the television, the Internet services is allowing you to keep electrical rates lower than they would have had to be.

10:07:

Danna:  Right.  We would have had a 4 percent rate increase had it not been for this fiber network.

10:13:

Chris:  Now, you know, some people are saying that the electric ratepayers are somehow paying for the network.  And you just noted that the electrical side owns all of the fiber infrastructure.  And so, there's some people who are saying that electric ratepayers in Chattanooga are coming out with the short end of the stick, and that they're paying unfairly for this fiber network.  And so, I'm curious if you can address both whether or not they're paying for it, and then also, if it's fair or not.

10:44:

Danna:  Well, the opposite of that is what's actually true. So, what's happening is, our customers who choose to subscribe to our EPB Fiber Optic services are actually paying for the network.  And, actually, by paying for the network, they're helping keep electric rates steady.  And our electric customers don't have to pay anything different.  There's no -- we've had one electric rate increase, I believe, in the past five years.  No rate increase related to any of the infrastructure that we've built.  And, again, the EPB Fiber Optics brand is paying back the EPB Electric Power brand, which is actually helping keep the EPB electric power rates low.

11:25:

Chris:  Well, it's actually kind of a -- it's a funny charge, in that it really preys on the ignorance of people.  Because it's not like EPB has a place to hide the electric rates.  You buy all of your power from TVA and other public institution, under contracts that can be inspected.  And your rates are themselves inspected by TVA, which is extremely careful to make sure that no electric ratepayers are paying inappropriately for other services.  So, I just -- I like to throw it out there, but the truth really is that there's no way for you to hide it if you were doing something that was inappropriate.

12:03:

Danna:  That's absolutely true.  That's one thing about being a municipal utility -- is, we are an open book.  We actually -- before we went into business, we put our entire business plan on display.  Anyone could come over and look at it.  We have -- we're subject to open records laws.  So, there really is nothing within our company that cannot be seen, read, analyzed -- by our customers, or by anyone in the community.  So, we're an open book.  It's about as transparent as it can be over here.  So, you're absolutely right -- but that -- it would absolutely be inappropriate to use electric power customer funds to pay for a fiber optic network.  But the exact opposite is what's happening.  The fiber optics customers are subsidizing the electric business.

12:49:

Chris:  Specifically, you meant the telecommunications services on the fiber optic network, right?

12:53:

Danna:  Yes.  Thank you.

12:54:

Chris:  So, one of the things that others say -- I mean, there's almost an industry that's been devoted to just trying to slime you.  Which, I know, in some ways, given the story of Chattanooga's past, that thrilled to be held up in such high regard that some people are paid to try and make you look bad.  I mean, it's actually a compliment.  But some of them are saying that the only reason that you went and built this whole big incredible fiber optic network is because Obama threw a bunch of money at you.  And so, can you walk us through what role the stimulus funds played in the network?

13:29:

Danna:  Sure.  The stimulus funds -- essentially what they did is, they allowed us to expedite our build. We had been planning to do this for many years, and had gone ahead and started down the road of building the network.  We were planning to build it -- it would probably have been about a ten-year build-out.  But the stimulus funds allowed us to expedite the build, so we could cover the entire service area in three years rather than ten.  But, really, nothing about out plan changed, except the timeline.  Everything about what we were planning to put in, the level of automation we were planning to have, the kinds of services we were planning to offer, none of that changed substantially if at all.  I can't think of any change that happened, except the timing.  So that stimulus -- the stimulus funds -- just allowed us to offer the services to all of our customers in three years instead of ten, and have the smart grid operational for all of our customers in three years instead of ten.

14:30:

Chris:  And, for those who aren't familiar, I think, you need to note that it isn't a smart grid in the sense of what other utilities are doing -- that this really deserved the expediting, because you're so far ahead of what most utilities are doing, in terms of the smart grid -- the advanced sensors and things like that -- that it really is a terrific experiment, on which so many utilities can get data as to whether or not it's worth making the level of investment that you have.

14:56:

Danna:  Yeah.  And, you know, sometimes, frankly, we call it a "smarter grid," because it really can do -- it's -- and we're really just scratching the surface of what it can do.  It can help us with reduction of outage duration.  But it can also -- it's improving our operational efficiency.  It also allows us to improve the power quality we're delivering to customers.  It allows us to identify when there are anomalies on a customer's end that, if not identified, could result in high usage, and therefore a high bill.  So, there are LOTS of applications for this "smarter grid."  And some of them we haven't gotten to really dig into yet.

15:34:

Chris:  So, one of the ways to judge whether or not the network's a success is whether or not people are taking service on it.  Can you tell us how many people are subscribing to your telecommunications services?

15:44:

Danna:  Right now, we are almost at 50,000 homes.  We're at 49,600 residential customers.  And we're at about 4,000 business customers now.  So, we're right around 54,000 homes and businesses in total that we're serving.

16:00:

Chris:  That's pretty incredible.  I mean, you're in a large region.  It's hard to ramp up.  Where are you with regard to your business plan, and paying back debt?

16:09:

Danna:  Well, we're well ahead of our business plan, actually.  That average annual cost to repay the smart grid portion of our bond issue is $12.4 million.  The average annual payment, to EPB Electric Power from EPB Fiber Optics, is $24.1 million.  So, we are making double what our "mortgage," so to speak, is.  We're easily covering the debt service.

16:37:

Chris:  That's always a -- it's a nice position to be in.

16:39:

Danna:  And we keep adding customers, as part of the beauty, also, is that, we still have -- we still add a couple hundred customers every week.  So it's not -- it's certainly down -- the rate at which new customers are signing up has slowed down, since we first launched.  But they're still coming to sign up with us.  And we're still getting a lot of great feedback from our customers, which is also -- we really like to hear that customers are happy with what we're delivering to them.

17:06:

Chris:  One of the ways that municipalities, you know, measure whether or not they're succeeding or not -- and by municipalities, I also include utilities, obviously -- is to -- is, obviously, the take rate.  The number of people that are subscribing.  And whether or not they're paying back their debt.  But, really, the number on reason that most communities build these networks is for job growth.  And I know that that wasn't your number on priority, but it was pretty high up there on the list.  And so, how are you doing, in terms of job growth in the region?

17:34:

Danna:  Yeah.  We -- and it was -- you're right, it was a big priority.  It wasn't number one.  But it was probably a real, real close number two -- to our improving our power system.  And, really, improving our power system is also about job creation.  If you think about economic development, and all the different reasons why companies choose to locate, or expand, or stay in a particular area, there are a lot of different factors that go into those decisions.  And one of them is power reliability.  Power costs and reliability.

18:05:

Chris:  You know, let me just jump in, because that's a terrific, terrific point.  And, in particular, with Chattanooga, where you have such a strong manufacturing base.  You know, I think of Global Green Lighting, which has opened up a factory there.  And they're doing really smart manufacturing.  It's -- it's not just a matter of manufacturing.  It's the smart manufacturing, that requires, you know, a really good, high-quality, reliable power, and then a variety of other things as well.  And so, I think it's just a terrific point.  And it's also worth noting that a lot of these jobs, and the manufacturers, are ones that -- it isn't yesterday's manufacturing, it's tomorrow's manufacturing.

18:45:

Danna:  And, you know, something else to consider with that, also, is that there might be one company with ten different manufacturing plants, and maybe not enough work for all of those manufacturing plants to be running at full steam.  Well, how do they choose which ones to send production to?  We hope that Chattanooga's going to be on the list.  And we hope that the reliable electric power here will be part of the reason we'll be on the list.  So it's not even just competing for companies to come to Chattanooga, or to stay in Chattanooga, or to expand in Chattanooga, but for the Chattanooga plants of existing companies to get the business that keeps them going.

19:19:

Chris:  Right.  So, I didn't let you answer the question.  How are you doing generally in terms of jobs?

19:25:

Danna:  Chattanooga is doing pretty well.  We've recruited a Volkswagen auto assembly plant.  And other foreign direct investments, including Amazon -- that's not foreign, but an Amazon fulfillment center.  Since we announced the gigabit infrastructure, Chattanooga has seen an increase of 6,700 jobs.  As well as the launch of dozens of new entrepreneurial ventures.  So, we have jobs numbers from the Chamber, but those are only companies that report to the Chamber what their jobs -- what jobs they're ** in or adding.  But then there are other, smaller, entrepreneurial efforts that might not be reported by the Chamber but are just as important.

One of the things that we've implemented, or one of the programs that's been implemented, started last year.  It's a program called GIGTANK, which is a summer accelerator, aimed at bringing techies to Chattanooga to spend the summer developing real businesses on the high-bandwidth network.  And just earlier this week, the seven companies that were here this summer, demoing their new businesses, gave the demonstration to a roomful of investors and some media and others.  And most of those companies have already told us that they want to stay in Chattanooga.  The winner from last year moved back to Tampa after he was -- after GIGTANK was over last year, and when he got back to Tampa, he realized that he couldn't be as productive there as he could here.  So he moved his business back to Chattanooga, and they've been here ever since, and they've even expanded.  So, there's an entrepreneurial movement.  There's a technology startup movement happening in Chattanooga that is related to the gigabit connectivity being available, that really is much more -- it's more prominent than its numbers might seem.  6,700 jobs is great.  And it's huge.  But then there's probably another few dozen of them that have some incredible potential, in terms of entrepreneurial success.

21:28:

Chris:  And I should note that I remember a conversation -- it may have been last year -- where the stat was that one out of every three new jobs that was being added in Tennessee was being added in Hamilton County.  And to have that level of job growth, I think, you know, you have to attribute a lot of that, you know, not just to the fiber network.  I like to say that it's not so much that fiber networks attract these big jobs, so much as it is, well-governed areas, that are likely to attract jobs, tend to build the infrastructure of the future.  And it's that sort of whole scenario that attracts the jobs.  It's not just having a fiber network.

22:11:

Danna:  I'm glad you said that.  Because Chattanooga's got a lot going for it.  The fiber optic network is one piece of it.  And we're really proud to play a role in economic development and quality of life in Chattanooga.  But we know that we're playing just one role.  There -- it's business leadership, and the Chamber of Commerce, and the city and county leadership.  There are a lot of factors, and a lot of people, and a lot of collaboration that has to happen, for communities to thrive.  And we -- that's another thing that we really love about Chattanooga.  It's a very collaborative, cooperative place, for the most part.  And folks here work together to get what needs to be done done.  So, we play a role, but not the only role.

22:56:

Chris:  Right.  And I think it's been pretty clear throughout this, for people who listen to a lot of my shows, I'm definitely more partial to Chattanooga.  And it's not at all a lie to say that, if it was not for winter, there's a very good chance I would have been tempted to move down there, because ...

23:11:

Danna:  It's always not winter.

23:12:

Chris:  [laughs]  I really appreciate your coming on the show.  And I want to give you a chance, if there's anything else that you want to mention about Chattanooga or the network before we sign off, please do.  There's a lot of things that we covered in the case study that I wrote and published last year.  And we're going to have you on, and a future guest.  In fact, I know, in September, you have your -- is it the third anniversary of offering the gigabit already?

23:37:

Danna:  We announced the gigabit in September of 2010.  So, you're right, it's the third anniversary of having the gigabit.  But it's the fourth anniversary of having the fiber optic network up and operational for customers to use.

23:49:

Chris:  Right.  And I know that there's no -- you guys are always very good about keeping quiet, but it seems you always do something interesting at around that time.  So I'm going to be staying, with my eyes open, hoping to hear something interesting.

24:02:

Danna:  Well, thanks so much, Chris.

24:05:

Lisa:  That was Danna Bailey, Vice President of Corporate Communications at EPB in Chattanooga.  For more on Chattanooga and its network, go to epb.net .  If you visit muninetworks.org and click on the "epb" or "Chattanooga" tags, you'll find our coverage.  Thanks again for listening to the Broadband Bits Podcast.  We encourage you to contact us with your ideas for the show.  E-mail us at podcast@muninetworks.org .  You can also follow us on Twitter, where our handle is @communitynets .  This show was released on August 13th, 2013.  Thank you to the group "Break the Bans" for their song, "Escape," licensed using Creative Commons.  Thanks for listening.