In January, Governor Bill Haslam announced that he and Senator Mark Norris would introduce legislation to provide grant funding and tax credits to private companies in order to expand rural connectivity in Tennessee. In a recent Knoxville News Sentinel, Christopher took another look at more subsidies to large private providers and how that strategy has worked out so far.

We've reprinted the op-ed here:

Christopher Mitchell: State needs better broadband, not subsidies

If you were tasked with improving the internet access across Tennessee, a good first start would be to examine what is working and what’s not. But when the General Assembly debates broadband, it frequently focuses on what AT&T and Comcast want rather than what is working.

Broadband expansion has turned into a perennial fight between Tennessee’s municipal broadband networks and advocates of better connectivity on one side and AT&T and Comcast on the other. On one side is a taxpayer-subsidized model, while the other depends solely on the revenues of those who choose to subscribe. But which is which?

AT&T has received billions of taxpayer dollars to build its networks, whereas Chattanooga, Tullahoma and Morristown, for example, financed their fiber-optic networks by selling revenue bonds to private investors and repaying them with revenues from their services. The big telephone companies are massively subsidized, whereas municipal networks have generally not used taxpayer dollars.

It is true that after it began building, Chattanooga received a Department of Energy one-time stimulus grant for $111 million, but that was actually less than AT&T is getting from just one federal program in Tennessee alone – over $125 million from the Connect America Fund. And most of the money to Chattanooga went into devices for its smart grid that have since led to massive job gains.

These community networks offer modern connectivity. Chattanooga offers 10,000 Mbps to anyone in its territory. AT&T is getting enormous checks from Uncle Sam to deliver 10 Mbps. Comcast will soon offer 1,000 Mbps, but only for downloads. If you are a small business trying to upload lots of data, Comcast won’t get you there.

Internet access for low-income households is becoming more affordable, thanks to an FCC modernization order that brings the Lifeline program into the 21st Century. 

Next Century Cities recently offered a webinar for people who want to learn more about changes to the Lifeline program; our own Christopher Mitchell moderated the event. Jaymie Gustafson, Director of Stakeholder Engagement for the Lifeline, and attorney Olivia Wein from the National Consumer Law Center shared their knowledge about the order, discussed how local governments can utilize the program in public housing, and suggested ways local governments can help make the program a success.

The program, which initially provided a $9.25 subsidy to eliminate or lower the cost of telephone services to low-income households, now allows recipients to use the funds to purchase broadband services. Gustafson noted one of the driving factors behind the modernization order:

“We know it’s so important in terms of helping children do their homework, in terms of people being able to search for and keep their jobs, in terms of accessing services, just in terms of interacting with society around you. Right now, broadband is not a luxury. It’s a necessity.”

About The Program

The Universal Services Administrative Company (USAC) governs the Lifeline program, which originated in 1985 and receives funding from the Universal Services Fund. The fund, established in 1935, supports other programs that invest in telecommunications infrastructure in addition to low-income access. Instead of receiving a voucher to purchase services from a carrier or an Internet Service Provider (ISP), the provider receives the subsidy directly from USAC; after the discount is applied to Lifeline participants' bill, the participant pays the remainder to the provider.

“The Internet has become an important as having electricity and water,” said Cole, an extension agent in Franklin County. “For our businesses to attract customers and to attract other businesses to come in here, we have to have broadband Internet access.”

Some Franklin County residents have access to dial-up Internet, which is slower than broadband high-speed Internet service. However, some Franklin residents still have a “party line” for phone service.

Commission Chairman Barry Moore said meetings were previously held to discuss the lack of high-speed Internet, but nothing materialized.

In addition, Kreg Kennedy, a district field representative for U.S.

Municipal broadband networks have been gaining traction across the country. It's easy to see why: In many rural and low-income communities, privately offered broadband services are nonexistent. In its 2012 Broadband Progress Report the Federal Communications Commission counted nearly 20 million Americans (the vast majority living in rural areas) beyond the reach of broadband.

The Free Press' Timothy Karr's words are supported by the growing number of pins on our Community Network Map. We connect with places nearly every day where municipal networks fill the cavernous gaps left by the massive corporations. Large cable and telecom providers do not hide their aversion to servicing rural areas, yet year after year their lobbying dollars persuade state politicians to introduce bills to stop the development of municipal networks. Karr reviewed recent efforts to use state laws to stifle community owned networks in a Huffington Post article.

LUS estimates that the citizens of the community have saved 5.7 million dollars—in part direct saving from LUS' cheaper phone, video, and internet services and in part as a consequence of Cox lowering its prices and giving out special rates. Those special rates were discussed in the meeting with Huval pointing out that Cox had petitioned for and received permission to treat Lafayette as a "competitive" area. That meant that Cox could offer special deals to Lafayette users and, as we all know, has offered cuts to anyone who tries to leave. Those "deals." as Huval pointed out to Patin don't include the rural areas of the parish where Cox has no competition.

Again it all goes back to the (un)Fair Competion Act. One of the things in that act a concession that LUS Fiber would be able to borrow from LUS' other utilities just like any other corporation could set up internal borrowing arrangements. This is not a subsidy, it's a loan—with real interest. One of the efforts to raise an issue by Messrs Patin and Theriot centered around "imputed" taxes. Those are extra costs that Cox and ATT got the state to require that LUS include in order to force LUS to raise their price to customers (you!) above the actual cost. (Yes, really. See this.