Fiber Optic Internet in Chattanooga: A Model for the Rest of the Country

Abstract

According to a study by the Organization for Economic Cooperation and Development (OECD), we rank 30 in price for broadband Internet (45 Mbps or more) among 33 countries. Many people associate the need for faster Internet with entertainment such as streaming films on Netflix but Hill emphasizes that the uses go far beyond that to include education (distance learning), business (high quality video conferencing which can save companies travel expenses) and healthcare (virtual office visits). Since EPB launched its fiber optic service, the city has attracted $1.3 billion in business investment and 6,800 jobs have been added by companies such as Volkswagen, Alstom, and Volkert.

Despite playing a pivotal role in the development of this important technology, the United States has fallen behind other developed countries with regard to the availability of truly high speed Internet. According to a report from Akamai Technologies, based on connections to its cloud system, in 2012 Hong Kong had the highest average peak connection speed at 54.1 megabits per second (Mbps), followed by South Korea at 48.8 Mbps, Japan at 42.2 Mbps, Latvia at 37.5 Mbps, and Romania at 37.4 Mbps. The United States trails behind at 29.6 Mbps and that is the best case scenario because these are peak speeds. A more realistic measurement is the top average connection speeds where South Korea is at 14.7 Mbps, Japan at 10.5 Mbps, Hong Kong at 9 Mbps, and Switzerland and Lativa both at 8.7 Mbps (Whiteman, 2013). Another Akamai report states that in early 2013 the United States was surpassed by Sweden and now has the ninth fastest average Internet speeds in the world (8.6 Mbps) despite having experienced an increase in velocity of 27% from 2012. The report finds that Vermont has some of the highest average speeds in the country at 12.7 Mbps, followed by New Hampshire, Delaware, the District of Columbia, and Utah (Gross, 2013).

Chattanooga serves as a model for how the United States can significantly increase business and residential Internet speeds. EPB, the municipally owned utility company, provides fiber optic Internet connections directly to its customers who have the option of purchasing up to a gigabit per second. Its service area has some much needed competition for Internet access, a technology and communications medium that is considered essential by many these days.

"Truly high-speed wired Internet access is as basic to innovation, economic growth, social communication, and the country's economic competitiveness as electricity was a century ago, but a limited number Americans have access to it, many can't afford it, and the country has handed control of it over to Comcast and a few other companies" (Crawford, 2013, p. 3). The unfortunate combination of slow Internet speeds at high prices results from a lack of government regulation. Eighty percent of Americans purchase their wired Internet service from cable companies, which in most cases are monopolies in their markets. The "competition" (mainly DSL) is often much slower than the already sluggish cable option. Some thought that wireless Internet from cellphone companies and the like could serve as an alternative for primary access but it has proven to be slower and unreliable compared to wired Internet connections. Limited government oversight allows cable companies to prioritize access to their own content while throttling and limiting access to competing sites (Crawford, 2013).

A few companies such as AT&T and Verizon built circumscribed fiber optic networks in several cities but decided to stop expansion of them a few years ago. Verizon's FiOS service reaches about 15% of the U.S. population and is available only in areas with higher incomes that are more likely to provide an acceptable return on investment. Verizon's shareholders do not want the company to make costly infrastructure upgrades that would support higher speeds because it would take the company too long to recover its costs and generate profits (Crawford, 2013).

Although it has slower average speeds compared to other developed nations, the United States actually has a higher average cost for access. According to a study by the Organization for Economic Cooperation and Development (OECD), we rank 30 in price for broadband Internet (45 Mbps or more) among 33 countries. Many residential customers get their Internet access as part of a package from cable companies and the monthly cost for Internet, video, and phone can easily surpass $200. These higher prices are mostly caused by a lack of competition among Internet providers. To foster a more competitive environment, the United Kingdom's regulatory agency requires telecommunications companies to allow competing services to use their infrastructure. In the United States, more limited competition exists through separate systems such as cable, phone, satellite, and fiber optics, if available (Geoghegan, 2013).

These high prices can make Internet access unaffordable for those who have low, moderate, or fixed incomes. A more contemporary manifestation of the digital divide is a lack of access to decent Internet connections rather than not owning devices. Computer, smartphone, and tablet prices have dropped significantly over the past several years while quality Internet access is often not available in lower income areas, and when it is, the prices are usually too expensive.

Some estimate that bringing fiber optic Internet connections to the majority of American homes and businesses would cost between $50 billion and $90 billion (Crawford, 2013). Construction of a nationwide high speed network would create much needed jobs, stimulate the economy, and increase the country's global economic competitiveness for years to come. In addition, all citizens, regardless of geographic area, income levels, or other factors, would have the option of getting truly high speed access. Established Internet providers would have to improve their services as a result of the competition and prices would likely decrease.

The Chattanooga Alternative

Much of this has already happened in Chattanooga with the development of the EPB fiber optic network. The Electric Power Board (as it was formerly known) was founded in 1935 by the city of Chattanooga as a non-profit organization to provide residents with electricity. It now serves around 170,000 homes and businesses in a 600 square mile service area which includes Chattanooga and Hamilton County as well as a few other counties in Tennessee and North Georgia, making it one of the largest publicly owned power distributors in the country. In the late 1990's EPB management wanted to find ways to serve its community beyond providing electricity. The move toward fiber optics began by making improvements to the power delivery system through the use of technology and automation. This "Smart Grid" is based on fiber optics that enable communications among sensors, switches, and other devices which has improved the quality of power, reduced the duration of electric outages, and created more efficiencies. EPB management quickly realized that this cutting edge "Smart Grid" could serve customers in another way: through the provision of telecommunications services such as Internet, video, and telephone (EPB, 2013a).

Harold DePriest, President and CEO of EPB, outlined three goals behind the initiative: enhanced electricity distribution, stimulation of economic development, and using the profits from the services to pay for the initial investment. He said that fiber technology has existed since 1972 but EPB waited until the late 2000's for the right electronics to be developed and mature. The Passive Optical Network technology upon which EPB's system is based was created within the past decade. The fiber network will serve the city for many years into the future because only the electronics will need to be upgraded to increase capacity. The fiber itself has a lifetime of at least 50 years, DePriest explained in an interview with the author. Compare this to the legacy technologies being used by cable companies and other telecommunications providers. They rely primarily on copper lines which have a maximum capacity of 100 Mbps, according to DePriest.

Construction on the EPB fiber optic network started in 2008 and was completed in early 2011. Danna Bailey, Vice President of Corporate Communications for EPB, said in an interview with the author that two unsuccessful lawsuits were filed against the company by competitors, attempting to prevent them from offering the new services. The total cost of the "Smart Grid," including the additional telecommunications infrastructure, was $303 million. It was funded by a 25 year municipal bond as well as a federal Department of Energy grant. The core of the network consists of two ten-gigabit redundant rings which are designed to provide capacity for future expansion as needed (EPB, 2013a).

What It Is

DePriest said that EPB started offering Internet, video, and telephone services on September 15, 2009. Internet speeds started at 15 Mbps, were later doubled to 30 Mbps, then 50 Mbps, and currently the "slowest" speed offered is 100 Mbps. EBP has so far chosen to not pass along any of the increased costs from the higher speeds to its customers. Bailey explained that several factors differentiate EPB's Internet services from the traditional copper-based ones. First, fiber runs directly to the home or business without any copper whatsoever. Second, customers do not need to share limited bandwidth with their neighbors like with many other services. Third, the network is symmetrical which means that download and upload speeds are exactly the same. Most traditional services provide upload speeds that are only a fraction of download speeds. Fourth, customers do not need to purchase or rent modems--an Ethernet cable is connected directly to the optical network terminal outside the building. Fifth, EPB fully supports the concept of net neutrality which means that all data, regardless of its source, gets treated equally by the network. No data is prioritized over others. Finally, customers can consume unlimited amounts of data since EPB does not have any caps.

In September 2010 EPB was the first company in the country to offer one gigabit per second speeds throughout its entire service area (EPB, 2013a). EPB now has about 35% of the combined commercial and residential Internet market. It also sells bandwidth at the wholesale level to three resellers which creates even more local competition, Bailey said. In keeping with the company's tradition of raising speeds to celebrate the service's anniversary, EPB doubled the minimum speed from 50 Mbps to 100 Mbps at no additional charge in October 2013. Customers who previously had 100 Mbps now have access to a gigabit also at no extra charge and existing gigabit customers' price has decreased by $230 (EPB, 2013c). This has resulted in nearly 3,500 residential and business customers having gigabit connections, giving Chattanooga the highest number of gigabit subscribers in the country, according to Bailey.

Comcast, the legacy cable company in town, has responded by trying to attract its former customers back with low priced promotional offers, increasing its fastest Internet speed offering, advertising campaigns featuring its Xfinity brand, allowing customers to use their smartphones as remote controls, and offering more video on demand television options, Bailey said. EPB, on the other hand, offers the same pricing for everyone with no special offers. It may seem expensive at first glance but it is often cheaper once the competition's limited time offers expire. For comparison purposes, as of November 2013, Comcast's Internet speeds in Chattanooga range from 3 Mbps to 105 Mbps (Comcast, 2013) and AT&T's range from 768 Kbps to 3 Mbps (AT&T, 2013).

EPB tries to help bridge the digital divide by providing free computers and Internet access to public recreation centers in the city, Bailey explained. This is the only free access the company offers. Public schools and other city entities, as well as EPB employees, must pay for access. It is commendable that EPB offers standardized pricing across the board for all of its products instead of limited time promotions designed to get the attention of potential customers. It is also laudable that EPB offers its fiber optic products throughout its entire service area instead of strategically selecting wealthy neighborhoods like companies have done in other cities. The problem is that many lower income customers are not likely to be able to afford the nearly $60 per month cost of EPB's "slowest" service (EPB, 2013b).

Unlike private corporations whose primary goal is to maximize profits for owners and/or investors, EPB as a municipally owned company can truly focus on serving its community in the best way possible. With this in mind, it should consider offering Internet services to poorer customers with prices based on their incomes. This could help close the digital divide in a more meaningful way than simply providing free Internet to community recreation centers.

Fortunately, Chattanooga is not the only city in Tennessee to have fiber optic Internet provided by a municipally owned utility. DePriest mentioned the following other areas: Bristol, Morristown, Tullahoma, Pulaski, Clarksville, and Jackson. It is no coincidence that all of these cities fall under the Tennessee Valley Authority, a governmental body founded in the 1930's to provide the region with low cost power which it sells to these municipal companies. DePriest said that 155 municipally owned and cooperative electricity distributors are in the Tennessee Valley (which includes Tennessee and parts of Kentucky, Alabama, North Carolina, Mississippi, and Georgia).

Bailey has several suggestions for areas interested in bringing universal fiber optic Internet to their communities. First, the company should have a strong, well-known brand. Second, it should have an organizational culture of innovation and risk taking. Third, it should discuss its plans with other cities that have already undertaken similar projects to learn from their experiences. Cities with existing municipally owned utilities certainly have an advantage since they would not have to start from scratch.

Impact on the Public Library

Corinne Hill became the Director of the Chattanooga Public Library in March 2012. For her, the significance of the EPB network lies in the fact that it is a public resource managed by a government entity. She explained in an interview with the author that most other developed countries consider Internet access to be a low cost public utility, much like water, and that Chattanooga is following this model. Hill believes that utilities as essential as the Internet must be managed by the government to ensure that they are a public good. Private corporations are primarily motivated by profits, not their communities' needs.

The Public Library offers a gigabit Internet connection in certain parts of its main branch. Hill plans on expanding it to the entire building as well as the other branches throughout the city. She is paying for this as a result of reallocating funds from the library's operating budget. The high speed connection has allowed the library to offer services that were previously not available. The main library contains 46 public access computers as well as a completely open WIFI network (with no login required). Patrons no longer experience problems viewing and listening to multimedia content that requires more bandwidth. The library staff does not have to ration Internet access since there is plenty to go around for everyone. Formerly used as a storage space, the fourth floor of the main branch is now a "maker space" that serves as an incubator for new technologies such as 3D printing. Numerous technology-focused events are now held at the library including hackathons, video conferences, app development workshops, and a coding camp for teenagers. Overall operations are smoother with the faster bandwidth because patrons can get their work done in less time. The gigabit Internet access is also helping attract demographics that tend to use libraries less such as teenagers and younger adults in their 20's and 30's, according to Hill.

Hill believes that libraries can help narrow the digital divide in several ways. The poor are likely to have low cost mobile devices but not necessarily fast and reliable Internet connectivity. Patrons who have them can bring their own devices to the library and use the WIFI or they can use the public computers. The library can also help marginalized groups become digitally literate. Hill defines digital literacy as knowing how to function in a high technology, highly connected world where Internet access is required to apply for jobs, government assistance, and conducting business in general. Library staff can provide patrons with training in this area.

Prior to Chattanooga, Hill was the Interim Director for the Dallas Public Library. She describes the Internet connections in the libraries there as "awful" because fiber was not an option. Patrons could not complete the tasks they wanted to because of the limited bandwidth. At home she had Verizon FiOS which she estimated was around 10 Mbps. "You cannot believe how quickly you adapt to this type of speed [in Chattanooga] and expect it. I don't realize how important it is until I leave Chattanooga and have to deal with [very slow] wireless access in other places," she remarked. Hill said that the public is often a step ahead of information technology departments with its wide array of devices and the need to connect them.

Overall Impact on the Community

Hill believes that fiber optic Internet is empowering Chattanooga's citizens by allowing them to participate in bandwidth-intensive activities that would be difficult to impossible with legacy copper lines. Many people associate the need for faster Internet with entertainment such as streaming films on Netflix but Hill emphasizes that the uses go far beyond that to include education (distance learning), business (high quality video conferencing which can save companies travel expenses) and healthcare (virtual office visits).

Since EPB launched its fiber optic service, the city has attracted $1.3 billion in business investment and 6,800 jobs have been added by companies such as Volkswagen, Alstom, and Volkert. Existing businesses have expanded and smaller businesses and startups are also taking advantage of the fast speeds. Several companies and organizations have developed an annual Gig Tank competition to encourage the creation of bandwidth intensive products and services. Chattanooga is one of 25 cities to be included in the White House's US Ignite Initiative which has similar goals to the Gig Tank at a national level (EPB, 2013a).

Conclusion

EPB in Chattanooga and other municipally run utilities across the country demonstrate that government has the capability of and is successfully managing essential services. Contrary to what many believe, the private sector may not always be the best option and the current state of the Internet in the United States can be proof of this. Private companies are mostly focused on maximizing profits and are less likely to invest in costly infrastructure such as 100% fiber optic networks that would greatly improve their services in the long term.

Hill said this country needs a national broadband plan that would make truly high speed Internet access available in every city, rural or urban. She is optimistic that President Obama is working on such a plan, which she said should have happened years ago. Hill equates this level of Internet connectivity to electricity and the ability to have lights on at night--it is that big of a cultural change. The Obama administration should follow in the footsteps of President Franklin Roosevelt's government sponsored rural electrification initiatives in the 1930's. A large scale public works project to build a nationwide fiber optic network would create much needed jobs in a time of high unemployment and stimulate economic development at the local, national, and global levels.

Truly high speed Internet is no longer an optional luxury. It is essential for libraries with their increasing reliance on electronic resources, particularly e-books and streaming multimedia content. Businesses need it to conduct routine operations and develop new products and services. Finally, ordinary citizens need it not only for entertainment purposes but also to communicate with friends and family at a distance, obtain an education, and take advantage of cloud-based online services, among other tasks. EPB's innovative broadband vision can be the precedent for the rest of the country to follow.

References

AT&T (2013). Shop U-verse high speed Internet plans. Retrieved from: http://www.att.com/u-verse/shop/

Comcast (2013). XFINITY from Comcast: TV, Internet and phone. Retrieved from: http://www.comcast.com/corporate/learn/xfinity-overview.html

Crawford, S. (2013). Captive audience: The telecom industry and monopoly power in the New Gilded Age. New Haven: Yale University Press.

EPB (2013a). About EPB. Chattanooga, TN: EPB.

EPB (2013b). EPB fiber optics packages. Retrieved from https://epbfi.com/enroll/packages/#/

EPB (2013c). EPB fiber optics support. Retrieved from https://epbfi.com/gigsupport/

Geoghegan, T. (2013, October 27). Why is broadband more expensive in the US? BBC News Magazine. Retrieved from http://www.bbc.co.uk/news/magazine-24528383

Gross, D. (2013, July 29). Slooooooooow: U.S. slips to 9th in Internet speed. CNN. Retrieved from http://www.cnn.com/2013/07/24/tech/web/us-internet-speed/index.html?iref=allsearch

Whiteman, H. (2013, January 25). Hong Kong takes Internet speed title. CNN (International Edition). Retrieved from http://edition.cnn.com/2013/01/25/business/fastest-internet-connection

The Institutional Review Board of the University of Tennessee at Chattanooga (FWA00004149) has approved this research project #12-160.