Knoxville Should Not Build a Government-Owned Broadband Network | Citizens Against Government Waste

Knoxville Should Not Build a Government-Owned Broadband Network

The WasteWatcher

High-speed broadband is being promised to everyone in Knoxville and Knox County courtesy of the local utility.  It sounds like a great deal, but government-owned broadband networks have been costly, wasteful, and unsuccessful across the country. 

After the Knoxville Utility Board (KUB) approved a business plan in March to offer internet, phone, and television services to all city and country residents using its existing electric utility grid as the entry point to provide fiber-to-the-home (FTTH) services offering a minimum of 1 Gbps symmetrical speed, the utility adopted a resolution at its June 17, 2021 meeting that will move the plan to the Knoxville City Council.  The council will decide on June 29, 2021 whether to approve the KUB plan, which will cost taxpayers up to $702 million to build out over the next seven years.  While KUB claims its plans will ensure that all low-income households in Knoxville and Knox County will have access to fiber broadband, there are only an estimated 6,000 residents who do not already have broadband service available from at least one private sector provider, since there are three available in the city and county that already provide similar service to the proposal. 

Based on the performance, or lack thereof, by government-owned networks (GONs) across the country, the KUB plan is unnecessary, would overbuild on top of existing broadband networks, fail to connect the remaining residents of Knox County who are considered unserved or underserved.  At least one existing provider has proposed to the KUB service area an alternative public/private partnership plan with the company investing $9.6 million to help connect those residents who do not have broadband access within the next 24 months, presenting a significantly lower cost to the community.  The proposal includes funds from the American Rescue Plan Act; $10 million from the state’s broadband expansion fund; $970,000 from Grainger County; $470,000 from Knox County; and, $570,000 from Union County.  The residents of Knoxville, and Grainger, Knox and Union Counties should ask their elected officials to stop rushing through this approval process and take a long, hard look at the KUB proposal, alongside any alternatives that are less costly and more effective. 

The council should also re-read the KUB report from March 13, 2013, which was reissued again in 2016, when the utility concluded it should not enter the broadband business for “operational, financial, and strategic reasons.”  KUB reissued the white paper again in July 2018 “to identify one more potential risk of KUB moving into a business area that is still evolving technologically.”  The utility was correct that it was a bad idea to build its own broadband network.  But it has not only decided to move the concept forward, but it has also made it much worse.

The KUB plan proposes symmetrical speeds of 1 Gbps, a standard already available in the Knoxville market.  While KUB claims this represents a superior product offering that would differentiate them in the marketplace, KUB’s own survey indicates that most customers do not choose gigabit services at the same or similar prices that KUB proposes.  More importantly, the KUB plan would increase utility rates for all utility customers by 9 percent, even if they do not subscribe to the network.  This regressive rate increase would have the most disproportionate impact on low-income households, who are supposed to benefit from efforts to bridge the digital divide.

Since governments are electric ratepayers as well, KUB’s plan will divert taxpayer funds from community priorities like public safety, education, and affordable housing to underwriting a fourth choice for gigabit speeds in Knoxville.

Overbuilding existing broadband services, particularly in areas in and around Knoxville, is especially wasteful.  According to measurements from BroadbandNow, 98 percent of homes have three options for broadband service, and more than 90 percent of homes have access to gigabit or greater internet speeds.  The solution is not to overbuild existing broadband service and charge those households for something they do not want or need; it is to reach only those who are unserved or underserved.

Before squandering local ratepayers and taxpayer money on a municipal broadband network that overbuilds existing providers and ignores a less expensive private sector alternative, the Knoxville area would be better served by encouraging increased network deployment by existing and new private sector providers by reducing pole attachment and right-of-way fees; reducing franchise application times and fees; and encouraging network buildout by streamlining the application process.  Building a government-owned network in a region already served by so many different providers would be costly, wasteful, and unsuccessful.

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