Netflix backs Chattanooga's broadband expansion with FCC

photo Netflix, the streaming video service, has said it supports the right of municipalities to offer broadband Internet service.

Streaming video giant Netflix has waded into the fracas over the right of public utilities to expand high-speed broadband, throwing its considerable weight behind the efforts of Chattanooga and Wilson, N.C. to upend restrictive laws in 20 states.

Chattanooga and Wilson are constrained by laws in Tennessee and North Carolina, respectively, which limit the cities' ability to offer high-speed broadband beyond their current borders.

But in a filing with the FCC, Netflix said such laws, which are supported by cable and telecom monopolies, "represent retrenchment and a move away from a pro-consumer policy of limitless bandwidth."

Internet subscribers of Chattanooga-owned EPB can access speeds as fast as 1 gigabit per second, about 50 times faster than the average connection in the rest of the U.S., and $20 cheaper than the fastest Comcast plan, Xfinity Extreme 105, which is just one-tenth the speed.

Comcast, AT&T and other cable and telecom giants have lined up against EPB's petition, calling competition between public and private entities "unfair," since public utilities have access to public money that private companies do not.

They cite a number of bloated ventures in which bungling city administrators across the U.S. left taxpayers on the hook for millions of dollars in failed investments.

But many others have succeeded. In Chattanooga, EPB has signed up more than 60,000 residential customers, and reported 2013 revenue of $80.7 million from its fiber-optics division, an increase of $14.2 million from the previous year. The utility's fiber-optic expenses during the same period were just $72.1 million, yielding a tidy profit.

Thanks in part to EPB's efforts to build the first citywide gigabit-capable network in the western hemisphere, Netflix says its 21,119 Chattanooga subscribers have access to a service that is "more than capable" of streaming next generation 4K content, which offers resolution roughly four times better than traditional 1080p TVs.

But it isn't only EPB customers who benefit from the increased competition in Chattanooga, Netflix said in its filing.

"Prior to the launch of EPB's gigabit broadband service, Comcast raised its cable TV rates every year, leading to a 154 percent increase in rates between 1993 and 2008. After EPB entered the field, the annual rate increases halted and Comcast eventually offered two tiers of service, Netflix said. "The presence of a fiber-based competitor also incentivized Comcast to improve its broadband speeds, with the fastest advertised speed going from 8 Mbps in 2008 to 105 Mbps in 2013."

While Netflix is primarily interested in ultra high-speed broadband as a tool to deliver its streaming content to more customers without expensive barriers imposed by cable giants, many have compared the need today for broadband to the need for widespread electricity in the 1930s -- the dawn of public power.

But cable companies reject that analogy. Though acknowledging that there remain pockets of customers across the U.S. -- estimated at 19 million Americans by the FCC -- opponents of the plan supported by Netflix and EPB say that the high cost of serving these mostly rural customers would hit public utilities just as hard as private service providers.

For instance, in Washington State, two rural public utilities spent more than $300 million on a fiber network. But instead of serving remote parts of the community, those utilities moved to compete with private companies in more profitable areas, charged the Fair Competition Alliance, an association of private telecom companies.

"After more than a decade of operations, these two PUDs still operate in the red with nearly $9 million in 2011 alone subsidized by their electric utility ratepayers," the FCA wrote.

It remains to be seen how EPB will handle the task of reaching rural communities without dipping into the red. The utility has declined to comment on where it might go, except to say that it would first have to examine the cost and determine if it could break even on any investment.

"It might not be profitable for us to go every place that someone wants us to go," said Danna Bailey. "But you also have to think about the fact that EPB is not for profit. We think about, how can we, while maintaining a viable business, offer a community what it needs to succeed."

Contact staff writer Ellis Smith at 423-757-6315 or esmith@timesfreepress.com with tips and documents.

Upcoming Events