Chattanooga's 1 Gbps service drives innovation, economic development - and envy

Chattanooga Tennessee
Image: David Andrews

CHATTANOOGA, Tennessee – Known as a titan of industry that later fell on hard economic times, the city of Chattanooga has again become a hotbed of innovation, drawing a growing base of startup companies and even large companies to locate and retain businesses.

Behind this revolution is the presence of gigabit services provided throughout the city by Electric Power Board (EPB), a municipal utility provider that delivers 1 and now 10 Gbps fiber-to-the-premises (FTTP) services to the community.

Long before Google Fiber started the conversation on disruptive broadband pricing, EPB launched its 1 Gbps service in 2010. Thanks to that Gbps service, the city managed a large coup in 2011 when Volkswagen announced it would expand its Chattanooga plant.

Amazon.com also established facilities in Chattanooga. It is the home for startup incubators like Dynamo and the Lamp Post Group, which are fostering companies like Bellhops, an on-demand moving service that employs local college students.

An independent study by the University of Tennessee at Chattanooga found that since EPB introduced the gigabit network in 2010, it has helped generate at least 2,800 new jobs and added at least $865.3 million to the local economy.

Smart grid drives upgrades

Despite the economic boon for the city, EPB’s entry into the broadband business was in some ways by accident, as the utility’s initial goal of FTTH was to enable smart grid services. By implementing the FTTH system on the electrical grid, EPB has improved its ability to proactively respond to electrical system faults.

Danna Bailey EPB
Danna Bailey

“Our leadership wanted to modernize the power grid because most power grids across the country have not been modernized at all, and one of the reasons they wanted to change that was because there’s a real cost of communities for powering interruptions,” said Danna Bailey, VP of Communications for EPB, during a press event at the company’s headquarters in Chattanooga, Tennessee. “According to a Berkeley Lab study, power interruptions cause the country to lose $80 billion a year, which is a loss to the manufacturer that has to close down their plant or the restaurant owner who can’t serve food and all of the trickle-down effect that has.”

Chattanooga itself loses about $100 million to power losses, for example, so EPB looked at what they could do to automate the power grid. This fiber network passes every home and every business in its 600-square-mile territory.

“How do we take all of these manual processes that have been in place for years and years and automate them to make the system more reliable,” Bailey said. “The first thing they realized, to automate anything you have to have a communications infrastructure, so we decided on a fiber optic network because there’s no end in sight with what you can do with fiber optics.”

City of Chattanooga (Matt McLelland)
EPB’s fiber network passes every home and every business in its 600-square-
mile territory. Image: Matt McLelland

As part of upgrading the electric grid to ensure greater reliability, EPB has installed 1,200 intellirupters in the power grid. These automated intellirupters use the fiber network to communicate with EPB to reroute power around damage caused by an event like a storm severing a power line, for example.

Christopher Mitchell, director of community broadband networks at the Institute for Local Self-Reliance, said what’s different about Chattanooga is that it represents a broader effort across multiple domains.

“They have set a high bar, not just for municipal networks but any network operator in the U.S. It is important to note that it is a team effort – many institutions in the city work together to promote Chattanooga in ways you don't see in other places where the network might just be seen as solely a utility project,” Mitchell said in an interview with FierceTelecom. “There are a lot of interests working together to make sure the community gets the maximum benefits from the utility investment.”

Driving competitive choice

EPB may still arguably be a small regional broadband player, but like Google Fiber, its presence has driven the two main incumbent players – AT&T and Comcast – to respond.

AT&T has been expanding its 1 Gbps Gigapower services throughout Tennessee in larger cities like Nashville and others, but has yet to officially announce Chattanooga as one of the destinations for 1 Gbps. Between 2012 through 2014, AT&T invested over $1.2 billion in its wireless and wired networks in Tennessee.

The more compelling force in Chattanooga is clearly Comcast, which has been responding with a 1 and 2 Gbps service. Being a much smaller market in comparison to other ones it serves like Chicago, Comcast’s moves are a likely response to EPB’s efforts to offer the community 1 Gbps and even 10 Gbps fiber-based services.

Comcast has increased its network investments and launched new products in the city, including Gigabit Pro, Comcast’s 2-gigabit internet service, and installed hundreds of Xfinity Wi-Fi hotspots in its markets. Gigabit Pro is a FTTH-based service, which requires a special installation at the home.

The cable MSO has been no less aggressive on the business front. In June, Comcast Business completed a multi-million dollar fiber optic network across greater Chattanooga capable of delivering up to 10-gigabit speeds to local businesses.

Alex Horwitz, VP of Public Relations Comcast, said that speed is only one part of what the cable MSO can provide for its residential and business customers.

“I think for us, it’s probably a little less about pure speed and more about what you’re able to offer from a value proposition so if you come in and offer video, phone and internet, we think we do very well,” Horwitz said. “Our reach to get across the most households across Chattanooga as opposed to EPB’s focus area is smaller than what Comcast can get to, so being able to offer the fastest speeds to the most homes is vital for us.”

Besides Chattanooga, the cable MSO also offers similar services in other parts of Tennessee, including Memphis, Knoxville and Nashville. In Memphis, Comcast just completed a 10G rollout for business.

Coleman Keane, director of fiber technologies for EPB, said that because of the competition between AT&T, Comcast and EPB, consumers and businesses have more choices for TV, internet and phone services. “This means everyone in Chattanooga wins because you have two really good networks running,” Keane said.

Broadband envy

Utilities providing municipal broadband services have been nothing but controversial, and EPB is no different.

Similar to Bristol Virginia Utilities in Bristol, Virginia, EPB has faced opposition from AT&T and Comcast, which have launched legal challenges. The two providers contended that public funds not be used to fund expansion of public networks in competition with private ones.

mayor of chattanooga
Chattanooga Mayor Andy Berke

“The telecom response has been lawsuits,” said Chattanooga Mayor Andy Berke. “We’ve had lawsuits from the beginning whether it was building out the network to start with or trying to expand it and recently there’s been push back.”

Berke added that the real issue is the community’s perception of the utility of internet service.

“The main question is internet a luxury or a necessity,” Berke said. “Is it more like a highway that gets you access to goods and services for quality of life or is it something that people can live without? In our city I believe it’s a lot more like a highway and if people are going to participate in the modern economy and shop and communicate with one another, the web is an essential tool and is growing in importance.”

According to EPB, the investment in the fully fiber optic network is justified by electrical system benefits alone because it provides early fault detection and decreases in standby power.

State law prohibits expansion

The battles aren’t just relegated to telcos. Political battles are also ensuing as neighboring towns ask for the service. Despite the fact that incumbent players like AT&T and Comcast refuse to make updates to provide higher speed broadband service in some towns, Tennessee state law prohibits EPB from making that expansion even into neighboring towns that want the service.

Berke said that this situation creates possible conflicts with neighboring towns that also want the gigabit service. This has created new battles with the state government as traditional telcos and cable that are trying to protect their turf.

“We have seen that our neighbors want this asset we have,” Berke said. “Bradley County to our North and Marion County to our west have pushed to see the gig network built in their area, and that’s been a fight in our legislature, which has so far rejected our chance to expand the network beyond the current order.”

Charles Wood Chattanooga Chamber
Charles Wood 

Charles Wood, VP of economic development for the Chattanooga Chamber of Commerce, agreed, adding that residents in other towns are talking to their local politicians about how they can get access to higher speed broadband service.

“If you’re standing with one foot in Hamilton County and one foot in Bradley County, your right foot is in Hamilton County and you have 1 Gbps internet service, but your left foot has limited access to broadband so our neighborhoods are looking over the fence and saying, ‘why don’t we have that?,’” Wood said. “It’s forcing in some cases what I would consider very conservative elected officials to have a real heart-felt discussion about what they do with this issue.”

Wood added that these political leaders are starting to see how a lack broadband in neighboring towns is affecting residents. In particular, parents have to drive their school children to restaurants or libraries that have Wi-Fi access so they can complete homework assignments.

“There are some conservative elected officials that would like to see EPB expand their territory because they recognize their constituents are impacted,” Wood said. “If you have to drive your kids to McDonald’s where they have Wi-Fi so they can do their homework, that’s a problem and that’s not far from Chattanooga and I am hopeful we’ll see some movement around that.”

For all the utility that a 1 Gbps connection brings, Berkes said it has no value if people don’t use it. “Like any technology, the gig is not a panacea – it’s a tool you can use to build economic development and quality of life and also it’s only what you make of it,” Berke said. “We spent a lot of time trying to figure out how to take advantage of it before we figured out some better solutions.”

Expansion limits loom large

Despite the growing demand for 1 Gbps service, today’s reality is Tennessee law prohibits EPB from bringing service to other neighboring towns. Earlier this year, the FCC voted to preempt state laws in North Carolina and Tennessee governing municipally run broadband companies. But that effort was overturned by a Sixth Circuit Court panel.

EPB remains confident that the will of the people will be able to overturn the laws. While it is still limited by Tennessee law to selling 1 Gbps FTTH service within its defined borders, the municipal fiber provider for Chattanooga is confident that growing demand for higher speed broadband could drive a change to current legislation. 

The municipal service provider has begun working with six other communities in Tennessee that have built out similar FTTH networks. As part of that work, the communities have continued to petition the state general assembly to get the law changed, but no progress has been made.

“We haven’t been successful in working with the Tennessee general assembly to get this law changed,” Bailey said. “I expect that will come up again on the docket this winter when general assembly goes back into session.”

Economic development, new innovations

What the 1 Gbps presence has done via EPB is drive new economic development throughout Chattanooga. The presence of gigabit services drove $856 million in jobs even though the gigabit and FTTH network technology was initially driven for EBP’s smart grid efforts.

Other cities – including Greensboro and Lakeland, Florida, Eastern Shore, Alabama, and Tupelo and Rogers-Lowell in Arkansas – have taken notice of Chattanooga. Following the emergence of 1 Gbps services, each of these cities have come to Chattanooga to engage with city leaders and local businesses to see how they can apply gigabit speeds to meet their needs.

Chattanooga’s 1 Gbps story is similar to that of Bristol, Virginia, where local utility Bristol Virginia Utilities launched a FTTH network in 2001. Similar to Chattanooga, OptiNet has helped the community retain and create jobs, attracting and retaining more than 1,220 positions from Northrup Grumman, CGI, DirecTV and Alpha Natural Resources.

Officials estimate around $50 million in new private investment and $36 million in new annual payroll have come to the community since the development of OptiNet. However, the BVU has been the object of controversy. The municipal provider, which has been relatively quiet as of late, has faced allegations of corruption. BVU has entered into a deal to sell its OptiNet Fiber network to a private provider, but no deal has been formally announced yet.

Driving innovation, new entrants

The presence of 1 Gbps is clearly driving new innovation throughout Chattanooga. A new group of emerging logistics, SDN, virtual reality and 3D printing companies have come to the city to start their businesses.

“The Gig is a foundation and attracting talent is more important,” Wood said. “New companies are looking at locating in Chattanooga.”

Likening itself to an Uber-like company for moving, Bell Hops raised $20 million in funding, employs 110 and is present in 82 cities. The company, which employs part-time college students, enables consumers to set up a house move on demand.

Many of these businesses have gotten support from local business incubators like Dynamo. When Dynamo began last year, it found 1,000 companies that fit its mandate and it now maintains a database of 5,000 contacts in this segment. From there, it whittled down 10 companies to focus on founding teams and the dynamics. 

Weston Wamp
Weston Wamp

Weston Wamp, principal at Lamp Post Ventures, said that even for businesses that don’t know what 1 Gbps speeds are will eventually adopt it. 

“It’s one of those things that when somebody sets in motion a standard that’s bolder and more ambitious than anything before it. People follow behind it whether they know how to apply a gigabit to their company or not,” Wamp said. “It spoke to a lot of startups that relocated companies here or companies from Chattanooga that stepped away from a large employer to start their own company. It represented a hustling mentality that was reawakened by, ironically, a government commitment to pursue through the Obama stimulus program.”

Jon Bradford, entrepreneur in residence for Dynamo, said it is actively speaking to 10 companies and out of that group, three or four may relocate to Chattanooga. It could have 20 companies that could reside in the city.

“The biggest challenge that small entrepreneurial companies have is trying to be different and trying to find what genuinely is their unfair advantage?,” Bradford said. “At one point the gigabit rollout was an unfair advantage and it’s a massively important part of infrastructure, but it is less about infrastructure and more about content in Chattanooga to help entrepreneurs and attract other entrepreneurs.”

The gigabit service has also benefitted the local Chattanooga Aquarium. Attracting over 700,000 visitors a year, the aquarium is a large driver of Chattanooga’s growth by contributing $101.3 million in economic impact every year. The aquarium, which prides itself on providing a good experience for its customers, has incorporated an IMAX laser projection system in its 3D theater.

Thom Benson, senior marketing and communications manager for the Tennessee Aquarium, said that the presence of broadband enables it to expand the programs it provides.

“Because we have the high speed internet access we’re trying to come up ways we can do alternative programming,” Benson said. “Things like the 3D microscope project where we can have 400 seats in the theater and do a live interactive session with Bob Ballard when he’s on a deep ocean expedition.”

In hand with the incubators, Chattanooga’s CO.LAB, a non-profit organization that helps startups, is seeing benefits. Mike Bradshaw, outgoing Executive Director of CO.LAB, said that gigabit connectivity is a tool which businesses can use to advance their standing. 

“The gig, it is valuable, but talent is king right now,” Bradshaw said. “The gig is the foundation that says we play on a different level than everyone else.”

Bradshaw noted that since EPB’s initial drive with the 1 Gbps FTTH network was to enable smart grid, manufacturing companies in the city were the first to see the initial benefit because they could maintain uptime.

This is a key element not only for existing manufacturers, but also for new companies like Gestamp, a company that designs, develops and manufactures metal automotive components for the automotive industry.

To conduct its daily business, Gestamp needs reliable power in order to support its hot stamping process where they heat up steel at a very high level before they mold it. Keeping that temperature level is important for them.

“It’s important to remember that the gig was rolled out as a smart grid network so the first beneficiaries were the manufacturing companies,” Bradshaw said. “If you’re BASF and you have to shut down even for a minute due to a power loss, you’re losing a lot of money, so that reliability is absolutely critical for those companies.”

In addition to supporting electrical reliability, the presence of a 1 Gbps service enables Fortune 500 insurance companies like UNUM to enable their workforce to work remotely, for example.

“When you have all of this bandwidth coming into somebody’s house it becomes another value add as well as back office, call centers and data centers benefit,” Bradshaw said.

Comcast is also seeing the fruits of having 10 gigabit services for business customers contribute to the local economy.

“Part of what drove the 10G announcement on the business side is nowadays we believe that businesses make their decision on whether to expand or relocate based on the technology that’s available in that marketplace,’” Horwitz said. “You tend to see markets that are equipped with that technology infrastructure like Atlanta and Chattanooga attracting lots of new business and it’s definitely a requirement.”

Regardless of the progress made in Chattanooga, the lack of affordable broadband is a big inhibitor for rural communities, particularly for local businesses.

“It’s very hard for a rural community to attract jobs or to attract people if you can’t tell they have broadband,” Wood said. “If I am a company and making a decision about where I am putting my manufacturing and if I look at what that means for my process and how I communicate with my supply chain, that becomes a big issue and in a lot of parts of the country is an issue a lot of rural communities have no control over.”

Chattanooga has established itself as a new city of innovation. Clearly, its adoption of high-speed broadband and smart grid technology reflects a city that others will want to follow to grow their own economic and technological ambitions.