Bureau Chief’s Note: This is the first of a two-part series about the Tennessee Broadband Accessibility Act. Part two is available here.
Tennessee’s General Assembly is likely to change state law and allow electric co-ops to offer internet and cable TV, despite a warning from a private internet provider who says the move would kill competition in rural areas.
Under current state law, electric co-ops may not provide video or Internet. The legislation to change that is intended to help people in rural areas, where high-speed Internet isn’t available through the free market — at least not yet.
Rural co-ops that begin offering the services aren’t likely to face competition, said Jonathan Harlan, who owns an ISP in Jackson.
Harlan said he won’t expand his business into any areas where an electric co-op offers internet access.
Naturally, Harlan went on, electric co-ops would have a monopoly in the areas they serve, and customers would pay more.
“Through this, you have a government competitor or a monopoly competitor endorsed by the government,” Harlan said.
Electric co-ops aren’t funded by taxpayers. Technically, they are private, nonprofit, member-owned corporations. They differ from a government-owned network such as EPB in Chattanooga. The legislation doesn’t expand municipal broadband.
“Yes, electric co-ops are not the government, but they are a monopoly electric provider,” Harlan said.
Harlan said he speaks not only for himself but for his colleagues around the state — small business owners also offering internet who, until now, planned to expand into rural areas.
In previous years, Tennessee Watchdog has interviewed several such people. But many, in fear of government retribution, have declined recently to speak.
Republican Gov. Bill Haslam refers to the bill as the Tennessee Broadband Accessibility Act, and he’s one of its biggest advocates.
In an email, Haslam spokeswoman Jennifer Donnals said “this bill accelerates and supports private sector investment.”
In a dissent, Harlan said those same electric co-ops who want to compete against him for business enjoy tax advantages he and other private business owners don’t get.
Kelly Cortesi, spokeswoman for the Tennessee Department of Revenue, said nonprofit electric co-ops aren’t subject to Tennessee’s franchise and excise tax.
The franchise tax is based on tangible personal property, and the excise tax is based on income for the tax year.
For-profit entities, such as Harlan’s business, are subject to the tax, Cortesi said.
Harlan said electric co-ops in Tennessee are eligible for a variety of financial assistance programs from the U.S. Department of Agriculture.
A simple Google search shows Harlan is correct.
Donnals said co-ops — the state has 23 — are often the largest taxpayers in the cities and counties they serve.
The original legislation didn’t allow co-ops to offer cable television, at least not until Haslam tweaked that bill as it has moved through the General Assembly.
Donnals said if co-ops can’t offer cable it “could eliminate the economic feasibility of some potential broadband expansion.”
According to the Chattanooga Times Free Press, “the legislation prohibits the electric co-ops from cross-subsidizing their broadband operations from power revenues and would be required to create stand-alone broadband operations.”
As of Wednesday, the bill was referred to the state House’s Finance, Ways and Means Committee, according to the General Assembly’s website.
In a statement, state Sen. Mike Bell, R-Riceville, said the legislation gives $15 million over three years in tax credits to private service providers to purchase broadband equipment to provide broadband access in rural areas.
He also said the bill makes it unlawful for a cooperative to use unfair or anticompetitive practices, including predatory pricing, collusion and tying.
“Any business or individual, therefore, who has been damaged as a result, can bring a civil action in chancery court for injunctive or declaratory relief,” Bell said.
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