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Small town spends millions on hyper-fast Internet nobody wants ... yet

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Photo - The city of Tullahoma, TN, spent millions to offer residents the hyper-fast LightTUBe Internet connection but so far has found no takers for the service. (Photo courtesy of Watchdog.org)
The city of Tullahoma, TN, spent millions to offer residents the hyper-fast LightTUBe Internet connection but so far has found no takers for the service. (Photo courtesy of Watchdog.org)
News,Science and Technology,Watchdog,Tennessee

Tullahoma, a city of only 18,000 residents, has invested $17 million of taxpayer money in ultra-high-speed Internet in hopes of attracting business to the small Tennessee town.

But, as city leaders tout the potential economic benefits of the service known as Gigabit Internet, critics question the high cost of the infrastructure and why local government is getting into a business normally provided by the private sector.

No private Internet service providers in the state offer the service, which runs 150 times faster than the slowest Internet speeds, because they say market demands don't require it yet -- nor will they for at least 10 more years.

The Tullahoma City Council passed the initiative a few years ago at the behest of the Tullahoma Utilities Board, said City Administrator Jody Baltz.

"We're trying to position our city for the future. We're trying to compete globally. We felt like this would be something that could give our community an edge," Baltz said.

TUB introduced the ultra-high-speed Internet this month, as part of its LightTUBe Internet service.

LightTUBe currently has about 3,100 subscribers on its basic Internet service, capturing about a third of the market against Charter, its primary competitor in Tullahoma, said TUB spokesman Chambliss Fewell.

The cost for Gigabit Internet isn't cheap, as customers would have to fork over $300 a month, the same as residents of Chattanooga, another city with taxpayer-subsidized Gigabit Internet. Tullahoma is the smallest city in the nation to offer the service.

Fewell and Baltz told Tennessee Watchdog that businesses are seriously interested in investing in Tullahoma now that it has ultra-high-speed Internet.

"As of right now we have no one under contract -- but we have multiple people who are coming to us and talking to us about it," Fewell said, although he would not say who or how many.

Has anybody in Tullahoma signed up for the ultra-high-speed Internet? "As of right now we have no one that has upgraded to that package," he said.

Baltz admitted that Tullahoma's decision to fund the Internet expansion had its critics.

"There were some people who felt like the city was getting into an area that had traditionally been provided by the private sector," he said. "There was some question about it. 'Is this what we want to do? Is this a core business that we want to be in?'

"Ultimately, the economic development arguments prevailed for our city not to be left behind in the next century. Just waiting for AT&T or Charter wasn't worth it. Those big companies cherry pick which communities they bring this sort of stuff to. Whereas we are more in a rural town situation," Baltz said.

Charter declined to say in an e-mailed statement whether it has plans for ultra-high-speed Internet in the area, but other ISPs in other communities have previously told Tennessee Watchdog that free market forces are not demanding this technology yet.

"They (government) have built a solution looking for a problem," David Snyder, an ISP provider in the Chattanooga area, told Tennessee Watchdog in 2011.

"It makes for great marketing, but there is no demand for this service. By the time this service is needed, the private sector will have established this for pennies on the dollar."

Two other Tennessee cities, Bristol and Morristown, offer ultra-high speed Internet through public utilities.

Tennessee Watchdog asked TUB General Manager Brian Skelton if he could name any private companies in Tennessee that plan to offer ultra-high-speed Internet.

Skelton didn't answer that question and quickly ended the phone call, saying he only wished to discuss the benefits of ultra-high speed Internet.

Before hanging up, Skelton said anything Tennessee Watchdog wanted to know was a matter of public record and was available at the State Comptroller's Office.

"I don't need to be doing your work for you. If you can't figure that out from a simple Google search, then you aren't a very good reporter, are you?" he said.

According to a Comptroller's audit released earlier this year, Tullahoma's Fiber Optics Fund had a $1.6 million deficit in fiscal year 2011. That deficit increased to $2.1 million in fiscal year 2012.

TUB officials said that wasn't a surprise. They told auditors they expected to lose money the first three years of operation.

Chris Butler is a reporter for the Tennessee Watchdog, which is affiliated with the Franklin Center for Government and Public Integrity.

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