Charter, Tenn. Ops Slam an Overbuild

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Charter Communications Inc., backed by the Tennessee Cable Telecommunications Association, is questioning the legality of a recently granted franchise that allows the city-owned Jackson Energy Authority to expand its broadband operations into the surrounding county.

The operator and association are considering legal action against the utility, which provides electric, natural gas, water and wastewater services to 38,000 homes and businesses in the city, which is northeast of Memphis.

FIBER GOING IN

The JEA is building a $50 million fiber-to-the-home plant in the city. It offers five more cable channels than Charter’s expanded-basic package of 75 channels, and undercuts Charter’s rates by about $5.

The JEA uses an outside company, Cinergy Communications, to provide telephony and high-speed data services for its bundle.

Tennessee state law bars municipal operators from expanding beyond their locality’s borders. The activities of such companies are tightly controlled and they must seek permission from the state to expand their businesses.

So far, two utilities have been authorized to expand broadband services beyond their service territories, but only as pilot projects. Authority has been given to Covington’s electric utility, a competitor of New Wave Communications; and to Morristown’s. The latter utility has yet to offer broadband services.

PRIVATE AUTHORITY

But executives at the Jackson utility note that the company is no longer a municipal utility. In 2000, it was privatized into a public utility authority and its charter states it can move outside its service area, according to JEA general counsel Teresa Cobb.

Based in part on that language, the Madison County commissioners gave the utility a 15-year franchise in December.

“We’ll build out Jackson first, then expand into the county,” Cobb said. She estimated the city plant would be completed this spring, followed immediately by the county expansion.

Cable executives say the utility is reading the wrong portions of its own charter, as well as ignoring state law.

TCTA executive director Stacey Burks Briggs asserts that if it expands into the county, the JEA is subject to laws governing rural electric cooperatives. State law specifies that co-ops can only offer broadband via partnership, which would compel the JEA to work with Charter.

“Our issue, as an association, is that our members and competitors compete under the rules of law,” she said.

Briggs said the utility has yet not done anything wrong, as it has not moved into the county. But cable executives believed that when JEA negotiated for its privatization, rules barring municipal utility expansion would remain in effect.

The JEA is going up against a Charter operation that has been fully upgraded to 860 Megahertz of capacity, said Curtis Person, Charter’s director of government affairs for Tennessee and Kentucky. The system is one month away from area-wide deployment of the interactive Moxi Media Center HDTV digital video recorder, he said. Moxi will complement other services, including high-speed data and video on demand.

“We helped write the privatization act. Our understanding of the act differs greatly from theirs,” Person said.

JEA has already butted heads, legally, with Charter. The utility filed suit in the county in August to seek quicker access to the incumbent’s junction boxes in multiple dwelling units. Charter wants several days between the disconnect notice and a switchover date during which to try to save the customer.

BOND QUESTIONS

Person questioned the finances of the broadband expansion, noting the utility gets its financing through a taxpayer-secured revenue bonds.

If the broadband project fails, “it could fall back on the taxpayers,” he said.

Cobb said the taxpayer-funded bond is only part of JEA’s capital, adding that citizens are near the end of the guarantor list.

The utility’s expansion into the county will be funded through proceeds from JEA’s broadband customers within the city limits, she added.

Person said no date has been set for a legal challenge, but “the process has already been started to determine if they are justified to move into the county.”

“We will pursue this,” he said.

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