Cleveland Utilities (CU) is pleased to announce that on Monday, April 10, 2023, the Cleveland City Council passed a resolution authorizing CU to provide broadband services within its electric service territory.
Highlights of CU’s Business Plan
- Total Project Cost: $72 Million (includes the construction of fiber and cost of operating the division through the period of construction)
- No Rate Increase Forecasted for Broadband/Fiber Project
- 12 new full-time employees of Cleveland Utilities
- Conservatively based on 30% take rate
- Plan financials show cash flow positive between years 2-3
- Projected payback between years 10-12
How will it be paid for?
- Public Issued Debt of $64 Million
- Business Plan based on 6% Interest Rate
- Issued in two series of debt
- Interdivisional Loan of $8 Million
- Business Plan based on 6% Interest Rate
- Issued in two series of loans
How will it be paid back?
- Broadband Customers in Monthly Bill
- Broadband Division to pay Electric Division for fiber system access
- Electric System Efficiencies
- Reduced Outage Times: Grid Modernization Project
- Increased Reliability Across Entire Electric System
- Increased Real Time Data for Design of Rates for EVs and Solar Installations
Public Hearing Review
CU is appreciative and values the input and feedback received during the Public Forum held on Wednesday, March 8, along with the comments submitted through the voicemail and email platforms. CU recognizes there are some differences in opinions and understands the importance for the utility to be challenged with questions regarding CU potentially entering the broadband business. The majority of local comments received have been supportive and positive. With the authorization to enter the broadband business, CU will expand on its role as the local, trusted utility provider and continue to innovate and put customers first.
Benefits of Municipal Broadband
- Electric Service: The reliability of CU’s electric service will be improved with Distribution Automation (DA), which creates a “self-healing” system where power outages are isolated to smaller sections through automated reclosers and switches. CU has been planning for DA for several years and currently has approximately 40 miles of fiber installed for communications with the SCADA and meter reading systems. Offering broadband services will allow CU to fast track the Distribution Automation Project and expand its existing fiber plant. A fiber-based infrastructure enables utilities to create a smarter, more dynamic and resilient grid which results in improved overall service reliability, minimizes power disruptions, speeds outage restorations, and enhances system performance. Fiber will position CU to utilize emerging technologies to benefit the electric rate payers well in the future.
- Economic Development & Tourism: A broadband network directly supports the creation and retention of jobs, makes communities more competitive for industries looking to locate in their area, allows for lower local unemployment rates. It opens doors for local businesses to access global markets and sell their goods & services around the world from their location. Economic development is important to the vitality of communities and bolsters tourism.
- Workforce Development & Education: Broadband networks enhance educational experiences by providing students and teachers with access to an array of resources. Broadband allows students to participate in distance learning opportunities at any time from any location. Educated individuals provide a better workforce for our businesses. This is one of the components new industries look for when selecting cities to locate.
- Healthcare: Broadband makes remote access to clinical services possible for patients and provides through telehealth a significantly improved, cost-effective access to quality health care.
- Telework: Broadband allows teleworkers to choose where they live based on the quality of the community, not its proximity to their office. It would enable us to keep our citizens here in Cleveland but allow these citizens the ability to work at distant cities without having to move or commute long distances.
- Speed & Reliability: CU’s broadband network would provide symmetrical service (same upload and download speeds). Cleveland Utilities would provide packages up to 10 Gbps symmetrical with plans to increase speed offerings as technologies become available.
- Local: Municipal broadband is local, responsive to customer needs, and invests back into its community. Customer service will be handled by local customer service representatives equipped to handle questions/issues with all utility and fiber needs. CU’s plan includes 12 new employees (local jobs).
- Long-Term community growth: A digital infrastructure that is both utilized and evolving is a leading indicator of a vibrant and growing community.
The COVID-19 pandemic identified a gap in the availability of reliable, quality, high-speed broadband internet, and additionally highlighted the need for communities to stay connected. Access to reliable, high quality internet services allows residents & communities the ability to telework, access online education resources, participate in online classes, utilize telehealth, support more economic development opportunities, tourism promotion, and more. Fiber-optic internet is the most reliable and secure internet option in the industry with speeds significantly higher than traditional technologies.
Points of Concern Raised & Questions Regarding CU’s Broadband Plan at Public Hearing
- Increased electric rates to fund the $72 million project:
-This is where CU’s Business Plan is unique. The plan was built on the idea that CU did not want electric customers to subsidize the cost of a Broadband Division in Cleveland, and CU’s Business Plan was designed to NOT include an electric rate increase to fund the broadband business plan.
- Privacy concerns, government intrusion, monitoring, and controlling usage:
-CU will NOT be monitoring or controlling internet or phone usage. CU will keep customer records private and will not release information to the public or sell this information to a third party.
- Duplicate service and competition with private industry:
-CU’s proposed broadband plan is different from other services currently provided in that CU’s would provide symmetrical service (same upload and download speeds), which is currently not available in most of the Cleveland market. Once the build-out is complete, service would be available as a choice to every CU electric customer.
-CU plans to build a fiber network for the Grid Modernization Project (see more on this project and Distribution Automation under the Benefits section below in the first electric service bullet point). Offering broadband services allows the fiber network to be built and paid for much more quickly (3 years vs. 15 years) and it allows the cost of the fiber network to be paid for using broadband services instead of electric rate payer funds.
- Out of date technology by the time the system is built:
-Fiber optic cables are made of glass and use light pulses to transmit data at extremely fast speeds. This makes fiber different from traditional networks and why fiber networks are said to be a long-term solution for the data needs well into the future. The best part of a fiber network is that only the electronics at the end of the fiber strand need to be changed to increase the bandwidth availability long into the future. This is distinctly different from the coaxial and copper systems built by the existing providers, in that, their entire network path must be replaced to reach the speed and resiliency of a fiber network.
- Government-owned broadband networks have an extensive history of failure:
-CU’s plan was designed on a conservative take rate and on the premise that only 30 percent of electric customers would potentially sign up for broadband services. As an assurance the venture was viable, CU dropped the take rate to 20 percent, and the plan was still deemed viable by the Comptroller of Tennessee.
-The Tennessee Valley Authority and the State of Tennessee Comptroller’s office both completed an extensive review of CU’s Business Plan, and both entities determined CU’s plan to be viable.
-The previous government failure in the broadband business were built on different principles as to the network architecture (i.e. Fiber/Coax Hybrid Systems) as well as documented misappropriation of funds/asset cases that were studied and remedied with additional state legislated internal control requirements. Additionally, those government systems currently operating today in the State of Tennessee have been found to be successful business enterprises and have provided vital support to their communities.
-Chattanooga has seen numerous benefits because of EPB’s municipal broadband network. It has delivered economic and social benefits worth over $2.69 billion in its first decade according to a new, independent research published in an article in February of 2021. Cleveland should have these same opportunities and will build a collaborative community culture through this proposed project.
- No ability to opt-out:
-CU’s broadband service offerings of internet/phone services simply provide another option for CU’s electric customer base. Customers will have a choice in selecting CU’s internet/phone services. There will not be an opt-out fee if customers don’t choose CU’s internet/phone service.
- Close-minded people making the decision:
-The decision for CU to enter the broadband business has not been made. CU is moving through the process and steps required to make this determination. The local leaders making the final decision want this process to be as transparent as possible. They will take all feedback and input presented to make an informed decision with an open mind and vote accordingly with the best interest of the community and its collective citizen base at the forefront of those considerations.
-Next steps consist of consideration of approval of CU’s Business Plan by the CU Board of Directors. If the CU board approves, the final step would be submitting the plan to the City Council for their consideration, and they would vote for final authorization on whether to proceed or decide against CU providing broadband services.
- What would the process be to change the rate that broadband pays the Electric Division for the use of fiber?
-It will require action to adopt a new rate by all governing bodies (i.e. currently CU Board of Directors and Cleveland City Council) and review of the rate will be performed by the regulatory body (TVA).