Last Wednesday, BrightRidge directors approved moving forward with an 8-year, $64 million investment to bring competition to the regional broadband, cable television and phone service marketplace.
The board voted unanimously to move forward with a phased plan that will offer up to 10 Gb symmetrical service to commercial and residential customers. The decision came after three years of study. A request will now go to the Johnson City Commission, which under state law must give final approval for BrightRidge to enter the broadband business.
There will be an opportunity for public comment on BrightRidge’s plans during a meeting at 6 p.m. on July 26. Provided the Johnson City Commission gives the proposal its blessing, service should initiate by the fourth quarter of 2018. By year eight, an estimated 33,000 residential locations will be reached by BrightRidge fiber, with another 25,000 residential locations served by wireless.
The Board of Directors of BrightRidge’s forerunner – the Johnson City Power Board – considered a similar move about a decade ago but decided against the measure at the time due in part to an estimated $120 million price tag.
“I am proud of this Board and the staff at BrightRidge for reaching this decision today,” said Board Chariman Dr. BJ King. “Each have put in the time necessary to make a sound decision that will greatly enhance the economic opportunity and well-being of the community by ensuring the fastest speeds in the marketplace to power our community moving forward.”
Under the plan, each individual phase stands on its own as a viable business segment. The first-year expenditure is estimated at $14 million with the broadband division achieving positive net income by year four.
Building on BrightRidge’s 167 miles of existing high-capacity fiber, distribution fiber will be extended into denser areas in and around Johnson City. From there, high-speed fixed wireless broadband will be offered in more rural areas.
At the end of eight years, coverage will be provided to 75 percent of the BrightRidge service population, including customers living in Johnson City, Jonesborough, Washington County, Colonial Heights, Piney Flats and western Carter County.
As required by law, the Tennessee Comptroller’s office issued a report detailing the importance of local diligence in making this decision while adding a note of caution on projected take rates.
“Our broadband business plan is built on a take rate of about 45 percent of those customers we pass actually signing up for the service,” BrightRidge CEO Jeff Dykes said. “Our external consultants and internal staff agree this is very realistic and comparable to take rates seen by some of our sister electric companies in the region.
“However, we went the extra mile and prepared a draft model based on a take rate of about 33 percent – more than 26 percent lower than the original business model. Our business model easily supports the lower take rate, although it would increase early year financing needs.”
BrightRidge and its consultant, Magellan Advisors, have conducted several market surveys in recent years, each indication a high level of demand for competition in the marketplace.
The Tennessee Valley Authority, which serves as a federal regulator for BrightRidge, has thoroughly examined the business plan and agrees it will support electric division loans to the broadband division. TVA further agreed with the cost allocation method for shared infrastructure and employees.
Moving forward, TVA will monitor cost sharing and charges for services to ensure the broadband division pays for services and covers its costs with BrightRidge to maintain broadband specific reporting as well. Subsidizing broadband with electric division revenues is prohibited by law.
For the communities served by BrightRidge, substantial new fiber optic and broadband fixed wireless will be added to the community, enhancing economic development.
“The board demanded a business plan that preserved the utmost flexibility moving forward,” Dykes said. “We will have to ask for patience as we will not be positioned to serve everyone in year one, but moving forward with a conservative approach, the broadband division builds cash necessary to help construct the buildout. A conservative approach also allows us to adapt to any technological advancements in the marketplace.”