Comment by bogomipz | Hacker News Reader

Comment by bogomipz | Hacker News Reader

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"Notwithstanding questions about its accounting practices and the extent to which the utility might be leveraging its monopoly electric service to support its telecom division, EPB continues to report relatively strong financial health of its fiber system.

In 2014, the GON increased its revenues from $80.7 million to $99.9 million.53

Revenue from Internet access sales in particular saw a net increase of about $17 million,54 much of which was due to residential customer growth.55 Overall, residential services accounted for two-thirds of EPB Fiber’s revenues in 2014.56 Expenses and transfers to the city of Chattanooga totaled $84.7 million.57"

This sounds OK to me, what am I missing?

Why is it important that their electricity monopoly subsidized anything? How is that any different than any other new enterprise that has gotten funding from a VC? You don't hear anybody criticize that some star up is only possible because they got money from an investor. How is the source of funding relevant?

It's not sustainable. They're making less than 4% return on a network they issued 4.5% bonds to build. Ratepayers who have no choice of electric company are subsidizing the internet service.

Why couldn't they raise prices by a bit?

Presumably, they set prices to maximize revenue--raising prices would decrease revenue by losing subscribers.

Not necessarily. It's entirely plausble that they set the price lower in order to boost the number of subscribers and thus their political constituency.

Disregarding what amazon_not said about the facts on the ground, your objection is an interesting one in theory.

I think in such a situation I would perhaps try to play on people's pride and make an emotional appeal.

And/or sell equity to customers. Some are happy to hold part of an enterprise they believe in, and will accept submarket returns. Come to think of it, a cooperative wouldn't be too different.

No need. EPB fiber is already squarely in the black.

It is sustainable, they just need to boost their numbers and market penetration like every other venture that regularly gets discussed on HN whether it be a music streaming service or ride sharing app etc:

"Recent reports estimate that those numbers have risen to over 65,000 residential customers and about 5,500 commercial customers so far in 2015.48 This represents about a 45 percent share of the local residential market for broadband, video, and telephone service. 49 Despite being available to all potential customers, only about eight percent – or fewer than 5,500 – of residential customers that purchase Internet access subscribe to its signature gigabit service.5"

This venture is only 5 years old(2011) and the bond has a maturity length of 25 years! Lastly only 162 million out of the bond issue was used to build out the fiber network, the rest was used to build a smart grid.

Incorrect, EPB fiber is sustainable as they make a profit after debt service. There is no subsidy from the power side.

You are not missing anything. EPB fiber made a profit after servicing it's debt. The electric monopoly is not subsidizing anything, they are receiving a subsidy from the fiber side!

The source of the funding is a bond, not a subsidy from the power company.

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