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Chanute needs state nod to offer fiber broadband, says 1947 law; AT&T joins case

Chanute utilities director Larry Gates said the city is ready to issue the bonds and start hooking up customers as soon it gets the Kansas Corporation Commission’s approval.
Chanute utilities director Larry Gates said the city is ready to issue the bonds and start hooking up customers as soon it gets the Kansas Corporation Commission’s approval. The Wichita Eagle

After beating back a legislative effort to stop them, city leaders in Chanute now face another state government hurdle in their effort to extend ultra-high-speed fiber broadband to residents’ homes and businesses.

Because of a 1947 state law on utilities, the city has to get permission from the Kansas Corporation Commission to sell bonds to fund its fiber-to-home project, which would extend some of the fastest Internet service in the nation to the rural community of about 9,200 people in southeast Kansas.

Larry Gates, Chanute’s utilities director, said the city is ready to issue the bonds and start hooking up customers as soon it gets the commission’s OK. “This is our last hurdle,” he said. “I imagine we’ll do it right away.”

AT&T, one of two lower-speed broadband providers serving Chanute, filed to officially intervene in the case and was granted that permission on Tuesday morning.

“Any decision made by the KCC could impact AT&T’s business operations in the area, which is why we asked to intervene in the proceeding,” the company said in a written response to questions from The Eagle. “AT&T remains interested in both broadband issues and the work of the KCC.”

The company has not yet filed any testimony in the case.

The service the city is planning has a download speed of 1 gigabit and is projected to cost $40 a month for city residents. That’s 14 times faster and 60 percent cheaper than the fastest Internet service that Chanute residents can get now.

The speed would be as fast as the Google Fiber network being deployed in the Kansas City metropolitan area – and 42 percent cheaper for the customers.

The 1947 law requires municipalities to get commission approval for bonds to pay for constructing, expanding or improving utility service. The commission must find the proposed service “is necessary or appropriate for the municipality and its consumers, and for the protection of investors and will not result in the duplication of existing utility services in the area served or to be served by the municipality.”

Chanute’s fiber-to-home project would be an expansion. Acting through its water, gas and power department, the city already provides fiber broadband to government facilities, select businesses and the local hospital and community college. City parks are covered with free wi-fi.

The service has gotten rave reviews and city officials say it’s a major reason why Chanute is growing, while other rural Kansas towns are losing population.

The hospital uses it for advanced telemedicine to link stroke patients to specialist doctors in Wichita; the college is now one of the nation’s fastest-growing and students and small-business owners routinely work out of the city library to take advantage of its faster Internet.

Chanute officials say the law requiring commission permission to expand is outdated, because it was written in the days when the telephone company was a monopoly. In any case, its service isn’t a duplication because it will be a lot better than anything the private sector is willing to offer to a small town, the city argues.

“AT&T is the incumbent telephone company and Cable One is the incumbent cable TV operator,” the city’s filing to the commission said. “Neither of those providers offers the level of service throughout Chanute’s utility service area that Chanute will be able to offer its citizens as a result of the investment planned for Chanute’s network. As such, there will not be a duplication of existing services, even if such a consideration were still relevant today.

Early this year, Chanute fought against a Senate bill – written by a cable-TV industry lobbyist – that would have outlawed municipal broadband throughout the state. The bill was scheduled for a hearing but it was cancelled after Chanute started raising issues about it.

The thinking behind the bill was that cities and counties, which don’t have to pay taxes, would be unfair competititon for the private-sector service providers.

In the commission case, Chanute is arguing that the 1947 law was actually designed to protect municipalities from defaulting on bonds because of private-sector competition, not to protect private-sector providers from competition with local government.

Since then, lawmakers and regulators have almost entirely deregulated telecommunication services, counting on competition in the marketplace to keep providers from charging too much or providing substandard service.

“This reasoning (behind the 1947 law) reflects an environment where construction of a telecommunications network was considered a natural monopoly, where one company could supply an entire market at less cost than two or more companies,” Chanute’s filing said. “That is no longer the case in the telecommunications marketplace.”

David Springe, chief consumer counsel for the Citizens’ Utility Ratepayer Board, said he sympathizes with Chanute, but the telecommunications industry is so deregulated that legally he can’t make a case to intervene. CURB is the state agency created to protect the interests of residential and small-business customers in matters involving regulated utilities.

The 1947 law “does really sort of fly in the face of everything that has been said about competition,” he said. “It’s either a competitive world and you can stand on your own two feet, or it’s not.”

Reach Dion Lefler at 316-268-6527 or dlefler@wichitaeagle.com.

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