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May 31, 2004 Provided by System Dynamics Inc.

Putting Jackson, Tennessee on the Fiber Map

Jackson, Tennessee is known to some as home of railroading's "Casey" Jones, to others as one of the ten largest U.S. publicly owned nongenerator electric utilities, but Jackson Energy Authority is aiming to make "fiber to the home" (FTTH) its new hallmark. We had previously interviewed ( ) Kim Kersey, Senior Vice-President of Telecommunications at JEA, We were intrigued enough that we vowed to visit Jackson as soon as their network--said to be the largest FTTH deployment in the US to date--went live. On April 27th the system went live with JEA's "EPlus Broadband" services, and we arrived a week later.

JEA provides electric, natural gas, water and wastewater services to about 38,000 residences, businesses and industry in Jackson and parts of Madison County. JEA had been a municipal utility, but about three years ago gained its current status as a public utility created under a private act passed by the Tennessee Legislature. JEA's assets and operations are paid for through its utility rates -- not tax money. Jackson Energy Authority is governed by a five-member Board of Directors appointed by Jackson's Mayor and City Council. It believes it has the best aspects of both municipal utilities and investor owned utilities (IOUs): its shareholders and its ratepayers are the same group and it has the ability to issue general obligation bonds.

Although Jackson is a relatively small city, it has a good location in western Tennessee, between Memphis and Nashville. A number of manufacturing companies have facilities in Jackson, including Maytag, Procter & Gamble, Armstrong Wood Products and Delta Faucet. The city and JEA have mutual goals of supporting economic development, but recently have felt unable to be responsive in putting together attractive telecom proposals for prospective industries. JEA President and CEO John Williams said to us "I like Jackson. I didn't think the town was being well served."

Charter Communications provides TV services, broadband and telephony to Jackson residents. The cable system in Jackson, as with many systems, has gone through multiple transitions of ownership and management. JEA says that neither Charter nor BellSouth were able to respond quickly to meeting the telecommunications needs of prospective new businesses. With the increasing importance of telecom to all kinds of companies, Jackson's business leaders felt they were losing some new businesses to more responsive communities. Now the city can put together a complete package for a prospective industry in twenty-four hours.

Providing jobs for graduating students was another factor in JEA's decision to become a telecom provider. Jackson has four colleges with nearly 10,000 students, and has had problems keeping the students after they graduate. The city believes that better telecom infrastructure will attract industries such as finance and real estate, offering more attractive jobs to college graduates.

FTTH Infrastructure

The decision to use FTTH as the residential infrastructure resulted from the desire to provide more than a "me-too" service. A hybrid fiber coax (HFC) infrastructure was estimated to cost about $800 per home and a fiber one about $1100. They considered an all-digital approach but felt that all-digital set-tops added an additional risk element and were still too expensive to provide one for each TV set. They chose Wave 7 Optics solution since it enables easy offering of analog video over the same fiber, and supports Motorola set-top boxes similar to those used by Charter, making an easy transition for JEA video customers.

The Wave7 Optics Last Mile Link system has three main elements: the core, the tap and the gateway.

The Last Mile Core (LMC) is the main component of the system. On the upstream side, it connects to the backhaul fibers carrying video and Gigabit Ethernet to and from JEA's headend; on the downstream side, it connects to the feeder fibers carrying all services toward the homes. Each core can support 96 customer sites--homes or businesses--on a "home run" or tapped basis.

The Last Mile Tap (LMT) is a passive device. On the upstream side, it connects to the feeder fiber from the core; on the downstream side, it connects to the drop fibers toward the homes. Each tap can support eight sites.

The Last Mile Gateway (LMG) provides all services for a site. On the upstream side, it connects to the drop fiber from a tap; on the downstream side, it provides standard twisted pair, coax and Category 5 Ethernet cables for telephone, video and high-speed Internet services. The gateway is mounted outside the home near the electrical meter; a backup battery provides 8 hours of backup power for voice services.

The JEA system will include 365 cores when completely deployed. JEA expects to complete all 100 miles of underground fiber by the end of this year, and plans to have service available to 23,000 customers within a year. JEA will install all the cores and taps in each neighborhood, but will not incur the expense for the fiber drop and the gateway device until a customer orders service.

Control of the system takes place from JEA's Operations Center, a modern underground center opened in 2001 to withstand natural disasters. Such precautions are warranted since Jackson has been hit by major tornadoes in 1999 and again in 2003, when six people were killed and millions of dollars of damage incurred by homes and infrastructure in the downtown area.

JEA In The Community

The importance of local people and relationships appears to be one of the key elements in the community's reaction to JEA's fiber services rollout. JEA is part of the community and prides itself on providing services beyond just utilities. Their Web site notes that they make house calls at no charge to troubleshoot utility problems, to light gas pilot lights, and to check heating and cooling units for efficiency and safety. Customer service is available 24 hours a day and prides itself on answering 97% of calls within 30 seconds.

Kersey was a long-time employee of the cable company and has lived in Jackson for many years. When we drove around several neighborhoods and went to lunch with him, people waved and stopped him to ask how soon they would be able to sign up for JEA's services.

Part of keeping the community happy was the relatively painless way that JEA chose to install the fiber. Rather than major damage to lawns, they used a method that was minimally disruptive. Another nice touch was their choice to save a historic house from destruction and renovate it as a display of the energy saving and broadband features that their infrastructure can support.

JEA believes it provides a superior video line-up and options, including better reception of some Memphis channels by providing fiber backhaul, more HBO choices, an HD-DVR option and selections that are closer to a la carte. The price of the video services is roughly comparable with the incumbent, approximately $44 for the cable operator and $39 for JEA.

Although the original model was for JEA itself to offer the "triple play" of video, high speed data and voice services, it has not turned out that way. Aeneas, an established local ISP and CLEC, challenged the plan, and a settlement was reached whereby JEA offers only video services directly. Voice and data services are offered by ISPs and CLECs using leased bandwidth from JEA's fiber facilities.

How well the Jackson story will transfer to other electrical utilities remains to be seen. We asked about BPL, and were told they had not considered it because BPL technology was not ready at the time they made their decision. CEO Williams said municipal utilities are willing to take more risk than investor-owned utilities, and often try new technologies first; if they work, IOUs follow.

Our visit was at the start of the service going live, so we'll be sure to check back to see what the take figures actually turn out to be.

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