Tennessee
AT&T, the broadband conundrum and a $204 million tax exemption – Tennessee Lookout
The AT&T building also known as the batman building in Downtown Nashville, Tenn. (Photo: John Partipilo)
As Tennessee lawmakers rushed toward the end of the 2022 legislative session, debates over a new school funding formula, the budget, and critical race theory took center stage.
Amid the chaos comparable to the final days of a school year, lawmakers unanimously passed the Tennessee Broadband Investment Maximization Act, containing only one item: a nine-figure tax exemption, primarily benefitting one company.
Since 2009, AT&T has spent $9.6 million to influence Tennessee’s state politics, according to a database created by the Lookout. The company, whose significant presence in Tennessee comes from its buyout of BellSouth, is the state’s largest political spender over that period, averaging $500,000 on lobbying and $100,000 on political donations annually.
The act — which went largely unscrutinized by the public, media and lawmakers— granted a three-year sales tax exemption to broadband companies for the purchase of any equipment to improve or expand high-speed internet networks. The annual tax savings, estimated by the Tennessee General Assembly Fiscal Review Committee at $68 million per year, are enough to hire 142 new highway patrol officers, 25 new forensic scientists and build a new park every year.
On its surface, the exemption looked benign. Two years ago, the federal government designated hundreds of millions of dollars to Tennessee to expand broadband in rural communities, and the broadband investment act was designed to prevent those funds from being taxed by the state.
But, Stephen Spaulding, a policy and government affairs executive with the watchdog group Common Cause, said the broadband investment act reminded him of a bait-and-switch tactic to passing legislation.
“You can take a bill, call it Americans for Apple Recognization Day and then just strike out all the language, insert a tax cut, and it will likely pass,” Spaulding said. “There are lots of maneuvers to make something happen without the public having sufficient ways to evaluate who will ultimately benefit or lose out.”
The broad nature of the tax bill and the process of its passage exposed the power of AT&T in the Tennessee legislature, where it has used its money to maintain a vast influence over telecommunications and broadband policy in the state.
An initial draft of the broadband investment act included a provision to remove barriers for nonprofit electric cooperatives to build more high-speed networks in rural areas. But AT&T successfully lobbied for the bill to change into only a tax cut. As the largest private broadband company in Tennessee AT&T is likely to receive the lion’s share of the tax benefit versus the nonprofit cooperatives that are, in most cases, not paying sales tax.
Blair Levin, a former official with the FCC and senior fellow at Brookings Metro, said AT&T likely fears the competition from cooperatives because they have proved a nonprofit model can be more effective in accomplishing the goal of bringing high-speed internet access to rural communities.
“The biggest untold story of the last decade is how electric cooperatives have been the biggest primary driver of great broadband for rural areas,” Levin said. “They’ve had the best business model.”
A system satisfying no one
The fight over which companies could build broadband lines and where they could put them has a long and complex history in Tennessee.
It dates back to AT&T’s monopoly over phone lines, passing through the 2015 fight over whether Chattanooga Electric Power Board could bring high-speed internet to Bradley County, and ends up in today’s dispute with electric cooperatives.
The latest battle comes down to whether lawmakers consider broadband a public utility or private good, especially after COVID-19 proved the necessity of high-speed internet in schooling, telehealth and business.
Tennessee’s current broadband policy involves a two-tiered system where private companies operate in profitable urban areas, while publicly-backed companies — like electric cooperatives and municipality broadband providers — function in mostly less prosperous rural areas, with strict rules separating them.
Kathryn de Wit, a broadband expert with Pew Charitable Trusts, said this system creates a situation where competition is low, making prices higher and leading to a lower quality of service.
“The industry is largely a monopoly or duopoly throughout the country, one that’s has been reinforced by some low-grade policy,” de Wit said. “A lack of transparency and lack of information limits our ability to understand whether or not we can create competition in the marketplace.”
COVID boosted broadband as a bipartisan issue
This argument shifted heavily towards the utility side during the COVID-19 pandemic, which in part prompted the broadband investment act.
“Broadband is now an essential service,” said Sen. Jon Lundberg, R-Bristol, who co-sponsored the act.
Lundberg and his House sponsor, Rep. Kevin Vaughan, R-Collierville, brought the bill forward following the passage of the federal bipartisan infrastructure bill which gave Tennessee over $800 million to bring broadband to rural communities.
The two lawmakers sold the bill as a way to avoid having companies pay taxes on federal grants.
“I think this bill was a good idea,” Vaughan said, adding AT&T had no undue influence on the legislation.
But electric cooperatives are more likely than private companies to receive federal broadband funds because they are the organizations expanding into rural areas, and most are nonprofits which don’t pay sales tax.
Representatives from AT&T echoed Lundberg and Vaughan’s sentiments, arguing in a statement the bill was a “wise public policy” decision.
“The moratorium on sales tax on broadband equipment, can help make broadband investments even more effective in connecting people and communities, whether those investments come through private capital or government subsidy programs,” said Scott Huscher, a communications director for AT&T.
Can’t undo the ban
In 2015, the Federal Communications Commission tried to step in and change the playing field between privately-owned and publicly-backed broadband by preempting Tennessee’s ban on allowing publicly-backed broadband from expanding outside their coverage areas.
Republicans in the state legislature decried this as federal overreach, expressing fears that forcing private and public companies to compete was unfair.
The FCC stated its goal was to remove barriers to expanding broadband and create competition to lower internet prices. But, the Tennessee Attorney General sued the FCC, winning in federal court to keep the ban in place.
Since then, the publicly-backed broadband companies have tried to remove the ban to no avail.
Since at least 2009, these groups have funded organizations like the Tennessee Fiber-Optic Communities, the Tennessee Broadband Association, and Tennessee Electric Cooperative Association and spent nearly $9.4 million lobbying and donating to state lawmakers.
Even still, AT&T itself outspent all three groups.
The latest attempt to break the cooperative ban came in 2022 as part of the initial language proposed in the House version of the broadband investment act.
But quickly into the process, AT&T’s lobbyists advocated for lawmakers to cut the expansion provision.
Now, Tennessee lawmakers could renew the tax break as soon as the 2024 legislative session.
Levin, the former FCC official, said this is where lawmakers would ideally step in and analyze the effectiveness of the tax exemption, who it benefited and is it worth it.
“Are lawmakers deciding on a very complicated analysis of if we give a tax break of $68 million, that we lose that money to spend on schools, but we get faster broadband?” Levin said.
That’s what the debate should be, but I’m well aware that in this particular political environment, that does not seem to be the way it’s going.”
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The Tennessee Volunteers and defensive coordinator Tim Banks have agreed to a contract extension, sources told ESPN on Wednesday.
Banks led one of the country’s top defenses in 2024. The Vols held 11 of their 13 opponents under 20 points on defense and finished fifth nationally in yards per play allowed (4.56).
Banks received interest from multiple teams and coached this season on a contract that expires at the end of January. His new deal will pay him in the $2 million range annually, sources told ESPN, after he made $1.5 million this season.
A finalist for the Broyles Award as the top assistant coach in college football this season, Banks has been with Josh Heupel all four seasons at Tennessee after coaching under James Franklin at Penn State for five seasons.
Banks, 53, could be without one of his top players for part of next season. Cornerback Jermod McCoy, an ESPN second-team All-American, underwent surgery after tearing an ACL while training at his home in Texas, school officials said.
McCoy will miss spring practice, and his rehabilitation and recovery will determine whether he can get back in time for the start of the 2025 season.
The transfer from Oregon State was a key part of Tennessee’s defense as a sophomore and one of the top returning defensive backs in college football. He tied for the team lead with four interceptions, led the team with nine pass breakups and finished third with 44 total tackles. His 90.3 coverage grade by Pro Football Focus ranked fifth nationally among cornerbacks during the regular season.
Tennessee tied for seventh nationally with 11 touchdown passes allowed in 13 games.
Tennessee legislature: 3 key issues to watch
The 114th Tennessee General Assembly convenes on Jan. 14 for a new two-year term.
Tennessee Republicans are poised to pass new rules that would allow House Speaker Cameron Sexton to ban a spectator from the House gallery for the entirety of the legislative session, an escalation of public protest guardrails the GOP supermajority has implemented in the last two years.
The new two-strike rule allows the speaker to order anyone in the gallery removed for disorderly conduct. If a person is removed once, they will be blocked from returning to the gallery for that day and the next legislative day.
Once a person is deemed disorderly and removed a second time, though, they can be prohibited from the gallery “for any period up to the remainder” of the legislative session.
Sexton could also immediately ban someone for “especially egregious conduct.”
Republicans also gave initial passage Tuesday in the House Rules Committee to a new three-strikes provision that would block a disorderly member from the House chamber, as well.
How Sexton, R-Crossville, might define disorderly or “especially egregious” conduct is fully at his discretion, a point House Democrats have repeatedly criticized over what they argued was inequitable application of the rules. Democrats have argued that by holding supermajority the GOP has total power to define what is and is not considered out of order.
The new rules package come amid several sessions of heated public pushback, typically sharply critical of House Republicans, that first began as gun control protests in the wake of the 2023 Covenant School shooting.
Since then, House Republican leadership has implemented increasingly stringent speaking rules for members, instituted certain signage bans for members of the public and blocked off one-half of the public House gallery for ticketed entrance.
Rep. Yusuf Hakeem, D-Chattanooga, was one of the three Democrats on Tuesday’s House committee that voted against the rules package.
“If the representative can’t be heard, if they can’t express themselves, and then the people are being put out, who are you listening to?” Hakeem asked Rep. Johnny Garret, R-Goodlettsville, who presented the GOP rules package.
Garrett, an attorney, likened the House chamber to a courtroom. Public access does not mean there aren’t rules to follow, he argued.
“Courts in the state of Tennessee are wide open, you and I can walk in and observe,” Garrett said. “But we do not have the constitutional right to scream bloody murder inside a courtroom. That judge would slap us with contempt and throw us in jail.”
Under the new three-strikes rule for House members, a representative who is “called to order” for breaking House rules, which the rules package also refers to as “unruly behavior,” will at first face a limit on their speaking time. For the second transgression, the member would be silenced for two legislative days.
A third transgression could trigger total removal from the House chamber for three legislative days.
Garrett said the House would set up a remote voting chamber in a committee room to allow the member to cast votes.
The remote voting rule appears targeted at Rep. Justin Jones, D-Nashville, who frequently clashes with Sexton and other House Republicans on the chamber floor.
Jones demurred Tuesday when asked if he felt the remote voting punishment was aimed at him but described the rules package overall as “authoritarianism without guardrails.”
“It’s going to impact the right of the public to be here in this building, going to impact their rights and their ability to show up in the capital,” Jones said.
In other rule changes, House members’ bill allowance will drop over the next two years. Members previously could file 15 bills each but would be held to 12 bills in 2025. Next year, the bill allowance would drop to 10 per member. Committee chairs and other leadership would have a higher allowance.
Republicans voted down all rules changes proposed by Democrats, including one brought by Jones to curtail conflicts of interest between lawmakers married to lobbyists.
Republicans also blocked a ban on guns in committee rooms. Firearms are currently banned from the state Capitol but allowed in the adjoining office building.
The new rules package must be adopted by the full House before any changes go into effect, but Republicans easily have the votes to pass the package.
Tennessee
Injury Report: Tennessee's Cade Phillips 'getting his chippiness back' despite shoulder injury
Tennessee Basketball’s injury report on Tuesday night once again listed only sophomore forward JP Estrella, who had season-ending foot surgery in November, as out for Wednesday’s game against Georgia.
But the left shoulder injury for sophomore forward Cade Phillips isn’t going away. Phillips continues to wear a brace on the shoulder in practice and games, playing through pain while hesitating to the left arm he injured in the second half against Arkansas on January 4.
“Cade is tough as nails, that’s a good thing,” Tennessee assistant coach Lucas Campbell said before practice on Tuesday. “In the games he’s told me adrenaline takes over and he starts to just go.”
No. 6 Tennessee (15-1, 2-1 SEC) and No. 23 Georgia (14-2, 2-1) on Wednesday are scheduled for an 8 p.m. Eastern Time start (TV: SEC Network) at Food City Center. The Bulldogs listed all players as available on Tuesday’s injury report.
Phillips scored four points in 10 minutes off the bench in the 74-70 win at Texas on Saturday night, going 2-for-3 from the field with four rebounds. He played just three minutes in the loss at Florida last Tuesday.
“He missed a bunny there (at Texas),” Campbell said. “I don’t know if that had to do with his shoulder or not, but he did a great job. He had a nice put-back dunk.
“He’s getting his chippiness back. We need that. He’s probably the most physical big we have as far as hitting people.”
Cade Phillips suffered dislocated shoulder injury vs. Arkansas
Head coach Rick Barnes said Phillips “battled” through the injury at Texas.
“Really proud of Cade Phillips tonight,” Barnes said after the win at Texas. “Really proud. He went in the game and he battled. And his shoulder is not what it needs to be.”
The ESPN2 broadcast of the Tennessee-Florida game described the injury as a dislocated shoulder. He has worn a brace on his left shoulder since suffering the injury.
Barnes said after the Arkansas game that Phillips could have played more in the second half after getting hurt, but the score didn’t make it necessary.
Cade Phillips averaging 15.9 minutes per game off the bench
Phillips is averaging 5.9 points and 4.1 rebounds in 15.9 minutes per game this season.
He was injured while chasing a loose ball in the second half against Arkansas, going to the Tennessee locker room briefly before returning to the floor. He finished the Arkansas game 11 minutes played.
The three minutes he played at Florida was a season low.
“He wasn’t the same in terms of like the one lob he went up for,” Barnes said last week, “he didn’t even raise his left arm. He went up and tried to get it one-handed, which that’s one reason he didn’t play more.”
“Cade’s tough,” Barnes added. “He’s never going to complain. He’s just … I could tell he wasn’t normally what he is.”
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