TACIR: Tennessee shows progress on broadband but tax exemptions’ effect on deployment is unclear

Dr. Matt Owen, staff analyst, told the Tennessee Advisory Commission on Intergovernmental Relations on the broadband update that Federal Communications Commission data show 94% of residential locations in Tennessee could be served with at least 25 Mbps download and 3 Mbps upload as of June 30, 2023.

Owen said Tennessee’s rank varies by speed tier and technology: at the 25/3 tier, combining wired and fixed wireless service the state ranks about 31st nationally, while for a faster 100/20 wired-only tier Tennessee ranks about 15th. He warned, however, that recent FCC methodology changes limit year‑to‑year comparisons because the agency shifted from census‑block reporting to a location‑by‑location map and introduced a public challenge process to correct errors.

Why it matters: the FCC’s coverage map and the challenge process will affect eligibility for federal grant programs, including forthcoming BEAD (Broadband Equity, Access, and Deployment) awards. Owen said roughly $813 million has been set aside for broadband in Tennessee from federal infrastructure legislation and that another federal round of awards is expected.

State grants and deployment: Owen summarized ECD (Tennessee Department of Economic and Community Development) grant rounds since fiscal year 2017–18, saying providers have committed to expand service to more than 179,000 locations in Tennessee in exchange for about $566 million in grants. ECD-reported data indicate roughly 98,500 of those previously unserved locations have been reached so far, with additional projects still in progress.

Tax exemptions: the state enacted two sales‑tax exemptions in recent years. Public Chapter 501 (Acts of 2019) exempts labor costs for installing fiber; Public Chapter 1102 (Acts of 2022), the Tennessee Broadband Investment Maximization Act, temporarily exempts certain equipment, machinery and related inputs from sales tax for the period July 1, 2022, through June 30, 2025. Owen said Department of Revenue records show exemptions valued at about $125 million in fiscal 2022–23 and about $196 million so far in fiscal 2023–24; TASIR staff produced estimates of avoided tax revenue shown in staff materials.

Owen stressed a key limitation: neither exemption is conditioned on expanding coverage, and no state agency currently tracks whether firms claiming the exemptions reinvest savings into Tennessee deployment. “We cannot assess the extent to which these exemptions have resulted in coverage expansion using existing state data,” he said, adding staff plans to follow up with broadband providers and ECD for more information.

Local concerns and next steps: Mayor Waters told the commission that residents in his county experience unreliable wireless service and questioned advertising claims that 90‑plus percent of the county has broadband. Owen acknowledged these concerns and explained the FCC’s prior census‑block method often overstated coverage; under the new approach the FCC reports location‑level coverage and a public challenge process exists to correct misreports. Owen recommended that local officials make use of the FCC and ECD challenge processes and offered to connect county leaders with ECD broadband staff for the BEAD round.

What’s next: staff offered to seek further breakdowns from ECD and the Department of Revenue on grant recipients and local matching contributions, and to pursue follow‑up contacts with providers to understand whether tax savings have been redirected into Tennessee deployments. The commission did not take formal action at the meeting.