In the global race to see who can offer the fastest Internet service, an unlikely challenger has emerged: Chattanooga, Tenn.

The city-owned utility, EPB, plans to announce on Monday that by the end of this year it will offer ultra-high-speed Internet service of up to one gigabit a second. That is 200 times faster than the average broadband speed in America.

Only Hong Kong and a few other cities in the world offer such lightning-fast service, and analysts say Chattanooga will be the first in the United States to do so. “This makes Chattanooga — a midsized city in the South — one of the leading cities in the world in its digital capabilities,” said Ron Littlefield, the city’s mayor.

There is one caveat: the highest-speed service will cost $350 a month, a price that may appeal to some businesses but few households, even though the service will be offered to all the 170,000 homes and businesses EPB serves.

“We don’t know how to price a gig,” said Harold DePriest, chief executive of EPB. “We’re experimenting. We’ll learn.”

Chattanooga’s effort is the byproduct of an aggressive high-tech economic development plan in recent years, helped along by funds from the federal economic stimulus program. But it comes at a time of increasing debate among communities, countries and corporations about how best to pursue the next generation of broadband, a technology seen as the gateway to a new wave of Internet-based products and services.

The Obama administration presented its broadband strategy earlier this year and set the goal of bringing broadband to 100 million American homes at download speeds of at least 100 megabits a second — a tenth of Chattanooga’s top speed — by 2020. The United States, according to studies, is a laggard among developed nations in broadband adoption and service speeds.

Eric E. Schmidt, Google’s chief executive, and other leaders in technology and government point to the trailing broadband performance as a danger to American competitiveness that threatens to saddle the nation with an “innovation deficit” compared with other countries.

To help close the gap, Google pledged this year to supply service at one gigabit a second to up to 500,000 people in the United States. The company says that 1,100 communities have applied, and Google will make its selection — one community, or a few — this year.

In announcing the program, Google offered a glimpse of the benefits of ultra-high-speed Internet service. “Imagine sitting in a rural health clinic, streaming three-dimensional medical imaging over the Web and discussing a unique condition with a specialist in New York,” its statement said. “Or downloading a high-definition, full-length feature film in less than five minutes. Or collaborating with classmates around the world, while watching live 3-D video of a university lecture.”

Such visions of new high-speed services in health care, entertainment, education and business are behind the ambitious national programs under way in countries like Australia and South Korea. Already a leader in high-speed broadband, Korea plans to offer one-gigabit-per-second service nationally by 2012.

Higher-speed Internet service, experts agree, is an important national goal, but it is less clear whether moving quickly to very-high-speed service is worth the cost. Much of the economic gain can be achieved, and consumer demand met, by moving on a more measured path, they say.

Verizon, for example, has invested billions of dollars to upgrade much of its network for fiber optic Internet service, at speeds of 15, 25 and 50 megabits per second. Those speeds are three to 10 times faster than standard broadband service; the monthly charges are $50 for 15 megabits, $65 for 25 and $140 for 50. And the vast majority of Verizon’s fiber optic Internet customers, analysts say, choose the 15-megabit, $50-a-month service.

The demand for one-gigabit-per-second service could be minuscule, experts say. “I can’t imagine a for-profit company doing what they are doing in Chattanooga, because it’s so far ahead of where the market is,” said Robert D. Atkinson, president of the Information Technology and Innovation Foundation, a nonpartisan research group.

Even Mr. DePriest of EPB does not expect brisk demand for the one-gigabit service anytime soon. So why offer it? “The simple answer is because we can,” he said.

And, Mr. DePriest said, it can be done at minimal additional expense, once fiber optic cable is strung to homes and businesses, and the electronics for ultra-high-speed Internet — more than 100 megabits per second — are in place.

“The overriding consideration is that this is a real tool for economic development for our community,” Mr. DePriest said. “It is the basis for creating the products and services of the Internet of the future. And it’s in Chattanooga today.”

The utility started stringing fiber optics to homes about two years ago, and began offering high-speed broadband a year ago. It supplies 30-megabits-per-second service for $58 a month, 50 megabits for $71 a month, and 100 megabits for $140 a month (as of Monday, down from $175).

That service is now offered to 100,000 of the utility’s 170,000 customers, and will be available to all of them by the end of the year. At present, 15,000 customers subscribe to at least one fiber optic service — television, Internet access or phone service. And 12,000 subscribe to the Internet service, a strong sign-up rate in the first year, Mr. DePriest says.

The high-speed Internet service is piggybacked on top of the utility’s smart-grid network, which was the reason for stringing the fiber optic cable to homes in the first place. Smart grids are advanced electrical networks that can improve energy efficiency, enable variable pricing based on the time of day, and reduce disruptions. They require digital networks for two-way communications, and computerized meters in homes.

EPB had already begun a smart-grid program before the Obama administration included billions for grants for smart-grid projects in the economic stimulus program in 2009. But the Chattanooga utility did win a $111 million grant from the Energy Department, accelerating its smart-grid plan. The federal funds did not go to subsidize the high-speed Internet service, Mr. DePriest said.

The customers for the fastest offering may be few, but Dr. James Busch will most likely be one of them. He is one of 10 radiologists in a practice that reads and interprets medical images from 14 hospitals and clinics in Tennessee and Georgia. Those data-heavy medical images are shuttled over the Internet.

“The business model works because bandwidth is so available in Chattanooga,” Dr. Busch said.

The bandwidth requirements for the practice will only grow, he said, and the faster service to homes will help. “Our docs will be able to read images from home,” Dr. Busch said. “That could change our practice.”