Skip to comments.Municipal Broadband Ventures More Harm Than Help
Posted on 04/13/2012 9:03:23 AM PDT by 92nina
We can all agree that further broadband deployment is key to further economic and technological advancement. Yet, many local and state governments are going about deploying broadband in the entirely wrong waythrough municipal broadband ventures. These projects, financed by tax dollars and taxpayer-backed debt, permit governments to engage in regional broadband deployment, essentially building entirely new broadband networks from the ground up. In a recent study by the National Taxpayers Union (NTU), the authors found that several of these municipal broadband ventures have ended in failure, mostly due to poor management, and have saddled taxpayers with the bill.
Since 2001, the number of municipal broadband ventures across the country has exponentially increased, going from 16 government-run networks in nine states, to 108 networks in 33 states by 2011. This increase has occurred even though private companies are pouring out billions of dollars each year in their efforts to expand broadbandat no expense to taxpayers.
One particularly imprudent venture is the UTOPIA (Utah Telecommunication Open Infrastructure Agency) project. This project brings together 11 municipalities who have put forward hundreds of millions of tax dollars to build out a broadband network since its inception. When it was first built in 2005, it had a debt of $85 million. Today, UTOPIA is $201.5 million in debt. If UTOPIA was forced to be sold today, it would owe the creditors around $120 millionpassing their burden of mismanagement onto taxpayers. Not only has this project failed financially, but only around 8,500 of a possible 56,000 households have signed up for services through UTOPIA. This is hardly a constructive use of taxpayer dollars.
Another failed municipal broadband venture highlighted in the study is one in Marietta, Georgia called FiberNET. This network was built out by Marietta Board of Lights and Water with the intention of providing high-speed Internet to many residents and local businesses that did not have previous access. Yet, between 1996 and 2004, FiberNET built over 400 miles of cablefor 180 customers. Never once did the venture turn a profit and it ended up being sold at a loss of $25 millionanother cost to taxpayers that did not sign up for this service to begin with.
The NTU study discusses a number of other failed ventures all with the same resultmismanagement, failure, and taxpayer-backed debt. Instead of perpetuating the failures that municipal broadband ventures have produced, governments should instead work on fostering an economic environment in which private companies are better able to operate, thus allowing these entities to better service regional consumers.
My town of 14k has a vote scheduled for this late next month.
I have mixed feelings. I am not sure government can provide better price/service. However, my city has provided electric service for over a century.
Cable, mobile and landline telephone are fighting it. Based on some towns with similar demographics where the city started offering these services, the cable/phone lost between 30 and 50% of their customer base.
However, the city promises that it will all be fiber optic connections. That will provide reliable service and increased speed for about 10% less cost than private companies. We definitely know the phone and cable are NOT going to put money into fiber optics for existing connections. [They are using fiber optics in some of the new business buildings and residential developments.]
Ironically, cable upped (again) various fees, which increased my cable TV/Internet about $7 last month. They occasionally up the Internet speed and/or add a couple of new HD channels (that 3 people watch).
If you really want to see what a financial disaster it can be, look for articles on Burlington Telecom [Vermont].
One thing to consider is that everyone wants electricity. That permits the capital expense to be spread over a large base.
Perhaps a minority of the town will want high-speed Internet [though they'll all claim they do before it comes down to actually shelling out the money.] That will either make it pricier and/or result in tax increases depending on the user base.
There are hundreds of municipalities that provide electricity. There are very, very few who have successfully implemented broadband.
I think it’s the size of these newer Internet projects, and also that they’re untested that allows for government to overspend in horrific numbers. Electric service by now has a certain measure for what the cost should be.
In the small city near me (40K people) they built a city owned cable/internet company. There was no need for once since they already had a private company that continued to provide service even after the city owned company started. The only reason I can see that they started the company was because the city wanted to provide al Jazeera to it’s citizens. I’m serious about that.
The city owned company leased equipment and started operating but they were hemorrhaging money. They made a back room deal to illegally borrow $17M from the city funds which they knew they had no way to repay. A couple of years later the money has still not been repaid but they are a bit closer to breaking even since they have not been paying for the leased equipment. They are being sued for the unpaid bills but they make the claim that the equipment is essential and cities should have to repay money if it is borrowed for essential purposes. Again, I’m serious about that.
Needless to say the politicians have rallied to cover their own asses. The state’s attorney decided his political career would be slowed by bringing charges so none were brought. The lawsuits are ongoing and legal observers are concerned that if the city wins it’s case it will then become very difficult for cities to borrow money because they will have a precedent to legally stop paying at any time.
See my post #6.
I doubt that it was just al Jazeera. The city could have found a way to provid it on their own local access channel on the then Adelphi(?), now Comcast service.
This incompetence began with Bernie Sanders, his progressives, IRV, Deb Markowitz, et al.
They bundle their cr@p in such a way as to make it very expensive to just get basic cable and internet. You get minimal broadband, so in reality it is only about 30 bucks to get premium channels along with unlimited phone.
The new generation of wireless broadband would make it so much easier, then add phone service and make it cheaper.
Until the all the facts are divulged in the discussion, I must assume that the perceived losers are behind the criticism.
How many successful municipal broadband systems are there? No mention whatsoever.
Why are wireless systems not discussed?
Because the existing cable/phone companies' experience would look abysmally bad and predatory by comparison.