The Dangers of Municipal Broadband

February 17th, 2016 by Leave a Comment

The Franklin Center for Government and Public Integrity published this roundup on February 17, 2016, of municipal broadband project initiatives around the nation. Find the article online at  http://franklincenterhq.org/12493/watchdog-government-broadband.

The Internet of tax dollars: Watchdog covers the dangers of municipal broadband

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As the economy continues its full-throttle transition into the digital age, government-run Internet projects have become all the rage among lawmakers in statehouses, counties, and cities. Bolstered [1] by a Federal Communications Commission ruling last year that struck down laws preventing local governments from building out and competing with other broadband networks, these “municipal broadband” projects lead governments to sink tens – if not hundreds – of millions of dollars into Internet infrastructure. Much of these costs are expected to be recouped through customers paying for Internet services, but they inevitably involve substantial help from taxpayers – either from local coffers or from federal grants (or both).

The FCC’s ruling claimed to tear down barriers to competition, but it also had the effect of incentivizing politicians to invest public funds in dubious broadband projects. Places like Provo, Utah, Marietta, Ga., and Lake County, Minn.[2] provide cautionary tales [1] about what can happen when government overestimates sign-up rates and fails to count the cost of upgrading and maintaining broadband networks: taxpayers are left on the hook for millions of dollars.

Even so, many states and cities are pushing forward with municipal broadband projects. Here’s how Watchdog has been covering these proposals across the country.

Alabama

Alabama Gov. Robert Bentley has been pushing to build infrastructure so that private providers can provide Internet to rural Alabamans. His “ambitious plan,” he says [3], would bring Internet access to more than “1 million Alabamians (who) do not have access to even the slowest and most basic high-speed wireless technology.”

One taxpayer watchdog group, however, is asking: At what cost? Taxpayers Protection Alliance president David Williams hopes [3] Gov. Bentley tries to encourage the private sector to step in, rather than going the big government route and dumping $300-$500 million to install fiber-optic cable. Gov. Bentley has created a task force [4] whose express goal is to find sources of taxpayer money to fund government-developed Internet projects – chiefly government grants – but it remains to be seen just how much money he thinks he will need.

At the same time, there is a movement afoot [5] in the Alabama legislature to let city utilities provide ratepayer-backed broadband services beyond their current service areas. State Sen. Tom Whatley says he believes this is one case in which a public entity should be empowered to provide a service if private companies aren’t providing it.

A potential problem with his argument is that Opelika Power Services, which is in Whatley’s district, already competes with private Internet providers, and it’s unclear if expanding services to rural areas would mean the Opelika public utility would continue to compete with private providers. AT&T, for example, has been testing [6] an Internet service in Alabama’s Walker County that uses a directional antenna to get access through a nearby cell tower – much like through a cell phone. The signal wouldn’t be quite as fast as users with copper wires or fiber, but it is a promising broadband solution for those who don’t have it. The nature of this wireless access point also means that a private provider could more easily improve service over time.

Kentucky

Kentucky recently received the blessing [7] of FCC chairman Tom Wheeler, who praised government-sponsored broadband networks on a recent tour of the state. The network in question, KentuckyWired, which was signed into law by former Democratic Gov. Steve Beshear, benefitted from $50 million in federal stimulus funds and capital. It also called for $30 million from state taxpayers and $280 million in bonds.

Kentucky’s new governor, Republican Matt Bevin, was initially silent [8] about the impending $350 million municipal broadband project, but he has since said [7] that he wants to scale back the plan and focus it on the poorer part of the state. The original plan, he said, was “somewhat untenable,” so even though he hopes to eventually take the project statewide, he wants to work with private telecommunications companies to ensure that KentuckyWired can “walk before we run.”

Georgia

The city of Peachtree, Georgia approved a municipal broadband project last year, but a number of doubts were raised about its viability. The consultant hired by the city to determine whether the project made financial sense, for example, exaggerated[9] the level of private-sector interest, initially claiming this interest was unanimous and enthusiastic. Ultimately, however, the consultant failed to profile any business owners who really wanted a city Internet service. This led critics to worry that city officials had decided to approve a multimillion dollar broadband project with studying it carefully.

Several months later, Peachtree decided to pass [10] on building its own system. Instead the city opted to improve Internet speeds by contracting with a private provider, eliminating its business risk of operating a utility itself and freeing it of maintenance costs and responsibilities (though it’s worth noting that Peachtree’s option of building its own municipal broadband network isn’t completely off the table [10], should the deal with the private provider fail).

Tennessee

Tennessee is also taking a more cautious route [11] in its quest to provide residents with quality Internet access. The state’s Department of Economic and Community Development is hosting a survey to figure out the size and scope of broadband access currently available. Commissioner Randy Boyd explained the rationale this way: “Everybody says ‘We need more rural broadband,’ but no one can tell you, is it 5 percent of people who don’t have it or is it 20 percent? Once we know what percentage needs to be build out, then we need to determine what the cost is. Is it $30 million or $300 million or a $30 billion problem?”

Boyd’s caution in making sure the problem is clearly identified before suggesting a government solution may have in mind the struggles [12] of Clarksville, Tennessee. The city’s municipal broadband project suffered a string of major outages last year, prompting public uproar and calling city officials’ grandiose claims into question. The network was supposed to be faster for less money, but many consumers worry that it is unreliable.

For its part, Clarksville has blamed unnamed “third-party providers” and broken fiber lines.

 Article printed from Franklin Center: http://franklincenterhq.org
URL to article: http://franklincenterhq.org/12493/watchdog-government-broadband/

URLs in this post:

[1] Bolstered: http://reason.com/archives/2015/10/12/city-run-broadband-internet-is-a-disaste

[2] Lake County, Minnesota: http://franklincenterhq.org/12035/watchdog-politico-urs-broadband/

[3] he says: http://watchdog.org/255726/alabama-broadband-expansion/

[4] task force: http://watchdog.org/252698/alabama-broadband-development/

[5] movement afoot: http://watchdog.org/255217/state-senator-trying-expand-government-broadband/

[6] has been testing: http://watchdog.org/253604/att-rural-broadband/

[7] received the blessing: http://watchdog.org/256343/wheeler-broadband-kentucky/

[8] initially silent: http://watchdog.org/254319/bevin-mum-state-owned-broadband/

[9] exaggerated: http://watchdog.org/244107/georgia-3/

[10] decided to pass: http://watchdog.org/255980/georgia-city-passes-municipal-broadband-project/

[11] more cautious route: http://watchdog.org/253697/broadband-access-tennessee/

[12] struggles: http://watchdog.org/247186/tennessee-32/

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