Officials Weigh Risks of Muni Broadband Against Inaction
Municipal broadband is risky for cities, but the cost of doing nothing may be higher, said former Pennsylvania Gov. Ed Rendell (D) in response to a paper by the University of Pennsylvania Law School showing more than half of muni broadband projects are operating in the red. Penn law professor Christopher Yoo released the report at an event livestreamed Wednesday from Washington. Acting alone, the private sector is unlikely to spread broadband everywhere it’s needed, Colorado government officials said Tuesday at Mountain Connect, a municipal broadband conference streamed from Dillon.
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Penn reported 90 percent of projects won’t cover their costs within their bond periods, said Yoo. The Chattanooga, Tennessee, network, cited as a success by advocates, is cash-flow positive but will take more than 400 years to cover its debt, he said. Of 20 municipal projects that report financial results of broadband separately from electric power, 11 showed negative cash flow. Of nine that were cash-flow positive, seven would need more than 60 years to break even. One of the two success stories -- Vernon, California -- is atypical because the town is industrial and has few residents, the report said.
The report highlights a big dilemma for mayors, said Rendell, who was Philadelphia mayor before becoming governor. The risk of a municipal broadband project must be weighed against the possibly higher costs of not providing good internet, he said. A municipality that doesn’t provide quality internet for residents, businesses and government users won’t be competitive, he said. “Who’s going to come? Who’s going to stay?” Governments may not be best suited to operate a broadband network, he said, but they could pay for the infrastructure and contract out the management. As a last resort, a local government may have to do it all, he said. “Their existence is up for grabs.”
The biggest factors in muni-broadband success are keeping operating expenses down and generating revenue by signing up customers through strong marketing, Yoo said. Less important is the initial capital expense, he said. Municipalities tend to think only of initial costs and not operating expenses, Raymond James analyst Frank Louthan said on a panel. People underestimate the willingness of companies to provide broadband service, he said. Muni broadband projects may turn those companies away, he said.
Colorado seeks cooperative arrangements with industry, cabinet officials for Gov. John Hickenlooper (D) said on the Mountain Connect panel. If there’s no agreement, government should be able to act, they said.
Colorado lags in broadband and the slow pace of deployment is frustrating, said Office of Economic Development and International Trade Executive Director Stephanie Copeland. “This isn’t moving fast enough.” Public funding alone won’t solve the problem, but neither can the state depend on incumbent providers, she said. “We cannot pretend that they are in it for charity.” Rather than be frustrated, government should seek first to cooperate with industry, then work around it if cooperation fails, she said. She urged state legislation to promote competition but also to “undo things that are inhibiting communities helping themselves.”
Industry would roll out broadband to unserved areas if it could, said Colorado Broadband Office Executive Director Anthony Neal-Graves. If industry won’t come up with “creative business models” to reach those areas, maybe it “ought to get out of the way,” he said. Colorado won’t get anywhere without industry-government cooperation, said state Department of Transportation Deputy Executive Director Michael Lewis. The hope, said Department of Local Affairs Executive Director Irv Halter, is that companies will see “much more opportunity here than threat.” Local leadership is important, too, Halter said. "There is no way any of us can help if that community hasn't decided they are ready to charge into this to spend money” and make a public commitment, he said.
Colorado’s ban on municipal broadband is “a pain in the butt,” but it’s driving passion for broadband, said Neal-Graves. The 2005 statute known as Senate Bill 152 restricts municipal broadband in the state, but many communities held ballot votes to opt out (see 1704060033). Such passion is “a very good thing,” he said.
President Donald Trump's potential $1 trillion infrastructure package could spur broadband deployment, said NTIA Chief of Staff Glenn Reynolds at Mountain Connect. That could include $200 billion in federal funding to spur $800 billion in state, local and private funding. NTIA is providing information to the White House. Some information appeared in the budget released Tuesday, but “a lot more of that information is expected later in the month,” he said.