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 way—through 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 broadband—at 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 million—passing 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 cable—for 180 customers. Never once did the venture turn a profit and it ended up being sold at a loss of $25 million—another 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 result—mismanagement, 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.