Although I do not paint as dire picture as Annette Meeks on municipal broadband. There are still several cautionary tales out there that need to be seriously considered by localities when embarking on a municipal broadband project. Most of them have been failures due to poor planning and optimistic projections including the miscalculation of how their commercial competition will respond. In some cases there are no other alternatives than a city to offer their own services, but those are few and far between. There are many creative alternatives that municipalities can implement that increase broadband penetration and offer competition.
By Annette Meeks
Annette Meeks
Another Minnesota city is debating jumping on the municipal broadband wagon and ignoring the risks and disastrous fate of similar projects.
This time it’s some on the Rochester City Council and Rochester Public Utilities who seek to join nearly 450 communities that have invested over $2 billion to construct, own and operate some form of taxpayer-funded, government-owned Internet service. Before the Rochester broadband proposal moves ahead, everyone should be aware of one crucial fact: Many local governments that have invested in city-owned Internet services have left taxpayers and bondholders with returns of pennies on the invested dollar and created a huge financial mess.
One reason for the failure of these Internet systems is the rosy projections offered to local officials in the form of free studies that show the local community is clamoring for faster speeds and better service based upon low construction costs estimates. The reality is that nearly every one of these assumptions is wrong, and it doesn’t take a lot of wrong assumptions to do a lot of harm to bond holders and taxpayers.
For example, construction costs for building fiber-to-home broadband service is nearly universally underestimated, both in terms of construction costs and likely subscribers. Nearly 12 months ago when this issue first came before the city council, the Post-Bulletin reported that preliminary construction costs were estimated to be $42 million. The presentation currently before the council projects costs of $53 million and once bonds are issued an even higher price tag of $67 million.
