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Profits not found: Government Internet loses public money year after year

By   /   April 7, 2015  /   News  /   No Comments

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NET LOSS: Public utilities that offer cable and Internet using public dollars regularly lose money, according to a new study.

 

By Chris Butler | Tennessee Watchdog

NASHVILLE — Public utilities that offer cable and Internet using public dollars regularly lose money, says a professor who’s studied the issue.

Clarksville is a prime example of this problem, according to its most recent audit.

State comptrollers reported the city’s Lightband service lost $1.05 million in 2013, a deficit that increased to nearly $1.2 million in 2014.

Photo courtesy University of Denver's website

Ronald Rizzuto

University of Denver professor Ronald Rizzuto said government-owned Internet networks’ deficits in Clarksville and other areas of Tennessee are but “a microcosm of what’s happening throughout this country.”

“None of this is surprising,” Rizzuto told Tennessee Watchdog Monday. “About 75 to 80 percent of all GONs operate at a deficit.”

Some GONs, such as Chattanooga’s, have used taxpayer dollars to set up their services, while others, such as Clarkville’s, issue bonds backed by taxpayer dollars as insurance.

According to Rizzuto’s most recent findings, as of 2012 Tennessee had nine GONs that have run up deficits of $194 million.

Only three of the nine networks — in Columbia, Jackson and Pulaski — are making money, Rizzuto said.

Tullahoma’s GON, LightTube, had a $2.1 million deficit, according to its most recent audit.

Lightband Director Brian Taylor acknowledged the Clarksville service is losing money, and he also mentioned a letter state Comptroller Justin Wilson wrote about it, according to the January minutes of that city’s audit committee.

Clarksville spokeswoman Jennifer Rawls acknowledged Tennessee Watchdog’s emailed request for a copy of Wilson’s letter, but did not immediately provide a copy of it Monday. Neither did officials with the comptroller’s office.

City officials said at the audit committee meeting the network’s deficit would go down this year.

Rizzuto, meanwhile, said only one GON, in Iowa, has paid off all its debts.

Photo courtesy Clarksville Department of Electricity

Lightband

“Promises made to get out of debt are generally pretty empty ones,” Rizzuto said.

The fact that Wilson has now involved himself should be a concern, Rizzuto added.

“That’s particularly true in Tennessee because its state auditor has been pretty hands off and flexible on this issue, but it sounds like we’re getting to a breaking point here,” Rizzuto said.

Clarksville residents might brace themselves for a tax increase if Lightband’s deficits continue to rise.

Bad things happen when government forces compete against the free market in the Internet business, Rizzuto said.

“Local political forces promise the constituents that we, in fact, are going to save people money, but they do it at the expense of covering their costs, and then they get away with it because they have the monopoly power utility to cover the deficit,” Rizzuto said.

As reported, Clarksville officials paid for the infrastructure necessary to set up the fiber network through bonds, not ratepayer money, as determined by a citywide referendum.

The Indianapolis-based Coalition For a New Economy issued a report in 2014 saying Clarksville could have put the $20.5 million it spent on Lightband on 108 police officers, 115 teachers, 110 firefighters and five ambulances, among other services.

UPDATE: After the publication of this story, Comptroller spokesman John Dunn sent a copy of the letter his office sent to Clarksville officials.

Contact Christopher Butler at [email protected] 

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Chris formerly served as staff reporter for Watchdog.org.