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New York Law School: Government broadband a taxpayer sinkhole

By   /   December 20, 2016  /   News  /   No Comments

New York Law School recently released a policy briefing highlighting several examples of government broadband projects with a similar theme: such efforts are generally a sinkhole for taxpayer funds.

The school’s Advanced Communications Law and Policy Institute noted the disparate reactions to the recent Sixth Circuit Court of Appeals decision in favor of Tennessee and North Carolina over the Federal Communications Commission. That court ruled the FCC overstepped its authority in trying to supersede state law to allow municipal networks to expand.

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NEW YORK LAW SCHOOL: Researchers here have determined government-owned networks are bad news for taxpayers.

The institute says those reactions “highlight the unproductive fault lines that have emerged in the ongoing dialogue about broadband in the United States.”

ACLP said government-owned network advocates have reframed the projects “as essential vehicles for addressing what some assert as lackluster levels of competition and speed in areas already served by multiple ISPs.”

Despite the “very poor (and expensive) track record of GONs, a seemingly ever-changing narrative about the perceived viability of municipal broadband has succeeded in gaining some legitimacy — a fact evidenced by the FCC’s efforts and related federal initiatives,” the report stated.

The institute said the efforts are marginalizing state governments.

“Increasingly, state actors, legislators, regulators, and governors who do not acquiesce to the agenda of pro-GON advocates are seen as offering nothing more than ‘interference’ with localities’ proclaimed ‘right of self determination.’ This is an unfortunate outcome that dismisses the many key roles that state entities are well positioned to play in bolstering broadband connectivity in meaningful, rational ways.”

To support its argument, ACLP lists a handful of such failed efforts, including Bristol-Virginia Utilities’ OptiNet broadband division, which will soon be sold to private provider Sunset Digital for $50 million — essentially the amount of debt still left on the books.

The parties had hoped to finalize the deal before the end of the year, but the approval process is taking longer than anticipated, pushing the sale back at least three months.

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In a June 2014 case study, ACLP noted that more than $100 million was spent to build the network, including tens of millions in grant funding from state and federal agencies.

“Like many other GONs across the country, the municipal broadband network in Bristol has significant debt and, though profitable, there is continued debate as to whether the benefits of the system outweigh the significant public resources that were used to build it,” wrote study authors Charles Davidson and Michael Santorelli.

In its December roundup, ACLP also looked at some other GONs:

  • In Grand Junction, Colorado, where local officials have debated a municipal broadband system at a cost of up to $70 million for the past two years, a councilor said a first attempt at a survey by consultant NEOConnect was biased. “If we do a good survey we can determine the commercial and residential demand,” said Rick Taggart. “We’re not in the business of creating demand.”
  • A government network in Pitcairn, Pennsylvania, shut down this summer due to a lack of subscribers. The primary reason for its failure, ACLP noted, was robust competition from private ISPs.
  • Officials in Madison, Wisconsin, are in the early stages of considering a citywide government network, but it will be a whopper: early estimates project a cost of between $143 million and $212 million.

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Johnny Kampis is National Watchdog Reporter for Watchdog.org. Johnny previously worked in the newspaper industry and as a freelance writer, and has been published in The New York Times, Time.com, FoxNews.com and the Atlanta Journal-Constitution. A former semi-professional poker player, he is writing a book documenting the poker scene at the 2016 World Series of Poker, a decade after the peak of the poker boom. Johnny is also a member of Investigative Reporters and Editors.