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Curbing the Muni-Broadband folly

by Brent Mead / /

Cablecompanies don’t exactly poll well with the public. Unfortunately, politicianstake low public approval of private enterprise to mean government can performthe service better. The explosion of local government units standing uppublically owned cable and broadband networks has led to a correspondingexplosion of public debt. As we have seen over the past couple years in casesranging from Burlington, Vermont to Memphis, Tennessee, this trend has lefttaxpayers holding the bag for millions in bad deals and malinvestment.

Fortunately,some states are starting to take the lead to combat the issue. Senator ChipRogers in Georgia introduced SB 313 to level the playing field betweenmunicipal broadband networks and incumbent providers.

Georgia’sexperience with municipal broadband networks is not overly unique. Cities suchas Acworth and Marietta wasted millions of taxpayer funds pursuing suchprojects.

Mariettaprovides a great example of the general malfeasance and consequences fortaxpayers. In the late 1990’s, Marietta created FiberNet to compete directlyagainst existing cable and internet providers at a cost of $35 million. Overthe next five years, the city managed to lure a whopping 180 customers awayfrom those existing providers. In 2004, Marietta decided to cut its losses onthe project and sold the network for a mere $11 million.  

So ifMarietta is the problem, what is the solution?

SB 313prohibits a set of procedures used by municipal broadbands in order to maintainan illusion of competitiveness.

Raising of Rates or Taxes: Often, muni-broadbands are financed bybonds issued from an existing entity, such as a public utility. In order to payfor the new debt, utilities will raise rates on their captive consumer base,without public approval or meaningful oversight. SB 313 would end thispractice.

Tax Treatment Equity: SB 313 would force muni-broadbandcompanies to pay taxes equal to what a private incumbent provide would pay.

Force a Public Vote: Most importantly, SB 313 stipulatesthat before a city can move forward on a municipal broadband project they must receivesupport from the public. This is simply good common sense. Taxpayers are beingasked to back millions in new debt, it is only fair they have a voice in thematter.

Ultimately,the solution is that government needs to get out of private enterprise. In myhome state of Montana, the federal government spent $7 million per household onexpanding broadband access. We simply cannot afford these expensive, failingdistractions any longer. Providing cable TV is not a core function ofgovernment. While SB 313 does not go that far it does offer protections fortaxpayers and should lessen the chances of another Marietta.