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Curbing the Muni-Broadband folly
February 6, 2012
Cable companies don’t exactly poll well with the public. Unfortunately, politicians take low public approval of private enterprise to mean government can perform the service better. The explosion of local government units standing up publically owned cable and broadband networks has led to a corresponding explosion of public debt. As we have seen over the past couple years in cases ranging from Burlington, Vermont to Memphis, Tennessee, this trend has left taxpayers holding the bag for millions in bad deals and malinvestment.
Fortunately, some states are starting to take the lead to combat the issue. Senator Chip Rogers in Georgia introduced SB 313 to level the playing field between municipal broadband networks and incumbent providers.
Georgia’s experience with municipal broadband networks is not overly unique. Cities such as Acworth and Marietta wasted millions of taxpayer funds pursuing such projects.
Marietta provides a great example of the general malfeasance and consequences for taxpayers. In the late 1990’s, Marietta created FiberNet to compete directly against existing cable and internet providers at a cost of $35 million. Over the next five years, the city managed to lure a whopping 180 customers away from those existing providers. In 2004, Marietta decided to cut its losses on the project and sold the network for a mere $11 million.
So if Marietta is the problem, what is the solution?
SB 313 prohibits a set of procedures used by municipal broadbands in order to maintain an illusion of competitiveness.
Raising of Rates or Taxes: Often, muni-broadbands are financed by bonds issued from an existing entity, such as a public utility. In order to pay for the new debt, utilities will raise rates on their captive consumer base, without public approval or meaningful oversight. SB 313 would end this practice.
Tax Treatment Equity: SB 313 would force muni-broadband companies to pay taxes equal to what a private incumbent provide would pay.
Force a Public Vote: Most importantly, SB 313 stipulates that before a city can move forward on a municipal broadband project they must receive support from the public. This is simply good common sense. Taxpayers are being asked to back millions in new debt, it is only fair they have a voice in the matter.
Ultimately, the solution is that government needs to get out of private enterprise. In my home state of Montana, the federal government spent $7 million per household on expanding broadband access. We simply cannot afford these expensive, failing distractions any longer. Providing cable TV is not a core function of government. While SB 313 does not go that far it does offer protections for taxpayers and should lessen the chances of another Marietta.
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