Critics warn against plan to allow city-owned broadband systems
The North Carolina League of Municipalities is making a push to allow local governments to build broadband infrastructure and lease it to private internet service providers, but critics warn the plan would harm taxpayers’ pocketbooks.
The league tried and failed to get the same concept through the North Carolina General Assembly as part of the BRIGHT Futures Act during the 2017-18 session. Lawmakers instead created a program called Growing Rural Economies and Access to Technology (GREAT) and budgeted $10 million in grants that would help pay for the cost of rural broadband projects.
Gov. Roy Cooper mentioned expanding broadband infrastructure in rural areas using public-private partnerships during Monday’s State of the State Address.
The N.C. Department of Information Technology said there were 30 applicants in the first year of the program seeking $17 million, so the department will have to pare down the list.
The league isn’t happy that cities aren’t eligible for the GREAT program because the state now prohibits them from building their own networks.
“We just feel like even though there are some of these public-private partnerships out there taking place now, the authority needs to be more clearly stated so that people aren’t having to jump through a bunch of hoops, and so it’s clear as well that municipalities can receive grants to build this type of infrastructure,” said League of Municipalities spokesman Scott Mooneyham to The Insider (see editor’s note at the end of this story).
Mooneyham said that he expects multiple bills will be filed this session to enable municipal broadband.
Critics argue it would be a bad idea to pass one of those. David Williams, president of Taxpayers Protection Alliance, said communities nationwide are “losing millions of dollars on these taxpayer-funded broadband projects.” He points to Kentucky, whose statewide Kentucky Wired fiber backbone project is hemorrhaging hundreds of millions of dollars. He also noted Lake Connections in Minnesota, which was funded primarily by the federal stimulus, was sold last year for pennies on the dollar.
To see the adverse effects of government broadband projects, North Carolina lawmakers wouldn’t have to look far. Last year, Salisbury voted to lease its city internet service Fibrant to Hotwire Communications. At the time, the city was losing about $3 million a year to operate the network.
Another government-owned network, MI-Connection, which services Mooresville and Davidson, has seen annual operational deficits of $6 million.
These networks were created before the legislature voted to ban the practice of cities getting into the broadband business.
“We hope that folks in North Carolina can see the mistakes that have been made by these communities and stop these ill-advised projects,” Williams said. “It makes no sense to put valuable taxpayer money at risk for projects that should be built by the private sector.”
Another wrinkle is the movement from fiber to wireless, especially with the emerging 5G technology. Tom Struble, technology policy manager at R Street Institute, noted the next generation of wireless and its promise of 1 gigabit-plus download speeds is quickly gaining a foothold. He expects to see mass use of 5G in many locales by 2020.
It takes an average of five years to construct a fully-functional broadband system, so any cities hoping to start now are probably already behind the curve, he said.
“I would be extremely hesitant to push public money into one of these [government] projects right now,” Struble said. “I think it would be particularly foolhardy because of how 5G can disrupt the home internet market.”
Cable providers recently announced their 10G initiative at the annual Consumer Electronics Show in Las Vegas. In this case, the G stands for gigabits rather than generation. The goal is to ramp up speeds along fiber-optic cables nationwide, although urban areas will benefit from this plan much more than rural regions where fiber is less cost efficient to deploy.
Private providers are also establishing other solutions to lower the rural broadband gap. At a recent town hall meeting in Stanly County discussing ways to improve connectivity, Alan Fitzpatrick, CEO of Open Broadband LLC, told attendees that his company has signed a contract with the county to access cell towers. That will enable it to establish a gigabit-capable wireless ring across the area, Fitzpatrick said.
Some cable and internet providers already offer discounted broadband service for some households on public assistance. Spectrum, Comcast, AT&T, and Verizon are among the providers offering high-speed data service with equipment for $15 a month or less to families receiving Supplemental Nutritional Assistance Program benefits (aka food stamps).
Johnny Kampis is an Alabama-based freelance writer who has worked for Watchdog.org and written for the Taxpayer Protection Alliance along with many other publications.
Editor’s note: Due to an oversight, The Insider was not credited in the initial version of this story. We regret the error.