News: CJ Exclusives

Six N.C. city systems make list of ‘broadband boondoggles’

MI-Connection in Mooresville and Davidson makes Taxpayer Protection Alliance's group of "dirty dozen" debt-ridden city internet systems

RALEIGH – A North Carolina municipal broadband network has made the Taxpayers Protection Alliance’s “Dirty Dozen” — 12 high-profile taxpayer-funded internet projects that have cost the public more than $2 billion.

The North Carolina network is MI-Connection, which provides broadband service to the Charlotte suburbs of Mooresville and Davidson. MI-Connection —$80 million in debt and has an annual operating deficit of $6 million, according to the Alliance — is one of six North Carolina municipal broadband systems profiled in a recent TPA report of government-run internet service providers. 

Mooresville and Davidson borrowed $80 million in 2007 to purchase a bankrupt cable television system and turn it into MI-Connection, the Alliance says. “Little did local taxpayers know that the massive outlay was just the beginning of tax dollars being used to subsidize the municipal broadband and telecom scheme — or that MI-Connection would threaten the financial stability of both towns,” the Alliance says.

The Alliance report says municipal broadband networks frequently go over budget, customer subscription numbers rarely meet projections, and bonds used to finance the projects strain municipal budgets for decades, causing credit ratings to drop. The Alliance says there are “almost no circumstances in which it would be wise for government to build, manage, or control a broadband network.” In nearly all cases, the Alliance says, the private sector is already providing a broadband network in the area where there is a municipal network, adding that those public networks compete unfairly against private enterprise. It says the best thing government can do to make sure residents and businesses are served by a competitive internet system is to reduce tax burdens and regulation.

Before policymakers decide to build a government-owned network, the Alliance urges officials to commission a study determining that the private sector is not able to provide internet service in the market, making government intervention the only fallback. The study should be conducted by a professional embraced by policymakers and the independent stakeholders in the community who would be affected by such an undertaking.

Rep. Susan Martin, R-Wilson, represents one area that is serviced by a municipal broadband company. Greenlight provides broadband services to Wilson and surrounding areas. Martin said she doesn’t disagree that many of the government broadband experiences haven’t panned out but says there could be a role for government in broadband infrastructure.

“I think what we’re seeing now is that the access to really high-speed and quality digital infrastructure is important for so many areas of life and it’s not just a luxury anymore,” Martin said. “I think making sure that infrastructure is in place could be part of government’s role.”

Martin has signed on as a primary sponsor to the BRIGHT Futures Act (House Bill 68), which seeks to boost broadband expansion in rural and underserved areas of North Carolina.

“What we’re trying to accomplish with the BRIGHT Futures Act is to see if there are smarter ways that we can partner and really leverage whatever resources we do have,” Martin continued. “Unfortunately there’s a lot of infrastructure that we have invested in across the state that is sort of dark fiber where we’re not able to tap into it even though it’s there.”

Dark fiber refers to fiber-optic cable that has been put in place but goes unused. Often, companies lay more lines than needed to curb future costs.

Martin said she hopes government won’t take over the role in providing internet services. However, she said that often there’s not a sufficient return on investment for the private sector to get more involved.

While Wilson’s Greenlight municipal broadband network wasn’t listed in the Alliance’s “dirty dozen,” it and MI-Connection were among more than 200 networks mapped out on the Alliance’s webpage. The page, called “Broadband Boondoggles: A Map of Failed Taxpayer-Funded Networks,” charts debt, waste, and broken promises left behind by the municipal networks.

The price tag for Greenlight, which started in 2008, has topped $33 million, including a $3.2 million subsidy from the city’s gas fund, the Alliance says.

Five other North Carolina municipal broadband projects listed among on the map. They include:

  • Altitude Community Broadband in Highlands. The town offers fiber-to-home and fixed wireless service to residents and business in the downtown area, the report says. However, anyone living outside that specific area may be unable to access it. The program began in 2016 and has a total debt of $250,000, the Alliance says.
  • PANGAEA, in the western North Carolina communities of Tryon, Columbus, Mill Spring, Saluda, Lake Lure, Rutherfordton, Spindale, Forest City, Ellenboro, Bostic, and Cliffside. The network, started in 2003, cost more than $3 million to build but serves only 100 locations, primarily schools, the alliance says.
  • Fibrant in Salisbury. Fibrant, started in 2008, was launched in 2015 and has speeds of up to 10 gigabits per second. The Alliance lists $32.1 million in total debt by Fibrant. It says the city council is looking at options to offload the fiber network by leasing parts out to third parties or completely sell the network.
  • Tri-Gig in High Point. Started in 2015, Tri-Gig is a public-private partnership that adds additional expenses to a network that already costs taxpayers $24 million, the Alliance says.
  • Holly Springs Dark Fiber. The project cost taxpayers $1.5 million, with city officials acknowledging that the project likely will not pay for itself for at least 10 years, the Alliance says.
  • Greenlight in Wilson. The price tag for the broadband service, which started in 2008, has topped $33 million, including a $3.2 million subsidy from the city’s gas fund, the Alliance says.

In addition to MI-Connection, the Alliance’s “dirty dozen” includes Burlington (Vt.) Telecom, Cedar Falls (Iowa) Utilities, Click Network in Tacoma, Wash., CT Gig Project in Connecticut, Electric Power Board in Chattanooga, Tenn., Fibernet Monticello (Minn.), iProvo in Utah, KentuckyWired, Lus Fiber in Lafayette, La., Memphis (Tenn.) Networx, and Utopia in Utah.



  • It is not a surprise that 6 cities made the list – that is how many muni broadband cities are in NC. This is not a list of failures, it is a list of cities that have debt, which you would only assume makes you a failure if you have zero understanding of the industry. Verizon, AT&T, Comcast, all have lots of debt. Turns out you need to borrow to build a network. Retaining debt is not a mark of failure. Unless you want to claim all homeowners that didn’t pay cash are failures…

    • Abraham_Franklin

      Not all debt is the same, Mr. Mitchell.

      Telecoms invest in broadband based on the expertise of industry professionals.
      Towns invest in broadband based on the whims of political appointees.

      • Not all debt is the same, true. But your bright lines sure don’t explain the many telecom bankruptcies among private firms or the incredible success of munis like Wilson and Chattanooga. Operating in the black, paying down debt on schedule.

        • Abraham_Franklin

          Even if you’re correct in claiming Wilson and Chattanooga have had incredible success, they’re only two municipalities.

          Private ventures sometimes fail and government ventures sometimes succeed. But the rates of failure and success matter. Municipalities have very poor track records for making these decisions.

          Mr. Mitchell, I’m curious: George Soros’ Open Society funds your website. Of what interest is municipal broadband to an extremely wealthy hedge fund investor like him? Do you think he’s shorting the U.S. telecom industry?

          • If you look at OSF, it is pretty clear that it serves his interests well beyond simply improving his fortune. His interest in media is similar to that of the rest of his philanthropy, he fears totalitarian societies and wants to see open markets, open dialog, etc. Those in the foundation that fund me do it because they want to make sure a few telecom companies cannot corner the market in an essential service and that those who own the airwaves cannot control information flows.

          • Abraham_Franklin

            Keeping a few telecom companies from cornering the broadband market is a reasonable concern, but how many is too few? Arguably, by deregulating the industry at national, state, and local levels we could foster the creation of far more competitors.

            What you are advocating is the establishment of many localized municipal monopolies. That’s certainly preferable to a federal monopoly or state monopolies, but we shouldn’t trust a local government with the control of information flowing into, out of, or within that community.

          • I love being told that I am creating monopolies as though this were a theoretical question. It is empirical. With over 450 local governments having made investments, the overwhelming majority have led to increased competition. To my knowledge, there are only 2 in which an incumbent provider decided to pull out. And even in those two, they have the wireless options that people generally use to “prove” that there is private competition today.

            Fully agree that local governments shouldn’t have a monopoly on fiber networks or on the control of information. We haven’t seen anything like that developing and I don’t find it particularly likely – particularly given the nature of overlapping networks that telecommunications can provide.

          • Abraham_Franklin

            Of these 450 local governments, how many of their investments became operational within the past ten years? Five years? If we look at a short snapshot in time, we’re in effect doing a static analysis, i.e. one of limited value.

            History shows that when governments enter an industry, they have a strong tendency to use their coercive power to give advantages to the government-owned entity and disadvantages to the privately-owned entities. The government entity eventually crowds out its private competitors. This explains why there are virtually no privately-owned local bus lines, for example.

            It will be interesting to see how these 450 municipal systems are faring 20-30 years from now.

          • Ed Clark

            give us a break…..when corporations enter an industry, like food, their bottom line has nothing to do with concern for the health of their customers. Mass transit is not something that should be seen as a profit–based business.

          • Ed Clark

            I find it laughable that you use Abraham Franklin as your handle. How unlike Mr. Lincoln or Benjamin you are.

          • I would say that more than half are more than 5 years old and well over 100 are more than 10 years old. I don’t see mass transit crowding out taxis, we still have private security guards and bookstores despite police and libraries. Bus lines run at a loss, it is the wrong comparison – they meet a public need.

          • Ed Clark

            these cities with their own internet system are NOT monopolies (like Duke Energy and electricity)

          • Ed Clark

            Koch brothers funded the group that created this article and the website is owned by the John Locke Foundation. What is YOUR vested interests in all of your negative, lop-sided comments, Mr. Franklin?

      • Ed Clark

        not true….this article is on a website owned by the John Locke
        Foundation and written by a Koch Brothers funded right wing group.
        Salisbury,
        NC built their own fiber system after pleading with local companies
        (including AT&T, Time-Warner, BellSouth) for fiber internet to
        attract bigger businesses.
        Those bigger companies lobbied/bought the
        NC legislators and passed a law that prevents Fibrant and other
        city-owned networks from expanding in their local neighborhood. No
        wonder that they may have trouble with bringing their systems up to
        break-even.
        An internet system is as much a necessity as water and sewer, so what IF the city has to subsidize one to provide the other?

  • Ed Clark

    not true….this article is on a website owned by the John Locke Foundation and written by a Koch Brothers funded right wing group.
    Salisbury, NC built their own fiber system after pleading with local companies (including AT&T, Time-Warner, BellSouth) for fiber internet to attract bigger businesses.
    Those bigger companies lobbied/bought the NC legislators and passed a law that prevents Fibrant and other city-owned networks from expanding in their local neighborhood. No wonder that they may have trouble with bringing their systems up to break-even.
    An internet system is as much a necessity as water and sewer, so what IF the city has to subsidize one to provide the other?

    And that’s the rest of this story, Christopher Mitchell et al. (below)

  • dananet

    When I look into these projects I often wonder how do we account for the savings that residents realize. In Wilson Time Warner upped their service and dropped their price by about $25. I don’t see those savings accounted for. On another note, In one quarter TWC grossed 12 billion, had a net profit of 4 billion and paid zero in taxes. They paid no tax and took 178 million in refunds. Corporate welfare. pays for a lot of lobbying. This isn’t partisan, they cover both sides of the isle.

  • Bill Sellers

    The cable cartels have the imperial NCGA in their back pockets, fighting muni-broadband as a “boondoggle”…same as potable water (muni water systems), sanitary sewer sytems (muni sewer), paved streets, and any other parts of standard urban infrastructure used by everyone. Inasmuch as I lived in Chattanooga, ask Volkswagen, or Amazon, or any of the dozens of others flocking there because they started with 1 gig, now up to 10 gigs. The simple fact is broadband (the general delivery of content) will be indispensible to economic development; content providers are a dime a dozen. Stay stuck in the past NC, while the rest of the world will increasingly need simultaneous voice, video, and data transmission.