This week’s “Daily Journal” guest columnist is Katie Bethune, research intern for the John Locke Foundation.
Wilson City Council has recently taken a big risk by building its own fiber-to-the-premises network. From the network, the city will be able to sell cable, telephone, and high-speed Internet services to all Wilson addresses.
The initial investment for the project was $28 million, and this month the city council approved an additional $12 million in funding.
The council has used economic development to justify spending so much money on a service that the private sector already offers. Like many other cities, Wilson has invested a great amount of taxpayer money in an effort to create jobs and grow business. The all-fiber network will be able to accommodate speeds of up to 100 Megabits Per Second (Mbps). The city council says this high speed will be an important factor in many companies’ location decisions.
Wilson leaders have assured taxpayers that none of their money will be used to support the network, which is being called “Greenlight.” They say subscription fees will cover all costs associated with the service. Mayor Bruce Rose has even said, “I can assure you there’s no tax dollars going into this project.” However, the city’s application to the State Treasurer’s office states, “The intent is to repay the electric portion of the project with electric system revenues. A rate increase of 2% is projected in FY 07/08 or 08/09 to meet the debt service requirements of this financing, depending upon the final debt service schedule.”
The application goes on to say, “Should the fiber optic project not perform as expected, the debt service could be repaid through other sources. For example, an electric rate increase of approximately 1.4% would be needed; a tax rate increase of 5.6 cents would be needed; or, some combination of the two could be put in place. These rate increases are not considered by the city to be unreasonable if they become necessary.”
The city’s consultants found that Greenlight will need 30 percent of Wilson residents to sign up for services to make the project profitable. In a city that is served by Time Warner, Embarq, HughesNet, and satellite companies, this rate seems high. If Wilson is unable to reach this goal, like most other cities that have invested in this technology, the taxpayers will be left footing the bill.
It is especially troubling that the city would invest so much in a network that cannot even be utilized by all its residents. Many Wilsonians do not own a computer. The Census estimate for the number of North Carolina homes with computers is about 55 percent. However, Wilson has a lower median income ($31, 169) than the rest of the state ($39,184), suggesting Wilson’s rate of computer ownership is probably lower as well.
Furthermore, the city’s residential cable/phone/Internet packages come with a speed of 10Mbps. Time Warner already offers this speed. If a resident wanted to take full advantage of the fiber technology by purchasing 100Mbps service, it would cost nearly $300 a month. Even for Wilson households with computers, the all-fiber network provides them nothing more than the private sector.
Wilson’s Greenlight is another example of corporate welfare. The city spent its citizen’s dollars to support the big businesses that benefit from this technology.
Wilson has higher-than-average unemployment, high crime rates, and low graduation rates. Before spending $28 million on a venture into the telecommunications market, the city council should have considered taking care of its essential business first.