Government Broadband Is a Disaster for Taxpayers

Posted: Oct 08, 2019 1:31 PM
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Government Broadband Is a Disaster for Taxpayers

Source: Frederick Gore/The Republican via AP

Of the “solutions” Elizabeth Warren is touting on the campaign trail, her proposal to spend $85 billion federal dollars on government-owned broadband is the most laughable. Government-owned broadband networks (GONs) are a tried and failed experiment.

It seems Warren is not the only politician uninterested in learning from the dozens of cautionary GON tails that have piled up over the years. Elected officials in the city of Redding, California recently agreed to spend $30,000 tax dollars on a “study” of the feasibility of a GON.

For much less than $30,000, one could take a train to Chattanooga, Tennessee and learn where a GON leads. Chattanooga received a $50 million loan from the city’s electric power division, $162 million in local revenue bonds, and a one-time $111.5 million subsidy from the federal government. The return on investment for this GON has been so poor that it’s estimated to take more than 680 years to break even.

Proponents of GONs often try to distract from these facts with claims that Chattanooga’s network has created jobs and been a boon to the local economy. However, a 2019 independent assessment by the Phoenix Center – a Washington, D.C.-based think-tank – finds otherwise.

The report, The Rewards of Municipal Broadband: An Economic Analysis of the Labor Market, concluded, “[W]e find almost no statistically significant effects for a wide range of important labor market variables, with the possible exception of a reduction in labor force participation. “Employment status, wages, information technology employment, self-employment, and business income appear unaffected by the introduction of a government-owned broadband network.”  

One could also buy a train ticket to Provo, Utah for much less than $30,000 to learn what happened to its GON, iProvo. When iProvo was first started back in 2004, proponents claimed it could be built for $39.5 million. Including bond interest, however, this amount ballooned to almost $67 million.

By 2011, after iProvo managed to rack up $10 million in operating losses, the city tried to bail it out by charging a $3.35 tax on the monthly electric bills of all households – including those that were not using the network. Two years later, iProvo was sold to Google for $1 and taxpayers were left on the hook for $3.2 million in bond payments over 20 years.

The City of Redding is headed down this same path. According to the report included in the council agenda, the city’s network may be funded by charging all citizens a monthly rate regardless of their interest in using the city’s network. 

Redding thinks they can minimize that by operating a so-called “Open Access” system and leasing space on their network to private internet service providers. Good idea? Well, this is exactly what iProvo tried. High-quality providers were not interested in the deal, customer service suffered, and consumers cancelled iProvo subscriptions.

Redding already has access to fast internet speeds thanks to the private sector, and government monopolies have a sorry history of failure. Britain pre-thatcher. Eastern Europe before the wall came down.

Rather than pouring millions of hard earned tax dollars into a GON, Redding officials should focus their efforts on getting government out of the way and allowing the private sector to thrive.