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Economist: Opelika, Ala. Shouldn’t Expand Its Municipal Network

April 13, 2017

Earlier this month, an Alabama senate committee rejected a bill that would allow Opelika’s municipal broadband network to expand beyond its state-mandated footprint. According to George Ford, chief economist of the Phoenix Center for Advanced Legal & Economic Public Policy Studies, the Senate’s decision was the right one for taxpayers.

In a column posted Sunday at AL.com, Ford explained that private Internet Service Providers should not be forced to “compete with a government that is also a regulator” because that competition would violate the U.S. Constitution’s due process clause.

Another concern, Ford said, “is the burden the city’s network has already put on Opelika’s taxpayers and, most directly, the electric ratepayers.” (According to Ford, the city’s “captive electric ratepayers … provide the city a steady stream of income to subsidize the broadband business’s losses.”) Ford also takes issue with Opelika’s mayor, who has argued that the city’s network doesn’t receive taxpayer funding. Ford calls that claim “grossly misleading” because the network “is a division of the city, and ratepayers are taxpayers.” Ford also explains that, “If the network is eventually sold for pennies on the dollar, as these government-run networks often are, then it is the citizens that will pay the difference.”

According to Ford’s calculations, Opelika’s municipal network had lost $8 million by the end of 2015 and very likely lost money in 2016 as well. (Data for last year is not yet available.) If those figures are correct, that would mean that “each household shoulders about $3,800 in debt for the network” and $730 in financial losses. The per subscriber cost (about 3,000 residents have signed up for the network) “is a stunning $13,000,” according to Ford. Ford also noted that, “since the poor are less likely to have broadband, these losses amount to a regressive tax whereby the poor pay for the broadband services of the rich.”

Ford concludes that expanding Opelika’s network would make “a bad situation worse.”

We agree.