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Newport, Tenn. Takes Municipal Broadband Risk Despite Comptroller’s Warning

October 11, 2017

Watchdog.org investigative reporter Johnny Kampis recently revealed that Newport, Tenn. is now ready to spend $24.7 million—or $6,861 per “expected customer”—on a municipal broadband system. (Kampis’ figure is higher than the $21.9 million estimate for the project that the Coalition for the New Economy (CNE) discussed this past April.) 

The Newport system will be financed through “a 35-year, $21.3 million loan from the taxpayer-funded U.S. Department of Agriculture.” Additionally, the city’s utility system “will loan the remainder of $3.4 million to the broadband division, which will be paid back over seven years.” City leaders promise the network will be online by next January and that service will be available to all 8,000 residents by 2021.

Newport Utilities spokeswoman Sharon Kyser has said that the city will pay back those loans with subscribers’ fees. Many analysts, however, believe that the city won’t be able to achieve that goal.

Newport expects 45 percent of residents to eventually sign up to receive service from the network. As CNE noted earlier this year, state comptrollers have told city officials it’s likely that figure is too optimistic. As Kampis explains, “Sandra Thompson, director of the Office of State and Local Finance, sent a letter to Newport officials on May 17 saying the broadband plan didn’t provide adequate assumptions, or methodology, to support the 45 percent customer-capture rate given the number of existing providers in the area.” According to Kampis, existing providers include AT&T, Charter, Comcast, Windstream, Planet Connect. and Ultranet.

John Dunn, a spokesman for the Office of State and Local Finance, said his office got calls from “Newport folks” asking them to change the comptroller’s mind. According to Kampis, the comptroller’s assessment hasn’t changed. Dunn said, “We just couldn’t come to the same conclusions they did.”

Newport’s project is a partnership with the utility system in nearby Morristown. According to a study this year by researchers at the University of Pennsylvania, the Morristown project will likely never be cash flow positive.