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Opelika Network Failure Highlights Muni Broadband as a Path to Financial Ruin

October 25, 2018

The City of Opelika recently sold its city-owned broadband system at a tremendous loss.  An article by George S. Ford of the Phoenix Center for Advanced Legal & Economic Public Policy Studies highlighted that the taxpayers of Opelika have poured $58 million into Opelika Power Services (OPS) since its inception.  To fund the losses, the city has raised electric rates by over $5 a customer and forgone millions in services the profits of the city’s electric utility once funded.

Unfortunately for Opelika, the $14 million sale price for the network doesn’t come close to covering its losses. The electric utility is left with $28 million in debt on the books for this network, in addition to the $15 million in cumulative losses that now are a bygone.

While the OPS broadband network is now gone, Opelika residents are still responsible for making an annual payment of $1.4 million on the network’s debt.  According to Ford, the city’s electric ratepayers will be forced to pay nearly $10 per month per customer to fund it.

The Opelika municipal network was once hailed as a municipal broadband success story but will now serve as a cautionary tale for other cities considering a broadband network as part of their electric utility service.  As we continue to see with government-owned broadband, it is taxpayers and utility ratepayers who end up footing the bill.