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Update: LUS Fiber Remains a Costly Disappointment

November 26, 2013

It’s been awhile since the Coalition for the New Economy reported on Lafayette La.’s municipal fiber network, LUS Fiber. A new research paper from the Reason Foundation finds that things haven’t changed much since we last wrote about the network.

Here are the facts about LUS Fiber as outlined by the Reason Foundation:

  • The network has cost $160 million; it’s in debt by the same amount.
  • The system has fallen 30 percent below its business plan revenue projections.
  • At one point, the system sustained losses totaling $45,000 a day.
  • LUS Fiber’s deficit has grown each year since 2007.
  • The system continues to struggle “to compete with cable, telephone, wireless and satellite service providers in terms of price, performance and service options.”
  • Lafayette taxpayers will provide $1.3 million to LUS Fiber during the fiscal 2013-2014 year.

Why has LUS Fiber failed so miserably? The foundation argues the main reason is that those who run government-owned networks like LUS Fiber fundamentally misunderstand the market. Reason says, “Government-funded broadband projects, exemplified by the one undertaken in 2005 by Lafayette Utilities Service (LUS), start with a fundamental error: governments believe they are entering a monopoly-based infrastructure business when in reality, they are entering an extremely competitive service business.”

This misunderstanding causes policymakers to underestimate the long-term costs of operating the network because they assume they can merely “maintain” a network when, in reality, broadband networks must be continually updated and upgraded. They also overestimate the revenues the network will earn because they assume consumers will opt for their service over private sector offerings.

The Reason Foundation’s conclusion is one CNE has made several times before. The report says, “For all the enthusiasm about municipal broadband, one fact remains: A great majority of systems fail. Those that survive end up falling short of their promised goals of lower prices, better service and ubiquity.”

This statement is couldn’t be more true and CNE has seen it from Utah to Minnesota and Connecticut to Georgia.