July 9, 2014
Two weeks ago, the Coalition for the New Economy (CNE) alerted readers to a new study by Charles Davidson and Michael Santorelli from New York Law School. Our blog listed the duo’s top 10 arguments against government-owned broadband networks (GONs) and over the summer CNE plans to provide a deeper dive into Davidson and Santorelli’s ten GON case studies. Last week CNE looked at the Chattanooga, Tenn. case study and this week we look at the Bristol, Va. GON (BVU), which is approximately $70 million in debt.
Davidson and Santorelli begin the Bristol assessment by noting its similarities to Chattanooga. They note both systems are operated by the city’s utility, offer gigabit speed options and now compete against private sector companies even though, originally, they were meant to offer service only to the government.
The Bristol network was approved in 1999 and the original plan was for it to provide broadband to city departments and offices only. However, in 2001, the city approved a plan to allow it to compete with private carriers and secured state and federal taxpayer funds to carry out this plan. The state approved a plan in 2009 to transfer ownership from the city to a state entity so the GON could “expand its territory.”
BVU’s total price tag – so far – is $100 million. Davidson and Santorelli report half of that funding came from municipal bonds. (See our recent post on municipal bonds here.) The report says the network has also received “tens of millions of dollars” in direct help from state and federal taxpayers.
Bristol’s GON has 13,400 subscribers, which means the current total cost-per-subscriber is around $7,463. Despite the healthy dose of taxpayer money and a high subscriber-to-population ratio, Davidson and Santorelli say the GON has “struggled financially.”
Many Bristol residents are worried BVU’s debt is much higher than the $70 million reported. Davidson and Santorelli explain, “[S]ome residents accused the city of shifting to an authority model in an attempt to prevent public scrutiny of a project that had amassed significant debt.” The two conclude, “Creating a quasi-independent authority allowed the city to remove the GON’s tens of millions of dollars of debt from its books and freed the new entity to assume even more debt and grow beyond the boundaries initially set for it.”
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