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Government-Owned Broadband Review of the Week: Monticello, Minn.

August 28, 2014

iStock_000005643842MediumToday the Coalition for the New Economy (CNE) continues its look at a recent study of government-owned broadband networks (GONs) from New York Law School‘s Charles Davidson and Michael Santorelli by examining their case study on Monticello, Minn.’s GON, FiberNet.

FiberNet offers Internet, telephone and television services and is overseen by the city’s advisory board and general manager. The Monticello City Council approved a plan for government-owned broadband network in 2006 and voters gave their go ahead a year later. The network began service in 2010 and today the standalone fee for Internet service ranges from $30 a month to about $95.

The city originally estimated the network would cost approximately $16.8 million, but Davidson and Santorelli report, “Ongoing operational costs and unanticipated expenses have proven to be substantial and in excess of initial estimates.” (The report doesn’t outline the total cost.)

As of March 2013, the network had 1,270 Internet customers. According to Davidson and Santorelli, its this number that will doom the network. They argue, “As a result of the lack of a strong customer base, the system appears not to be viable.” Indeed, the city has failed to make required debt payments at least two times (bondholders sued the city as a result) and the city has “loaned” the system money from its liquor fund and its general fund in order to cover shortfalls.

The GONs financial difficulties also resulted in a downgrade of the the city’s bond rating in September 2012. It’s no wonder, then that “many citizens have expressed resentment toward the city government for getting into the business of broadband and failing.”

To read more about Davidson and Santorelli’s study, see our previous posts on their top 10 arguments against government-owned broadband networks, Chattanooga, Tenn., Bristol, Va., Cedar Falls, Iowa, Danville, Va., Groton, Conn. and Lafayette, La.