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Expand Municipal Broadband in Kansas? It Will Cost You

October 30, 2014

Kansas-Flag-3Chanute, Kan. is contemplating whether to expand its municipal broadband network in order to allow the city to offer broadband service directly to homes for a base price of $40 a month.

Part of the discussion, according to a mid-October report from The Chanute Tribune, was for city leaders to hear from a consultant with Strategic Networks Group (SNG) in Colorado. The consultant discussed the economic benefits to businesses that have broadband access.

The benefits the SNG consultant outlined are not unique to municipal broadband and, indeed, local businesses may already reap these benefits from their current broadband service. It’s unclear from The Tribune report whether the consultants’ report accounted for that possibility. To be sure, Chanute leaders have committed to surveying residents and businesses about their current broadband needs before going forward with the city expansion, but, based on other reports, it also seems city leaders are unlikely to consider the costs of municipal broadband networks along with any potential benefits.

They should – because in Chanute these costs are already clear based on the experience of the city network as it currently exists.

A separate Chanute Tribunestory reported the current network has cost the city $4,109 million over nine years, but has only brought in $3.437 million, a $672,000 deficit, or a loss of $74,647 a year.

What have city taxpayers received for their $4.1 million investment? A network that actually doesn’t serve all that many venues. According to The Tribune, “Currently, the fiber network is used by 34 business customers, eight public services, and 14 city facilities. Additionally, two businesses pay for wireless service from the city. Nine city facilities and two public services also receive this wireless service.”

City officials countered these figures – which some officials rightly used to question the potential profitability of a city-wide network – by saying it would cost Chanute approximately $94,200 to pay an outside company to provide broadband service to city buildings.

In other words, they argued the $74,647 annual loss isn’t really a loss.

While that math seems questionable, even that accounting ignores the opportunity costs of a government-owned network. For example, it ignores the fact that a private provider serving the city would bring additional jobs to residents – and additional revenues to city coffers.

Chanute’s proposed expansion will cost an estimated $15.2 million. It’s clear from the network’s current financial situation that spending this money is a gamble for Chanute and its taxpayers.