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Top 5 Costs of Government-Owned Broadband Networks

February 4, 2015

According to NetworkWorld, the mayors of several major U.S. cities want states to stop passing municipal broadband laws. The mayor of Syracuse, N.Y. is considering building a government-owned network in her city as are leaders in Rochester, N.Y. These local officials argue their cities need better access to broadband to allow their residents to compete in a 21st century economy. Broadband is essential to modern life, but today we thought we would remind these leaders of the top five “costs” of city-owned broadband.

  • Lower Credit Ratings. Chattanooga, Tenn. and Burlington, Vt. both had their city credit ratings’ downgraded because of financial issues and funding schemes associated with their government-owned networks.
  • Huge Financial Losses. Provo, Utah sold its network for $1. The network cost more than $30 million. Provo was still on the hook for its debt even after it sold to a private provider. That’s math no taxpayer should like.
  • Less Competition. What happens when monopolistic city networks try to expand beyond their markets? Small Internet Service Providers are shut out because they can’t compete with the generous subsidies government-owned networks enjoy. This lost investment not only results in less competition, because it means one less job creator in town it results in employment opportunities and less tax revenue for cities as well.
  • Higher Taxes. Cities involved in the UTOPIA network have repeatedly tried to increase general revenue taxes in order to finance their struggling network. How much do taxpayers have to spend before city leaders call a failure a failure?
  • Fewer Dollars For Essential Priorities. Even if funds for a city-owned network are generated through additional borrowing, as opposed to direct taxpayer investment, it means local leaders will have have fewer dollars available for more essential government tasks like law enforcement and education. (See our infographics here.)

These costs don’t apply to private-owned networks. Before building government-run networks, we urge leaders in Syracuse, Rochester and other cities to look first look for ways they can attract more private providers to their towns.