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Another GON Bites The Dust?

July 6, 2015

leg.While exploring whether or not Seattle should build its own government-owned broadband network, Seattle Weekly reported recently that the city of Tacoma is considering shutting down its city-owned network. According to a June 30 story by Jennifer Karami Tue, “[T]he region’s second-biggest city is going in a decidedly different direction: Tacoma has had public internet for years, but is now considering getting rid of its broadband network, Click.”

What happened?

Click’s story represents two problems from which government-owned networks generally suffer: an overestimation of public demand for getting this service from the government and an inability to anticipate how technology will change and, as a result. how the city network will need to adapt.

Click hasn’t generated enough interest from the public. According to spokesperson Chris Gleason, the city believed it would “would get 50 percent of the cable market and 25 percent of the Internet market” to break even. It hasn’t achieved those rates because officials “couldn’t anticipate the growth of the Internet.” According to Seattle Weekly, “Click’s cable subscriptions are actually being cannibalized by their own Internet subscriptions, because of streaming services like Netflix and Hulu.”

City officials are now looking for a private company to take Click off its hands.

The Seattle Weekly report concludes by discussing Chattanooga’s public broadband system, which has turned a profit.

Unfortunately, the report fails to tell readers that system received an enormous $111 million subsidy from the federal government that makes it unique among municipal networks. As New York Law School scholars Charles Davidson and Michael Santorelli wrote last year, “Although the roots of the system stretch back to the late 1990s, momentum around the gigabit GON was greatly bolstered by the economic responses to the Great Recession. The city received a one-time federal grant in excess of $110 million to deploy its smart grid, while actions by the Federal Reserve resulting in historically low interest rates allowed EPB to finance its network (and refinance its debt) in ways that might be difficult for other cities going forward, as interest rates are likely to rise in the future.”

Seattle should remember there are more stories like Tacoma’s, than Chattanooga’s.