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Freedom Foundation Of Minnesota: Rochester City Network A Bad Idea

August 15, 2016

Blue and red fibre optical cablesThe Rochester, Minn. Post-Bulletin published a compelling op-ed last week by Freedom Foundation of Minnesota CEO Annette Meeks counseling city officials in Rochester to abandon plans to build a municipal broadband network there. Meeks argues, “Before the Rochester broadband proposal moves ahead, everyone should be aware of one crucial fact: Many local governments that have invested in city-owned Internet services have left taxpayers and bondholders with returns of pennies on the invested dollar and created a huge financial mess.”

Meeks said the fiscal disasters are a result of city officials who rely on consultants that overstate demand for municipal broadband and underestimate the costs to build and maintain city networks. Meeks says, “The reality is that nearly every one of these assumptions is wrong, and it doesn’t take a lot of wrong assumptions to do a lot of harm to bond holders and taxpayers.”

Indeed, according to Meeks, it’s already clear that Rochester officials have no idea how costly a citywide network within its limits would be. A preliminary estimate put the cost at about $42 million, but the plan currently before the city council could cost up to $67 million once bonds for the project are issued. Meeks herself estimates a citywide system would cost taxpayers about $70 million “before a single customer would be served.”

Meeks suggests Rochester’s plan might be a repeat of what happened to taxpayers in Burlington, Vt. She explains the cost of Burlington’s network ballooned from $33.5 million to about $50 million—and that was just “to get the project operational.” The city found and used the additional $17 million “without any official approval” and the city’s CFO got sacked as a result. The city still owes $7.3 million on the network.

Monticello, Minn. also ran into trouble with its city-owned network, Meeks notes. As she explains, “After losing $4 million of taxpayer’s money the city defaulted on loan payments and joined the ranks of communities who saw their credit rating tumble after risking taxpayer dollars on a municipal broadband network that, according to court records, was never going to be financially viable.”

Meeks concludes her op-ed pleading with Rochester city officials to reconsider. She says, “Rather than risking and diverting precious Rochester taxpayer dollars on a questionable plan to construct a city-owned network, elected officials would be wise to consider advances underway by private sector Internet providers and to work with those providers who seek to better serve the city with greater innovation that Rochester desires and deserves.”