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Newport, Tenn. Consultant Would Benefit From Government Network

April 25, 2017

East Tennessee native and Taxpayers Protection Alliance (TPA) Senior Scholar Drew Johnson says that the city of Newport, in east Tennessee, is about to make “a very big mistake” and the force driving the city toward that error is the only one that stands to benefit.

The mistake Johnson is referring to would be using $21.9 million to build a municipal Internet Service Provider (ISP) to be operated by Newport Utilities. This network would serve the city and “parts of Cocke County.”

Johnson argues that plan will “cost taxpayers millions of dollars, while producing little or no benefit at all.” To illustrate, he points to Memphis, Tenn.’s government network, on which the city lost more than $20 million and to Provo, Utah, which lost $77 million on its venture into broadband. (Johnson refers to other well-known failures as well, all of which are outlined in the TPA’s municipal broadband failures map. He notes, “Of the more than 200 taxpayer-funded municipal broadband projects built in America, not a single one has managed to live up to expectations.”)

If the risks are so evident, who or what is behind Newport’s efforts? Is there overwhelming support for a government network among Newport citizens?

It doesn’t seem so.

Johnson lays blames with a consultant, called Magellan Advisors, that is based out of Denver, Colo. Newport officials have tasked Magellan with exploring demand for, and the potential benefits of, a government ISP. But there’s an inherent conflict of interest in this agreement because, as Johnson explains, “Magellan is a consulting firm that also just so happens to be in the business of helping to build municipal broadband projects.” That’s why, as Johnson says, “Magellan has never seen a taxpayer-funded internet proposal it didn’t love.”

To try to convince Newport officials of the need for a municipal ISP, Johnson alleges that “Compared to government broadband networks in similar areas, [Magellan’s] report appears to inflate the number of people who will use the service, lowball the cost to operate the network, and wildly exaggerate the economic benefits of the project.” Importantly, Magellan’s report contains no methodology explaining how its “experts” arrived at those findings.

Instead of relying on an advisor with questionable motives and methodology, Johnson concludes Newport city leaders should “learn from history” and avoid “spending $21.9 million of tax dollars and electric customers’ money on a government broadband boondoggle that has never worked anywhere else and is destined to fail …”