May 19, 2017
According Taxpayers Protection Alliance Foundation investigative reporter Johnny Kampis, taxpayers in Rock Falls, Ill., Mont Belvieu, Tex., and Newport, Tenn. have been sucker punched by a consultancy called Magellan Advisors. And not once, but twice.
Kampis explains that, first, these cities paid Magellan, which is based in Denver, Colo., to conduct studies to determine whether their residents needed a government-owned broadband system. Then, when their respective study concluded a municipal network was necessary, each city opted to pay Magellan to build one. Newport’s network will cost $22 million to build while the Rock Falls City Council has voted to allow up to $13 million in borrowing to finance its network. (Kampis did not provide a cost estimate for Belvieu’s network.) Magellan told Rock Falls that it would need a penetration rate of 45 percent in order to turn a profit within six years.
According to Kampis, “Magellan has conducted such studies telling at least 200 local government entities they should build broadband networks.” Kampis also noted, “After extensive internet research, there was no evidence of any broadband consultants – of which Magellan is the leader – telling a community that it shouldn’t build its own network.” Kampis asked Magellan CEO John Honker to comment on his findings, but Honker “didn’t respond to a request for a comment.”
Very few cities have opted not to take Magellan’s advice. Lakeland, Fla. was one that Kampis found. The city’s chief financial officer, Mike Brossart, said Magellan’s report was “highly speculative and we’re not in the business of being highly speculative with the citizens’ money.”
Other localities that have worked with Magellan include Chatham County, Ga. and Savannah, Ga. (these cities shelled out about $65,000 apiece for their feasibility studies) and Stark County, Ohio. In Stark County Kampis says that “Magellan found during a random sampling that most addresses already have at least two provider options and nearly every residence could access speeds of 50 megabits per second, or twice the broadband standard set by the Federal Communications Commission.”
Kampis hopes other cities will avoid getting sucker punched. He concludes, “Taxpayers and local politicians must be sure to avoid the new snake oil salesman Magellan when they recommend building a taxpayer-funded broadband system.”
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