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Despite Robust Competition, City ISP Thinks It Can Take 42 Percent Of Market

September 8, 2017

According to Michigan Capitol Confidential, Holland, Mich. is getting into the broadband business despite warnings from “experts in both academia and the private sector” who say a city system “could mean trouble” for taxpayers.

The Holland Board of Public Works will operate the government-owned Internet Service Provider (ISP), which will launch in “a small portion” of the city’s downtown this fall. The city spent $789,000 on this, the project’s first phase.

Experts believe it will be difficult for the network to earn a profit. To do so, the city system will have to attract about 30 percent of available customers. That feat will be difficult since there is plenty of competition in the city. Capitol Confidential notes that Holland already is home to 13 commercial ISPs. The Board of Public Works’ network won’t even be the only ISP to offer 1,000 megabit per second speeds. Two commercial providers already offer gigabit service packages.

Despite the robust competition, utility board officials think that 42 percent of available customers will sign up for the city ISP within four years. The utility will achieve this, officials say, by “greatly underpricing the competition.” Holland Board of Public Works Technology Director Becky Lehman said “the project would be considered a success if it gained 37 percent of the local market.”

Capitol Confidential argues those rosy projections are unlikely to ever become a reality. The website says, “Local governments around the country have had a poor track record with their internet projects” and notes that “a recent University of Pennsylvania study showed that only two of 20 municipal broadband projects for which transparent financial information is available expect to recover their costs within 40 years.”

The Coalition for the New Economy will keep an eye on this project. One (somewhat) positive development: utility officials promised that any expansion of the project would “be covered by subscription revenues,” not taxpayer dollars.