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Iowa Town Told Muni Network Would Be Too Expensive

September 28, 2017

A consultant for a city in Iowa has concluded that local taxpayers cannot afford to build and operate a municipal broadband network. 

Decorah, a town of about 9,000 in the northeast part of the state, engaged Uptown Services, a telecommunications firm based in Boulder, Colo., “to conduct a feasibility study of a municipal telecommunications and fiber network.” According to The Decorah Newspapers, a citizens group called Fast Fiber pushed for the investigation and voters approved the idea two years ago.

Uptown Services told city officials at a meeting earlier this month that it would cost taxpayers $10 million to build a municipal system, or more than $1,100 per resident. Uptown also concluded that it would be very difficult for Decorah to recover its initial investment and that the city would have to use general revenues to subsidize the municipal network. Consultant David Stockton said, “The idea with a municipal broadband revenue based service is you want to recoup your investment with subscriber fees over time.” He then explained that it would take Decorah at least 20 years, and maybe even longer, to make its money back.

In the meantime, private sector service providers would continue to come into the community ready to offer superfast broadband speeds. (Already, more than half of residents in Winneshiek County, where Decorah resides, have access to 100-megabit speeds.) For example, Stockton said Mediacom, which is planning to offer one-gigabit internet service in the area, has a “a two year jump” on the city. As a result, Stockton said that, “from the outset,” the city would have to subsidize the municipal network with dollars from the city’s general fund.

The city paid Uptown Services $29,000 for its work. Fast Fiber contributed an additional $30,000. Members of Fast Fiber told Decorah Newspapers that they had no comment on the consultant’s findings.

City leaders are planning to discuss the study and decide how to proceed.

It’s pretty clear how they should.