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Little Shop Of Horrors: $1.9 Billion Proposal For San Francisco Municipal Network

October 31, 2017

municipal broadbandTaxpayers in San Francisco should be spooked.

According to a consultants’ report released earlier this month, it potentially would cost the city $1.9 billion to build a municipal broadband network that would connect every home and business to the internet.

Columbia Telecommunications Corporation, a firm in Maryland that is the driving force behind many municipal broadband reports, wrote San Francisco’s study.

Thankfully, the consultants who wrote the report at least recommended the city not go it alone. Instead, they advised officials that they work with the private sector. Under that model, San Francisco would own the network, but would take out bonds to finance its portion of the capital expenditures. (The report does not say how much of the expenditures the city would be responsible for and does outline specific risks to this approach and difficulties the city might run into in structuring a deal.)

A wholly public model would create even more financial risk for the city, the consultants said. And, as the report explained, would require the city to take out “almost $1.29 billion in bonds and a $20 million loan.”

The report acknowledges that private sector Internet Service Providers (ISPs) continue to make new investments in the city. Indeed, according to Broadband Now, the city is home to more than 50 ISPs and 99.7 percent of residents have access to speeds up to 25 megabits per second.

San Francisco Supervisor Mark Farrell did not seem daunted by the $1.9 billion cost. He told The San Francisco Examiner, “We are going to continue to move aggressively down this road … I, along with the mayor, will do everything possible to make this a reality for San Francisco.”

According to the Examiner, “If all goes according to plan, The City would approve the project next year.”

Farrell also argued the network would pay for itself.

Taxpayers have heard that before, and Columbia’s report acknowledges that the city would need to attract between 45 percent and 53 percent of potential subscribers in order to break even. That’s an unusually high rate and would require the city to take subscribers away from current providers. Columbia analysts also noted that “few municipal networks have managed to reach this level of penetration.”

In other words, San Franciscans: beware!