December 14, 2017
In 2015, Loveland, Colo. residents voted to allow their city lawmakers to explore the cost of a creating a municipal broadband network. Officials went forth and, on Dec. 12, released the results of their feasibility study … without actually saying how much a municipal system would set back taxpayers.
According to the Loveland Reporter-Herald, the investigation did find “a public-public partnership would be the most favorable municipal broadband business model for the city, providing the least risk and greatest reward.” The study said that model would cost taxpayers between $68 million and $83 million, but it does not appear that the city revealed how much a network built and operated solely by the local government would cost.
City councilors were also skeptical a public-private system would pay for itself.
Staff and consultants who presented the report to the city council noted that “A municipal broadband service can only be self-supporting if enough customers buy it, so the
‘take rate,’ or number of customers who subscribe to the service compared to other service providers, is a key aspect of the project’s risk.”
The study assumed 40 percent of residents and 30 percent of local businesses would subscribe to the city system—a high assumption. It also assumed the city would use a 20-year bond with a 3.5 percent interest rate to finance the system.
After hearing the presentation and analysis, councilors discussed the risks associated with building a network. Councilor Don Overcash asked why the city would want to compete with private sector job creators. He said, “What is driving our enticement to go in competition with those businesses that we’ve been trying to attract and work with over the years?” Other councilors worried about the taxpayer risk associated with a municipal network.
At Overcash’s urging, the council agreed to ask private providers to meet with them to discuss how a municipal network would affect consumers. Overcash also suggested the city council ask residents to vote again before they agree to take on debt to build a municipal system.
Magellan Advisors completed Loveland’s study. Click here to read more about this company.
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