Don’t use taxpayer funds to expand municipal broadband
Despite the fact that the vast majority of Tennesseans have access to wireline and wireless broadband service, legislators in Nashville are contemplating how best to use taxpayer subsidies to expand access and improve speeds for rural residents.
Research compiled by the Taxpayers Protection Alliance Foundation (TPAF) makes it clear that lawmakers should steer clear of providing direct subsidies to cities that want to sell internet service directly to consumers. They also should keep in place a current statute that keeps municipal broadband networks from expanding beyond a certain footprint.
Last July we released a report that examined 12 of the worst government broadband failures in the nation. Two were in Tennessee.
First there is Chattanooga’s system. Despite getting the federal government to kick in more than $110 million for the half-billion-dollar system, and benefiting from a startling number of examples of cross subsidization from the electric side, Chattanooga’s fiber service, administered by the city’s Electric Power Board, is still barely staying afloat.
In a good year, the cable, telephone and internet business clears $2 million. The municipal broadband scheme would be running a huge deficit every year if it had to foot the bill for its own infrastructure.
Then there is Memphis. The Memphis Light, Gas and Water Division (MLGW) launched a municipal broadband business in 1999 and rolled the network out to the public two years later. By 2005, city leaders began attempting to sell the system and in 2007, with Memphis’ government internet experiment on the verge of bankruptcy, Memphis Networx was sold off for a massive loss ($20.5 million) at the expense of taxpayers and the city’s utility customers.
Lawmakers in Nashville already have considered legislation that would allow city-owned networks to sell service in rural areas outside their footprint, but it’s not clear that many of these cities actually have any interest in expanding.
In fact, some cities have acknowledged that expanding too broadly is cost prohibitive. For example, the city of Morristown told the Tennessee Advisory Commission on Intergovernmental Relations (TACIR) that it was too expensive to serve the rural communities around it.
A draft TACIR report released in December said, “Morristown Utilities, which is one of two systems allowed to provide broadband outside its electric service area under state law, has not chosen to expand service beyond a few communities because of the cost of doing so.”
This is why TACIR concluded that it is too risky for Tennessee taxpayers and ratepayers for city broadband providers to leave their footprint.
More than 99 percent of state residents have access to wireless high speed internet service and 96 percent have access to fixed high speed internet. Speeds also are improving rapidly — 83 percent of state residents have access to high-speed broadband with speeds of more than 100 megabits per second (that’s super fast, and more than most families and small businesses will ever need or are willing to pay for).
While a few municipal networks in the Volunteer State try to take credit for this advancement, it’s really the private sector that has led the way, investing billions to improve access and speed.
State lawmakers are right to maintain geographic boundaries on municipal providers because free markets work and provide protections for the state, and for its taxpayers.
David Williams is president of the Taxpayers Protection Alliance, a Washington D.C.-based nonprofit, nonpartisan organization dedicated to educating the public through the research, analysis and dissemination of information on the government’s effects on the economy.
any interest in expanding.”