It may be centuries before TN municipal broadband might recoup costs, study says

It may be centuries before TN municipal broadband might recoup costs, study says

Bureau Chief’s Note: This is the first of a three-part series about municipal broadband in Tennessee. You may read Part Two here and Part Three here

If taxpayers in Pulaski, Tennessee, are around in 500 years they’ll have lived long enough to see the city’s municipal broadband project break even and start to make money.

The author of a new study, Christopher Yoo, a professor at the University of Pennsylvania law school, writes a grim synopsis of what may happen to government-owned internet networks.

Pulaski’s example isn’t an isolated one.

Christopher Yoo (photo courtesy of the University of Pennsylvania)

Tullahoma’s municipal broadband, for instance, was about $1.3 million over cost, and it will be 108 years before it sees a positive cash flow. The Fayetteville system will take 61 years before that happens.

Clarksville’s municipal broadband, meanwhile, will never become cash positive, Yoo concluded.

Time is running out, as many of these municipal broadband networks have an expected shelf life of 30 to 40 years, he said.

These were among only several of Yoo’s findings, part of a study that examined 20 municipal broadband projects nationwide. Yoo investigated what toll, if any, these projects have taken on government finances.

RELATED — Rural areas could have broadband in five years, even without taxpayer involvement

As reported, these government-owned broadband networks, usually administered by public utilities, compete for customers against private providers like AT&T. These public networks are backed by taxpayer dollars, which removes the financial risks.

John Pless (photo courtesy of EPB)

“Of the 20 municipal fiber projects that reported the results of their municipal fiber operations separately, 11 generated negative cash flow. Unless operations improve substantially, these projects cannot continue to operate over the long haul, let alone cover the capital costs needed to establish operations,” Yoo wrote.

“Many cities managing these projects have faced defaults, reductions in bond ratings, and ongoing liability, not to mention the toll that troubled municipal broadband ventures can take on city leaders in terms of personal turmoil and distraction from other matters important to citizens.”

Yoo said only two of the 20 municipal broadband projects he looked at — including one in Bristol, Tennessee — are on track to break even.

Yoo was unavailable to comment for this story.

People affiliated with most of the Tennessee public utilities singled out for criticism also failed to respond to requests for comment. Only one, John Pless of the Chattanooga-based Electric Power Board, said Yoo’s report “includes inaccurate financial data and salacious interpretations” of his utility’s performance.

Yoo’s study examined audits and other government documents about municipal broadband released between 2010 and 2014, he said.

Contact Christopher Butler at chris@tennesseewatchdog.org

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