Study: Municipal broadband may sink taxpayers if things go wrong

Study: Municipal broadband may sink taxpayers if things go wrong

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

Too many people who analyze the performance of municipal broadband projects focus on public relations-style success stories yet give too little attention to financial performance, according to a new study.

That study, written by University of Pennsylvania Law School professor Christopher Yoo, was released earlier this month.

The study focused extensively on Tennessee.

But when and if there is a shortfall, public utilities might default on their loans and call upon an endless supply of taxpayer dollars, he added.

Christopher Yoo (photo courtesy of the University of Pennsylvania)

Problems with municipal broadband may prove a distraction from more important matters, especially if the city pays interest on an investment that’s not yet creating benefits, he said.

“Decision makers must consider the risk that a struggling municipal broadband network might consume much of their time while in office,” writes Yoo, adding that evidence shows little need for such high broadband speeds, at least not now.

RELATED — Tennessee Watchdog reporter goes on Chattanooga radio to talk broadband and Airbnb

“The U.S. take-up rate of gigabit service remains very low, and media outlets report that consumers are questioning whether gigabit service is really necessary.”

Ultimately, tax revenue is limited, debt financing is expensive and investments start incurring interest the moment they begin, Yoo writes.

“There are real costs to making capital expenses before they are needed. Doing so not only increases the costs to taxpayers; it ties up funds and forecloses them from being invested in other areas that citizens need.”

The municipal broadband in which government officials invested so much time, effort and money may become outdated and obsolete.

Better technology will inevitably make itself available through the free market, he writes.

Contact Christopher Butler at chris@tennesseewatchdog.org

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