Municipal broadband is risky, TN agency says in new report

Municipal broadband is risky, TN agency says in new report

A new state study says publicly funded broadband networks are risky ventures for Tennessee taxpayers.

The Tennessee Advisory Commission last month released what’s essentially a draft study explaining how municipal broadband networks can improve conditions in rural areas without private providers.

The warning to Tennessee taxpayers wasn’t the main theme of the study, but it was mentioned, albeit briefly.

Private providers, the study says, can’t afford to deliver service to remote areas.

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“The cost of providing service is greater than the revenue that can be expected from subscribers. Low population densities make it particularly difficult for providers to cover their costs in many of these areas, “the study says.

Cliff Lippard (photo courtesy of the state of Tennessee's official website)

Cliff Lippard (photo courtesy of the state of Tennessee’s official website)

The study suggested public-private partnerships as an alternative. This happens when local governments team up with private providers to offer high-speed Internet.

“But they are not without risk,” says the study, referencing three such networks in Memphis, Utah and Minnesota that failed for various reasons.

TACIR Executive Director Cliff Lippard said he and his staff wrote the draft study, and the final version is scheduled for release around Jan. 26.

Lippard said forces at the state and federal levels are pushing for more municipal broadband networks. TACIR’s job, he added, was to “lay the groundwork for expanding broadband access without expanding the size of state government.”

Mark Cunningham, spokesman for the Nashville-based Beacon Center of Tennessee, a free market think tank, said broadband Internet shouldn’t be considered a right.

“This whole report says they want government to be more involved in your life. They want more power for the government. They want more of your tax dollars. High-speed internet for everyone sounds great in theory but that is up to the market to decide,” Cunningham said.

“It is not up to the government to take our tax dollars and put broadband internet in these rural areas that might not have it. Part of what we need to do is understand that these people who live in these rural counties probably knew going in that if they lived out there it would be harder to get certain things like broadband internet and that is a choice they made.”

Representatives of some of Tennessee’s eight listed municipal broadband networks failed to return repeated requests for comment.

Mark Cunningham (photo courtesy of LinkedIn)

Mark Cunningham (photo courtesy of LinkedIn)

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Chattanooga’s Electric Power Board took $111 million in federal taxpayer money to set up a smart grid for its municipal broadband network.

EPB serves people in Chattanooga, which, of course, is not rural. By state law, EPB can’t offer its service outside its municipal boundaries. EPB officials, though, have lobbied hard to change that law so they can expand into rural areas.

In an email, EPB spokesman J. Ed Marston said private providers have accepted federal subsidies and have had several years to use them to offer their service to rural areas.

“A number of studies including one recently completed by the Tennessee Department of Economic and Community Development, quantify the negative economic impacts these Tennesseans face including being unable to operate a business from home, work for their employer from home, further their children’s education or use online services for health care, career development, training, agriculture, research and more,” Marston said.

More competition, Marston went on, will do more to encourage private providers to expand service versus the government continuing to pay them more subsidies.

Cunningham said free market forces will eventually bring high-speed internet to rural areas, regardless, and it’s not government’s job to compete.

J. Ed Marston (photo courtesy of EPB)

J. Ed Marston (photo courtesy of EPB)

“Private companies can’t compete against government because the government can lose a ton of money, and we’re the ones paying for it. Government-run Internet is already losing money and is not reliable,” Cunningham said.

“I’d be shocked if high-speed internet doesn’t come to rural areas.”

The market generally solves societal problems, he said.

“When a lot of us were growing up we had dial-up internet. Only rich people had high-speed Internet at the time.”

As reported, Jonathan Harlan, CEO of the Jackson-based Aeneas Internet & Telephone Services, said less-costly solutions will, in the coming decade, become available through the free market.

It’s likely that carriers such as AT&T will introduce wireless technology to reach rural areas — just as they do now with smartphones, Harlan said.

Some private providers in Tennessee have said they won’t compete in areas with municipal broadband, increasing the risk of giving government networks a monopoly.

In a study, University of Colorado professor Ronald Rizzuto says municipal broadband networks regularly lose money.

Private Internet Service Providers, meanwhile, said they can’t afford to branch out into rural, underserved areas because pole attachment fees in Tennessee cost three times the national average.

As reported, the Clarksville Department of Electricity’s municipal broadband has had many outages and cost business owners thousands of dollars, including two this month, according to the CDE Lightband’s Facebook page.

Contact Christopher Butler at chris@tennesseewatchdog.org 

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