Utah a cautionary tale for municipal broadband in Tennessee, expert says

Utah a cautionary tale for municipal broadband in Tennessee, expert says

A $40 million municipal broadband network in Provo, Utah, iProvo, was designed to lure high-tech companies worth billions.

Those companies came to Provo, and the city’s economy is thriving because of it.

But these events had nothing to do with municipal broadband, said Brigham Young University economics professor Brennan Platt.

As it turns out, the city doesn’t need iProvo or its ultra-high-speed Internet, Platt says in way of a warning to Tennessee residents about the pitfalls of municipal broadband.

“I don’t think municipal broadband was directly connected to Provo’s success,” Platt says, adding the city of nearly 500,000 people is filled with young college graduates with cracker-jack technology skills.

Brigham Young University economics professor Brennan Platt (photo courtesy of LinkedIn)

Brigham Young University economics professor Brennan Platt (photo courtesy of LinkedIn)

High-tech business officials notice things like that and, as is inherent in a free market, private Internet providers already in Provo — Comcast and CenturyLink, for example — deliver the high-speed Internet those companies need, Platt said.

“My take on this is that the market had already spoken in terms of what Internet was being demanded. The companies were already offering things that were pretty fast,” Platt said.

“The problem is that whenever government steps into these private industries, thinking they can do it better, it usually turns out they did something people didn’t want or that was overly optimistic by the costs of doing it.”

City officials introduced iProvo in 2004.

As reported, iProvo failed so badly the city sold it to Google Fiber in 2013. For a dollar.

“I don’t think we would have languished and sat in some type of dark ages of Internet silence if we didn’t have iProvo,” Platt said.

“I think we were already moving toward higher Internet speeds.”

Utah Valley Chamber of Commerce President Rona Rahlf said Provo’s high-tech companies rely on high-speed broadband.

In an email, Rahlf says she doubts iProvo did anything to improve the city’s economy.

Provo officials did not respond to repeated requests for comment this week.

ECONOMIC DEVELOPMENT

Steve Titch, an independent policy analyst who specializes in information technology, said city officials had motives beyond economic development.

“The justification for iProvo was a concern that the private sector was not going to deliver broadband to Provo in a timely manner,” Titch said.

WELCOME: Provo rolled out the welcome mat to several high-tech companies, and few people in the city believe they came because of municipal broadband (photo courtesy of Provo's official Facebook page).

WELCOME: Provo rolled out the welcome mat to several high-tech companies, and few people in the city believe they came because of municipal broadband (photo courtesy of Provo’s official Facebook page).

Government officials, he said, believed they had a product superior to anything on the free market.

“iProvo got bogged down in construction delays, court cases and difficulties finding quality retail partners.”

But when iProvo was finally ready, Platt said, the municipal broadband network found itself competing against private providers — who offered fast speeds at cheaper prices.

“The city had predicted 10,000 subscribers in the first two years or something like that, but what I remember was they got around 20 percent of what they projected in terms of signups,” Platt said.

Rahlf cites other problems.

“The municipal broadband was a drain on city coffers, was poorly managed and created great strife in the community,” she said.

‘INFRASTRUCTURE FEEDS ITSELF’

What really attracted the high-tech companies to Provo, Rahlf said, was a well-trained, loyal workforce, including many people who graduated from private BYU, a nationally renowned school with tough admission standards.

The new economy, says Theresa Foxley, deputy director for Utah Republican Gov. Gary Herbert’s Office of Economic Development, has changed the culture of Provo.

“For a city that used to be not as culturally diverse, it now has some of the better restaurants in the state, some of the best music in the state and some great artists,” Foxley said.

RELATED — Google takes advantage of taxpayer-backed broadband in Missouri, reports show

“That’s all because this infrastructure feeds itself, and that’s been really cool to watch the last five years.”

Rona Rahlf (photo courtesy of LinkedIn)

Rona Rahlf (photo courtesy of LinkedIn)

Rahlf doesn’t know how many high-tech industries are in Provo or their direct economic impact on the city.

Provo hosts the online survey company Qualtrics, worth at least $1 billion, and Vivint, worth at least $2 billion, according to Pando.com.

According to a news release from Google Fiber, Provo ranks second in the nation for patent growth and consistently ranks as one of the top places to live and do business in the U.S.

As reported, David Williams, president of the Washington, D.C.-based Taxpayers Protection Alliance, accused Google Fiber officials of rooting for municipal broadband networks because they know those networks are destined to fail.

Google Fiber, Williams said, then cheaply buys those networks, as they did in Provo.

Utility ratepayers — ultimately taxpayers — back municipal broadband networks financially.

Google Fiber officials haven’t commented, but in a news release say they have built most of their networks from scratch.

Foxley said high-tech companies worth $5 billion may come to Provo within the next five years.

Theresa Foxley (photo courtesy of the state of Utah's official website)

Theresa Foxley (photo courtesy of the state of Utah’s official website)

Platt said the city lost a great chunk of change, regardless.

“Take the market value of iProvo, which, again, was $40 million. It probably could have been sold on the order of $11 million or $12 million. That’s all it’s really worth. It was just a bad investment,” Platt said.

“In most places, if there’s lots of people who need high-speed connections then the free market will set that up for them. I just don’t expect that government will be the one that beats them to the punch.”

Contact Christopher Butler at chris@tennesseewatchdog.org 

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