Two years ago, in 2002, I weighed in on the pros and cons of municipal ownership of broadband networks. I used as a case study a fiber-to-the-home (FTTH) plan that was the subject of a referendum in three suburban Chicago communities—Geneva, St. Charles, and Batavia, the so-called Tri-Cities. At the end of the 22-page analysis, I wrote:
Generally speaking, municipal ownership of broadband networks is probably not in the best interests of residents and most businesses, even in communities not well served today by private providers. Access to broadband services in the Tri-Cities is more plentiful than advocates of municipalization claim or admit, suggesting the real issue is not availability but price and who should pay it.
I commended elected officials in the Tri-Cities “for moving cautiously so far” and discussing their options with companies in their area, studying other cities, and commissioning a study of the municipalization option. I warned, “they will need to greet the finished study with healthy skepticism, since the consultants have a financial interest in advocating municipalization, but the report should provide some valuable guidance nonetheless.”
Despite what I thought was the moderate tone of my report, local officials were swift and harsh in their criticism of it. As I predicted, the consultants produced an uncritical report calling for a taxpayer-financed broadband system. Rather than show the “healthy skepticism” I had recommended, local officials embraced the consultants’ report. But voters, not consultants and city bureaucrats or even mayors, had the last word on this subject. They rejected the broadband initiative at the polls by a vote of 60 percent to 40 percent on April 1, 2003.
This year, the advocates of municipal broadband are back again, flogging another consultant’s report and once again asking voters to approve the plan by referenda. This time, the plan relies on a different funding mechanism, called certificates of participation, which its advocates claim will immunize the area’s taxpayers from liability in the event of cost overruns or bankruptcy.
This analysis, revised and updated to reflect national and local changes since the original analysis, finds the case for municipal ownership is even weaker than it was two years ago. Broadband services that were scarce two years ago are now plentiful and reasonably priced. New data from communities that attempted to build and operate municipal broadband systems suggest taxpayers would be very much at risk, even under the new financing scheme. The Tri-Cities proposal continues to be a useful case study and precautionary lesson for other communities with similar plans.
