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Study: Municipal broadband 'risky' for taxpayers

Sun, 10/24/2004 - 8:00pm
Jeff Baumgartner

Although municipally-owned and operated broadband networks are sprouting from the ground by the week, at least one analysis believes that this trend represents a risk for taxpayers and questionable economic upside.

According to a report from The Heartland Institute, the case for municipal ownership of these "superfluous" fiber-to-the-home networks is withering as competition among incumbent providers increases and equipment prices plummet. Such trends, the report went on, erases some of the motivations behind muni-backed broadband networks.

"Threatening to build a municipal broadband network may have been a good strategy two years ago, to prompt incumbent cable and telephone companies to make good on past promises," wrote Joseph Bast, president of The Heartland Institute and the study's author. "Broadband services that were scarce two years ago are now plentiful and reasonably priced."

On that point, he explained that a company like SBC Communications offers DSL for as low as $26.95 per month, and predicted that forthcoming WiMax-based data services will run $25 per month, and $40 or $50 when bundled with voice.

Bast also writes that municipals stand to a financial bath on broadband networks they own and operate.

"Many communities that have taken the plunge have experienced multi-million-dollar losses that must be paid for by taxpayers or ratepayers," he added. "Very few cities attempt to build and own broadband networks because the costs and financial risks are too great."

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