A recent letter to the editor in The Hill uses the Lake County broadband network as an example of when government should not get involved in providing services…
Armed with an infusion of federal stimulus money, Lake County, Minnesota, ran a network costing $80 million. By the time the project officially failed, the county was paying $22,000 per subscriber in subsidies and recently had to sell the network.
Also in Minnesota, 10 cities and 17 townships joined a cooperative that financed $13.7 million in taxpayer bonds to construct a $55 million fiber optic network. After only two-thirds of the needed subscribers actually signed up, a $1 million revenue shortfall developed. This resulted in a tax increase on much of the community to cover the bond payments.
I don’t know that they talked to the people in Lake County. Last year the Blandin Foundation published work I had done (with Bill Coleman) looking at several rural communities with better broadband; Lake County was on our list. They recognized back when they accepted the money that private providers were not going to upgrade to fiber any time soon. The research that we used indicated that each house with broadband reaps an (average) annual benefit of $1850. And homes increase (on average) 3 percent. Of the counties we looked at, Lake County had the slowest ROI because they got the most public funding and that was in the form of a loan but even for them, the time that the community would reap the benefit of the investment was 7 years.
The cost was $83,418,170 – but the combined annual benefit to residents (with fiber) was $13,695,550 and the increase in home values came to $38,547,421.
What we found talking to people on the front lines was that homes without broadband didn’t sell. Areas with broadband attracted businesses. The faster internet made school, healthcare and work easier and faster for people. So it may take a while to repay the loan but without the faster broadband, the community would not be seeing these other benefits.
The article offers three alternatives to government-led networks:
- Rely on private industry
- Make broadband deployment cheaper and faster by streamlining state and local rules.
- Issue vouchers for rural and senior citizens.
Those alternatives seem very provider-centric. The vouchers and the accommodations used to lure providers to the area would need to be profitable enough to be attractive to encourage development – at least with commercial providers. Commercial providers focus on their bottom line because they are beholden to their shareholders. A middle ground solution would be to consider cooperatives where customer and the shareholders are the same people. Where you can balance profitability with investment with a different outlook.