Minnesota City Should Reconsider Plans for Taxpayer-Funded Broadband Network

City leaders in Willmar, Minnesota, will soon consider a plan to build their own government-owned network (GON), with a plan to create open-access fiber.

The Willmar City Council initially intended to vote to create the Connect Willmar Initiative at its May 6 meeting, but Operations Director Kyle Box submitted testimony saying the administration needed more time to craft the language of the proposal. The Council will likely take up the issue at a future meeting.

The council would vote on approving $9.2 million in funding for the first phase of what is estimated to be a nearly $25 million project to run fiber citywide in the municipality of about 21,000 residents. The city is partnering with Hometown Fiber in nearby Maple Grove to build and manage the network, which would be built in three phases over three years and funded by general obligation bonds.

The open-access model means that multiple service providers could tap into the fiber to operate their own networks, but that model can run into the same problems as middle-mile networks – the major providers already have their own infrastructure in place.

Hometown Fiber found and CEO Kyle Moorhead admitted during a recent discussion about the GON that large broadband providers are unlikely to lease the network from the city. Moorhead said he hopes that smaller providers enter into agreements with the city, the West Central Tribune reported. Providers would pay a lease fee of 35 percent of revenue to the Willmar Connect Initiative.

“I think that your local incumbents, unless it was absolutely free to them, I don’t think that they would come on board,” Moorhead said. “That’s our take on it, but what we are trying to do here is bring new businesses in.”

Hometown Fiber is touting a generous take rate of 40 percent of households and businesses in Willmar. The Taxpayers Protection Alliance noted in its report “GON with the Wind: The Failed Promise of Government-Owned Networks” that consultants’ projections often miss the mark, with revenue being less than anticipated when competitors lower prices and prevent GONs from capturing the anticipated market share.

Willmar currently has several providers offering internet through various means, including cable, satellite, 5G and fixed wireless, according to Broadband Now. Spectrum offers speeds of up to 1 gigabits per second to about 85 percent of residents.

City Councilman Rick Fagerlie expressed concerned about taxpayers taking a hit if Willmar Connect Initiative falls flat. “Twenty-six businesses have shown a willingness to sign up for this?” he asked. “That won’t pay off the full $25 million this project requires over four-plus years.”

The Freedom Foundation of Minnesota is warning Willmar officials against the project, pointing to other GON failures in the Gopher State. Director Annette Meeks said on KWLM radio recently that “if a large existing provider of internet doesn’t want to use the open access network, they have large, well-financed marketing departments to convince their existing customers not to switch.” She noted that the largest incumbents (Charter and Spectrum) have told city officials they are uninterested in leasing the fiber.

Willmar leaders should reconsider this project, another GON likely to fail as so many others have done in the past.