From Tennessee to Seattle, Government Broadband is A Bad Idea for Taxpayers and Consumers

From the Chattanooga EPB to the Memphis Networx, Tennessee is becoming the leader in wasteful and unnecessary municipal broadband systems.  In particular, the Chattanooga EPB fiber optic municipal broadband system has become the poster child for wasting taxpayer money and bullying tactics (click here for a detailed description of the problems with Chattanooga EPB).  A new report from Seattle, Washington shows that Chattanooga may have competition for the biggest waste of taxpayer dollars.

Over the last several months, Seattle has been looking into the idea of providing an expanded broadband service that taxpayers would have to pay for despite the fact that there is already plenty of broadband competition in Seattle.

The move toward municipal broadband in Seattle has been marked by many problems. Multiple reports over the past ten years have already looked into the cost of setting up such a program and have always projected that taxpayers would not be able to cover the costs.  Last year, a failed initiative yielded disastrous results for city officials that led to lawsuits against the private sector company they were in line to partner up with to provide the service.

The city, led by Mayor Ed Murray, commissioned a report on the cost/feasibility of setting up a government broadband program and the results are in and nobody who has pointed out the consistent failures of government broadband boondoggles should be surprised.

Here are some of the main takeaways from the report:

• Initial investment of $480 million to $665 million to build.
• A required “take rate” – the percentage of single-family homes within the service area that would need to subscribe for success – of 43%. The study notes that the Chattanooga, Tenn., network that is often hailed as a success among advocates has a take-rate of just 33%.
• A required cost of at least $75 per month for subscribers, and the report notes that even a “slight decrease” in this monthly fee would cause a “very significant” hit to Seattle’s General Fund.

Aside from the cost, the fact that the “take rate” number required to recoup such a cost is a higher take rate than other cities who have created taxpayer-funded broadband, may be the most telling statistic. The failure to cover the costs could lead to a raiding of city funds, and that could have devastating consequences on other services that the city is already committed to providing.  Again, Chattanooga EPB should be a warning.  The city of Chattanooga is $1 billion in debt, and according to The Chattanoogan, “The biggest slab of debt is created by EPB, with the total obligation at $429.76 million payable through 2034.”

A memo from Seattle’s Budget Director Ben Noble outlines the fiscal and physical risk:

If the municipal effort were in fact to falter, the result would be immediate financial pressure on the City’s General Fund. The General Fund represents the roughly $1.1 billion in annual resource that support basic City functions such as police, fire, parks and human services. Any attempt to rescue a faltering municipal effort would necessarily entail correspondingly large cuts to these and other existing City programs and priorities.

This isn’t the first time Seattle has seen the facts derail in their plans for government broadband. In fact, this is the fourth time the city has released a report showing that the cost of setting up a government broadband program would be too much for taxpayers to handle. Previous reports released in 2005, 2007, and 2011 detailed the roadblocks of cost.

TPA hopes that this report will prove (again) that Seattle should scrap the idea of government broadband and allow the private sector to provide the needed competition that they have been doing for years. Statistics show that competition has already provided nearly half a million residents with an internet connection and given the state of Washington one of the top spots in total internet connectivity. The last thing the city (or taxpayers) need is government intrusion into private sector markets that will likely leave taxpayers on the hook for unforeseen costs and may end up harming other programs the state must fund. Seattle would be wise to make this the last report on cost of government broadband.