Survey: Municipal Ownership Of Broadband Networks Is Too Risky

Municipal ownership of broadband networks, once threatened by cities as a way to pressure cable and telephone companies to live up to contractual promises, no longer makes financial or technological sense, according to a study by The Heartland Institute.

The widespread availability of broadband technology, industry innovation, stiff competition among providers, and falling prices, means that municipal ownership of broad networks is risky for taxpayers, no boon to economic development, and could leave cities owning outdated networks, concludes the new report, "Municipally Owned Broadband Networks: A Critical Evaluation."

"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," Joseph L. Bast, president of The Heartland Institute and the study's author said in the study. "Following through with municipalization, however, is not a good idea."

The report found that cities that have tried to build and operate broadband networks often report large losses borne by taxpayers or ratepayers. It claims that many communities that built the networks have experienced multi-million-dollar losses, borne by taxpayers or ratepayers. The survey found that of 55,000 towns and municipalities in the U.S., only about 200, or 0.5 percent, operate municipal broadband networks.

"Very few cities attempt to build and own broadband networks because the costs and financial risks are too great," Bast concluded. "Cities that have taken the leap simply illustrate the riskiness of the venture, costing their taxpayers and ratepayers millions of dollars in subsidies with no end in sight."