The city of Holland wants to take on $30 million in debt to finance a government-owned and run broadband network. On August 2, voters in the city will decide whether that’s a good idea.
Michigan Capitol Confidential reports that similar programs in other Michigan cities have repeatedly missed the mark. In Traverse City, the electric utility running the new broadband network predicted half of residents would sign up. Far fewer actually did, and revenue projections are off by more than 60%. In Marshall, despite the city’s network having an unfair advantage over private companies when it comes to regulations, the city took years to begin repaying the debt for the system and had to raise internet rates to cover operating costs.
Ted Bolema, a Mackinac Center board of scholar member who studies technology policy issues, noted in an op-ed in The Holland Sentinel that “voters will decide whether they want to gamble that Holland can succeed where so many other cities have failed.” Bolema questions whether new technology will quickly make the city’s plans obsolete. Cord-cutting and the arrival of better internet solutions make it unlikely that the city’s expensive wired infrastructure will still be viable 25 years from now.
An op-ed Bolema and I authored in the Grand Rapids Business Journal highlights a study from the University of Pennsylvania that analyzed all municipal broadband systems over a decade and found that none of them were financially viable without public subsidies.
We suggest four things cities and counties should do if they want to continue fostering higher-speed internet:
Clear away needless local regulations and lower barriers for additional private investment. The first thing for municipalities to do is look at what regulations they have in place right now. Simply making it easier for internet providers to build out their networks goes a long way.
Foster competition among private providers. Even if there’s only one provider covering most of the city, the provider still will be responsive to competition from other companies — as long as the municipality makes it easy for competitors to enter the market.
Resist one-size-fits-all technological solutions. A key problem with the city of Holland’s plan is that the city is relying on one solution (laying wire) to solve what it sees as the key problem (giving everyone high-speed internet). But there are other ways to access high-speed internet than just running wires to homes, and many are cheaper and more efficient. An increasing number of people already are turning down wireline broadband, but Holland wants to go all in on one type of technology.
Use targeted subsidies rather than building a whole new network. The internet is important. Food is more important. But to provide food to people who need it and can’t get it, the government doesn’t build its own grocery stores — it uses food stamps. There already are federal voucher programs for low-income residents to get high-speed internet. It would be more efficient for Holland to set up an individual voucher program to encourage private service.
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