It's not free. Why Summit County should reconsider government-owned broadbandApr 28, 2022
This opinion piece was originally published by the Akron Beacon Journal.
Anything too good to be true usually is — an adage especially true of “free” government money and services.
So, Summit County should be careful before committing millions of dollars of temporary federal COVID-19 funds to build a permanent government-owned broadband network —or GON — and a new countywide fiber-optic ring.
Summit County officials currently plan to spend $35 million in federal aid to build a fiber-optic ring connecting 31 county offices, then spend another $25 million on grants to entice those 31 local offices to connect to the new network. The county will almost certainly then attempt to add residential and commercial customers to the GON despite ample private-sector broadband service in the area.
The plan is politically attractive but fiscally risky. After all, local officials can tout a new “free” government network that local taxpayers haven’t paid for — at least not yet. And by the time Summit County taxpayers are asked to cough up the taxes to pay for network maintenance, system upgrades, and cost overruns, many of the officials advocating the plan today won’t be in office to take the political heat tomorrow.
As The Buckeye Institute has shown, GONs typically overpromise and underdeliver their services and savings to consumers. A University of Pennsylvania Law School report examined 20 GONs nationwide and found that more than half of them generated negative cash flow, five of the cash-flow positive projects would take more than 100 years to recover their start-up costs, and two would take more than 60 years. That means that GONs tend to cost more than advertised and more than they collect in user fees. And that means, of course, that GONs only survive on reshuffled taxpayer funds that offset the operating losses.
Unfortunately for Summit County residents, those additional funds will come from their pockets. When it is time to pay for maintenance and upgrades the federal spigot will have been turned off, and those who pay for private broadband service will then be paying for a public option that they do not even use. Ouch.
And it may prove riskier and more painful for municipalities after the initial tranche of federal funds is spent.
Cities are rightly worried as they watch the municipal income tax, their long-term revenue stream, dry up as more and more telecommuters work from home. Until cities find new ways to assess taxes and raise revenue, spending precious local resources on government-owned broadband looks like a bet that most cities cannot afford to wager.
Every local taxpayer dollar spent supporting an underfunded GON is a dollar not spent providing core government services like law enforcement. Eventually, something has to give. Either the quality of core services will decline or local taxes will be raised, jeopardizing jobs and economic growth. An unappealing choice. Someone should tell the people of Summit County about that part of the plan.
Communities that need better broadband service should avoid signing up for the GON that’s too good to be true. Instead, they should partner with private providers and pursue the state’s new residential broadband program or use the federal COVID-19 money to create vouchers for consumers to purchase broadband services from private providers. Either option is less risky for Summit County taxpayers than the county’s current plan.
Local governments awash in “free” federal aid should resist the alluring temptation to buy today what they cannot afford to maintain tomorrow, especially since that federal money will soon be gone.
Greg R. Lawson is a research fellow at The Buckeye Institute and is the author of Broadband “GON” Wrong: Remembering Why Government-Owned Broadband Networks Are Bad for Taxpayers.