National group questions state broadband project

In Meredith Willson’s “The Music Man,” conman Harold Hill convinces the good people of “River City, Iowa” that the moral fabric of their children is severely corrupted by “the presence of a pool table” in their town.

The shameful situation, Hill counsels, must be remedied immediately through the formation of a boys’ band to direct the children to a wholesome endeavor rather than the corruption of the pool hall. Indeed, he will be glad to sell them instruments and lead the band.

But, as he has done elsewhere, he plans to pocket the proceeds and skip town. Hill travels around the country selling a solution to a problem that does not exist.

There is a similar scam going on right now across the country. Proponents of government-owned networks (GONs) are going from town to town, breathlessly warning citizens that their internet service is inadequate.

But fear not, they say: Just fork over a few more tax dollars, and the town will have the world’s greatest internet service. While these projects have usually been limited to towns, cities and counties, slick salesmen decided that the in Kentucky the state should have a GON.

In August 2015, then-governor Steve Beshear, then-House Appropriations Committee Chairman Hal Rogers (R-Ky.), and politicians across the state trumpeted KentuckyWired as an essential economic lifeline to millions of Kentuckians. Rogers heralded the “endless capacity and endless connectivity” that KentuckyWired would bring.

Then-state House Speaker Greg Stumbo (D-Prestonsburg) declared it “a true game-changer” that “will level the playing field in ways we can only dream about.”

KentuckyWired was supposed to stretch 3,400 miles across the state; cost $324 million in federal grants, state funding and “public-private partnerships;” and be completed by the end of 2016. Unsurprisingly, things have not gone as planned.

Only 129 miles of the network have been completed. More than half of the original $324 million, or $175 million, has been spent, equal to $1.36 million per mile. The projected completion date, delayed three times, is now late 2019.

The state chose Macquarie Capital, an Australian investment firm, to be its private sector partner and operate KentuckyWired for a 30-year period. Macquarie is familiar with GONs, having previously been called in to bail out a failing GON in Utah in 2014. Macquarie Group’s stock price has gone up 206 percent over the last five years.

Macquarie Capital is making out like a bandit because GONs are set up to fail from the start. The state (like towns, cities and counties) does not have personnel with the skills or experience to manage, build and maintain a vast broadband infrastructure project like KentuckyWired.

By the time the GON is built, it is already obsolete and has been surpassed by private sector innovation and quality. With taxpayers footing the bill, the problem of concentrated benefits and dispersed costs is present; there is little incentive to control costs or examine the practicability of construction.

Improving internet service and bridging the digital divide cannot be achieved by throwing money at a municipal or state-run system. They leave consumers with less choice, poor service, and little chance of new, innovative services. Taxpayers are left holding the bag.

When it sounds too good to be true, it probably is.

Spencer Chretien is state policy manager for Citizens Against Government Waste in Washington, D.C.