Government-financed broadband is a bad deal for taxpayers

David Williams
David Williams

On June 6, Federal Communications Commission Chairman Tom Wheeler will be in Pikeville for the SOAR summit to discuss the future of broadband in Kentucky and across the United States. His remarks are likely to turn into a pep rally for government-owned broadband.

Taxpayers shouldn’t cheer.

Government-owned broadband already has harmed Kentucky taxpayers. A few years ago, a handful of lawmakers dreamed up a plan for a statewide “middle mile” network called KentuckyWired. The network would largely be financed by taxpayers, but managed by an Australian financing firm. The total cost of the project is pegged at more than $300 million with the state issuing $289 million in bonds to finance the project. State taxpayers would be on the hook for $30 million while federal taxpayers will kick in another $23.5 million.

KentuckyWired isn’t even finished and already it’s run into significant problems because state officials planned to allow KentuckyWired to provide service to state public schools. This maneuver would have allowed the state to use federal school broadband dollars to pay KentuckyWired for service.

That may not sound so bad — shouldn’t a government network provide service to government entities like schools? Perhaps, but for that plan to work, the state had to take away the schools’ contract from their current broadband provider and give it to KentuckyWired.

The gentleman who was in charge of that process later went to work for KentuckyWired. That’s not only unethical, it sends a message to private sector job creators that they shouldn’t invest in Kentucky. State officials cannot be trusted. They’ll change the rules in the middle of the game and throw private job creators overboard when it suits.

What’s happening in Kentucky is not an isolated incident, it’s happening nationwide.

Wheeler’s remarks are part of a broader push by the Obama administration to promote government-owned broadband. Apparently unaware of the fact that the nation is $19.2 trillion in debt, states face mounting long-term debt issues arising from their government pension programs.

And even though local governments are struggling to fully fund education and keep up with needed improvements to basic infrastructure, the White House has decided it’s a good idea that cities and states spend millions of taxpayer dollars — no matter the consequences — to compete with private sector broadband companies.

Last February, three of the five members of Wheeler’s FCC even voted to overturn laws in two states that set commonsense limits on government broadband. It is shameful to think that three bureaucrats in Washington could weaken states rights and upended laws meant to protect taxpayers.

North Carolina and Tennessee are challenging the FCC’s move in court, arguing that the FCC shouldn’t interfere with laws that were passed by democratically elected state officials. Supreme Court precedent is on their side, as is common sense.

As Wheeler is well aware, state and municipal broadband networks rarely succeed. Marietta, Ga., Provo, Utah, and Groton, Conn. all sold their municipal networks for much less than taxpayers invested in them. Bristol, Va. now wants to unload its government network after officials were indicted in a contracting scandal. Cities like Burlington, Vt. had their credit ratings downgraded because problems associated with their networks.

To make their case, government broadband supporters generally point to just one municipal network success: Chattanooga, Tenn. But, as a New York Law School study has pointed out, if this network is successful (and that’s debatable), it’s because the federal government subsidized it with a more than $100 million handout.

It is inconceivable that Wheeler and President Barack Obama would give $100 million to every city that wants government owned broadband. Federal taxpayers can’t afford that kind of unnecessary handout.

When he comes to Kentucky, Wheeler has some explaining to do. Does he believe it’s unfair for the government to take away a contract from a private employer and give it to a government entity? If Kentucky can’t use federal broadband education dollars for KentuckyWired, how does he propose state officials continue to pay for the system? By raising taxes?

And why should taxpayers spend taxpayer money on government broadband when there are so many other pressing priorities, and when the private sector has the expertise to provide this service?

Taxpayers will be waiting for his answers.

David Wiliams is president of the national nonprofit Taxpayer’s Protection Alliance based in Washington, D.C.