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05/25/2017

Muni Broadband Study: Half Are in Red

A new study of municipal fiber networks indicates many are not making a go of it and only two of 20 studied are making enough to cover development costs.

ISPs have long argued that muni networks, which they say often wind up being government-subsidized overbuilds of existing private nets, can leave taxpayers holding the bag when initial investments don't convert to ongoing sustainability.

The just-released study is from University of Pennsylvania Law School Professor Christopher Yoo and co-author Timothy Pfenninger. Yoo hit the high points at an event in Washington rolling out the study.

Yoo said there were 88 municipal broadband projects they identified as of 2014, almost all those were where cities had municipal power and thus access to rights of way.

He said that only 20 of the cities report broadband financials separately from electric power, so the study focused on the 20 for which those data were available. Of those, 11 of 20 fiber networks assessed don't generate enough to cover operating costs (they operate in the red). 90% will not generate enough to cover costs within the period of the bond issued to borrow money for them and only two of them are expected to be able to cover total project costs over an estimated 30-40 years of "useful life."

Five of the nine that do cover operating costs would take a century to recover those project costs, say Yoo and Pfenninger.

The report includes case studies of Chattanooga's Electric Power Board project and the Utah Telecommunication Open Infrastructure Agency (UTOPIA).

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