New England Ratepayers Association

Advocacy for Ratepayers Across New England

Municipal broadband effort too risky for ratepayers

When we last visited the issue of municipal broadband, the Westerly, Rhode Island town council was weighing a proposal from SiFi Networks to build a $30 million fiber-optic network. The system was to be taxpayer funded through annual payments ranging from $1 million to $2.5 million over 30 years.

SiFi “guaranteed” the network would generate enough revenue for the town to fully cover that cost, but the guarantee was backed only by their good word. Westerly wisely rejected that plan as too risky to the town and its taxpayers, as have a number of other municipalities where SiFi has overhyped the promise of municipal broadband.

Now SiFi is back, contracting with the town of East Hartford to build a high-speed fiber optic network “at no cost to the town,” according to the director of finance. But it seems that “no cost” may actually just mean “no cost we are disclosing at this point in time.” Looking behind the curtain at the development agreement and the smart city managed services agreement, both recently approved by the East Hartford town council, there are a number of red flags.

The town appears to be responsible for hundreds of thousands of dollars in upfront costs, including: a $40,000 fee upon “substantial completion” of the network; at least $257,000 in fees to connect the town’s initial list of “demand points”; potentially hundreds of thousands of dollars of added costs to connect additional town “demand points”; any costs required to adapt town facilities to the system; and $20 per month per “demand point” charges, which could mean hundreds of thousands of dollars per year.

Hardly a “no-cost” proposition, and these are just the costs we are aware of at this stage. Why are these costs no surprise? Because the promises of “no cost” municipal broadband prove to be smoke and mirrors. Inevitably, these agreements either have hidden costs or result in zombie developments that never actually commence construction.

SiFi is typical in this regard. The company has no record of delivering on its promises of building “no-cost” municipal fiber networks. Besides the failed effort in Westerly, municipalities such as Pacific Grove, Calif. walked away from potential agreements with SiFi.

The company did manage to enter into agreements in 2014 with Fullerton, Calif., and Louisville, Ky., for “FiberCity” projects similar to the East Hartford proposal. However, three years later neither project has begun construction, according to SiFi’s website.

Ask yourself: If these networks can be developed at no cost to municipalities, why are we not seeing them roll out on a regular basis? Why have so many communities, such as Provo, Utah, and Groton, Conn., been forced to fire-sale failed municipal broadband projects, leaving taxpayers stuck with millions in debt? In fact, if fiber-based broadband deployments are such a home run that can be financed privately, why is Google Fiber rolling back expansion plans and limiting the service offerings in existing locations?

Reliable, robust internet service is important in today’s economy. It’s also widely available across Connecticut, with 99 percent of the population having access to 25 mbps or greater service, and Gig service beginning to roll out

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If local or state governments wish to address the small slice of truly unserved populations, they should engage the private sector to extend service to those specific areas but leave the ownership and ongoing network operation with private providers.

East Hartford taxpayers have much to risk and little to gain from SiFi. Internet service providers in town can already provide residents and businesses speeds of 100mbps or more. Broadband providers have spent hundreds of millions of dollars to lay thousands of network miles throughout the state and they continue to improve those networks year after year.

Most importantly, though, they do this in a manner that ensures long-term viability, and ensures taxpayers and ratepayers do not foot the bill if the systems are no longer sustainable.

There is no such thing as a free lunch and municipal broadband is no exception. The citizens of East Hartford should look behind the curtain and the town council should think twice and reverse its decision to go down this road.

Marc Brown is the President of the New England Ratepayers Association, a nonprofit dedicated to protecting ratepayers in New England.

(A version of this column originally appeared in the Hartford Business Journal.)

Updated: November 8, 2018 — 9:20 am

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