{"id":230613,"date":"2026-06-29T01:11:07","date_gmt":"2026-06-29T01:11:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-pa\/230613\/"},"modified":"2026-06-29T01:11:07","modified_gmt":"2026-06-29T01:11:07","slug":"should-cities-compete-with-their-isps-university-of-pennsylvania-study-warns-taxpayers-to-beware-american-enterprise-institute","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-pa\/230613\/","title":{"rendered":"Should Cities Compete with Their ISPs? University of Pennsylvania Study Warns Taxpayers to Beware | American Enterprise Institute"},"content":{"rendered":"

Yet another academic study<\/a> has given municipal broadband a failing grade. Not that there are a lot of actual studies of what happens when a government that regulates businesses also competes with them \u2013 perhaps because the answer seems rather obvious that the government tilts the playing field<\/a> in its favor and often drives out private providers<\/a>. What this new study from the University of Pennsylvania tells us is that governments are generally not very good at providing broadband service and tend to fail financially.<\/p>\n

What did the new study find?<\/p>\n

The study found that municipal fiber projects lose an average of about $1 million on a net present value (NPV) basis. The most profitable \u2013 a project in Bristol, Tennessee \u2013 made about $4.3 million in the analysis. The biggest loser was Lafayette, Louisiana, which lost over $36 million. The study considered 88 fiber projects but could obtain financial results on only 20.<\/p>\n

The study found some real disasters. Marietta, Georgia, lost $24 million on its fiber system that it eventually sold for $11.2 million. Provo, Utah, incurred $39 million in debt and sold its system for $1. (That\u2019s not a typo.) Dunnellon, Florida, took on $7.4 million in debt and sold its system for $1 million. Bristol, Virginia (not Tennessee), sold its system for $50 million after burning through $52.8 million in federal and state subsidies, $23.4 million in subsidies from the city\u2019s electric utility, and $79.6 million in bond funding and operating cash flow.<\/p>\n

Sadly, the study\u2019s NPV approach probably understates the actual losses. The approach focuses on cash, which misses some opportunity costs and risks. In some instances, such as Bristol, Virginia, electric customers bore some of the risk and were not compensated for doing so. As I explain below, taxpayers bore risk and were not compensated in other instances.<\/p>\n

Why does municipal broadband fail?<\/p>\n

These projects don\u2019t always fail. The study found that 9 of the 20 cities that disclosed financial information had positive NPVs. However, the positive cash flows for five of these nine cities (Pulaski, Tennessee; Tullahoma, Tennessee; Chattanooga, Tennessee; Powell, Wyoming; and Brookings, South Dakota) were so small that recovering all their costs would take more than a century.<\/p>\n

The harsh reality is that it is basically impossible for a city to do better than a private network provider unless the city somehow takes unfair advantage of its government status. With only small variances, people\u2019s wages, fiber optic cable, vehicles, and so forth\u00a0cost the same for government and private industry alike since they compete in the same markets for these inputs. Sometimes cities give themselves preferential treatment for access to and information on city property. Sometimes they take advantage of the preferential tax treatment of municipal bonds. And sometimes they receive taxpayer assistance that is not available to the private sector.<\/p>\n

One outlier (that was missed by this new study) may be my own city of Gainesville, Florida. The city-owned electric utility \u2013 Gainesville Regional Utilities (GRU) \u2013 has a fiber optic enterprise that is consistently cash positive. (Full disclosure: GRU is a sponsor of the university research center that I direct.) The difference between GRU and the typical municipal broadband provider appears to be that GRU serves only institutional customers and invests only when a customer asks for service and is willing to cover the costs.<\/p>\n

Who pays for these losses?<\/p>\n

It isn\u2019t always clear who pays for the losses these cities incur. In some cases, it has been the bondholders: The study found that Burlington, Vermont, and Monticello, Minnesota, defaulted on their loans. It also found that a coalition of 16 Utah cities \u2013 a system interestingly called Utah Telecommunication Open Infrastructure Agency (UTOPIA) \u2013 is no longer covering the debt service on its bonds.<\/p>\n

In other instances, the citizens pay: The study found that Burlington, Vermont; Salisbury, North Carolina; and Chattanooga, Tennessee, all had their bond ratings cut. Customers of city utilities sometimes subsidize broadband.<\/p>\n

Why do cities continue to develop fiber projects?<\/p>\n

A recent Pew Research survey<\/a> found that 67 percent of Republicans and 74 percent of Democrats favor allowing cities to build fiber networks. Why this fondness for municipal fiber given that the initiatives lose so often?<\/p>\n

It might be that the losses are not well publicized. The Washington Post wrote about the Pew study showing public support for municipal broadband, but I was unable to find an article there or in The New York Times regarding the Penn study despite its public release<\/a> in late May at an event featuring a former Pennsylvania governor.<\/p>\n

It might also be that cities and their voters are simply overconfident. After all, most US car drivers think they are above average in their driving skills, and the vast majority of academics think they are smarter than their peers.<\/p>\n

What to do? Maybe this is a solution: Whenever a city wants to launch a fiber project, make the city managers and the local politicians financially liable for the project. That might encourage them to be more realistic.This post was originally published on TechPolicyDaily.<\/p>\n","protected":false},"excerpt":{"rendered":"Yet another academic study has given municipal broadband a failing grade. Not that there are a lot of…\n","protected":false},"author":2,"featured_media":230614,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[52712,28,30,29],"class_list":["post-230613","post","type-post","status-publish","format-standard","has-post-thumbnail","category-pennsylvania","tag-broadband","tag-pennsylvania","tag-pennsylvania-headlines","tag-pennsylvania-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts\/230613","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/comments?post=230613"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/posts\/230613\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/media\/230614"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/media?parent=230613"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/categories?post=230613"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-pa\/wp-json\/wp\/v2\/tags?post=230613"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}