Study Uncovers Hidden Costs of Muni Wi-Fi

Study Uncovers Hidden Costs of Muni Wi-Fi

Phil Britt

Phil Britt (spenterprises@wowway.com) writes from South Holland, Illinois. (read full bio)

A new study is drawing attention to common misconceptions about the benefits claimed for municipal wi-fi systems and identifies the many problems encountered with the deployment, expense, and maintenance of such projects.

The National Taxpayers Union study, “Municipal Broadband: Wired to Waste”—authored by Andrew Moylan, vice president of government affairs, and Brent Mead, NTU state government affairs manager and released in April—refutes popular claims muni wi-fi is “free” and attracts business to areas where it is provided.

Since 1982, 259 local governments that have implemented muni wi-fi have been forced to declare their systems bankrupt, the vast majority of which were city or municipal utilities.

Unanswered Questions
Although many government officials tout the benefits of these networks, few have analyzed the costs imposed upon the taxpayers who are forced to fund them, the study states. Moylan and Mead detail several high-profile programs that ended in utter failure due to mismanagement, with taxpayers left to foot the bill for entrepreneurial adventurism gone wrong.

The authors say “Wired to Waste” is one of few reports to seriously analyze the costs to taxpayers for municipal wi-fi. Among the questions the authors aimed to answer are: “How much debt is associated with these projects? How high is the risk of a project failing? If it does fail, how much will taxpayers be on the hook for? Can government officials ever hope to run a business when many of them can’t even balance a budget or restrain spending? These are just some of the questions that remain unanswered in the case of many municipal broadband projects.”

Moylan and Mead add, “The march of broadband Internet service has been steady and growing without government subsidies, and there’s little reason to believe it will slow without more infusions of cash from taxpayers or the creation of whole businesses from scratch with taxpayer backing. Indeed, this is a march whose pace and direction should be led not by governments, but by consumers—with private providers responding to the drumbeat.”

‘Stranding Taxpayer Dollars’
"This is not a new phenomenon—we have seen localities itching to get into the telecom business for years, well before broadband,” said Mike Wendy, director of MediaFreedom.org in Washington, DC. “Like so many services provided by local and state governments, it's sold as a costless no-brainer,” he said.

However, Wendy adds, “Operating muni-provided communications services—keeping up with advances in technology, as well as the continually rising expectations of consumers—resembles more a treadmill one can't easily get off of than a simple, pain-free investment, resulting in taxpayers asked to foot ever-larger investments just to keep afloat with technology, to keep it useful; or, these projects wither on the vine, stranding taxpayer dollars."

Andrew Schrage, co-owner of Money Crashers Personal Finance in Boston, Massachusetts, agrees. “The private sector does well in creating and expanding businesses; . . . government does not,” he said. “More importantly, since the majority of people in this country without sufficient Internet access live in rural areas, it’s more a matter of geography than economic status. Were there a high percentage of inner-city folks that needed Internet access, that problem could be solved with relative ease and with a much cheaper price tag.”

Costs of $56,000 per Household
Twenty states have laws requiring municipalities to perform a strict vetting process to determine whether municipal broadband service is necessary and feasible before deploying it. The NTU study reports costs to expand Internet service to underserved areas sometimes reach $56,000 per household.

“I’d question how many people without access to the Internet truly need or want it,” said Schrage. “A 2009 survey on the topic noted that when respondents were asked why they don’t have home access to the Internet, 16.7 percent replied ‘Don’t need/not interested.’ This would further skew the costs of providing Internet access to 100 percent of the American population,” he said.

“It is just too costly,” Schrage added. “The fact that many municipalities and cities have gone bankrupt in the recent past makes government funding risky and perhaps even unrealistic.

Phil Britt (spenterprises@wowway.com) writes from South Holland, Illinois.

Internet Info

“Municipal Broadband: Wired to Waste,” Andrew Moylan and Brent Mead, The Taxpayers Union, April 9, 2012: http://news.heartland.org/policy-documents/wired-waste

Phil Britt

Phil Britt (spenterprises@wowway.com) writes from South Holland, Illinois. (read full bio)