Many advocates in Maine and around the nation have highlighted the need for more stable and faster internet speeds, especially in the shadow of the remote-learning, work-from-home, socially-distant economy that many Americans have been thrust into as a result of the last 15 months of pandemic-inspired emergency rule.
This month, voters in a handful of Knox County towns will vote on a town meeting article to “authorize the Select Board to enter into an Interlocal Agreement with other municipalities for the purpose of creating the Midcoast Internet Development Corporation (MIDC).” Effectively, the voters of Rockport, Camden, and Thomaston have the opportunity to weigh in on the prospect of a government-owned network (GON) in their community.
The proposed MIDC would be a nonprofit municipal utility owned by participating towns to provide broadband internet service to residents and businesses. It would leverage funds derived from federal disbursements to the towns and Knox County via the American Rescue Plan Act (ARPA) to purchase the existing physical network infrastructure, upgrade it to fiber-optic cable, finance building and maintenance costs, and contract with a private-sector system operator. In order to pay off its debts and finance network upgrades, the MIDC would lay down its network as “dark fiber,” and lease usage to local ISPs.
MIDC-owned infrastructure would be “dark fiber” because it would not yet be “lit” by the transmissions of light-pulses-as-information from service providers over the fiber optic cable. The idea of using “dark fiber” is to provide the physical network and attract ISPs to compete within it. While this may seem like a more data-secure solution, it could be less financially secure for the municipalities. A dramatic weather event like an ice storm would place the entire burden of repairing the network on the utility, and by extension, local taxpayers.
The towns of Camden and Rockport have each put forward $35,000 to seed the project to get toward the $20 million total estimated cost. MIDC is urging Knox County to pledge its $7.7 million in federal ARPA funds as well.
While high-speed internet is crucial to building thriving communities and attracting businesses to Maine, government intervention in the broadband market is an inefficient, costly approach that, in the long run, weakens consumers’ purchasing power and burdens local taxpayers.
Government-owned networks have a dubious track record of financial feasibility simply because they are disconnected from the incentive to make a profit; they are less prone than private-sector actors to look for ways to deliver better, cheaper service. Because GONs are so heavily subsidized, they often crowd out competition for private sector alternatives. Consumers ultimately lose from this arrangement through fewer options, higher prices, and less accountability.
Virginia and Tennessee are two largely-rural states which have overseen botched GON implementations. In 2002, the Bristol Virginia Utility Authority (BVU) created their own GON called OptiNet. After BVU executives were convicted and sentenced for a corrupt kick-back scheme in 2015, the utility eventually sold OptiNet to a private provider at a loss to local taxpayers. Clarksville, Tennessee developed their GON in 2007; total costs amounted to over $40 million and the municipality was forced to borrow millions more than their projected cost due to construction cost overruns. Financial issues ultimately sank GONs in Burlington, VT, Groton, CT and Provo, UT, among many others.
Using data over a five-year period, a 2017 University of Pennsylvania Law School study of 20 GONs around the United States found that only 2 are on track to recover their total costs over the course of their useful life expectancy, between 30 and 40 years. Eleven do not bring in enough money to cover current operating costs, and five of the nine cash-flow positive projects are projected to take over 100 years to recover their costs. Considering many publicly-owned local networks require substantial bonding to get off the ground, the economics of GONs do not allow for sufficient taxpayer confidence that their investment will be recouped in any reasonable timeframe.
While the MIDC fact sheet mentions that Axiom Technologies will conduct a feasibility study on its potential costs and benefits, and that the project will not require any local tax increases, these are not explicit guarantees in the text of the agreement.
If MIDC meets the fate of other municipal-owned, fiber-to-the-premises (FTTP) broadband projects around the nation, Knox County taxpayers could be left holding the bag. Either residents’ property taxes will rise or the municipality will bond for it, adding greater liability to the town’s budget for future taxpayers.
Before going down this road, residents and local officials should ask whether this project is really necessary. A GON should truly be the last resort for an area truly not served by adequate service. So, what are the current internet connectivity options for the people of Knox County?
COVERAGE MAP:Maine Broadband Coverage
According to Broadband Now, 98.9% of the county has access to 25 megabits-per-second (mbps) download speeds, and speeds up to 100 mbps are available for 94%. Federal Communications Commission (FCC) data collected from internet service provider (ISP) companies show that 98.7% of Knox County Census blocks have at least 3 providers offering 25 mbps downloads and 3 mbps uploads, also known as 25/3 service.
About 93% of county blocks have at least 1 provider offering 100/10 service; 28% have 2 or more providers offering these speeds. The FCC, as well as Maine broadband agency ConnectME, currently define areas as “served” by adequate internet as those who have access to 25/3.
Despite the noble intentions of the MIDC, the vast majority of Knox County residents, especially those in Rockland, Camden, Rockport, and Thomaston—the proposed early adopters of the project—have a wide breadth of internet service choices today. In these towns, ISPs offer many speeds at different price points for residential service. Of course, some gaps exist, but this is hardly the “market failure” that big government broadband advocates suggest it is.
Taxpayers should demand better use of spending one-time federal funds than financing a GON with marginal benefits at best. If county officials want to ensure households can afford one of the many service options available to them, without greatly distorting the market, they may provide direct assistance for internet access to residents and businesses with their ARPA funds.
Knox County could provide a modest monthly voucher ($20-40) for those residents who struggle to afford service levels that meet their needs. This could be achieved with only the county’s ARPA disbursement over at least the next two years, dependent on uptake. A program like this would spare taxpayers the potentially massive financial liability of a new GON without threatening existing options for consumers.
In contrast, local ARPA funds may be used for direct tax relief, whereas state funds may not. In this spirit, county officials could give a property tax rebate to every household in an attempt to put more money back in residents’ pockets to help ease the burden of paying for broadband service.