Government is no exception. The federal government ran a $1.3 trillion deficit last year. Forty-two states, including Georgia, faced down budget deficits for fiscal year 2012 and counties and cities are in fiscal pain too. In this climate, policymakers’ first duty is to protect taxpayers by ensuring scarce public dollars are spent only on top priorities and projects that benefit the majority of constituents.
This is the principle at the heart of a bill introduced by Senate Majority Leader Chip Rogers (R-Woodstock). Rogers’s bill would update Georgia laws regulating government-owned communications networks, often called “GONs.”
Though faced with tightening balance sheets, too many local governments have opted to fund large-scale, costly and often unnecessary public broadband networks. These networks not only put taxpayers at risk, they may stifle added economic investment into an area.
Let’s look at the facts from another state. According to a recent study by Joseph P. Fuhr, Professor of Economics at Widener University, the City of Chattanooga’s EPB Fiber Optic System has received much attention because it offers broadband service 200 times faster than the average broadband speed in the U.S. At $350 per month, it is out of the price range of most consumers, and the financial situation of the fiber optic system is dire. An examination of the 2010 EPB annual report reveals assets of negative $16.8 million — a decrease of more than $3.8 million from 2009. It has $57 million in notes payable and assets of only $52.9 million.
Chicago and Philadelphia have walked away from plans to build and operate municipal networks after the costs became too great.
Here in Georgia, there was Marietta FiberNet, a project to bring Marietta into the Internet service market. The city spent $35 million to build and maintain its network, but eventually sold it eight years after it started — at a $24 million loss to taxpayers.
Some policymakers argue GONs are necessary to bring broadband to areas unserved by the private sector. Sometimes this is true — the private sector has simply not yet decided if it is profitable to invest yet. Sometimes it is not and GONs are in direct competition with privately operated networks.
In order to give public broadband networks the best chance at financial success, the local governments that build them often give them tax and regulatory advantages. These advantages create an uneven playing field. So if a private network already exists it will be less profitable (and thus create fewer jobs and make fewer investments in the local economy). More problematic is that it makes it virtually certain private networks will never move into unserved areas. Why would a private business choose to compete unfairly with the government when it can take its investment dollars elsewhere? Public broadband networks stifle competition and keep well-paying, private telecom jobs out of cities.
There is no arguing access to high-speed broadband is necessary for Georgia businesses to thrive. Lawmakers should look for ways to enhance access, but it’s clear that GONs are not always the best solution for taxpayers or businesses.
Rogers’s bill would require local governments — especially those in areas already served by the private market — to ask more questions before investing taxpayer dollars in GONs. Other states, including North Carolina, have passed similar legislation.
Georgia taxpayers in Georgia deserve the same protections. Which is why state lawmakers should support Rogers’s bill.
Former Western District Cobb Commissioner Louie Hunter is director of the Georgia Center Right Coalition.