Here we go again.
Several Minnesota communities regrettably have been at the forefront of some of the most prolific municipal broadband failures in the country. As CEO of an organization that tracks wasteful government spending, I had hoped we were done documenting municipal-broadband failures. But sadly, it appears that we’re not: some Willmar city officials seem determined to saddle local citizens with the latest broadband boondoggle, leaving taxpayers paying the bill.
What’s happening is that Willmar officials recently laid the groundwork to sell $25 million in general obligation bonds to build an “open access fiber network.” Currently dubbed the “Connect Willmar Initiative,” city officials approved this project that will fund a high-speed, fiber optic network to be laid throughout the city. Once that fiber network is installed, city residents could choose what Internet Service Provider (ISPs) they would like to contract with – meaning that ISPs would compete for their business.
Yet you don’t have to look too far into the details of this project to see how and why it will fail.
First of all, according to the network consultant building this fiber network, not one community in Minnesota has an open access network. Success for a program like this depends upon two key factors: first, that many Willmar residents are either “unserved” or “underserved” with the Internet service currently available in the community and secondly, those with Internet service will drop their current ISP in favor of a new provider.
If this business proposition sounds familiar, it’s because similar plans throughout Minnesota have been constructed based upon the same premise: that if a city builds it, customers will come. This proposition fails to account for what happened thirteen years ago in Monticello. In that nearby community, city-issued bonds were used to construct a $16.8 million network. Just two years later, city officials were scrambling for answers after the number of subscribers to the city-owned network was dramatically short of earlier projections. After the city lost $4 million in taxpayer money subsidizing the operating costs of the failed municipal network, the city defaulted on its loans, joining the ranks of communities which saw their credit rating tumble after risking taxpayer dollars on a network that was likely never going to be financially viable.
A much more tragic tale happened more recently on the North Shore in sparsely populated Lake County. With three private internet providers in the county, Lake County commissioners instead choose to develop a county-wide, county-owned broadband network. They authorized spending $15 million in local tax dollars – which represents $1,400 for every man, woman and child in Lake County, to begin constructing the broadband infrastructure that was never completed. The county eventually gave up on the project, defaulted on a federal loan of $56 million along with nearly $17 million in local taxpayer dollars spent and sold what was built for pennies on the dollar.
Expectations were sky high for subscribers to commit to this network – consultants who sold the county board on this project told them to expect 7,500 subscribers. When the network was eventually sold, there were only 2,462 paid subscriptions.
Since then, President Biden’s 2021 Infrastructure, Investment and Jobs Act committed $65 billion to provide high speed Internet service to every home and business in America. Minnesota will receive $652 million in Broadband Equity Access and Deployment (BEAD) funds. While this process is taking longer than many of us hoped to reach the states, it is an enormous source of funding that will be flooding cities like Willmar and others if they decide to submit competitive proposals to the state for funding. It is just one of many opportunities that communities will have to expand ISP competition without requiring local taxpayer funds or risking the financial future of the city.
There are a multitude of lessons to be learned from Lake County, Monticello and others that Willmar should consider before moving ahead with this risky and unnecessary project. The most important one is this: providing ultra-high speed broadband service in large, rural areas is complicated, costly and ultimately highly competitive. Projects like these, conceived by and operated by inexperienced municipal government, are sadly, wired to fail.
There were two members of the Willmar City Council pushing back on the project, but they were the dissenting opinion on the council. From the West Central Tribune:
“At Monday’s meeting, Fagerlie and Butterfield, both of whom voted against the proposal for the community education and outreach campaign, wanted to place the project on hold until a work session could take place between the council and other internet service providers that are currently operating in the city of Willmar.
“They said the representative from Spectrum indicated to them that Spectrum has 8,000 customers in Willmar and would not be signing up to provide its services on Willmar’s network. The Spectrum representative also indicated that Spectrum was going to be completing its own broadband project in Willmar in July, they said.
“Fagerlie and Butterfield continued to insist that another work session take place inviting other internet service providers. Box asked what kind of information the council was looking to receive at that meeting.
“Fagerlie said he would like to know how many customers each provider serves in the city and what their costs were for customers. Butterfield said he would like more information about what projects other providers are planning in the city or if other local providers are going to get involved with the city’s project.”
