Policy Documents

Lessons in Municipal Broadband from Lafayette, Louisiana

November 1, 2013

Government-funded broadband projects, exemplified by the one undertaken in 2005 by Lafayette Utilities Service (LUS), start with a fundamental error: governments believe they are entering a monopoly-based infrastructure business when in reality, they are entering an extremely competitive service business.

Because they assume broadband is an infrastructure business, they believe the model will follow the classic utility: high upfront construction costs, followed by high yield revenues that pay back the investment, while the installed plant can be routinely maintained as it depreciates on a long schedule. As with a classic utility, customer acquisition costs are believed to be low and incremental.

The shock comes when they learn, usually within two years of start-up, that technology cycles in broadband are short. Equipment can’t be “maintained” over a decade; it often has to be upgraded or replaced every two to three years. An even bigger shock comes when cities discover how much they must spend year-to-year to build and maintain viable market share. This is when municipalities realize that it’s not the speed of its Internet connections, but the quality, breadth and competitiveness of its cable TV service that drives revenues.

This paper examines one of the largest and most publicized municipal broadband projects in the U.S.: the $160-million fiber-to-the-home (FTTH) project launched by Lafayette Utilities Service (LUS) in Lafayette, Louisiana.