Illinois Town Considers Muni Broadband

Published June 21, 2011

Gilberts, a small town of about 8,000 in north central Illinois, is at the very embryonic stages of examining a taxpayer-financed broadband buildout. The town is exploring the option despite the widely reported failure of municipally funded Internet programs in North Carolina, Colorado, San Francisco, and elsewhere.

Gilberts hasn’t committed public funds to the project yet, nor has the town conducted any negotiations with potential broadband providers.

Michael Sanera, research director and local government analyst for the John Locke Foundation, a North Carolina-based think tank, says Gilberts should work with private broadband companies rather than attempt to compete with them.

“This is just another [case of] corporate welfare paid by the average city taxpayers, who receive little or no benefit,” Sanera said.

‘Costs Underestimated, Subscribers Overestimated’
In its initial discussion of the matter, Gilberts’ economic development committee pointed to Scottsburg, Indiana, which spent $385,000 to build its network, and Reedsburg, Wisconsin, which, according to the Gilberts EDC, was able to provide a better business environment to potential employers considering relocating to the town through the widespread implementation of broadband.

Gilberts officials argue broadband may help them attract some businesses and provide better resources for companies already in the town, according to Assistant City Administrator William Deitch, though he was quick to note town executives were still investigating potential pros and cons.

“Most of the time the construction costs are underestimated and the number of subscribers overestimated, leaving the city taxpayers with a large bill for the benefit of the few who gain from the higher speeds,” said Sanera.

This past April, Timnath, Colorado, abandoned its publicly administered wi-fi program, which cost the town $113,400 when it was built three years ago. When annual maintenance costs for the program topped $103,026 for the system’s 45 users, the town pulled the plug.

‘Money Pits’
Although widely available broadband does benefit some businesses and individuals by providing faster Internet access, many of these projects in smaller towns have suffered from lack of expertise, which can turn the schemes into”money pits” for towns like Gilberts, said Ari Zoldan of Quantum Networks, New York.

Lack of technical expertise can also mean faulty equipment and failure to deliver on promises, said Zoldan. The provider company should be on the cutting edge of technology so that it can deliver patches, updates, and new equipment as they become available, he said.

“Having higher speed will not bring new businesses there, but not having it may keep some businesses from moving there,” said David P. McClure, president and CEO of the U.S. Industry Association in Luray, Virginia. “So not having it can be a disincentive, rather than having it being an incentive.”

Instead of broadband, businesses move in or out of communities primarily on the basis of tax policies, said McClure.

‘Engaging in Unfair Competition’
Broadband has some value beyond the claimed appeal to businesses, because it can provide benefits to municipal governments, police, fire departments, hospitals, and schools, said McClure. If tax policies are in line and if there is readily available, reasonably priced power, a broadband buildout may help attract some data centers, he observed. However, broadband availability falls behind tax policies and power availability as a business priority.

“The city council members who vote for this should be required to put up a $20,000 personal bond,” said Sanera. “If the project fails to meet its financial objectives, their bond money is used to help pay for the cost overruns.”

Referring to passage of a bill forbidding cities to establish public wi-fi or broadband cable systems that directly compete with private companies offering the same services in North Carolina this past May, Sanara said, “The legislature looked at municipal broadband and decided it was unfair competition with the private sector. Thus they passed a bill that outlawed cities from engaging in unfair competition for most North Carolina cities.”

Phil Britt ([email protected]) writes from South Holland, Illinois.

Internet Info:

“NC Legislators Seek Level Field for Muni Wi-Fi,” Infotech & Telecom News, May 2011:
“Colorado Town Abandons Municipal Wi-Fi,” Infotech & Telecom News, June 2011: