Medina, Ohio Should Be Wary of Muni Broadband

Published August 1, 2006

It seems as if Medina, Ohio officials are relying on the “Field of Dreams” economic development model–“if you build it, they will come”–when promoting a proposed municipal-owned broadband Internet service.

Unfortunately for Medina taxpayers, there is a better chance of Babe Ruth coming to town than the new jobs and residents being promised by city and county officials.

The Medina County Economic Development Corporation, which is spearheading the municipal broadband venture, is touting its plan as a way to spur development in northeast Ohio. The presentation it used to sell the plan includes a quote from OneCleveland Board President Lev Gonick, who said, “There is no economic future in northeast Ohio without a broadband strategy.”

While it is certainly true that high-speed Internet access is essential for an area’s economic future, it’s highly unlikely that an area would have no future without a government-imposed strategy to provide high-speed Internet.

Government is notoriously poor at making these types of decisions. Unlike a private consumer, its decision-making process is not based on which product or service is best suited for its needs.

A large part of government decision-making is based on who lobbies politicians most effectively. This is rarely the same as the company with the best product or service.

A further complicating factor is that government officials are not spending their own money on these projects–they are spending money that comes from the taxpayer. No matter how good our intentions, we are always less careful when spending money that isn’t our own.

Tricky Ventures

Municipal broadband ventures are especially tricky. They usually cost more than planned, bring in less money than projected, and fail to lure economic development to the area.

Consider the municipal telecommunications system in Lebanon, Ohio. As a recently completed Buckeye Institute report illustrates, city officials had high hopes for the system when it was planned in the mid-1990s, but so far it has cost far more than anticipated and in most years operates at a loss.

Although the Lebanon system is different than what is being proposed for Medina, there are some similarities. For example, officials in Lebanon promoted the system as a way to improve delivery of city services, just as is happening in Medina. In Lebanon, however, the promised services never materialized.

The officials promoting the Lebanon system also claimed it would begin making money after a few years. Seven years later, this is not yet true. Medina should be careful of consultants’ predictions of profitability for its system.

This is the pattern for most other municipal telecommunications ventures. The Buckeye Institute isn’t alone in reporting this. As a report by Balhoff & Rowe LLC points out, “Financial analysis of municipal fiber models leads to the conclusion that virtually all the government-owned networks to-date have a negative net present value.”

Backers of the Medina muni plan contend that when the broadband infrastructure is built, the people and businesses will come. Unfortunately for taxpayers, Medina isn’t Hollywood. If history is any indication, this field of dreams is likely to remain empty.

Marc Kilmer ([email protected]) is a research associate specializing in technology issues with The Buckeye Institute for Public Policy Solutions.