City-Owned Telecom is a Bad Idea

There is a measure on the November ballot that would authorize the City to establish city-owned telecom services. The plan is to provide 1 gig broadband service to every home. As much as we admire our friends at the City, and as much as we strongly support a connected community, we do not support this measure.

There are a number of reasons for our non-support, but probably the biggest is the strong belief that city government should stick to its basic job – fire and police protection, street maintenance and water, sewers and electricity.

The City is asking voters for permission to launch a traditionally for-profit service where it has no expertise. And, to have taxpayers bankroll this new business venture for up to $150 million.

The caveat here is that they could negotiate a service agreement with a third party.

When asked about why the City wants to get into this business, the primary reason given is to ‘future-proof the community.’ Wow, that’s obtuse. I think it means the City believes it can do a better job of keeping up on technology than the traditional technology companies.

Maybe they can, but that feels like confidence bordering on hubris.

Here are a few things to ponder:

  • This is not free. A few people have mentioned to me that government-owned broadband would be great because it would be free. No! The City’s current assumption is that 1 gig service to a residence will cost $70 per month, comparable to the current market.
  • The system is expensive to build at $130 million to $150 million. This is noteworthy because if the City misses the mark on its market penetration numbers the bonds that are issued to pay for the construction costs would be secured by raising rates and / or by putting a lien on every house in Fort Collins. Even if you aren’t a customer of the City telecom.
  • This bond issue would use up the Light & Power Department’s full bonding capacity for 5 years. If something big goes ‘bang’ the City will be scrambling to fix it.

Among the questions you should ask are:

  • Exactly what problem are we trying to solve? According to the City’s own analysis, 98 percent of the Fort Collins citizenry is already connected to the internet.
  • Beyond a desire to try to provide low cost 1 gig service to residents, what is the motivation for city government to risk residents’ money on this project? What is the business case for doing this?
  • The City has identified several risks for this retail model but has done little to explain their plan and capacity to effectively address such challenges. Are you okay with that?
  • The business plan is incomplete to the point it would not meet conventional borrowing standards. In fact, City officials have stated that this is not a “take to the bank plan.” Then why is it acceptable to ask the citizens of Fort Collins to risk $150 million?

In the end, while applauding the connected-community motivation, the City did not make its case and should focus on providing high-quality, basic services.