Broadband project case of overkill?
High-speed Internet service, often referred to as “broadband,” has become something of a government golden calf in recent years. Not having broadband has become the 21st century equivalent of not having indoor toilets, a type of poverty that demands government intervention.
We concede that in 2016, communities and regions that lack access to high-speed Internet are at a disadvantage. Some types of modern businesses cannot function without it, and in terms of personal entertainment, a Netflix account is of little value in a community lacking the means to stream video to households.
But it has seldom followed that bringing broadband to a region was a road paved with gold. Governments and municipal utilities have often presented it as such because building and operating broadband networks is otherwise hard to justify. It’s not cheap, and in less-populated areas it’s not profitable either.
We cast a jaded eye whenever government rolls out grandiose plans to wire a state from end to end with broadband, as Kentucky recently has undertaken to do. One thing’s for sure in such a scenario – somebody is going to make a whole lot of money building a network of that scale. And the other thing that is a certainty is that taxpayers are going to pay for it, in some fashion.
In Kentucky’s case the program is called KentuckyWired. It started as a project of Save Our Appalachian Region (SOAR), a group founded by Republican U.S. Rep. Hal Rogers and former Democratic Gov. Steve Beshear.
The program began as an effort to bring broadband to seriously underserved counties in eastern Kentucky. In that regard we think it probably made sense. But Gov. Beshear and legislative leaders succeeded in expanding the project to a statewide scale. KentuckyWired became a plan that would create a 3,400-mile fiber optic network that would provide access points in all 120 Kentucky counties. It would initially connect 1,100 state offices, with local Internet service providers being relied on to offer “last-mile” service to homes and businesses.
The price tag: $289 million. The state worked with a group of private companies led by Australian investment firm Macquarie Capital to borrow the money to build the network. The state agreed to pay the companies about $28 million a year for Internet service, with the proceeds going to pay off the loans.
But a big part of that payback plan assumed Kentucky’s 173 school districts would buy Internet service from the new network. The contract for schools to buy Internet service had to be put out for competitive bid. And the process blew up when it was learned that a deputy cabinet secretary who wrote the contract during the Beshear administration had subsequently taken a job with the Kentucky Communications Network Authority, an entity Beshear created to bid on it.
Gov. Matt Bevin says KentuckyWired is off track, and he wants to scale it back to what was originally envisioned – a regional project to serve eastern Kentucky. But state Finance Secretary William Landrum says if the school contract does not go forward (which would assume the network would have to be built out) Kentucky taxpayers could be on the hook for the $289 million borrowed by Macquarie Capital.
It strikes us that this could have a bad end. It may be that local school districts will find themselves effectively paying for a statewide broadband network that wasn’t wanted or needed in some regions of the state. It’s another example of a high-minded government solution that went in search a problem, and taxpayers may be stuck with it.
By Jim Paxton
The Paducah Sun