There is probably no better poster child for government waste — which the Freedom Foundation of Minnesota focuses on eliminating — than municipal broadband. Many Minnesota communities have regrettably been at the forefront of some of the most prolific broadband failures in the country. The latest county-run broadband failure, in Lake County, was recently profiled by Star Tribune columnist Lee Schafer (“For sale: One rural broadband system,” June 30).
Schafer’s conversation with the Lake County administrator outlined some of the spin with which local officials are explaining what caused the massive failure of this broadband experiment. As someone who has followed this project since its inception and who will soon be releasing a report on the lessons learned from Lake County, I believe there were a few glaring omissions about this boondoggle that politicians arrogantly ignore.
The Lake County broadband experiment began amid sky-high hopes in the early days of the Obama administration. President Barack Obama, in an effort to inject cash into America’s struggling economy, announced a massive federal stimulus package. It became law in February 2009 and included an appropriation of $7.2 billion “to increase broadband access and usage in unserved and underserved areas of the Nation.” These funds ultimately were administered by the U.S. Department of Agriculture’s Rural Utilities Service (RUS) Broadband Initiatives Program. Later that year, Lake County authorities submitted paperwork to the RUS that included applications for $33 million in broadband grants and loans. This application was rejected.
It is important to know that at that time, many Lake County residents had access to broadband via three private providers. When confronted with these facts, county officials told the federal government in their application that they felt that those incumbent broadband providers were not entering sparsely populated areas quickly enough and that they charged too much for high-speed internet service. They mistakenly believed they could do better.
After the initial rejection, Lake County politicians doubled down on their federal grant and loan application, adding parts of neighboring St. Louis County to their new RUS application and increasing the estimated cost from $40 million to $66 million. In late 2010, Agriculture Department officials announced 43 new broadband infrastructure loans and grants to communities, including Lake County — one of the largest taxpayer-funded projects in the country.
Throughout this process, county officials made promises to local residents that were not kept. Starting as early as June 2009, Lake County officials involved in the broadband project gave multiple assurances to county residents that “taxpayers will not be responsible for any debt.” By that time, the County Board had authorized $15 million in local tax dollars — which represents $1,400 for every man, woman and child in Lake County.
This massive infusion of local cash was deemed necessary after the RUS briefly froze federal funding for the project in 2014. Worried that the project wasn’t living up to its ambitious projections, the RUS released additional project funding only after congressional intervention.
Currently, Lake County taxpayer funding for the project totals $17 million. There are many other twists and turns in this project, including a glaring lack of subscribers even as the system is nearly complete. At its current rate of subscribers, the project cannot become financially viable, nor can it begin to achieve the promised expectation of 7,500 subscribers (as of April 2017, there were 2,462).
And now this enormously expensive network is on the auction block and likely will be sold for pennies on the dollar, leaving taxpayers responsible for this irresponsible experiment.
There are a multitude of lessons to be learned from Lake County, but none as important as the simple facts that we’ve learned from Monticello, Moorhead and numerous other communities around the country: Providing ultra-high-speed broadband service in large, rural areas is complicated, costly and ultimately highly competitive. Market-based forces will always come into play when municipalities decide to compete against private telecom providers. But most important, it’s not something that local governments should be doing.
The lessons of Lake County will continue to be written in the coming weeks and months as local elected officials, in consultation with the RUS and other Minnesota politicians, decide the broadband project’s fate. I hope that the tone of the conversation going forward from Lake County officials is one of regret and concern for the vast amounts of taxpayer dollars that have been wasted on this costly experiment. But most important, I hope politicians across the state heed the lessons learned the hard way.
Annette Meeks is CEO of the Freedom Foundation of Minnesota.