Commentary: Private Sector Should Drive Broadband Innovation, Not Big Government

by Tommy Vallejos

Most of you are probably reading this very article using the power of broadband internet, which attests to the importance of high-speed internet in connecting us, sharing ideas and gathering as communities.

Access to reliable internet is powering every aspect of our lives, now starting from the earliest years of childhood – better connecting students to their education in urban and rural communities alike. Broadband gives rural entrepreneurs and small business owners the chance to connect with new customers, suppliers and business opportunities.

Millions of Tennesseans are reaping the benefits of the internet on a daily basis, including many who don’t stop to give it a second thought. However, 200,000 of our neighbors in Tennessee still don’t have reliable access to high-speed internet. And many of those impacted tend to be Latinos in sparsely populated towns across our state.

The good news is that additional federal resources have been allocated to states to help meet these broadband gaps, most of which are occurring in rural communities. We have Governor Bill Lee to thank for deploying these important funds. But we have to be careful because the federal government is prone to solutions that spend a lot of taxpayer resources without a lot to show for it.

First, we must ensure that all $800 million slotted for Tennessee makes it to the Volunteer State without delay.

Second, and equally important, we must ensure that those precious taxpayer dollars are spent most effectively to do the most good, rather than make the problem worse.

That’s why our organization, Latinos for Tennessee has launched a new project on our website dedicated to the importance of fiscal responsibility and protecting taxpayers as Tennessee deploys $800 million dollars to expand broadband access. You can learn more about this by visiting our website.

Let me explain why: some in Washington, and even some in Tennessee, have proposed bypassing the thriving private sector and using the $800 million to build out government-owned and operated broadband infrastructure either by towns directly or by town-owned and managed electric utilities.

The reasons to avoid a government boondoggle are numerous, and they start with the basic truth that it just hasn’t worked. Decades ago, Bardstown – a small town in Kentucky tried to make government-run broadband work. They discovered it was too clunky and too expensive, and after years of effort and money spent, the city sold it to a private company that could better handle the maintenance and upgrading of the network.

And this town’s experience is not unique. For example, Traverse City in Michigan planned for a government-owned network and originally expected it to cost $4.2 million. However, after repeated delays, far fewer customers than projected, an expansion of the project and several rounds of new loans – the network’s cost ballooned to nearly $30 million. Those city leaders said it was just too expensive to maintain the service and would have required significant rate increases to keep pace with private-sector providers.

Here in Tennessee, a report by Tennessee’s Comptroller showed that Newport, Tennessee exceeded their costs by over 100% and they found waste, fraud and abuse.

And KUB in Knoxville is currently spending three times more on marketing their fledgling broadband network than they are bringing in revenue – perhaps not the best use of taxpayer money. To add insult to injury, KUB is raising their utility rates on all customers to build a government broadband network funded by taxpayers, which then competes with private providers. Utilities across the state of Tennessee need to be accountable to ratepayers, full stop.

Many cities across our country that have gone down the path of building their own networks have found their initial cost projections to be extremely inaccurate, leading to delays in completion and the need to use much more taxpayer money than was initially planned – especially in light of recent natural disasters that caused significant outages across East Tennessee

And many of these utilities cross subsidize their broadband network by raising utility rates – making everyone pay for their broadband network whether or not they sign up for government-run internet.

In fact, one study from the University of Pennsylvania found that only 10% of government-owned networks generate enough revenue to cover the costs of development over a 30–40-year time span while almost 60% didn’t make enough money to cover their operating costs and five percent didn’t expect to do so for 100 years. When these networks can’t cover the cost, either the taxpayer is left holding the bill or the network has to be sold to a private Internet service provider, almost always at a loss.

This big government approach is too great a risk to take. Ignoring that obvious truth, and plowing forward with a government-knows-best mindset, always leaves taxpayers left to pick up the pieces and pay the tab. That can mean enormous debt, exorbitant prices, a depressed competitive market for broadband and outdated equipment to manage. Plus, as a free market principle, we should not be funding government-owned broadband internet networks on the backs of taxpayers to then go out and compete against private companies with existing networks.

There’s a better and more efficient path to connecting those 200,000 residents of our state without access to broadband internet: partnering with proven private companies. Private Internet providers have the expertise and the scale to expand broadband efficiently to those in need. And leveraging private sector partners also frees up state and city governments to focus on other projects that need their attention: lowering costs for families, attracting jobs to Tennessee and growing our economy.

Plus, private providers have the track record to prove it: the private sector is key to not only building the broadband infrastructure needed for rural communities, but their scale is key to keeping broadband at prices that Tennessee families can afford. It’s much easier to expand existing networks through incentivizing existing broadband networks to expand into areas that might not make the most financial sense (e.g. going the last few miles in very rural areas) vs. building out an entirely and largely duplicative new government-owned network to reach a few underserved areas in each county.

Finally, let’s be sure we use these federal funds to build upon our success. State data shows that Governor Lee has already closed the broadband gap from 20% in 2021 to just over 5% today. More families than ever in Tennessee have access to the economic, education and information power of the internet. Reaching those last underserved communities will require an efficient use of these new federal dollars into Tennessee’s private broadband sector, and not another government legacy program. Let’s do this right.

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Tommy Vallejos serves as Chairman of the Board for Latinos for Tennessee.

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