As originally appearing in Springfield Business Journal:
Big dreams with other people’s money.
That’s how one participant at a conference on economic development in Missouri described most infrastructure improvement plans. Local governments are all too willing to lavish other people’s money on grand schemes of a this-changes-everything nature. An example of this misguided but common impulse is taking place in Nixa, Missouri.
For the last couple years, Nixa officials have become more and more interested in building a public fiber network. The city commissioned a feasibility study from SiFi, a British fiber optic network developer, on building a network that would provide 1 gigabit–speed Internet to households and some businesses. The cost to Nixa could be almost $30 million, more than the city’s total 2015 budget.
The vast majority of broadband infrastructure, in Nixa and elsewhere, is privately built and operated. But increasingly, cities are treating Internet, and high-speed Internet, as a required utility. Indeed, having limited Internet availability or little private-sector competition may severely limit a locality’s ability to attract new residents and high-paying jobs. It may be reasonable for a city to step in where the private sector can’t (or won’t) provide competitive Internet access.
This is not the case in Nixa. A number of Internet service providers—AT&T, Comcast, Timer Warner, Charter, and Suddenlink, among others—serve the city. Internet pricing and speeds are competitive with many other cities. It is not as though, without government involvement, Nixa would never get super-high-speed Internet. One company operating in Nixa, Suddenlink, already has announced plans to provide gigabit Internet.
Nixa’s plans for government fiber are born of preference, not necessity. City officials have stated that they want to shed Nixa’s image as a bedroom community for Springfield; the city needs a special edge to make that transformation. Waiting for private companies to bring higher speed Internet at some time to some segment of Nixa at some price is, therefore, unacceptable.
The business strategy is interesting. Nixa, however, is not a business, it’s a city. Officials are not experienced telecom developers, and their money comes from taxes, not investors or customers. And there are risks. If Nixa goes forward with an arrangement with SiFi, the city will be responsible for millions in yearly payments. If there is not sufficient demand for the new gigabit Internet, the system could quickly become a drain on the city’s budget. Furthermore, by providing public broadband infrastructure at low prices, it may dampen the incentives for private Internet providers to invest their own money improving Internet in Nixa. With technology rapidly changing, Nixa might quickly find itself with an outdated and money-losing public Internet infrastructure, which nonetheless discourages private companies from building services of their own.
Having quality Internet access at affordable rates is important for all localities in Missouri. If the private sector truly cannot provide it in some of the more rural areas, local governments may be justified in providing it. But in the case of Nixa, and cities like it, need is simply not there. Instead, the problem seems to be that the pace with which private-sector companies are improving Internet service does not fit the dreams of local officials. These grand plans, and the government’s ability to be an effective broadband provider, should make taxpayers suspicious. Because when Nixa officials dream big, they do it with other people’s money.
Joseph Miller is a policy analyst at the Show-Me Institute.
