News today comes from the Northeast town of Groton, CT where The Day reports that Groton Utilities’ venture into cable an ambitious idea that didn’t pan out. The town of Groton has voted to sell its municipally-owned cable and Internet venture. Congratulations!
Begun in 2001 by Groton’s municipal electric and water utility, the city has experienced what the rest of us will see over and over across the country in the next few years: While government may be able to function as a monopoly provider of utility services, it does not fare well in competition with private providers.
Not only is government not equipped to compete, full-stop, but it is especially ill-equipped to keep pace in the rapidly-changing technology sector. As well, in non-urban areas broadband demand is often insufficient to cover costs. And in urban areas where there is robust private sector competition between both firms and technologies, government intrusion into the broadband marketplace not only wastes rate-payer/taxpayer resources, it confounds and can slow the pace of private investment.
Take a read on the Groton experience:
But over time, factors worked against the [government-owned network, Thames Valley Communications], including a decline in the economy, advances in technology and fierce competition.
Now, the city is $27.5 million in debt as a result of borrowing $34.5 million for capital investment throughout the years. Thames Valley has lost an average of more than $2 million each year, and operating expenses continue to exceed revenues. The losses led to a downgrade in the city’s bond rating earlier this year.
The debt will be paid through the Groton Utilities budget for the next 14 years, starting at $2.6 million annually and dropping by roughly $100,000 each year over the course of the 14 years, according to Finance Director Michael Hillsberg. Groton Utilities plans to refinance its debt at a savings that has yet to be determined. The town has paid back $6.8 million of the debt and has used $5.5 million of borrowed money in past years to subsidize operating expenses.
The next big challenge facing private telecommunications/broadband sector will be a possible (some believe likely) reprise of the federal broadband stimulus grants of the last several years. Since 2009, these grants have helped to initiate new government-owned broadband networks all over the country and to prop up existing public systems that, like Groton, CT., were otherwise preparing to toss in the towel.
Federal infrastructure grants can be useful, if state and local recipients are knowledgeable and their institutions are structured to employ the funds wisely. This is not what’s happening so far and it is unlikely to be in the complex world that is broadband telecommunications.
Where government funds are concerned, we should always proceed with caution. They seldom (never?) come without strings.
As for Groton, CT, as with government generally, what seems done may not yet be done as Petitioners oppose sale of Groton cable firm.