News Story

Despite Government Broadband’s Poor Record, Farmington Hills Considers It

Oakland County city already saturated with competing high-speed private providers

A group of local government officials and private citizens in metro Detroit have assembled a committee to explore building a municipal fiber-optic network in their communities.

Residents of Farmington and Farmington Hills can already purchase high-speed home internet from Charter Spectrum and AT&T. But Richard Lerner, a member of the Farmington Hills City Council, believes that current internet service isn’t adequate and the existing internet service providers will not invest in laying fiber to every home.

The group investigating a municipal broadband network also includes Joe LaRussa, a member of the Farmington City Council, and three private citizens who, Lerner said, work in technology-related fields.

“We are confident that we can deliver gigabit speeds faster than the cable company,” Lerner said.

Matt Groen, executive director of the Michigan Cable Telecommunications Association, said service in Farmington and Farmington Hills is already fast.

“These communities already currently enjoy access to some of the highest residential speeds deployed in the country, as virtually the entire Farmington/Farmington Hills area is blanketed with 1 Gbps download speeds from existing cable providers,” Groen said. “These companies are able to do this all over their existing fiber/coaxial hybrid infrastructure.”

When Michigan Capitol Confidential asked Lerner about the cost associated with municipal broadband projects, he said he doesn’t look at a municipal-owned broadband network as a profit center, but as a utility and a way to raise property values.

A 2017 study from the University of Pennsylvania Law School found that only 2 of the 20 municipal broadband projects studied were projected to earn enough money to cover their costs over their useful life.

Lerner’s committee has not obtained any formal cost estimates from contractors. But he said he has received estimates that designing, engineering and building 105 miles of fiber for a municipal-owned network in Farmington and Farmington Hills would cost roughly $7 million. Lerner also said that running fiber-optic lines to individual homes would likely cost an additional $1,500 to $6,000 per property, depending on the density, distance involved and geography of the neighborhood.

Lerner said that it’s unclear whether building the backbone of the fiber network would result in tax hikes, though he opened the possibility of borrowing funds by saying that Farmington Hills has a AAA bond rating. According to the city’s 2018 financial statements, the Detroit suburb currently has $51.6 million in bond debt and $41.1 million in unfunded pension liabilities.

Once the main portion of the network is constructed, Lerner said, neighborhoods could choose whether to accept special assessment property tax hikes to pay for running fiber-optic lines to individual homes.

The cost of a municipal-owned network isn’t the only question officials have to deal with; government ownership of internet infrastructure comes with legal questions as well.

Theodore Bolema is an adjunct scholar with the Mackinac Center for Public Policy and executive director of the Institute for the Study of Economic Growth at Wichita State University. He said that the presence of municipal-owned networks can drive away private internet service providers, leaving residents with fewer choices than they otherwise would have. Bolema added that municipal internet systems also present complicated legal questions surrounding a government agency determining what is “appropriate content on the networks.”

“Any internet provider has to struggle with how to enforce civility on the internet, including blocking users for various types of abusive language and conduct that can be harmful to other users,” Bolema said. “Internet providers also have to be careful with how they handle the private data of their users. But when a government provides the internet service, that raises all kinds of First Amendment speech issues and Fourth Amendment issues about protections from government searches of private information.”

When asked about the legal questions connected with government ownership of a fiber-optic network, Lerner said his committee hadn’t addressed the issue yet.

“Our mission has been to explore the feasibility of creating a municipal broadband network. We will likely form a cooperative venture with the cities of Farmington and Farmington Hills and look for a third party to operate the system (similar to RS Fiber and Hiawatha Broadband relationship). If the project moves forward, we will begin to discuss operational issues in the future,” Lerner said.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.