News Story

Farmington Hills Mayor Pushes Government Broadband Effort

Says it’s needed to attract young families

A three-year quest by Farmington and Farmington Hills to develop a government broadband network is at a critical juncture. A recent study estimated its cost at  $107.5 million and offered mixed views on its viability.

The study was released in November and presented to the city councils of both communities in January. It found a relatively high level of dissatisfaction among residential customers with their current Internet services.

But it also cast doubt on whether enough residents would switch to a municipal network to make it work.

Farmington Hills Mayor Vicki Barnett said in an interview that the need for higher internet speeds and capacities is demonstrable.

“We can’t have haves and have nots in a digitally dependent society,” she said. “We have to have robust internet infrastructure to attract young families and business.”

“But the first thing we have to decide (to go ahead with a municipal broadband system) is how we’re going to fund it,” Barnett said.

At a cost of $107.5 million, the cities need to find private investors willing to underwrite the project, or come up with the money on their own, she said.

“Do taxpayers really want to pay for that?” Barnett asked.

For perspective, Farmington Hills anticipates receiving $98.8 million in total revenue for its 2020-21 budget.

At least some city residents appear to be unenthusiastic about the prospect.

Charles Paul took to the local news website Farmington Voice to express his skepticism. “Are we to believe that (our local government is) capable of creating an entire bureaucratic infrastructure to build and manage a utility like this ... with absolutely no experience ... at lower projected costs?”

“There’s been some stupid ideas proposed to our local governments, but this is about the dumbest idea ever,” Paul said.

The consultants’ report suggested two ways to finance a municipal fiber network. First, it said, the cities could go into debt by issuing a general obligation bond, which would require voter approval. This debt would put all taxpayers in both cities on the hook for the cost, though it would be offset by whatever revenue the system generated. A second approach would be to sign up subscribers in advance, at $3,500 per household.

Farmington councilman Joe LaRussa, a longtime advocate for municipal broadband, said he’s not ready to embrace either option.

The primary concern, he said, is that both would rely on untested assumptions about how many paying customers the new service would attract.

The consultants, CCG Consulting and Finley Engineering, said they arbitrarily chose a 50% sign-up rate. The rate, they said, was based on experiences elsewhere and the level of dissatisfaction among the Farmington’s residential customer base, as measured by a survey.

Almost half of those surveyed (48%) said they would consider switching to a new network “to get faster speeds at the same price” they are currently paying for broadband.

On the other hand, “every business we heard from described their current broadband as adequate,” the consultants said.

How many customers would switch to a municipal network is unknown. As the consultants noted, “The business is fairly risky with such a high breakeven penetration rate.”

Across the country, government-backed broadband has had a poor financial record.

A 2017 report from the University of Pennsylvania found that only two of 20 municipal broadband projects studied were able to operate without taxpayer subsidies.

LaRussa said the feasibility study was useful, but it has not produced a consensus among elected officials about how to proceed. It might be possible, he said, to purse municipal broadband on a more limited basis. For example, the cities could work in partnership with one or more internet service providers, or start building a system in areas of the community where demand is highest.

“We need community support for whatever we decide,” LaRussa 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.