News Story

No Rush For Government-Owned Traverse City Internet

Out of 3,200 potential customers, only 12 signed up in February

The municipal utility in Traverse City, TC Light and Power, is continuing the build-out of a $22 million project to provide fiber broadband internet. But the number of customers signing up for the new service falls well below projections of what will be required to make the project economically viable.

Local watchdog and former telecommunications company executive Gerald DeGrazia says the gap between forecasts and reality suggests the utility may have trouble repaying the debt it assumed to install fiber broadband. In turn, this increases the likelihood that rates for other services will rise to cover the difference.

In February, the city-owned utility added a total of 12 new customers — one commercial customer and 11 residential customers — bringing the total number of active internet customers to 178, according to a report presented to the utility’s board.

The service area for the first phase of the project has approximately 3,200 potential customers.

DeGrazia said sign-ups need to more than double in the next few months to meet the revenue projections the board relied on when it approved the project in 2019.

The March report to the utility board said the number of customers signing up for fiber broadband, including those who had yet to receive or pay for the service, was about 55.5% of the target for residential customers. For commercial customers, the number was 11%. The utility budgeted $3.3 million for the first phase of the broadband project and borrowed another $850,000 from the city’s economic development fund in 2020. It also applied to the U.S. Department of Agriculture for an $18 million loan in January to make the service available to all its customer base.

“The concern is . . . how are they going to repay those loans if they don’t have the customers?” DeGrazia said.

The utility board “doesn’t seem to be too concerned. They seem to think they need to do better marketing.”

“But there has to be some form of reckoning by the end of the fiscal year (in June),” he 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.