News Story

Township Voters Give Firm ‘No’ To Government Internet Plan

Recent study found 90 percent of such plans fail

After a number of local governments in Michigan have begun building broadband networks, voters in one rural Washtenaw County township rejected a government-administered internet proposal by large margins.

Residents of Sharon Township voted 587 to 319 in a May 2018 election to reject a property tax increase — of $3.26 per $1,000 of taxable value — that would service debt incurred by a 20-year, $4.9 million bond meant to pay for a fiber-optic internet network.

If voters had approved the tax increase, the project would have provided a high-speed internet connection to all 711 homes and businesses in the community.

While the proposal received the support of some residents, the proposal received strong pushback from others, who believed that the tax increase would disproportionately affect farmers.

A May 2017 study from the University of Pennsylvania Law School casts some doubt on the financial viability of municipal fiber projects. It concluded that only 2 of the 20 projects studied earned enough revenue to expect to cover their projected costs over the useful life of the network.

According to Christopher Yoo, one of the study’s authors, many government officials fail to realize that the difficult part of operating a fiber network is not building it, but attracting customers and making revenue.

Sharon Township Supervisor Peter Psarouthakis isn’t worried about the financial issues other municipal internet projects have faced, because he believes each situation is unique.

“Studies are just that, studies,” Psarouthakis said. “Our conclusion, a majority of the board’s conclusion, was that if the community wanted this, it would be financially feasible.”

Jim Mann, a Sharon Township property owner who works in real estate, said the tax increase would have cost one farmer he talked to $32,000 over 20 years, in addition to the service fees it would bring.

Mann said that he would have been more in favor of the proposal if the taxes had been assessed on a household basis. He also believes fixed wireless internet offers good options at a much cheaper price than a hard-wired system.

Fixed wireless internet uses transmitters to wirelessly send an internet connection to any home with a receiver that pays for the service. Fixed wireless internet can achieve similar speeds to a wired broadband connection without having to physically connect a house up to the network

“All of our vacant land was paying for internet farmers didn’t need. Farmers are approximately 20 percent of the township,” Mann said. “Right now we’re working with a wireless carrier.”

Mann provided Michigan Capitol Confidential with a draft proposal from Air Advantage. The wireless internet company estimates that five towers, between 150 and 180 feet tall and costing between $80,000 to $100,000, could broadcast an internet signal that would reach most properties in the township.

Psarouthakis said he isn’t in favor of fixed wireless internet because of the speeds it offers, the likelihood that it wouldn’t serve every township resident and the possibility that a customer’s data could be capped after a certain amount is used.

“I’m anti-taxes to a point,” Psarouthakis said, “but when your community is telling you that we want this municipal fiber network — then at that point, I’ll talk taxes.”

Psarouthakis continued: “When your constituents are demanding something being done, you have to present them with something or step down and let someone else step up and try.”

Psarouthakis said the township worked with several groups, including the Michigan Broadband Cooperative, to educate township residents about the potential benefits of a municipal-owned internet service. The cooperative describes itself as a group of western Washtenaw County residents and friends who are working to bring affordable, high-quality, reliable, and uncapped internet service to the area.

A feasibility study commissioned by the township suggested that the township not only build the fiber-optic internet network but also play the role of internet service provider. The study also predicts that internet service would begin at a cost of $35 per month, with at least 60 percent of residents signing up the service.

A number of local governments in Michigan have approved municipal-fiber networks and are in the process of building them.

The city of Marshall is building network infrastructure and at the end of May 2018 announced it had acquired 200 customers for its Fibernet internet service.

Traverse City Light & Power is currently reviewing information from various companies about a possible network, according to Tim Arends, its executive director. The utility plans to eventually select a vendor to develop a full-project plan for a phased rollout.

The Holland Board of Public Works currently serves approximately 500 customers with fiber service that spans Ottawa County, according to the Ashley Kimble, a spokeswoman with the agency. With the addition of a new fiber cable, it has increased its customer base by 16 percent over the past year.

Lyndon Township expects to sign a contract with Midwestern Energy & Communications to make it the internet service provider for the township’s yet-to-be-built fiber-optic network, according to township supervisor Marc Keezer. Keezer also said that after the township issued a request for proposals from companies interested in building the physical infrastructure of a municipal internet, it received bids from four firms.

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.