News Story

Traverse City Promised Government Internet, Can’t Explain Why Project Stuck On Hold

Delays, high costs and disappointed residents very common with city-owned broadband

Traverse City’s $4.1 million plan to provide high-speed internet service through a network sponsored by its municipal utility remains aspirational more than a year after the project was approved and potential customers were told they could sign up in fall 2019.

The latest target date for consumer access to the fiber network is fall 2020, according to a presentation made to the Traverse City Light & Power board earlier this month.

That followed forecasts made in June 2019 that the service would be available in mid-to late fall. The date was then revised in October 2019 to a new projected date of January 2020. In February, the Traverse City Record-Eagle reported that the service “could be coming . . . in May [of 2020].” The project is still in the beta phase as of July 2020. 

Contacted Monday by Michigan Capitol Confidential about the delays, Traverse City Light & Power had no immediate explanation for the delays.

But a failure to meet expectations would not be a unique occurrence in the field of government-sponsored internet broadband initiatives.

Despite recurrent claims that government intervention is required to supply high-speed internet that will allow Americans to participate in the 21st century economy, many of those efforts have delivered disappointing and expensive results for taxpayers.

A 2017 study by the University of Pennsylvania Law School looked at every municipal broadband project in the country in which full financial details were available. It found that only two of 20 municipal broadband projects studied delivered enough of a return on investment to cover their costs during their useful life.

An analysis of the TCL&P project conducted by Fujitsu Network Communications, the contractor hired by the city to build and run the network, predicted it would reach profitability within five years.

TLC&P’s own FAQ webpage on the fiber optic network repeatedly claims that all the costs of the project will be borne by ratepayers who subscribe to the service, not taxpayers.

But skeptics insist that such claims are not supported by reality.

In general, the way government-sponsored broadband services achieve financial viability is by excluding competition from private internet service providers, said Wichita State University economist Theodore Bolema. (Bolema is a member of the Board of Scholars at the Mackinac Center for Public Policy, which publishes Michigan Capitol Confidential.)

City-organized broadband projects typically give one internet service provider access to the publicly owned right-of-way on favorable terms. They also remove regulatory barriers for a single, selected provider — barriers that private companies would normally have to contend with. As such, they create an uneven playing field, said Bolema.

That ultimately translates into higher costs for ratepayers and taxpayers, he said.

It is not clear that TCL&P will provide internet service that is superior to options local internet users already have. Bill Morand, senior director of communications for cable and internet provider Spectrum, which serves the city, said, “The misnomer is that high-speed services are not already available.”

Gigabit (1,000 Mpbs) “connections have been available to residential and (business) customers for almost two years to all of . . . the Traverse City market,” Morand said.

Spectrum offers 400 Mpbs internet speeds in Traverse City for $70 per month. A 500 Mpbs service from TCL&P will, according to documents provided to the utility board, also cost $70 per month.

Spectrum also offers high-speed internet service to low-income residents of the city, starting at $18 per month.

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.