A news service for the people of Michigan from the Mackinac Center for Public Policy

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Washtenaw County Township Builds Internet Service

Most local projects aren’t self-sustaining; township cites its unique topography as a justification

A rural community with less than 3,000 residents in western Washtenaw County is preparing to build a municipal fiber-optic network.

On Aug. 8, 2017, residents in Lyndon Township voted by nearly a 2-to-1 margin to approve a 20-year, 2.9-mill tax increase to borrow for a $7 million project. Township officials say the project will deliver up to a 1-gigabit fiber internet connection to every township resident and business that pays for the service.

Building municipal-owned fiber-optic networks, especially in a township with a light population density like Lyndon Township, has been challenging for local governments. Most municipalities that conduct these types of projects have been unable to cover the costs of building and maintain their network with revenue from customers, making the networks an added expense for the government.

The fiber-optic project is currently in the design stage, according to Lyndon Township Supervisor Marc Keezer. Once that stage is complete, Keezer said, the township will begin getting permits to either bury fiber-optic lines or hang them from utility poles.

Keezer said that township residents pursued the project, adding that for many families, not having internet options available is a deal-breaker. The Michigan Broadband Cooperative, a group committed to bringing high-speed internet to western Washtenaw County, ran an educational campaign before the August 2017 millage vote.

Keezer also told Michigan Capitol Confidential that he only knows of two private companies that currently offer broadband internet to Lyndon Township residents: Great Lakes High Speed, which serves 100 homes, and Charter Communications, which serves 10 to 20 homes.

Recent academic research conducted on municipal-owned fiber networks suggests they are a financially risky venture.

According to the May 2017 study from the University of Pennsylvania Law School, only 2 of the 20 projects studied earned enough revenue to expect to cover their projected costs over the useful life of the network.

At a policy conference in May 2018, Christopher Yoo, one of the authors of the study, said that many government officials fail to realize that operating the fiber network is the easy part. Attracting customers and making revenue is much more difficult, he said.

The task of covering the system’s cost and maintaining the fiber network did not bother Keezer.

“The cost of the infrastructure will be paid for by the sale of bonds which is backed by the taxable value of property within Lyndon,” Keezer said in an email.

Lyndon Township isn’t the only local government in Michigan to look into entering the broadband business. Other municipalities that have either looked into or have built fiber-optic networks include Sebewaing, Holland and Traverse City.

According to Matt Groen, the executive director of the Michigan Cable Telecommunications Association, providing and maintaining internet infrastructure in rural areas — such as Lyndon Township – is expensive.

“The challenge for the remaining homes are the same as those faced by water and natural gas – the high cost of delivering and maintaining service to people who live in rural areas, often in homes spread out on large lots or by farms,” Groen said in an email.

A feasibility study commissioned by the township says that running approximately 65 miles of fiber-optic lines to 1,158 homes and businesses in the township will cost $6 million to $6.3 million. The final number will depend on whether the township decides to run the fiber-optic strands on utility poles, or bury them underground.

The feasibility study assumes a 50 percent “take-rate” within the first two years the service is available, meaning that 579 of the homes and businesses connected will pay for some sort of internet or phone service.

Ted Bolema, a senior fellow with The Free State Foundation and an adjunct scholar with the Mackinac Center for Public Policy, said in a phone interview that he could see why a fiber-optic network would be attractive to some of the residents of Lyndon Township. But he said he also doubts officials will get a 50 percent take-rate.

Bolema said that many people living in Lyndon Township commute to Chelsea or Ann Arbor and have higher incomes and might want better internet service than is currently offered. Bolema said the township may want to consider less-expensive options like fixed-wireless internet or expanding the amount of mobile internet offered in the area.

“Whether this is going to be financially viable is going to come down to how many people will take it,” Bolema said.

Lyndon Township currently has limited internet options, with all providers offering average speeds of less than 25 megabits per second, the current minimum speed of broadband internet service. Charter’s Spectrum service averages 52 megabits per second, but it is only available to a small number of township residents.

Keezer told Michigan Capitol Confidential that Lyndon Township’s situation is unique and that the township unsuccessfully tried to get private companies to build a network there.

“The private companies did not see a profitable business venture to invest into a community with a very lengthy return on investment,” Keezer said. “Due to the very unique topographical challenges and limited homes and businesses within Lyndon, the residents were tired of waiting for someone to step up and build a broadband network that would work well into the future. The majority at the polls on August 8th [2017] wanted and needed broadband now and took matters into their own hands.”

Lyndon Township plans to own the fiber-optic network and contract the responsibilities of providing internet services to a private internet service provider.

According to Keezer, the township’s decision to set up the project as a public-private partnership will protect residents.

“We also intend to create a broadband oversight committee that will be the watchdog of both public and private interests,” Keezer said in an email.

But Bolema was not as optimistic that the township could set up the project in a way that would protect taxpaying residents.

“Maybe they’ll pull it off,” Bolema said, “but I’m not very optimistic.”