Public-owned Waldo County broadband sounds too good to be true because it is
On June 28, the voters of the small island town of Southport, Maine convened a special Town Meeting to weigh in on various proposals related to the town’s pursuit of a government-owned broadband network (GON).
In May 2021, residents voted to seek nearly $2.5 million in bonds to build out the proposed municipal-owned fiber optic network. This past April, a few residents circulated petitions to revisit the idea after preliminary subscriber numbers came in much lower than the advertised financial break-even point for the project.
Voters decided to rescind the town’s authority to fund the GON with bonds and ordered it to sell all property related to the build-out, amounting to less than $700,000. Voters also denied the Select Board’s plan to provide town funds to serve the 10% of residents who need help affording or accessing adequate internet service, as well as a question to authorize selectmen to apply for grants for the GON.
Add Southport to the list of other Maine towns who have recently rebuked unrealistic proposals to build out miles of duplicative and unnecessary public fiber-optic broadband infrastructure. Examples abound of GONs in which the public benefits failed to materialize, or for which taxpayers were left holding the bag of massive debt (though this history has not stopped other Maine activists from pursuing these types of projects in their towns).
Enter the Southwest Waldo County Broadband Coalition (SWCBC), an organized effort to pool resources of five towns: Liberty, Freedom, Montville, Searsmont, and Palermo to build a new publicly-owned network to connect all 3,334 homes in the region, whether they are currently served or not.
Granted, state mapping data (below) show these towns (save for Palermo) to be relatively underserved compared to their neighbors in terms of available service speeds and prices through provider competition. So, if there is a reason to explore a community-funded broadband effort, it is present in this case far more than other proposals around Maine.
That said, sites like BroadbandNow only count wired ISP offerings, not wireless solutions like satellite (Viasat, HughesNet, Starlink) or fixed wireless (Red Zone), but notes approximately 4,000 people in Waldo County do not have access to wired service providing at least 25 megabits per second (mbps) download, the minimum speed at which the FCC considers a bloc to be “served.” The question is whether the effort to provide broadband to this area is worth the potential risks and costs to residents of doing so.
Recently, SWCBC commissioned a feasibility study by Axiom, a frequent partner in municipal GON build-outs in Maine. The report looked at four possible structures of the project, each varying by cost, partner ISP, and the technology used to deliver the internet. The study judges each proposal on a fairly unrealistic metric: its ability to serve no less than 100% of homes. This almost immediately counts out satellite or fixed wireless solutions, even though these might be more cost-effective, because in rural, forested areas, there is no guarantee of consistent service given current wireless internet technology.
Showing the technological bias and economic illiteracy of proponents, the report touts fiber optic cable networks as “futureproof,” as well as its ability to reach every home, despite the high per-mile cost. While some of the proposed projects range in cost, the clear favorites among the report authors—brand new fiber network builds offered by Axiom and GWI—estimate a total between $12.2 million and $13.4 million. This significantly exceeds the initial estimate from SWCBC to create the network of between $7 million and 10 million.
All in all, the Axiom study presents very little interest in cost or return-on-investment, simply because it will be spending other people’s money. They claim that the GWI proposal, to establish a Broadband Utility District (BUD), a special, quasi-municipal district, to own and operate the GON, will not expose the town to financial liability like Axiom’s municipally-owned model would. Between state grants, federal loans, local ARPA funds, and revenue bonds, BUD proponents frequently tout the benefit of saving the municipalities from the BUD’s debt in the event it does not fulfill its subscriber goal. (Even if all 5 towns dedicated every penny of their ARPA disbursements to the project, they’d barely be scratching the surface of its total cost).
It doesn’t take much time to see that Axiom delivered rosy projections for the GON’s subscriber numbers, an issue which has befallen other local GON proposals. Why would residents of some of these towns, among whom at least 90% are served by providers offering adequate speeds, opt for an unknown service from a relatively unknown provider? Beyond that, how can Axiom and SWCBC assume that more than half of households in these five towns will switch to this new service within the next five years? Even in Axiom’s “conservative” estimate, they believe that 30% of year-round and 35% of seasonal residents will sign up in the first year, but those take rates rise to 60% in year five.
Astute observers might then ask: What happens to the BUD if it has to take on more debt than expected and cannot support the network on current revenue levels? SWCBC notes that if the BUD “is not sustainable, it would need to be dissolved. However, its assets could then be purchased by another entity” to continue service (emphasis added). There is no guarantee that any company will be willing to buy this potentially toxic asset in the event that it goes belly-up. But, the special revenue bonds taken out by the BUD must eventually be repaid.
In a slideshow summarizing the feasibility study hosted on the SWCBC website, the group promotes the BUD proposal, claiming that “towns are not liable for [BUD] debt…because the BUD is the bond issuer, the towns are not on the hook.” The state allows special municipal districts (like parking systems and water districts) to take out special revenue bonds carrying near-2% interest rates to pay for future costs, as revenue (hopefully) comes in.
Maine law dictates the parameters by which these revenue bonds may be paid off in Title 30-A, §5405. Aside from the requirement that “rates, fees and charges must be reasonable, just and equitable,” it allows the BUD officers to fix, and revise, the rate schedule:
“These rates, fees and charges, except rates, fees and charges for water system purposes, are not subject to supervision or regulation by any other commission, board, bureau or agency of the municipality or of the State… Except as otherwise provided, these rates, fees and charges…shall be fixed and revised to provide funds which, together with all other funds available for the purpose, will be sufficient at all times to pay the cost of maintaining, repairing and operating the revenue-producing municipal facility”
In regards to telecommunications systems, the law allows board leadership broad latitude to rationalize fee hikes:
“… rates, fees and charges must be adequate, just, reasonable, nondiscriminatory and uniform throughout the corporate limits of the municipality. They shall be based upon the extent and quality of service, number of channels, hours of operation, variety of programs, local coverage, safety measures, installation costs and other basis which are reasonably related to the use of or service furnished by the telecommunications system revenue-producing facility.”
Essentially, proponents can argue that the obligations of the BUD pose no risk to the participating towns because, in the event that revenue does not meet costs, the BUD can pass its bond expenses along to residents directly. Whether it be raising “per passing” fees on every resident potentially served by the network, or hiking rates and fees on subscribers, as long as those rates are “reasonably related to the use of or service furnished” by the BUD, residents will be on the hook. It simply takes a board vote to raise the fees and salvage the BUD’s financials, which the leadership would have a fiduciary duty to protect.
Just as Southport voters did in recent weeks, residents of southwest Waldo County will have an opportunity to make their voices heard on this GON proposal soon enough. Hopefully, with enough information, they too will see through this opaque and unnecessary plan to construct expensive internet infrastructure with flimsy potential for return on their investment.