Are Government Home Broadband Networks Facing Worse Business Cases?

Dr. George Ford, Phoenix Center for for Advanced Legal & Economic Public Policy Studies chief economist, notes in a recent study that three sales of municipal home broadband networks illustrates the financial issues such networks face. 

The Bardstown, Ky. network, for example, privatized in 2024, illustrates the revenue side of the problem. 

source: Phoenix Center 

Another study looked at the financial performance of every municipal fiber project (with published financial data) in the U.S. operating in 2010 through 2019. None of the 15 projects generated sufficient nominal cash flow in the short run to maintain solvency without infusions of additional cash from outside sources or debt relief. 

To be sure, 68 operating networks provide no public financial information, some observers note. 

Similarly, 87 percent have not actually generated sufficient nominal cash flow to put them on track to achieve long-run solvency. 

Some 73 percent generated negative nominal cash flow over the past three fiscal years, leaving them poorly positioned to make up their deficits and causing them to fall farther into debt, the authors note. 

Fully 53 percent of projects would not be on track to reach breakeven even assuming the theoretical best-case performance in terms of capital expenditures and debt service.

Business Model Issue	Impact	Sources
Short-Term Revenue Shortfalls	Most projects fail to cover operating costs with subscription fees, requiring taxpayer subsidies.	2,4,10
Long-Term Viability Concerns	Only 2/15 projects studied showed potential for self-sustaining cash flow over 20-25 years.	2,6,10
Network Upgrade Costs	Frequent tech advancements require reinvestment, straining budgets not designed for dynamic needs.	137
Cross-Subsidization Risks	Many rely on municipal utility funds or bonds, distorting competition and transparency.	7,10,11
Crowding Out Private Investment	Municipal entry reduces private sector incentives to build/upgrade networks in the same areas.	3,6,11
Project Management Complexity	Lack of expertise in broadband operations leads to cost overruns and service quality issues.	3,5,9
Political vs. Market Incentives	Prioritizing coverage over profitability results in unsustainable pricing and service models.	3,10,11
Financing Challenges	Securing loans/investment is harder due to incumbent opposition and uncertain ROI.	5,9,11