Michigan law makes fight for municipal broadband an uphill battle

By Sheila McGarth
WKTV Contributing Writer

There are a number of reasons that a municipality may seek government-run broadband such as faster service at a lower cost, encourage economic development, and provide economic development. (pxhere.com)

For more than a decade, municipalities around the United States have been starting their own government-run broadband networks to bring high-speed internet to their residents.

They might do so for a variety of reasons: to provide residents faster service at a lower cost, to encourage economic development, to provide high-speed internet to areas that private Internet Service Providers aren’t interested in serving, or to bring more economical connections to urban areas where residents can’t afford the service provided by private ISPs.

But due to laws on the books in Michigan, cities can face significant obstacles in starting their own network.

Michigan is one of 18 states that put restrictions on municipal broadband programs. Under the Metropolitan Extension Telecommunications Rights-of-Way Oversight Act of 2002, public entities can provide telecommunications services only if they have first requested bids for the services and received fewer than three qualified bids. They also must subject themselves to the same terms as those specified in their Request for Proposal.

Around the United States, measures regulating municipal broadband are enacted largely due to the influence of telecommunications companies wishing to be shielded from competition, according to MuniNetworks.org, a Community Broadband Networks Initiative of the Institute for Local Self-Reliance.

According to the Common Cause Education Fund, which tracked the spending of telecommunications companies for the years 2019 and 2020, Comcast spent $13 million on lobbying in 2019 and $14 million in 2020. The company spent $15 million on political contributions and expenditures in the 2020 election cycle. AT&T spent $11.5 million on lobbying in 2019, $11 million in 2020, and $13 million in political contributions in 2020.

Some small cities in the Michigan, such as Marshall, have been able to start their own network because they sent out a Request for Proposal and no ISPs responded, according to the Battle Creek Enquirer.

The City of Holland is hoping to be the next Michigan city to have its own fiber network available to all residents. Holland plans to expand an existing downtown network to every address in the city if voters approve a millage in August that would pay for its construction. The city’s Board of Public Works would run the fiber network as a public utility.

Holland is exempt from the Metro Act provisions because their fiber system predates the Metro Act, according to Ted Siler, utility services director for the city. They started it in the 1990s to connect their public utilities.

But even though the regulations don’t affect Holland’s plans to build a fiber network in the city, there are still parties pushing to stop it.

In late May, Holland residents began getting a “push poll” text from G1 Research. While purporting to be an opinion poll, the questions aligned with talking points by conservative commentators who believe municipal broadband networks place a unnecessary burden on taxpayers.

Daniel Morrison, a broadband activist who leads the civic group hollandfiber.org, said he didn’t know who was behind the push poll. All he had were “rumors and suspicions,” he said.

But he believes the Holland community supports the plan.

“I think the community is behind this because we have such a well-respected utility that takes good care of us,” he said. “It’s very clear to residents why a community-owned broadband utility fits in really well and would be an improvement over what they have now.”

Telecommunications companies aren’t the only ones trying to halt municipal broadband networks. Conservative lawmakers routinely introduce legislative restrictions because they feel municipal networks raise taxes and are not a cost-effective solution.

Holland representatives believe there is support to have a government-run broadband within their city.

Some studies have shown that municipal networks don’t attract enough users to pay for themselves. Elizabeth Hicks, U.S. affairs analyst at the advocacy group the Consumer Choice Center, cites a 2017 study by the University of Pennsylvania Law School concluding that of 20 municipal fiber projects that reported results of their municipal operations, 11 generated negative cash flow, and only two were on track to break even.

“What happens if there’s not enough consumers who end up signing up for the municipal broadband services or network? If that does happen – and what we see happen across the country with other municipal broadband networks – is the taxpayers within that municipality are stuck holding the bag for this failed network. So not only do they have a network that doesn’t work, but now they’re paying for it with their own tax dollars.”

But according to MuniNetworks.org, several of the cities that were subjects of the University of Pennsylvania Law School study disputed the accuracy of the numbers used in the calculations. The authors of the study issued a correction to some aspects of their report. The University of Pennsylvania released an updated study in January this year which again found that the actual performance of municipal broadband projects fell short of their financial forecasts.

Hicks said she believes everyone should have access to high-speed internet at reasonable prices, but that municipal networks are not the most effective way to do that. She said she has seen public-private partnerships work in rural areas where it’s cost-prohibitive to bring fiber. Cable and satellite service could be other options to consider, she said, or government subsidies for broadband in areas where there are ISPs providing service, but it’s too expensive for residents.

“There are a lot of unique solutions – I just don’t think jumping to a municipal broadband network should be the first one,” she said, adding that more than 200 communities nationwide currently offer municipal broadband, but only a small percentage of them have been successful.

In Holland, if the ballot measure passes, city residents will pay a millage of about $12.50 per month for building the system. Those who choose to connect would pay about $42 per month for service of 1 gigabit per second. The cost will depend on the “take rate,” in other words, how many people sign up. The more people who sign up for the service, the lower the cost will go.

Holland leaders are confident they will have the numbers needed to ensure success. The City and its Board of Public Works surveyed residents in 2018 and found that the vast majority of residents were in favor of a community-owned solution that provides high-speed internet access.

Morrison said demand for fiber connection in Holland’s existing downtown pilot project area has been strong. They have more than 200 customers in 150 buildings, he said.

The Covid pandemic and the lockdowns that followed brought the need for high-speed internet into sharp focus, he said.

“Everyone understands now the value of a good, reliable internet connection. We look at our very reliable utility that has been lowering electric rates, and say ‘We want (internet service) to be a utility just like water, sewer, or electricity.’ That’s what we want. We want to be in control of our own destiny. Not leave that up to a big telecom company.”