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Municipal Fiber in the United States: An Empirical Assessment of Financial Performance

May 24, 2017
By Christopher S. Yoo and Timothy Pfenninger

This paper, written by University of Pennsylvania Law School professor Christopher S. Yoo, identifies 88 active municipal fiber projects in the U.S., and examines their net present value and financial status.

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This paper, written by University of Pennsylvania Law School professor Christopher S. Yoo, identifies 88 active municipal fiber projects in the U.S., and examines their net present value and financial status.

Of the 88 taxpayer-funded internet projects studied, only nine are cash-flow positive, Yoo writes.

For the nine projects that are cash-flow positive, seven would need more than sixty years to break even,” Yoo writes. “Only two generated suffcient cash to be on track to pay off the debt incurred within the estimated useful life of a broadband network, which is typically projected to be 30 to 40 years. One of the two success stories is an industrial city with few residents that is unlikely to serve as a model for other cities to emulate. Regression models based on the data and the case studies of individual projects underscore the difficulty that municipal fiber projects face in becoming financially viable.”

Lawmakers should think carefully before spending taxpayer money on a project many other lawmakers have tried and failed to successfully execute, Yoo writes.

“These results suggest that municipal leaders should carefully consider all of the relevant costs and risks before moving forward with a municipal fiber program,” Yoo writes. “Underperforming projects have caused numerous municipalities to face defaults, bond rating reductions, and direct payments from the public coffers. In addition, troubled municipal broadband ventures take a toll on community leaders in terms of personal turmoil and distraction from other matters important to citizens.”