Time to Pull Plug on KentuckyWired

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Posted by William H Paul on Thursday, September 28th, 2017, 11:17 AM PERMALINK

The Interim Committee on Appropriations and Revenue will be meeting this afternoon to begin discussing solutions for KentuckyWired.

KentuckyWired – a 3,000 mile government-run broadband network currently being constructed in Kentucky – is already a taxpayer’s nightmare and should be shut down as soon as possible. This undertaking was originally estimated to cost a whopping $350 million and be completed by April 2016, but those assumptions could not have been more wrong.

As of last month, $175 million had been poured into just 123 miles of fiber, a cost of $1.3 million per mile, and with no clear cost estimate, the new date of completion is likely to be sometime in 2019. So, in addition to increased labor costs resulting from delays, taxpayers may now be forced to foot $50 million in contract penalties due to “supervening events”.

KentuckyWired just adds to the numerous case studies that have already proven government has no place in the broadband industry. “Municipal Fiber in the United States: An Empirical Assessment of Financial Performance,” a 2017 study, examined 20 municipal broadband networks and concluded they are not a good deal for taxpayers. More than half are reported to be cash-flow negative and the majority of those classified as cash-flow “positive” are generating returns so small they are expected to take more than 100 years to recover project costs.

Similarly, a 2012 study titled The Hidden Problem with Government Owned Networks concluded, “Government-owned networks have fared quite poorly because they have neither the resources nor the expertise necessary to provide consumers with reliable state-of-the-art broadband connections.” Government simply is not fit for this industry.

In addition to being a complete waste of scarce taxpayer resources, government-owned broadband networks (GONs) could also leave taxpayers with fewer internet service providers to choose from. Government entities unfairly compete with the private sector because they are able to subsidize their costs with taxpayer dollars. Private providers do not have this luxury and, therefore, are not able to charge consumers below the cost of service because it would result in bankruptcy. Naturally, this un-level playing field deters private providers from remaining, expanding, and launching their services in areas where GONs are present.

Fortunately for Kentuckians, it seems some lawmakers are willing to protect their constituents from the great deal of harm that will result from KentuckyWired. Sen. Chris McDaniel (R-Taylor Mill) has explained:

“I said within the first 20 minutes of what was a terrible presentation that the schedule on this would never work…Even if you had everything in place you couldn’t meet the construction schedule, let alone, all of the other components that go with it...I’m betting it’s going to be substantially cheaper to just stop and eat what we got versus what we are about to do here...This is the 21st century version of the big dig in Boston.”

Rep. Phil Moffett (R-Louisville) and Rep. Michael Meredith (R-Oakland) have also questioned the necessity and practicality of the project. Hopefully more lawmakers begin to recognize that no good will come from KentuckyWired and that the best solution for Kentuckians is bringing the GON to a permanent stop. Americans for Tax Reform made this point very clear in a letter to the Interim Appropriations and Revenue Committee earlier this week.

To read the full letter, click here.

Photo Credit: Jason Presser

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