St. Clair Today

Michigan law imposes conditions on municipalities regarding the creation of government-operated broadband systems, saying it is only supposed to do so when there are no willing internet providers or very few, Michigan Capitol Confidential reported.

Theodore Bolema, of the Institute for the Study of Economic Growth at Wichita State University, authored a paper exploring how several municipal broadband ventures have popped up in areas that already had private internet providers.

In his paper, he discusses the city of Marshall, Michigan, which had its own broadband service, which was exempt from the mandates imposed on private broadband service providers.

"Despite the advantages the city of Marshall gave itself, its municipal broadband system is already lagging behind the projections in its cost-benefit analysis," Bolema wrote, according to Michigan Capitol Confidential. "The project also has delayed repaying its loans for the projects at least twice, suggesting that the project may be on its way to requiring additional funding from city residents."

Bolema wrote that less-efficient local government broadband services have been selling their services for less because they are exempt from those regulations that impose on private providers. In Marshall, the local government's broadband services easily beat the prices of the private providers, the paper notes.

There are several other Michigan municipalities noted in the paper -- including Traverse City, Lyndon Township and Holland -- all of which are participating in what Bolema calls "a predatory strategy" in which they are undercutting private providers on purpose.

Bolema notes that the local government providers often fail.

“Established private providers have far more knowledge and experience in building networks, marketing to potential customers and operating networks," Bolema writes, according to Michigan Capitol Confidential. "Private providers also can take advantage of their economies of scale and spread their fixed costs over multiple geographic areas where they operate, giving them an actual economic advantage over government-run systems operating only within the municipal borders."